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4/15/12 THE INDIAN CONTRACT

INDIAN CONTRACT ACT1872

sanjeev mishrainvertis-bareilly

mba-c4/15/12 THE INDIAN CONTRACT 11

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DEFINITIONS

U/S-2(a) PROPOSAL or OFFER:- When oneperson signifies his willingness to do or toabstain from doing anything, with a view toobtain the assent of that other to such act orabstinence, he is said to make a proposal.

U/S-2(b) PROMISE:-When theperson to whom the proposal is

made signifies his assent thereto, theproposal is said to be accepted. Aproposal ,when accepted becomes a

promise.4/15/12 22THE INDIAN CONTRACT

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KINDS OF OFFER 1.According to mode of communication

a. Express offer: when an offer is put in words.

b. Implied offer: inferred from the conduct .

. 2.On the basis of offerees:

a. Specific offer-to a particular person.b. General offer-to the public at large generally.

4/15/12 THE INDIAN CONTRACT 33

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Cont..3. on the basis of nature

a. Cross offer: when two persons withouthaving the knowledge of others offter made

to each other identical offers.b. Counter offer: when an offer is accepted on

the terms or on conditions, it is not anacceptance but a counter offer.

c. Standing offer: a standing offer is an offerwhich is open for aceptance over a period oftime. This offer is also called continuing offeror open offer


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Cont..

U/S-2 (h)-CONTRACT:-A contract is anagreement enforceable by law.

Thus for the formation of a contract:

1.There must be an agreement.

2.Agreement must be enforceable by law.

So we can summarise as:

A CONTRACT IS AN AGREEMETN,ANAGREEMENT IS A PROMISE AND A

PROMISE IS AN ACCEPTED PROPOSAL.

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agreementAccording to sir William Anson

A legally binding agreement between two or

more persons by which rights are acquired byone or more to acts or forbearances on the partof the others

According to Salmond

A contract is an agreement creating anddefining obligations between the parties.


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Cont..but when it is given by

third party he will entitledto get the benefit onlywhen he is a party because

stranger to considerationcan sue but a stranger to

the contract cannot sue4/15/12 THE INDIAN CONTRACT 99

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Cont.f. Consideration need not to be adequate

g. It must be real, not fanciful or illusory

h. It must not be unlawful

i. It must be certain

j. It should not be impossible


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Without consideration.Agreements without considerations are void

but under the following circumstances anagreement may be without consideration.

NATURAL LOVE AND AFFECTION

1.If an agreement is made

a.In writing and registeredb.Made on account of natural love and affectionbetween parties standing in near relations.


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FOR PAST ACT.2.A promise for the act done in past

a. The act must have been already done

b. The act should have been done voluntarily.

c. The act should be done to the promisor.

d. Promisor so promises to compensate in

whole or in part.


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TIME BARRED DEBT3. Past debt;

a.Promise was made in writing and registered

b.Promise to pay whole or in part a debt ofwhich the creditor might have taken but unableto do so due to the limitations of suits.


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Cont.

u/s-2 (f) Reciprocal promises:-Promiseswhichform the consideration for each otherare called reciprocal promises.

u/s-2(g)-Void Agreement:-An agreement

not enforceable by law is said to be void.u/s-2(i) voidable contract:-An agreement

which is enforceable by law at the option ofone or more of the parties thereto,but not at

the option of the other is voidable contract.

u/s-2(j)void contract:-A contract whichceases to be enforceable by law becomes voidwhen it ceases to be enforceable.


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COMPLETION OF

COMMUNICATIONvThe communication of a proposal is complete

when it comes to the knowledge of the

person to whom it is made.Example:

A proposes to sell a house to B at Rs.5 lac byletter.The communication of the proposal iscomplete when B receives the letter.


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CON

v Revocation of proposals andacceptance:A proposal may be revoked at

any time before the communication of itsacceptance is complete as against theproposer but not afterwards.

v An acceptance may be revoked at any timebefore the communication of the acceptanceis complete as against the acceptor, but notafterwards.


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Example

A proposes to sell his house to B by a letter.

B receives the proposal letter and accepts itby sending a letter of acceptance by post.

A may revoke his proposal any time before orat the moment when B posts his letter ofacceptance but not afterwards.

B may revoke his acceptance at any timebefore or at the moment when the lettercommunicating it reaches A, but not afterwards.


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How revocation to be

made

By the notice to the other party.

By the lapse of the prescribed time.

By the failure of fulfilling conditions.

By the death or insanity of the proposer,if thefact of his death or insanity comes to theknowledge of the acceptor before acceptance.


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WHAT AGGREMENTS ARECONTRACTS.ALL AGREEMENTS ARE CONTRACTS OF THEY

ARE MADE

1.By free consent of the parties.

2.Parties are competent to contract.

3.For lawful Consideration.4.Object is lawful.

5.Not declared to be void.


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Essential elements of a

valid contractTwo or more parties.

Offer and acceptance

Lawful consideration

Intention to create legal relationship

Capacity of parties

Free consent

Lawful object

Agreement not declared to be void.

Certain and ossibilit of erformance.4/15/12 THE INDIAN CONTRACT 2121

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Consent u/s-13

Two or more person are said to consent whenthey agreed upon the same thing in the samesense.

