THE INDIAN CONTRACT ACT, 1872

Q.1 Define a Contract. What are the Essential Elements of a

Valid Contract?
A] Definition of Contract: A contract is an agreement to do or not to do an
act.
Indian Contract Act defines a contract as an agreement, enforceable by
law [Section 2(h)]
Contract = an agreement + its enforceability at law.
The two main elements of contracts are:
1. An agreement between two or more persons "To Do" or "Not to Do" something.
2. An enforceability of such an agreement at law i.e. personal rights and personal
obligations created and defined by agreement must be recognized by law.

B) Essentials of a Valid Contract: All contracts are agreements but all

agreements are not contracts. In order to become a contract, an agreement must
satisfy following essential requirements:
1. Offer and Acceptance: For any contract there must be at least two parties, one
of them making
the offer and the other one accepting it. The acceptance must
be unconditional and absolute.
2. Consideration: Consideration means "something in-return". It is a benefit
moving from one party to another. Consideration need not always be in cash or in
kind. It may be an act or promise to do or not to do something. It may be past,
present or future. Consideration must be real and lawful.
3. Capacity of the Parties to Contract: The parties to an agreement must have
the capacity at law to enter into a valid contract. Section 11 states that every
person is competent to contract ifa) he is of the age of majority,
b) he is of sound mind and
c) he is not disqualified from entering into a contract by any law, to which he is
subject.

4. Free Consent: The contract must have been made with free consent of the
parties. The parties must be ad-idem i.e. they must agree upon the same thing in
the same sense at the same time.
There is absence of free consent if the
agreement is induced by a) Coercion b) Undue Influence
c) Fraud d)
Misrepresentation e) Mistake.
5. The Agreement must not be Expressly Declared to be Void: The
agreements must not have been expressly declared to be void by any law in force in
the country. Void agreement is not enforceable by law & they have no legal
existence. For example a) Agreement in restraint of Trade
b) Agreement in
restraint of Marriage c) Agreement in restraint of Legal Proceedings d) Agreement of
Wager etc.
6. Writing and Registration: It is in the interest of the parties that the contract
should be in writing. Sometimes it needs to be stamped and registered.
7. Legal Relationship: The parties entering into the contract must have the
intention to create legal relationship. If there is no such intention the agreement will
not result into a contract.
8. Certainty: The terms of the contract should be very clear. They must not be
vague
(not clearly expressed) or ambiguous (having two or more
possible meanings).
9. Possibility of Performance: The performance must not be impossible. The
contracts must be capable of being performed. Example- 'A' agrees with 'B' to
discover treasure by magic and sharing of the treasure. This agreement cannot be
enforced.
10. Lawful Object: The object of the agreement must be lawful i.e. neither
fraudulent or forbidden by law, nor opposed to any public policy.

Q.2 Every contract is an agreement but every agreement is not a

contract. Discuss.
According to Section 2(h) of Indian contract Act, a contract is an agreement

enforceable by Law An agreement in order to become a contract must be

enforceable by law. Agreements, which do not fulfil the essential requirements of a
contract, are not enforceable.
Thus when an agreement enables a person to compel another to do something or
not to do something it is called a contract. Thus all contracts are agreements but all
agreements are not contracts.

In order to become a valid contract an agreement must possess the following

essential elements.
1) Offer and Acceptance
2) Consideration
3) Capacity of the Parties to contract
4) Free Consent
5) Writing and Registration
6) Legal Relationship
7) Certainty
8) Possibility of Performance
9) Lawful Object
10) The agreement must not be expressly declared to be void

Q.3 Discuss in detail the Types of Contracts.

Following are the different Types of Contracts-

1) Valid Contract: A contract which satisfies all the essentials of a valid contract is
known as a valid contract. If one or more essential elements are absent, the
contract becomes void, or voidable or illegal.
2) Void Contract: A void contract is that contract which is not enforceable by
either of the parties to it. A void contract has no legal effect. A contract may be void
from the very beginning or may be valid originally when it was formed but has
subsequently became void due to change in circumstances.
3) Voidable Contract: A voidable contract is that contract in which free consent of
one of the parties to it is not secured. For example, contracts caused by Frauds,
Coercion, Mistake, Undue Influence, Misrepresentation, etc. Such contracts are valid
till it is avoided by the injured party.
4) Unenforceable Contract: An unenforceable contract is that contract which
cannot be enforced in courts due to some technical defect, such as absence of
writing, payment of inadequate stamp duty etc.
5) Illegal Contract: An illegal agreement is one the object of which isa) Fraudulent b) against the provisions of any law c) causes an injury or damage to
any person or his property d) immoral or opposed to public policy.
6) Express Contract: In express contracts, the terms are stated in writing
expressly.