CONSENSUS AD IDEM


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Competency or capacity

to contractu/s-11

Every person is competent to contract who is

1. of the age of majority according to law inexistence.

2. of sound mind

3. and not disqualified by law for the timebeing in forece.


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Coercion u/s-15

Coercion is the committing or threatening tocommit any act forbidden by the IPC.or theunlawful detaining or threatening to detain, any

propertyto the prejudice of any personwhatever, with the intention of causing anyperson to enter into an agreement.

e.g.

A,a wife said to her husband to execute theproperty of house to her brothers name if hedoes not do so she will commit suicide.

Husband execute.This agreement of execution4/15/12 2626THE INDIAN CONTRACT

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UNDUE INFLUENCE-u/s-

16A contract is said to be induced by undue

influence where the relations subsistingbetween the parties are such that one of the

parties is in a position to dominate the will ofthe other and uses that position to obtain anunfair advantage over the other.

One person is deemed to be in a position ofdominating the will of other

--where one has real or apparent authority overthe other or where one is in fiduciary

relationship with other.4/15/12 THE INDIAN CONTRACT 2727

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FRAUD

Fraud means and includes any of the followingacts Committed by a party to contract or withhis connivance

or by his agent, with intent to deceive anotherparty thereto or his agent, or to induce, him toenter into the contract.

1.The suggestion, as a fact,of that which is nottrue , by one who does not believe it to be true.

2.The active concealment of a fact by onehaving knowledge or belief of the fact4/15/12 THE INDIAN CONTRACT 2929

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Cont

3.A promise made without any intention ofperforming it

4.Any other act fitted to deceive.5. Any other act which law specially so declares.

Explanation:- Mere keeping silence to the fact isnot a concealment amounted to fraud untillthere is not a duty to speak or to reply.

Examples:--A sells by auction a horse which Aknows to be of unsound of mind. A says nothing

to B about the horse. This is not a fraud.4/15/12 THE INDIAN CONTRACT 3030

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Examples

B is a daughter of A and has just come of age.Here,the relation between the parties wouldmake it As duty to tell B if the horse is

unsound.

B says to A if you do not deny. I shall assumethat the horse is sound A said nothing.Here,As silence is equivalent to speech.

A and B being trader,enter upon a contract. Ahas private information of a change in pricewhich would affect Bswillingness to proceed

with the contract. A is not bound to inform.4/15/12 THE INDIAN CONTRACT 3131

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MISREPRESENTATION

Misrepresentation means and includes

1.The positive assertion, in a manner not

warranted but the information of the personmaking it, of that which is not true, though hebelieves it to be true.

2.Any breach of duty which without an intent to

deceive, gains an advantage to the personcommitting it, or any one claiming under him,by misleading another to his prejudice or to theprejudice of anyone claiming under him

3.Causing, however innocently, a party to an4/15/12 THE INDIAN CONTRACT 3232

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MISTAKES

WHEN BOTH PARTIES ARE UNDER MISTAKE ASTO MATTTER OF FACT

Where both parties to an agreement are undera mistake as to a matter of fact essential to theagreement, the agreement is void.

But merely an erroneous opinion as to the value

of the thing which forms the subject matter ofthe agreement is not to be deemed a mistakeas to a matter of fact.


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Examples

A agrees to buy from B a certain horse. Itturns out that the horse was dead at the timeof the bargain, though neither party was

aware of the fact. The agreement is void.

A agrees to sell to B specific good supposedto be on its way from Delhi to Bareilly, Butbefore the time of bargaining the goods werefired


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Cont

EFFECT OF MISTAKES AS TO LAW: Acontract is not voidable because it was causedby a mistake as to any law in force in India;

but a mistake as to a law not in force in Indiahas the same effect as a mistake of fact.

EFFECT OF MISTAKES AS TO MATTER OFFACT OF ONE PARTY: A contract is notvoidable merely because it was caused by oneof the parties to it being under a mistake as toa matter of fact.


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3.LAWFUL OBJECT &

LAWFULCONSIDERATIONv If

It is not forbidden by law.

It is permitted it does not defeat theprovision of law.

It is not fraudulent.It does not involves injury to the person or

property of another person.

It is not immoral.4/15/12 THE INDIAN CONTRACT 3636

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illustration

1.A agrees to sell his house to B for 10,000rupees. Here B's promise to pay the sum of10,000 rupees is the consideration for A's

promise to sell the house, and A's promise tosell the house is the consideration for B'spromise to pay the 10,000 rupees. These arelawful considerations.

2. A promises to pay B 1,000 rupees at theend of six months, if C, who owes that sum toB, fails to pay it. B promises to grant time to Caccordingly. Here the promise-of each party is

the consideration for the promise of the other4/15/12 THE INDIAN CONTRACT 3737

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Cont..3.A promises, for a certain sum paid to him by

B, to make good to B the value of his ship if itis wrecked on a certain voyage. Here A'spromise is the consideration for B's payment

and B's payment is the consideration for A'spromise and these are lawful considerations.

4. A promises to maintain B's child and Bpromises to pay A 1,000 rupees yearly for the

purpose. Here the promise of each party is theconsideration for the promise of the 'otherparty. They are lawful considerations.

5. A, B and C enter into an agreement for thedivision among them of gains acquired, or- to4/15/12 THE INDIAN CONTRACT 3838

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Cont..