7) Implied Contract: An implied contract is one which is the result of the conduct
of the parties. For example when a person boards a public bus or drinks a cup of tea
in a restaurant there is an implied contract and he has to pay the charges for it.
8) Executed Contract: An executed contract is that contract in which both the
parties to the contract have performed their respective promises.
9) Executory Contract: An executory contract is that contract in which both the
parties to it have yet to perform their promises.
10) Unilateral Contract: A unilateral contract is that contract in which only one
party is required to perform his obligation.
11) Bilateral Contract: A bilateral contract is one in which both the parties are
required to perform their obligations.

Q.4 Define Offer. What are Essentials of a Valid Offer?

A] Definition of Offer: According to Section 2(a) of Indian Contract Act, 1872,
an offer or proposal is defined as when a Person signifies to another his
willingness to do, or, to abstain from doing anything, with a view to obtain
the assent of that other to such act, or, abstinence, he is said to make a
proposal.

A proposal is an offer. This offer may be express or implied. The words may be
spoken or written.
E.g. I want to sell my house to you for Rs.50,000 is an
express offer. An implied offer is not made in words. E.g. a taxi-driver sitting in the
taxi with the meter flag For Hire on, is an implied proposal by taxi-driver that he
intends to carry passengers in his taxi.
The first part of the definition explains that the offer must be signified or
communicated to the other person. The second part explains that the proposals
must be made with an intention to get the acceptance of the other party. The
person who makes the proposal is called "Promisor" and the person who accepts the
proposal is called "Promisee". If the other person accepts the proposal it becomes a
valid contract.

B] Essentials of a Valid Offer:

The following are the rules / essentials of a valid offer.

1. The offer must be Certain: The offer must be certain, clear, specific and
definite. The offer must not be based on a condition, which is uncertain or incapable
of performance.
2. The offer may be Express or Implied: Offer made in words, spoken or written
is an express offer. Offer made by conduct is an implied offer.
3. Offer must be made with an Intention to Legally Bind each other: A
proposal must be made with an intention to legally bind each other. If there is no
such intention to legally bind each other, the agreement will not result into a
contract. Example: A invites B to a dinner party, B promised but does not attend
the dinner party. In this case A can not sue B for breach of contract.
4. Offer must be Communicated: A proposal must be communicated to the
person or persons, for whom it is made. Until the proposal is communicated,
promisee cannot accept it.
5. The Proposal must be made to a Definite Person: By definite person means
to a specific individual person or to a definite class of persons or to the world at
large. When an offer is made to a definite person or definite class of persons it is
called as a special offer. When an offer is made to the world at large it is called as a
general offer.
6. How long does an Offer Remain Open: An offer remains open until:

It has been accepted or

It has been rejected or

It has been revoked (withdrawn) or

It has been lapsed (passage of time)

7. Until when can an Offer be Accepted: An offer can be accepted until:

It has been revoked

It has been lapsed.

Q.5 Distinguish between Offer and Invitation to Offer.

An offer must be distinguished from an invitation to offer. Many statements which
appear to be offers are not really offers but merely invitations to offers. For
example:

1)
2)
3)
4)
5)

Quotations of prices
Prices printed on the goods for sale
Catalogue of goods or books
Advertisements for tenders
Advertisements for auctions etc.
are not offers but invitations to offers. In these cases it is the purchaser who
makes the offer and its upto the trader or dealer to accept or reject the offer.

Example: A shopkeeper displays in his shop an article with a lable marking Price
Rs.500. In this case the person who enters his shop & demands the article is really
the proposer & it is upto the shopkeeper to accept or reject the offer. The same rule
is applied to Quotations, Catalogues & Price Lists.
An offer when accepted becomes an agreement on the other hand an invitations to
offer when accepted becomes only an offer.

Q.6 What is Acceptance? What are the rules regarding Valid

Acceptance?
A] Definition of Acceptance: According to Section 2(b) of Indian Contract Act,
1872,
when a person, to whom a proposal is made, signifies his
assent thereto, the proposal is said to be accepted. A proposal when
accepted becomes a promise.
The person making the proposal is called promisor & the person accepting it is
called the promisee.

B] Essentials of a Valid Acceptance:

1. Who can accept an Offer: An offer can be accepted only by the person or
persons to whom it has been made. When an offer is made to a person it can
only be accepted by him. When it is made to a class of persons, it can be accepted
by any member of that class. Finally, if a proposal is made to the world at large, it
can be accepted by any person or persons in the world.
2. Acceptance of an offer must be Absolute & Unconditional: Acceptance of
proposals with condition or variations is no acceptance at all. Acceptance must be
absolute & unconditional.
3. Acceptance must be made within a Reasonable Time: If the proposer has
prescribed the time limit for the acceptance of an offer, acceptance is not legally
binding. However, if no time limit is prescribed by the proposer, the acceptance
must be made within a reasonable time.