6.A promises to obtain for B an employmentin the public service, and B promises to pay1,000 rupees to A. The agreement is void, as

the consideration for it is unlawful.

7. A, being agent for a landed proprietor,agrees for money, without the knowledge ofhis principal, to obtain for B a lease of landbelonging to his principal. The agreementbetween A and B is void. as it implies a fraudby concealment, by A, on his principal


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Cont..8.A promises B to drop a prosecution which he

has instituted against B for robbery, and Bpromises to restore the value of the thingstaken. The agreement is void, as its object is

unlawful.9.A, who is B's mukhtar, promises to exercise

his influence, as such, with B in favour of C,and C promises to pay 1,000 rupees to A. The

agreement is void, because it is immoral.10. A agrees to let her daughter to hire to B

for concubinage. The agreement is void,because it is immoral, though the letting may

not be punishable under the Indian Penal4/15/12 THE INDIAN CONTRACT 4040

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DECLARED TO BE VOID

BY LAWAgreements void, if considerations andobjects unlawful in part: Ifany part of asingle consideration for one or more objects or

any one or any part of any one of severalconsiderations for a single object, is unlawful,the agreement is void.

Example: A,promises to superintend on behalfof B,a legal manufacture of indigo, and anillegal traffic in other articles, B promises to payto A a salary of 10,000 rupees a year. Theagreement is void, the object of As promise,

and the consideration for Bs promise being in4/15/12 THE INDIAN CONTRACT 4141

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Agreement in restraint ofmarriage voidu/s-26

Every agreement in restraint of the marriageof any person, other than a minor, is void.


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Agreement in restraint of

trade void.u/s-27

Every agreement by which anyone is restrained from exercisinga lawful profession, trade orbusiness of any kind, is to thatextent void.


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Exception 1.-

One who sells the good-will of abusiness mayagree with the buyer to

refrain from carrying on a similarbusiness,within specified local limits,so long as the buyer, or any personderiving title to the good-will fromhim, carries on a like businesstherein, provided that such limitsappear to the Court reasonable,

regard being had to the nature of the4/15/12 THE INDIAN CONTRACT 4444

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Agreements in restraint

of legal proceedings voidu/s-28Every agreement,-

(a) by which any party thereto isrestricted absolutely from enforcing hisrights under or in respect of any

contract, by the usual legalproceedings in the ordinary tribunals,or which limits the time within whichhe may thus enforce his rights; or4/15/12 THE INDIAN CONTRACT 4545

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Cont..(b) which extinguishes the rightsof any party thereto, ordischarges any party thereto fromaby liability, under or in respect ofany contract on the expiry of aspecified period so as to restrictany party from enforcing hisrights

Is void to that extent.4/15/12 THE INDIAN CONTRACT 4646

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Agreements void for

uncertainty u/s-29.-Agreements, the meaning of which is notcertain, or capable of being made certain, arevoid.

Illustrations:

(a) A agrees to sell to B " a hundred tons of oil". There is nothing whatever to show what

kind of oil was intended. The agreement isvoid for uncertainty.

b) A agrees to sell to B one hundred tons of oilof a specified' description, known as an article

of commerce. There is no uncertainty here to4/15/12 THE INDIAN CONTRACT 4747

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Cont..

(e) A agrees to sell B " one thousandmaunds of rice at a price to be fixedby C ". As the price is capable ofbeing made certain, there is nouncertainty here to make theagreement void.

(f) A agrees to sell to B " my whitehorse for rupees five hundred orrupees one thousand". 'There I isnothing to show which of the two

prices was to be given. The4/15/12 THE INDIAN CONTRACT 4949

Agreements b a of

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Agreements by way ofwager void.u/s--30Agreements by way of wager arevoid ; and no suit shall be brought

for recovering anything alleged tobe won on any wager, orentrusted to any person to abide

the result of any game or otheruncertain event on which anywager is made.


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Exception.

This section shall not be deemed torender unlawful a subscription or

contribution,or agreement tosubscribe or contribute, made orentered into for or toward any plate,

prize or sum of money, of the valueor amount of five hundred rupees orupwards, to be awarded to the winneror winners of any horse-race4/15/12 THE INDIAN CONTRACT 5151

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contingent on an event

happening u/s-32Contingent contracts to do or not

to do anything if an uncertainfuture event happens cannot beenforced by law unless and until

that event has happened.If the event becomes impossible,such contracts become void.


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illustrationsA makes a contract with B to buy B's horse if

A survives C.This contract cannot be enforcedby law unless and until C dies in A's lifetime.

A makes a contract with B to sell a horse to B

at a specified price, if C, to whom the horsehas been offered, refuses to buy him. Thecontract cannot be enforced by law unlessand until C refuses to buy the horse.

A contracts to pay B a sum of money when Bmarries C. C dies without being married to B.The contract becomes void.


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Enforcement of contractscontingent on an event nothappening.-u/s-33Contingent contracts to do or not to do

anything if an uncertain future event does not

happen can be enforced when the happeningof that event becomes impossible, and notbefore.

Illustration

A agrees to pay B a sum of money if a certainship does not return. The ship is sunk. Thecontract can be enforced when the ship sinks.


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When event on whichcontract is contingent tobe deemed-u/s-34

When event on which contract iscontingent to be deemed impossible, ifit is the future conduct of a livingperson.-If the future event on which a

contract is contingent is the way inwhich a person will act at anunspecified time ,the event shall


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Illustration:

A agrees to pay B a sum ofmoney if B marries C. C marries

D. The marriage of B to C mustnow be considered impossible,although it is possible that D may

die and that C may afterwardsmarry B.


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contingent on happening of

specified event within fixedtime u/s-35 Contingent contracts to do or not

to do anything if a specifieduncertain event happens within afixed time become void if, at the

expiration of the time fixed, suchevent has not happened, or if,before the time fixed, such event

becomes impossible.4/15/12 THE INDIAN CONTRACT 5858

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Cont

Contingent contracts to do or notto do anything if a specified

uncertain event does not happenwithin a fixed time may beenforced by law when the time

fixed has expired and such eventhas not happened or, before thetime fixed has expired, if it

becomes certain that such event4/15/12 THE INDIAN CONTRACT 5959

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Illustration:(a) A promises to pay B a sum of

money if a certain ship returns withina year. The contract may be enforced

if the ship returns within the year,'and becomes void if the ship is burntwithin the year.

(b) A promises to pay B a sum ofmoney if a certain ship does notreturn within a year. The contractmay be enforced if the ship does not

return within the ear, or is burnt4/15/12 THE INDIAN CONTRACT 6060

Agreement contingent

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Agreement contingenton impossible eventsvoid u/s--36Contingent agreements to do ornot to do anything, if an

impossible event happens, arevoid, whether the impossibility ofthe event is known or not to the

parties to the agreement at thetime when it is made.


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Illustrations:

(a) A agrees to pay B 1,000 rupees iftwo straight lines should enclose a

space. The agreement is void.(b) A agrees to pay B 1,000 rupees if

B will marry A's daughter C. C was

dead at the time of the agreement.The agreement is void.


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Illustrations

(a) A promises to deliver goods to B on acertain day on payment of Rs. 1,000. A diesbefore that day. A's representatives are bound

to deliver the goods to B, and B is bound topay the Rs. 1,000 to A's representatives.

(b) A promises to paint a picture for B by acertain day, at certain price. A dies before the

day. The contract cannot be enforced eitherby A's representatives or

by B.


Effect of refusal to

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Effect of refusal toaccept

offer of performance u/s-38.-Where a promisor has made an offer of

performance to the promisee, and the offerhas not been accepted, the promisor is notresponsible for nonperformance, nor doeshe thereby lose his rights under thecontract.

Every such offer must fulfil the followingconditions:-

(1) it must be unconditional;


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Cont.

(2) it must be made at a proper time andplace, and under such circumstances that theperson to whom it is made may have a

reasonable opportunity of ascertaining thatthe person by whom it is made is able andwilling there and then to do the whole of whathe is bound by his promise to do

(3) if the offer is an offer to deliver anythingto the promisee, the promisee must have areasonable opportunity of seeing that thething offered is the thing which the promisor

is bound by his promise to deliver.4/15/12 THE INDIAN CONTRACT 6565

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Illustration

contracts to deliver to B at his warehouse,on the 1st March, 1873, 100 bales ofcotton of a particular quality. In order to

make an offer of a performance with theeffect stated in this section, A must bringthe cotton to B's warehouse, on theappointed day, under such circumstancesthat B may have a reasonable opportunityof satisfying himself that the thing offeredis cotton of the quality contracted for, andthat there are 100 bales.


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Illustrations

(b) A, a singer, enters into a contract with B,the manager of a theatre, to sing at histheatre two nights in every. week during the

next two months, and B engages to pay her atthe rate of 100 rupees for each night. On thesixth night A wilfully absents herself. With theassent of B, A sings on the seventh night. B

has signified his acquiescence in thecontinuance of the contract, and cannot nowput an end to it, but is entitled tocompensation for the damage sustained by

him through A's failure to sing on the sixth4/15/12 THE INDIAN CONTRACT 6868

erson y w om prom se

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erson y w om prom se

is to be performed-u/s-40If it appears from the nature of the

case that it was the intention of the

parties to any contract that anypromise contained in it should beperformed by the promisor himself,such promise must be performed by

the promisor. In other cases, thepromisor or his representatives mayemploy a competent person to

perform it4/15/12 THE INDIAN CONTRACT 6969

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Illustrations

(a) A promises to pay B a sum of money. Amay perform this promise, either bypersonally paying the money to B or by

causing it to be paid to B by another ; and,if A dies before the time appointed forpayment, his representatives must performthe promise, or employ some proper

person to do so.

(b) A promises to paint a picture for B. Amust perform this promise personally


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Effect of acceptingperformance from thirdperson u/s-41When a promisee accepts

performance of the promise from athird person, he cannot afterwards

enforce it against the promisor.


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Devolution of joint

liabilities.u/s-42.-When two or more persons have made ajoint promise, then, unless a contraryintention appears by the contract, all such

persons, during their joint lives, and, afterthe death of any of them, hisrepresentative jointly with the survivor orsurvivors, and, after the death of the last

survivor, the representatives of all jointly,must fulfil the promise


ny one o o n

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ny one o o npromisors may be

compelled to performu/s-43When two or; more persons make a joint

promise, the promisee may, in the absence ofexpress agreement to the contrary, compel

any 1*[one or more] of such joint promisors,toperform the whole of the promise.