4. Mode of Acceptance: Acceptance must be made in some usual & reasonable

manner. That is, by a) express written words b) express spoken words c) conduct d) post / telegram e)
prescribed manner if any

5. Mental Acceptance is No Acceptance at All: Mere uncommunicated or

mental acceptance is no acceptance. Acceptance of the offer must be
communicated by the Offeree to the Offeror in some way.
6. Acceptance must be Communicated to the Offeror: Acceptence must be
communicated to the offeror only and not to his agent or friend.
7. Acceptance of an Offer is Acceptance of all its Terms: Acceptance of an
offer is the acceptance of all the terms even if the Offeree is ignorant of some of the
terms of the offer.
8. Act done without the knowledge of the Offer is no Acceptance: If the act
is done without the knowledge of the offer it is no acceptance of the offer because
to an uncommunicated offer there can be no consent.

Q.7 What is
Consideration?

Consideration?

What

are

the

rules

of

A] Definition of Consideration: According to Section 2(d) of Indian Contract

Act, 1872,
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, abstinence, or, promise is called a consideration for the promise.
Consideration is based on the term quid-pro-quo which means something in
return.
When a person makes a promise to other, he does so with an
intention to get some benefit from him. This act to do or to refrain from doing
something is known as consideration.

B] Essentials of a Valid Consideration:

The following are the essentials of valid consideration:
1. A Consideration must move at the Desire of the Promisor: The first
essential of consideration is that the act or abstinence must have done at the desire

of the promisor. It follows that any act performed at the desire of the third party
cannot be a consideration.
2. A Consideration may be given by the Promisee or by any other
Person: Under the Indian Law, it is not necessary that consideration must be given
by a promisee only. Consideration may also be given by any other person. A
contract is valid as long as consideration is given, whether by the promisee or any
other person.
For E.g. Chinnayya v/s Ramaya - In this case 'A' transferred certain property by
deed of gift to her daughter 'B', with the condition that 'B' should pay certain
annuity to 'A's brother 'C'. 'B' agreed to pay the annuity to her uncle 'C' in writing.
Later on, she denied to pay it on the ground that no consideration had moved from
'C' to her (B). It was held that consideration might also move from any other
person. Therefore C was entitled to maintain a suit.
3. A Stranger to a Contract cannot Sue upon it: Under English Law, neither a
stranger to a consideration can sue to enforce the contract nor a stranger to the
contract can sue upon it even though the contract may be for his benefit. For
example, if there is a contract between A & B, C cannot enforce it even though the
contract may be for his benefit.
4. A Consideration may be Past, Present, or Future: The consideration may be
past, present, or future. This is clearly indicated by the words, used in the definition
of consideration given in the Act.
5. Consideration need not be Adequate: Consideration means "something in
return" which need not necessarily be equal in value with "something given". The
law simply provides that a contract should be supported by some consideration and
the courts of law are not concerned as to its adequacy.
6. Consideration must be Real and not Illusory: Although the consideration
may be inadequate, it must be real, competent, and must have some value in the
eyes of law. It should be physically, legally possible to be performed. It should not
be illusory.
7. Consideration must not be Illegal, Immoral or Opposed to Public
Policy: Consideration must not be illegal, immoral, or opposed to public policy.
Every agreement, of which the object or consideration is illegal, immoral, or
opposed to public policy, is void under Section 23 of Indian Contract Act.
8. Consideration must be something, which the Promisor is not already
bound to do.

Q.8 What are the Exceptions to the rule of Consideration?

A] No Consideration, No Contract: Consideration is one of the essential
elements to support a valid contract. When a party to an agreement, promises to do
something he must get 'something' in return. If he does not get something in return,
the contract is not valid. This 'something' is defined as consideration. Therefore, an
agreement without consideration is void and cannot become a contract.

B] Exceptions: Following are the exceptions to the rule no consideration, no

contract:
1) An Agreement made on Account of Natural Love and Affection [Section
25 (1)]: When an agreement is made in writing and registered under the law, for
the time being in force, for the registration of documents, and is made out of
natural love and affection between parties standing in a near relation to each other,
no consideration is required in such a case For E.g. An agreement between a father
and his son or between a husband and wife.
2) A Promise to Compensate for Past Voluntary Services [Section 25 (2)]:
When a promise is made to compensate wholly or in part, a person who has already
voluntarily done something for the promisor, or something which the promisor was
legally compellable to do, is enforceable at law, even though without consideration.
E.g. A supports Bs infant son. B promises to reimburse As expenses. This is a
contract.
3) A Promise to pay Time Barred Debt [Section 25 (3)]: A promise to pay the
time barred debt, in whole or part is enforceable
provided it is in writing and is
signed by debtor himself or his agent on his behalf. For E.g. A owes B Rs.1,000 but
the debt is time barred. A signs a written promise to pay B Rs.500 on account of
the debt. This is a contract.
4) Creation of an Agency [Section 185]: No consideration is required to create
an agency.
5) Gift [Section 25]: According to Section 25, nothing shall affect the validity as
between the donor and donee of any gift actually made.

Q.9 Write short note on Agreement in restraint of trade.