----Each promisor may compel contribution.Each of two or more joint promisors may

compel every other joint promisor to contributeequally with himself to the performance of thepromise, unless a contrary intention appearsfrom the contract


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Cont

Sharing of loss by default in contribution.-Ifany one of two or more joint promisors makesdefault in such contribution, the remaining

joint promisors must bear the loss arising fromsuch default in equal shares.

Explanation.-Nothing in this section shallprevent a surety from recovering from his

principal, payments made by the surety onbehalf of the principal, or entitle the principalto recover anything from the surety onaccount of payments made by the principal


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Cont

(c) A, B and C are under a joint promise to payD 3,000 rupees. C is unable to pay anything,and A is compelled to pay the whole. A is

entitled to receive 1,500 rupees from B.(d) A, B and C are under a joint promise to

pay D 3,000 rupees, A and B being onlysureties for C. C fails to pay. A and B are

compelled to pay the whole sum. They areentitled to recover it from C.


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Effect of release of one

joint promisor u/s-44Where two or more persons havemade a joint promise, a release of

one of such joint promisors by thepromisee does not discharge theother joint promisor or joint

promisors ; neither does it freethe joint promisors so releasedfrom responsibility to the other

joint promisor or joint promisors.4/15/12 THE INDIAN CONTRACT 7777

l i f j i

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u/s-45.Devolution of joint

rightsWhen a person has made a promise to twoor more persons jointly, then, unless acontrary intention appears from the

contract, the right to claim performancerests, as between him and them, withthem during their joint lives, and, after thedeath of any of them, with the

representative of such deceased person.Jointly with the survivor or survivors, and,after the death of the last survivor, withthe representatives of all jointly


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Time for performance ofpromise,when no

applicationis to be made and no

time is s ecified u/s-46

Where, by the contract, a promisor is toperform his promise without application bythe promisee, and no time for performance is

specified, the engagement must be performedwithin a reasonable time.

Explanation.-The question " what is areasonable time " is, in each particular case, a

uestion of fact.4/15/12 THE INDIAN CONTRACT 8080

performance of

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performance of

promise, where time isspecified and noapplication to be made-47When promise is to be performed on a certain

day, and the promisor has undertaken toperform it without application by the

promisee, the promisor may perform it at anytime during the usual hours of business onsuch day and at the place at which thepromise ought to be performed.


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IllustrationA promises to deliver goods at B's warehouseon the first January. On that day A brings the

goods to B's warehouse, but after the usualhour for closing it, and they are not received.A has not performed his promise.


. Application for

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. Application forperformance on certainday to be at proper u/s-48When a promise is to be performed

on a certain day, and the promisorhas not undertaken to perform itwithout application by the promisee,it is the duty of the, promisee toapply for performance at a properplace and within the usual hours ofbusiness


Place for performance of

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Place for performance ofpromise, where no

application to bemade and no place fixed

for performance u/s-49When a promise is to be performedwithout application by the promisee, andno place is fixed for the performance of it,it is the duty of the promisor to apply tothe promisee to appoint a reasonable placefor the performance of the promise, and toperform it at such place.


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Illustration

A undertakes to deliver a thousandmaunds of jute to B on a fixed day. Amust apply to B to appoint a

reasonable place for the purpose ofreceiving it, and must deliver it tohim at such place.


Performance in manner

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Performance in manner

or at time prescribed orsanctioned by

promisee u/s-50The performance of any promisemay be made in any manner, or

at any time which the promiseeprescribes or sanctions


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Illustrations;B owes A 2,000 rupees. A desires B to pay the

amount to A's account with C, a banker. B, whoalso banks with C, orders the amount to betransferred from his account to A's credit, and thisis done by C. Afterwards, and before A knows of the

transfer, C fails. There has been a good paymentby B.

(b) A and B are mutually indebted. A and Bsettle an account by setting off one item

against another, and B pays A the balancefound to be due from him upon suchsettlement. This amounts to a payment byA and B,respectively, of the sums which


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illustrations

(c) A owes B 2,000 rupees. B acceptssome of A's goods in reduction of the

debt. The delivery of goods operatesas a part payment.

(d) A desires B, who owes him Rs.

100, to send him a note for Rs. 100by post. The debt is discharged assoon as B puts into thepost a lettercontaining the note duly addressed to

A.4/15/12 THE INDIAN CONTRACT 8888

Performance of

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Performance of

reciprocal promises u/s-51-55u/s-51.Promisor not bound to

perform, unless reciprocal promisee

ready and willing to perform. When acontract consists of reciprocalpromises to be simultaneously

performed, no promisor need performhis promise unless the promisee isready and willing to perform hisreciprocal promise.


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illustration(a) A and B contract that A shall deliver goodsto B to be paid for by B on delivery.

---A need not deliver the goods, unless B is

ready and willing to pay for the goods ondelivery.

---B need not pay for the goods, unless A is

ready and willing to deliver them on payment.(b) A and B contract that A shall deliver goods

to B at a price to be paid by instalments, thefirst instalment to be paid on delivery.