As per the Indian Contract Act, an agreement seeking to restrain (keep under
control) a person from exercising a lawful profession, trade or business of any kind
is void to that extent. The constitution of India has given a fundamental right to
every citizen of India to practice any profession or to carry on any occupation, trade
or business. Every agreement, which interferes with this fundamental right, is
agreement in restraint of trade. All agreements in restraint of trade, whether the

restraint is in general or partial or qualified of unqualified are void. But there are
some exceptions to this rule as given below-

1) A seller of goodwill of a business may agree with the buyer to retain from carrying on a
similar business, within specified limits as to territory and time so long as the buyer or his
representative in title carries on a like business and the restraint appears to the court as
reasonable.

2) The Indian Partnership Act permits contracts between partners to provide that a partner
shall not carry on any business other than that of the firm while he is a partner.
3) A partner may make an agreement with his co-partners that, on ceasing to be a partner,
he will not carry on any business similar to that of the firm within a specified period or
within specified local limits and the agreements shall be valid if the restrictions are
reasonable.

4) The partner of a firm may upon or in anticipation of the dissolution of the firm, make an
agreement that some or all of them will not carry on a business similar to that of the firm
within a specified period or specified local limits and such agreement shall be valid if the
restriction imposed are reasonable.

5) A partner may upon the sale of the goodwill of a firm, make an agreement that such
partner will not carry on any business similar to that of the firm within a specified period or
within specified local limits and such agreement shall be valid if the restriction imposed are
reasonable.

Q.10 Describe the law relating to Minors Agreement.

According to Section 3 of Indian Majority Act, a person becomes a major on
completion of 18 years of age. Hence a person who has not completed his or her 18
years of age is known as a minor.
LAW RELATING TO MINORS AGREEMENT: All the rules related to minor's
agreement are based on the fundamental that Law always protects the
minors.

The rules regarding minors agreement are as under-

1) A minor's agreement is void ab initio: In India an agreement with or by

a minor is
void ab initio and inoperative as a minor has no capacity to enter
into a contract. A minor is neither liable to perform what he has promised to do
under a contract nor is he liable to repay money which he might have received
under a contract.
Mohori Bibee V. Dhurmodas Ghose. In this case a minor executed a mortgage for
Rs.20,000, out of which he received Rs.8,000 from the mortgagee. Subsequently,
the minor sued for setting aside the mortgage. The mortgagee claimed refund of
Rs.8,000 paid by him. The Privy Council held that a minor's agreement was
absolutely void and the minor was not liable to return the money.

2) A Minor can be a Promisee or a Beneficiary: A minor cannot be bound

by contract but he can be a lawful beneficiary. Thus a promissory note executed in
favour of a minor can be enforced.

3) A minor's property is liable for necessaries: Under Section 68 of the

Indian Contract Act, if a person incapable of entering into a contract, or anyone
whom he is bound to support, is supplied by another person, with necessaries
suited to his condition in life, the person, who has furnished such supplies is entitled
to be reimbursed from the property of such person. It is to be noted that only
minor's property is liable, minor is not personally liable for necessaries supplied to
him.

4) No estoppel against a minor: The rule of estoppel is only a rule of

evidence i.e. a rule of formal law. This rule is not applicable to minors.
A Minor who falsely represents himself to be a major and induces another person to
enter into contract, can plead minority as a defence.

5) No subsequent ratification of a minor's agreement: Since a minor's

agreement is void ab initio, a minor who has entered into an agreement during his
minority cannot subsequently ratify (approve) the contract on attaining majority.
6) No specific performance of a minor's agreement: Neither the minor
nor the other party can ask for the specific performance of a minor's agreement.

7) No insolvency for a minor: A Minor is incapable of contracting debts and

hence he cannot be adjudged insolvent.

8) A minor can be admitted to the benefits of partnership: A minor

cannot enter into an agreement of partnership, however with consent of all the
partners he can be admitted to the benefits of partnership.

9) A Minor can act as an agent: A minor can become an agent, and by his
acts he binds his principal; however a minor is not personally liable for his principal.

10) A minor cannot be member of a registered company: This is

because a minor is not competent to apply for membership.

Q.11 What is Consent? When Consent is said to be given

under Coercion?
A) Consent: Acording to Section 13 of the Indian Contract Act two persons are
said to consent, when they agree upon the same thing in the same sense'.
Consent is said to be free when it is not caused by(a) Coercion (b) Undue influence (c) Fraud (d) Misrepresentation (e) Mistake

B) Definition of Coercion: Section 15 of the Indian Contract Act, 1872, defines

coercion as Coercion is the committing, or threatening to commit any act, forbidden
by the Indian Penal Code, 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.

E.g. A threatens to murder B if he does not sell his house to A, and B agrees to do
so. The agreement is bought about by coercion. This agreement is voidable at the
option of B.