---A need not deliver unless B is read and4/15/12 THE INDIAN CONTRACT 9090

Order of performance of

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preciprocal promises u/s-

52Where the order in whichreciprocal promises are to be

performed is expressly fixed bythe contract, they shall beperformed in that order; and,

where the order is not expresslyfixed by the contract, they shallbe performed in that order which

the nature of the transaction4/15/12 THE INDIAN CONTRACT 9191

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Illustration;

(a) A and B contract that A shall build a housefor B at a fixed price. A's promise to build thehouse Must be performed before B's promise

to pay for it.(b) A and B contract that A shall make over

his stock-in-trade to B at a fixed price, and Bpromises to give security for the payment of

the money. A's promise need not beperformed until the security is given, for thenature of the transaction requires that Ashould have security before he delivers up his

stock.4/15/12 THE INDIAN CONTRACT 9292

Liability of party

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Liability of partypreventing event onwhich the contract isto take effect- U/S-53.When a contract contains reciprocal promises,

and one party to the contract prevents theother from performing his promise, thecontract becomes voidable at the option of

the party so prevented; and he is entitled tocompensation from the other party for anyloss which he may sustain in consequence ofthe non-performance of the contract.


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Illustration;

A and B contract that B shall executecertain work for A for a thousandrupees. B is ready and willing toexecute the work accordingly, but Aprevents him from doing so. Thecontract is voidable at the option of B

; and, if he elects to rescind it, he isentitled to recover from Acompensation for any loss which he

has incurred by its non-performance.4/15/12 THE INDIAN CONTRACT 9494

Effect of default as to that promise

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Effect of default as to that promisewhich should be first performed,in

contract consisting of reciprocalpromises-u/s-54When a contract consists of reciprocal

promises, such that one of them cannot beperformed, or that its performance cannot beclaimed till the other has been performed, andthe promisor of the promise last mentioned

fails to perform it, such promisor cannot claimthe performance of the reciprocal promise,and must make compensation to the otherparty to the contract for any loss which suchother party may sustain by the non-erformance of the contract4/15/12 THE INDIAN CONTRACT 9595

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illustations(a)A hires B's ship to take in and convey, from

Calcutta to the Mauritius, a cargo to beprovided by A, B receiving a certain freight forits conveyance. A does not provide any cargo

for the ship. A cannot claim the performanceof B's promise, and must make compensationto B for the loss which B sustains by the non-performance of the contract.

(b)A contracts with B to execute certainbuilder's work for a fixed price, B supplyingthe scaffolding and timber necessary for thework. B refuses to furnish any scaffolding or

timber, and the work cannot be executed. A4/15/12 THE INDIAN CONTRACT 9696

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illustration(c)A contracts with B to deliver to him, at a

specified price, certain merchandise on boarda ship which cannot arrive for a month, and Bengages to pay for the merchandise within a

week from the date of the contract. B doesnot pay within the week. A's promise todeliver need not be performed, and B mustmake compensation.

(d)A promises B to sell him one hundred balesof merchandise, to be delivered next day, andB promises A to pay for them within a month.A does not deliver according to his promise.

B's promise to pay need not be performed,4/15/12 THE INDIAN CONTRACT 9797

Effect of such failure

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when time is not

essentialIf it was not the intention of theparties that time should be of theessence of the contract, the contractdoes not become voidable by thefailure to do such thing at or beforethe specified time ; but the promisee

is entitled to compensation from thepromisor for any loss occasioned tohim by such failure


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Effect of acceptance ofperformance at

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performance at

time other than thatagreed upon.If, in case of a contract voidable on account ofthe promisor's failure to perform his promiseat the time agreed, the promisee accepts

performance of such promise at any timeother than that agreed, the promisee cannotclaim compensation for any loss occasionedby the non-performance of the promise at the

time agreed,unless, at the time of suchacceptance he gives notice to the promisor ofhis intention to do so.


Contract to do

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Contract to do

impossible or unlawfulafterwards-u/s--56A contract to do an act which, after

the contract is made, becomesimpossible, or, by reason of someevent which the Promisor could not

prevent, unlawful, becomes voidwhen the act becomes impossibleorunlawful


Compensation for loss

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Compensation for loss

non performanceWhere one person has promised todo something which he knew, or, withreasonable diligence, might haveknown, and which the promisee didnot know, to be impossible orunlawful, such promisor must make

compensation to such promisee forany loss which such promiseesustains through the non-

performance of the promise4/15/12 THE INDIAN CONTRACT 102

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illustration

(a) A agrees with B to discover treasure bymagic. The agreement is void,

(b) A and B contract to marry each other.

Before the time fixed for the marriage, A goesmad. The contract becomes void.

(c) A contracts to marry B, being already

married to C, and being forbidden by the lawto Which he is subject to Practise polygamy, Amust make compensation to B for the losscaused to her by the non-performance of hispromise.


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Cont..

(d) A contracts to take in cargo for B at aforeign port. A's Government afterwardsdeclares war against the country in which

the port is situated. The contract becomesvoid when war is declared.

(e) A contracts to act at a theatre for six

months in consideration of a sum paid inadvance by B. On several occasions A istoo ill to act. The contract to act on thoseoccasions becomes void.


DOCTRINE OF UNJUST

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ENRICHMENT

ORQUASI CONTRACT:U/S-68-Claim for necessaries supplied toperson incapable of contracting, or onhis account.

If a person, incapable of entering into acontract, or any one whom he is legallybound to support, is supplied by another,person with necessaries suited to hiscondition in life, the person who hasfurnished such supplies is entitled to bereimbursed from the property of suchincapable person.