C) Features of Coercion:
1. Coercion means (i) the committing or threatening to commit any act, which is
forbidden by the Indian Penal Code, or (ii) the unlawful detaining, or threatening
to detain, any property.
2. Coercion may proceed from any person including a person, who is not a party to
the contract.
3. The act or threat, which constitutes coercion, may be directed against any person
and not necessarily against the other party to the agreement.
4. The act must have been actually committed to induce a person to enter into an
agreement.
5. It does not matter whether the IPC is or is not in operation, in the place, where
coercion is employed.

D) Consequences of Coercion:

Under Section 19, when a contract is brought about by coercion, it is voidable at the
option of the party, whose consent was so caused. The aggrieved party has the
following optionsa) have the contract set aside, or
b) refuse to perform it and defend it on the ground of coercion, or
c) abide by the contract, if he so desires and insist on its performance by other
party.
d) Under Sec.72, if a person has paid money or delivered anything to another
person, by mistake or under coercion, that money must be repaid or the thing
received must be returned to him.

Q.12 Define Undue Influence & explain its effect on the

validity of a contract.
A] Definition of Undue Influence: According to Section 16(1) of the
Contract Act a contract is said to be induced by undue influence where the
relations between the parties are such that one of the parties is in a
position to dominate the will of the other & uses that position to obtain an
unfair advantage over the other.

Section 16 (2) presumes some relationship where undue influence may be

exercised:
1. When one party holds a real or an apparent authority over the other party.
Example- the relationship between employer and employee.

2. Where one party stands in a fiduciary relation to the other party to the contract.
Fiduciary
relationship
means
a
relationship
of
mutual
trust
and
confidence.
Exampleparents
and
children,
guardian
and
ward,
solicitor
and
client
3. Where a person makes a contract with another person, whose mental capacity is
temporarily affected by a reason of age, illness, or mental or bodily distress.

B] Consequences of Undue Influence:

An agreement which is caused by undue influence shall be voidable at the option
of the party whose consent has been so obtained. Such an agreement may be set
aside absolutely or if the party, who was entitled to set aside the contract, has
received any benefit, the court may set it aside upon such terms and conditions as
may appear to be just.

Q.13 Define Fraud. Explain its main Elements & Effects on the
Agreement.
A] Definition of Fraud:
According to Section 17 of Indian Contract Act, 1872, Fraud means and includes any
of the following acts, committed by a party to a contract or with his connivance, or
by his agent, with the intention to deceive another party, or, to induce a person to
enter into a contract1. The suggestion, as a fact, of that which is not true by one who does not believe it
to be true.
2. The active concealment of the fact by one who is having knowledge, or, belief of
the fact.
3. A promise made without any intention of performing it.
4. Any other act fitted to deceive.
5. Any such act or omission as the law specifically declares to be fraudulent.

B] Constituent Elements / Essentials of a Fraud:

1. There must be a representation and it must be false. In order that the contract is
called a fraud there must be statement of assertion about some fact, which is false.
2. The representation must relate to the fact. The statement or the representation
must relate to an important fact, past or present.
3. The representation must be made before the conclusion of the contract and with
the intention of inducing the other party to act upon it.
4. The party must have relied upon that representation, must have acted upon it
and must have suffered a loss.

C] Effects of Fraud:
The person, who has been induced to enter into an agreement by fraud, has the
following 3 remedies-

1. As the consent to the agreement is caused by fraud, the contract is voidable at

the option of the party, whose consent is so caused.
2. The person, whose consent was so caused, can insist that the contract shall be
performed and that he shall be put in the position in which he would have been, if
the representation made has been true.
3. As fraud is a civil a wrong, compensation is payable, i.e. the aggrieved person
can sue for damages.

D] Mere silence as to facts is not fraud:

Mere silence does not constitute a fraud. According to the explanation to Section 17
of the Indian Contract Act, 1872, 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.
From the above explanation following 3 rules are given:
1. Mere silence is not a fraud.
2. Silence is fraudulent, where duty demands to speak.
3. Silence is fraudulent, where silence is equivalent to speech.

Q.14 Define & explain Mistake under Section 20 of Indian

Contract Act.
A] Definition of Mistake:
Mistake may be defined under Section 20 of Indian Contract Act, 1872, as "an
erroneous belief about something". If the agreement is made under an
erroneous belief it cannot be said that the parties enjoyed free consent i.e. both the
parties shall understand the same thing in the same sense.

B) Elements of Mistake:
1. Mistake must be bilateral. Unilateral mistake is no mistake.

2. The mistake must be in relation to some fact.

3. The fact concerned must be essential to the agreement.
4. As regards mistake of law, if there is mistake of about Indian Law then it is not
considered as a mistake of fact to an Indian. But a mistake of law of foreign country
is a mistake of fact.

C) Effects of Mistake:
1. If there is a mistake, the agreement is void. But as the mistake is subsequently
discovered it is called discovered to be void.
2. When an agreement is discovered to be void then any party who has received any
benefit from the other party shall restore it to him or make compensation for it.