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illustration

(a) A supplies B, a lunatic, withnecessaries suitable to his conditionin life. A is entitled to be reimbursedfrom B's property.

(b) A supplies the wife and childrenof B, a lunatic, with necessariessuitable to their condition in life. A isentitled to be reimbursed from B'sproperty.


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illustration

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illustration.

B holds land in Bengal, on a lease grantedby A, the zamindar. The revenue payableby A to the Government being in arrear, his

land is advertised for sale by theGovernment. Under the revenue law, theconsequence of such sale will be theannulment of B's lease. B, to prevent the

sale and the consequent annulment of hisown lease, pays to the Government thesum due from A. A is bound to make goodto B the amount so paid


Obli ti f

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Obligation of person

enjoying benefit of non-gratuitous act

u/s-70-Where a person lawfully doesanything for another person, ordelivers anything to him, not

intending to do so gratuitously, andsuch other person enjoys the benefitthereof, the latter is bound to makecompensation to the former in


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illustrations

(a) A, a tradesman, leaves goods atB's house by mistake. B treats thegoods as his own. He is bound to payA for them.

(b) A saves B's property from fire. Ais not entitled to compensation fromB, if the circumstances show that heintended to act gratuitously


Responsibility of finder

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Responsibility of finder

of goodsu/s-71.-A person who finds goodsbelonging to another, and takes them intohis custody, is subject to the same

responsibility as a bailee.

Illustration

A goes to a shop where on the floor he

finds a note of rupee one thousandknowing that note is of one person who isat that time at the shop. He put it in hispocket showing that he has found nothing.


Liability in case of goods

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Liability in case of goods

delivered by mistake orcoerscionu/s-72.-A person to whom money has been

paid ,or anything delivered,

by mistake or

under coercion,

must repay or return it.


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Breach of contract

After formation of contract this is the time toperform the duties underlying therein butbefore the time of performance or at the time of

performance either of the party refuses toperform duties on his part or make it himselfunable to perform the contract, it is calledbreach of contract. It may be:

A. Anticipatory breach of contract.

B. Actual or present breach of contract.


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Cont..

Anticipatory breach is that breach where aparty to the contract declared his intention ofnot performing the contract before the

performance is due.A contract to B that on 1st july,2010, that on

the 1st july 2011 he will appoint B as seniorHR in his company. But during the Dec.2010 A

says that he will not give him appointment, sorepudiates the contract.This repudiationbefore the actual time of performance isanticipatory breach of contract.


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Actual or present breach

Actual or present breach of contract may beeither on the date of performance or duringthe performance.

Illustration

X a famous singer enter into contract with Y,theatre owner, give his performance for twodays every week.If X does not sing for secondweek. This is breach of contract. Here Y has twooptions:

Y may rescind contract and claim

compensation4/15/12 THE INDIAN CONTRACT 115

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Damage caused by

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Damage caused by

breach u/s-73If the contract is breached or not performedthe party who is at loss can claim thefollowing damages:

Ordinary damages: those damages whichnaturally arise in usual course of things fromsuch breach. These can be recovered if thedamages are direct and aggrieved party

suffered.

Special damages: Suchdamages which theparties how, when they made contract to belikely to result from breach.


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illustrations

A contracts to pay a sum of money to B ona day specified. A does not pay the moneyon that day; B, in consequence of not

receiving the money on that day, is unableto pay his debts, and is totally ruined. A isnot liable to make good to B anythingexcept the principal sum he contracted to

pay, together with interest up to 'the dayof payment.


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A, showroom owner of Dell computers,contracts with B to supply 10 sets of laptopsat the rate of 50K per set at a specified date.A contracts with C, an agency owner of Dell to

supply 10 set of dell laptops informing C thatthese sets are to be supplied to his customerat so and so date at Rs.40K per set.

C fails to perform his contract so A purchase

those set from another agency holder atRs,45K per set to fulfill his promise to A.

A can claim 50K rupees from C as

compensation if he could not have perform4/15/12 THE INDIAN CONTRACT 120

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illustrations(a)A and B jointly owe 100 rupees to C. Aalone pays the amount to C, and B, notknowing this fact, pays 100 rupees over

again to C. C is bound to repay the amountto B.

(b)A railway company refuses to deliver upcertain goods to the consignee, exceptupon the payment of an illegal charge forcarriage. The consignee pays the sumcharged in order to obtain the goods. He is

entitled to recover so much of the charge4/15/12 THE INDIAN CONTRACT 121

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Rights of indemnity

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Rights of indemnity

holderAll damages within the scope contract.All costs and expenses.

All sums which he has made under the termof any compromise of any such suit.


C t t f t

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Contract of guarantee

u/s-126

A "contract of guarantee " is a contract toperform the promise, or discharge the liability,

of a third person in case of his fault.

The person who gives the guarantee is calledthe " surety

The person in respect of whose default theguarantee is given is called the " principaldebtor ", and the person to whom theguarantee is given is called the " creditor ".

A uarantee ma be either oral or written4/15/12 THE INDIAN CONTRACT 124

illustrations

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illustrationsB requests A to sell and deliver to him goods

on credit. A agrees to do so, provided C willguarantee the payment of the price of thegoods. C promises to guarantee the paymentin consideration of A's promise to deliver the

goods. This is a sufficient consideration for C'spromise.