D) Classification / Types of Mistakes: Mistake may be mistake of law or

mistake of fact:
1. Mistake of law: Mistake of law may bea) A mistake as to a law in the country (India) or
b) A mistake as to a law of foreign country.
2. Mistake of Fact: Mistake of fact can be divided as bilateral and unilateral
mistake.

a) Bilateral Mistake: According to Section 20 "where both the parties to an

agreement are under a mistake as to a matter of fact essential to the agreement,
the agreement shall be void".
Various cases that fall under bilateral mistake are as follows:

Mistake as to the subject matter: Mistake as to the subject matter may

be - regarding existence of the subject matter, quality of the subject matter,
quantity and price of the subject matter.

Mistake as to the possibility of performance: If the parties believe that

the agreement is capable of being performed when in fact it is not the case, then
the consent is nullified. The agreement is void on the ground of impossibility.

b) Unilateral Mistake: If the mistake is only unilateral, i.e. one party to the
contract is
under a mistake of fact, the contract is not voidable. Unilateral
mistakes do not affect the validity of the contract unless they concern some
fundamental fact and the other party is aware of the mistake.
An unilateral
mistake may be:

Mistake as to the nature of the transaction: A contract shall be void if

a party to the contract without any fault of his own makes a mistake about the very
nature of the contract. It may be because of blindness, illiteracy, or servility of the
person signing the contract or due to the trick or fraudulent misrepresentation as to
the nature of the document.

Mistake as to identity of the contracting parties: The person or with

whom the contract is to be made must be identified correctly by the other party. It
is a fundamental mistake on the part of the other party not to recognise the correct
person. The principle of the contract holds good only when the identity of the
contracting party is given importance.

Q.15 Define Misrepresentation? Explain Consequences of

Misrepresentation.
A] Definition of Misrepresentation:
The term misrepresentation means a false statement, made by a person who
honestly believes it to be true or who does not know it to be false. It also includes
non-disclosure of a material fact or facts without any intent to deceive the other
person.

According to the Section 18 of Indian Contract Act, 1872, misrepresentation means

and includes
"the positive assertion, in a manner not warranted by the
information of the person making it of that, which is not true, though he
believes it to be true".
Positive assertion means an absolute full and clear statement of a fact.

B) Essentials of Misrepresentation:
1. It must be a misrepresentation of the material fact.
2. It must be made before the concluding of the contract to induce other party to
enter into a contract.

3. It must be made with the intention that the other party acts on it.
4. The other party must have actually acted upon it.
5. It must be wrong i.e. the person making it must have believed it to be true.

C) Effects of Misrepresentation:
When a misrepresentation has been made, the victim has the following alternative
courses open to him:
1. He can treat the contract voidable or
2. He may affirm the contract and insist on the misrepresentation being made good.
3. He may rely upon the misrepresentation as a defense to an action on the
contract.

Q.16 Distinguish between Coercion and Undue Influence.

Coercion

Undue Influence

1. How Consent is Obtained

Consent is obtained by committing,
Consent isor,obtained by dominating the will of
threatening to commit an offence under
another
I.P.C.person
or,
with a view to secure an unfair
by detaining or threatening to detain
advantage.
property
unlawfully.
2. Nature
Coercion is basically of physical nature.
Undue influence is mainly of moral/mental
nature.
3. Burden of Proof
Burden of proof lies on the person,Burden
who alleges
of proof lies on the party, who is in a
employment of coercion.
position to dominate the will of the other.

Q.17 Write a short note on Quasi Contracts?

Generally a contract comes into existence as a result of offer made by one party
and its acceptance by the other party, with free will of both the parties. However
under certain conditions even though no will is expressed by both the parties for
creating contractual relations, the law creates and enforces legal rights and
obligations. Such contracts are known as Quasi Contracts. The principle behind
Quasi Contracts is that a person shall not be allowed to enrich himself at the
expense of another.

Section 68 to 72 of the Contract Act deals with 5 different kinds of Quasi Contracts
explained below:

1. Supply of Necessaries to Incapable Person (Section 68):

If a person incapable of entering into a contract, or anyone whom he is legally
bound to support, is supplied by another person with necessaries, suited to his
condition in life, the person who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.
Example: A supplies B, a lunatic, with necessaries suitable to his condition in
life. A is entitled to be reimbursed from Bs property.

2. Payment by Interested Person (Section 69):

A person, who is interested in payment of money, which another is bound by law to
pay, and who therefore, pays it, is entitled to be reimbursed by the other.

Example: A holds land in Bengal on a lease. B is the owner of the land. The land
revenue payable by Bto the government is in arrears and therefore the government
advertised the land for sale to recover the dues. To prevent the sale of land A pays
the arrears of land revenue. In this case B is bound to reimburse the amount to A.

3. Payment for Non-gratuitous act (Section 70):

Where a person lawfully does anything for another person or delivers anything to
him not intending to do so gratuitously and such other person enjoys the benefit
thereof, the later is bound to make compensation to the former in respect of, or, to
restore the thing so done or delivered.
Example: A, a tradesman, leaves his good at Bs house by mistake. B treats the
goods as his own and uses them. B is bound to pay for the goods.

4. Liability of Finder of Goods (Section 71):

A person who finds the goods belonging to another, and takes them into his custody
is subject to same responsibility as a bailee. He must take reasonable care of the
goods and keep them in sound condition and try to find out its true owner.

5. Payment of Delivery by Mistake or under Coercion (Section 72):

A person to whom money has been paid or anything delivered by mistake or under
coercion must repay or return it.

Example: A and B jointly owe Rs.5,000 to C. A alone pays this amount to C. B not
knowing this again pays Rs.5,000 to C. In this case C is bound to repay Rs.5,000
to B as this amount is paid to him by mistake.

18 Explain in detail Contingent Contracts.

A contingent contract is a conditional contract. Section 31 defines it as: a contract
to do or not to do something, if some event, collateral to such contract
does or does not happen.

Following are the main elements of contingent contracts:

1. The performance of contingent contract depends upon the happening or non
happening of some event in future.
2. The event must be uncertain
3. The uncertain event must be collateral to the contract.

Rules regarding Contingent Contracts:

1. The Happening of future uncertain event:
A contract contingent upon the happening of future uncertain event cannot be
enforced unless and until that event has happened. If that event becomes
impossible, then the contract becomes void.
Example: A makes a contract with B, to sell a car to B at a certain price, if C to
whom the car has been offered, refuses to buy it. The contract can not be enforced
unless & until C refuses to buy the car.

2. The Non Happening of an uncertain future event:

A contract contingent upon the non happening of a future uncertain event can be
enforced only when the happening of that event becomes impossible and not
before.
Example: A agrees to pay B a certain sum of money if a certain ship does not
return. The ship is sunk. The contract can be enforced when the ship sinks.

3. When Event is Deemed to be Impossible:

If a contract is contingent upon how a person will act at an unspecified time, the
event shall be considered to become impossible when such a person does anything
which renders it impossible that he should so act within any definite time, or
otherwise than under future contingencies.
Example: A agrees to pay B Rs.10,000 if B marries C. C marries D. The marriage
of B to C is now considered impossible, although it is possible that D may die and
that C may afterwards marry B.

4. The Happening of an event within a Fixed Time:

A contract, which is contingent upon the happening of an event within a fixed time,
becomes void if, at the expiration of the time fixed, such an event has not
happened or if before the time fixed such event becomes impossible.
Example: A promises to pay B a sum of Rs.1,000 if a certain ship returns within one
year. The contract may be enforced if the ship returns within one year and becomes
void if the ship is sunk within a year.

5. The Non Happening of an event within a Fixed Time:

A contract contingent upon the non happening of an event within a fixed time, may
be enforced when the time fixed has expired and such event has not happened, or,
before the time fixed has expired, it becomes certain that such event will not
happen.
Example: A promises to pay B a sum of Rs.10,000 if a certain ship does not return
within a year.
This contract can be enforced if the ship does not returns within a
year or is burnt or sunk within a year.

6. Contract contingent upon the Happening of an Impossible Event:

A contract contingent upon the happening of an impossible event is void whether
the impossibility of the event is known or not to the parties, when the contract was
formed.
Example: A agrees to pay B a sum of Rs.1,000 if B marries As daughter C. C was
dead at the time of the agreement. The agreement is void.

Q.20 Explain the various modes in which a contract can be

discharged.

Discharge of contract means termination of contractual relationship between the

parties. A contract is said to be discharged when the rights and duties created by it
come to an end. A contract may be discharged by any of the following ways-

1) Discharge by Performance:

When both the parties to a contract perform their respective promises, the contract
is discharged by performance. The performance must be complete, precise &
according to the terms of the agreement.

2) Discharge by Agreement:

A contract is the result of an agreement. In the same way a contract can also be
discharged by agreement in the following ways Novation: Novation means forming a new contract in place of the existing contract
by the same or different parties.
Example: Ram owes Shyam Rs.5,000 under a contract. It has been agreed between
Ram, Shyam and Ghanshyam that Shyam shall henceforth accept Ghanshyam as
his debtor instead of Ram. In this case the contract between Ram and Shyam is
replaced by contract between Shyam and Ghanshyam.
Alteration: Alteration means change in one or more of the terms of the contract. If
the parties to the contract agree to alter it, the original contract need not be
performed. Alteration is valid only if it is done with the consent of all the parties.
Remission: Remission means acceptance of lesser fulfillment of the promise made.
Example: A owes B a sum of Rs.5,000. B pays A Rs.2,000, and A accepts it in full
settlement. In this case the whole debt is discharged.
Recission: Recission of the contract takes place when all or some of the terms of
the contract are cancelled. Recission may be total or partial. Total recission is the
discharge of the entire contract whereas partial recission is the variation of the
original contract by altering only some of the terms of the contract.

3) Discharge by Lapse of Time:

According to Limitation Act, a contract should be performed within a specified
period called as limitation period. If the contract is not performed, and no action is

taken by the promisee within a specified time, the contract is discharged and the
aggrieved party is deprived of legal remedy.