(b) A sells and delivers goods to B. Cafterwards requests A to forbear to sue B forthe debt for a year, and promises that, if hedoes so, C will pay for them in default ofpayment by B. A agrees to forbear asrequested. This is a sufficient consideration

'4/15/12 THE INDIAN CONTRACT 125

Difference between

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contract of guaranteeand contract ofindemnityThere are three parties in contract of

guarantee i.e.creditor,principal debtor andsurety. While in contract of indemnity thereare only two parties i.e. indemnifier andindemnity holder.

The primary liability is of the principal debtorin contract of guarantee and suretys liabilityis secondary. But in indemnity liability ofindemnifier is primary and secondary.


C t

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Cont..

In contract of guarantee at the same timethere are three contracts whereas in contractof indemnity there is only one contract.

In contract of guarantee it is necessary thatsurety should guarantee at the request ofdebtor but in indemnity indemnifirer shouldgive the indemnity on the request of

indemnity holder.Liability in contract of guarantee is existing

one but in contract of indemnity it iscontingent upon some happenings.


Contract of Bailment

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Contract of Bailment

(u/s-148)The term bailor has been derived from thefrench word baillier which means to deliver.

As per Indian contract Act Bailment means

The delivery of goods by one person toanother for some purpose, upon a contractthat they shall,when the purpose isaccomplished, be returned or otherwise

disposed of according to the conditions of thepersons delivering them

The person who delivers the goods is calledBailor and the person to whom goods are


Essential elements of

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Essential elements of

BailmentThere must be a contract.Contract must be to deliver some movable

goods.

There must be delivery of goods from oneperson to another.

Goods must be delivered for some specific

purpose.Goods delivered must be returned when the

purpose is fulfilled.

Examples bailment may be for deposit for


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D ti f b il

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Duties of bailor

Duty to deliver the goods.

To disclose the fault if any in the

goods.To pay the expenses.

To indemnify the bailee for breach of

warrants.

To receive back the goods or to givediretion for its disposal.


D ti f B il

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Duties of Bailee

To take care of the goods as his own.

Not to do anything with the goods against theconditions.

Not to make unauthorised use of goods.

Not to mix goods with others.

Mixture of goods when separable or non-

separable.

To return the goods to bailor or as directed.

To give back profit or increase in the goods.4/15/12 THE INDIAN CONTRACT 132

Ri ht f B il

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Rights of Bailee

To claim damage.

To claim necessary expenses.

Right to be indemnified.

To recover goods due to defects ofthe goods.

To return goods.

To exercise lien on goods.


Contract of Pledge-u/s-

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g /

172The bailment of goods as securityfor payment of a debt or performanceof a promise is called pledge.

In this case the bailor is calledpledger and the bailee is calledpawnee

A borrows Rs 300 from B and keepshis watch as security for payment ofthe debt, the bailment of watch is a4/15/12 THE INDIAN CONTRACT 134

Difference between

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Difference between

pledge and bailmentPurpose: The bailment may be for any

purpose but pledge is only for the

security for payment of debt orperformance of promise.

Right to use: Bailee may according to theconditions of bailment, use the goodsbailed but pledgee can not use thepledged goods.

Right to sell: the bailee can not sell the

goods but if pawner default then pawnee4/15/12 THE INDIAN CONTRACT 135

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Rights & duties of

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g

pawner/pledgerRIGHTSTo get back the goods.

To redeem the goodsTo take care and preserve the goods

To receive increase or profit from the goods

To exercise rights of a debtor.


Duties of pawner

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Duties of pawner

To disclose the defects in the goods pledged.

To pay the debt interest and other expensesor perform the promise any time specified.

To pay extraordinary expenses if no contraryis there with the pawnee

To redeem the goods pledged before sale

To pay additional expenses arise due todefault.


Rights and duties of

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g

PawneeRights----To retain the goods untill payment is not

made

To retain goods for subsequent advances

To receive extraordinary expenses.

To sue against the pawner

To sell the goods.


duties

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duties

To take care of the goods

Not to use the goods

Not to mix the gods with his own goods

To return the goods after payment of debt orperformance of the promise

To give notice before sale of the goods

To return the increase or profit from the goodspledged

To pay surplus of the proceeds of the sale of

the oods led ed4/15/12 THE INDIAN CONTRACT 140

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Cont

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Cont..

The essence of the matter is that the principalauthorised the agent to represent ro act forhim in bringing the principal into contractual

relation with a third person.Two principles govern the law of agency are:

1.Whatever a person can do personally, he isauthorised to do it through agency.

2.He who does his act throught other isconsidered as he has does it himself.


Creation of agency

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Creation of agency

By express agreement.

By implied agreement

Agency by ratification

Agency by operation of law


Termination of agency

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Termination of agency

By the principal revoking agents authority

By the agent renouncing the business of theagency

By the business of the agency beingcompleted

By either the principal or agent dying or

becoming of unsound mind.


Rights of agent

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Rights of agent

Rights of retainer

Right to receive remuneration

Right to lien

Right of indemnification

Right of compensation

Right of stoppage in transit.


Duties of agent

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Duties of agent

To carry out the work undertaken according tothe directions given by the principal

To carry out the work with reasonable care

skill and deligence.

To communicate with the principal

Not to deal on his own account

To pay sums received for the principal

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