4) Discharge by Impossibility:
i) Precontractual Impossibility:
a) when a person has promised to so something which at the time of
entering into contract is impossible to perform, the contract is void.
b) if the fact of impossibility was known to the promisee only at the time of
making of the contract then he must compensate the promisee for any loss suffered
to the promisee due to non performance of the contract.
c) where at the time of making of the contract, the fact of impossibility is
unknown to all the parties to the contract, the contract is void on the ground of
mutual mistake.

ii) Post Contractual Impossibility:

When the contract is originally capable of being performed but later on due to
change in circumstances its performance becomes impossible, the contract
becomes void. It is also called as supervening impossibility. Supervening
impossibility may occur in the following circumstancea) By destruction of the subject matter.
b) By death or disablement of the parties.
c) By change in law.
d) By declaration of war.
e) By change in the state of things.

5) Discharge by Operation of Law:

Sometimes a contract is terminated, even if the parties do not wish to terminate it.
This is termination by operation of law.
Termination by operation of law may take place-

a) By Death: Where the performance of the contract depends on the personal skill,
quality or qualification of the promisor, the contract is discharged on the death of
the promisor.
b) By Insolvency: When a person is adjudged insolvent he is discharged from all
liabilities incurred by him prior to his adjudication.
c) By Merger: Merger takes place when an inferior right of a party merges into a
superior right of the same party.
d) By Unauthorised Alteration of Terms: If one party makes some alterations in the
written agreement without the consent of the other party, then the other party can
avoid the contract.

6) Discharge by Breach of Contract:

The breach of contract can be divided into 2 main typesa) Actual Breach of Contract: Actual breach of contract takes place when one of the
parties to a contract fails to perform his promise, when the performance is due. For
example A agrees to deliver certain goods to B on a certain date. A does not supply
those goods on that date. This is actual breach of the contract.
b) Anticipatory Breach of Contract: Anticipatory breach of contract occurs when a
party to the contract declares his intention of not performing the contract, before
the performance is due. For example,
A contracts to supply certain goods to B on
st
1 January. Just before this date, A informs B that he will not supply those goods.
This is anticipatory breach of contract.

Q.21 Write a short note on Agreement in Restraint of

Marriage.
Agreement in restraint of Marriage: According to Section 20, every
agreement in restraint of the marriage of any person other than a minor is void.
Such an agreement is considered to be opposed to public policy. The expression
restraint of marriage means any restriction or limitation, imposed on individual's
rights to marry.
Example: 'A' promised to marry 'B' only and none else and to pay 'B' a sum of
Rs.2,000 if he married someone else. 'A' married 'G. It was held that the
agreement was void.

Q.22 Explain law relating to Agreement in Restraint of Legal

Proceedings.
Agreement in restraint of legal Proceedings: According to Section 28 of
Indian Contract Act, every agreement, by which any party thereto is
restricted absolutely from enforcing his rights under or in respect of any
contract, by the usual legal proceeding in the ordinary tribunals, or which
limits the time within which he may thus enforce his rights, is void to that
extent.
Section 28 contains two points as under:
1. An agreement, which wholly or partially restricts the parties from having recourse
to a court of law, is void to that extent, being opposed to public policy.
2. An agreement, which cuts the period of limitation, prescribed by the law of
limitation, is void to that extent, as its object is to defeat the provisions of law.

Exceptions 1. A contract by which two or more persons agree to refer future disputes arising
out of the contract, to arbitration, is valid and binding.
2. A contract in writing, by which two or more persons agree to refer a pending
dispute to arbitration, is not rendered illegal by Section 28.
It may be pointed out that Section 28 applies only to rights arising out of a contract.
It does not apply to civil wrongs or torts.

Q.23 Explain the

Doctrine of Frustration of contract.

Doctrine of Frustration: A contract, which was capable of being performed at

the time, when it was entered into, may subsequently become impossible to
perform because of some event or circumstances beyond the control of the parties,
as a result of which, the performance becomes impossible or unlawful. This is
known as the doctrine of supervening (subsequent) impossibility or the doctrine of
frustration.
Supervening impossibility is of three types- physical, legal and frustration.

1) Physical Impossibility: The performance of a contract is made impossible by

destruction of the specific thing essential to the performance of the contract.
2) Legal Impossibility: Here the performance of the contract is made legally
impossible either by a change in the law or by operation of the law. The law may
actually forbid the doing of some act undertaken in the contract. In legal
impossibility the original contract becomes void.
3) Frustration: Here there is change of circumstances so that the very purpose or
object of the contract fails to materialize. In Krell V/s. Henry, H hired a room from
K for two days with the object
(both parties knew) of using the room for
viewing the coronation procession of Edward VII. Due to the kings illness, the
procession was cancelled. It was held that, the contract was discharged and H was
not liable to pay the room rent, as the existence of the procession was the basis of
the agreement.