Al-Ameen College of Law

Model Answer Paper

Contract-I

UNIT-I
1.a. Define offer. Explain the rules relating to valid offer.

Ans:

Introduction

A contract is an agreement which can be enforceable by law. An

agreement between the parties is one of the essentials of valid contract. An
agreement arises by an “offer” by one of the parties and “acceptance” by the other.

Definition

Section 2(a) of The Indian Contract Act 1872, defines offer as, “When one
person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said
to make a proposal”

As per definition there are three main essentials of valid offer. They are as
follows”

1. The person who makes the offer should communicate it to the

person to whom it is made.
2. The proposal should be made with the view to obtaining the assent
of the offeree.
3. The offer should make the proposal signifying his willingness to
do or to abstain from doing anything.

The person who makes the proposal or offer is called “offeror”, and the
person to whom the offer is made is called “offeree”.
Illustration

A’s willingness to sell his car to B for Rs.1,00,000. If B accepts to purchase

the same then it results in agreement. Here A’s willingness to sell his car to B
amounts to offer and B if he gives his assent then it amounts to acceptance. But if a
statement is made without any intention to obtain the assent of other party thereto,
that cannot be termed as valid offer.

An offer to be valid must contain the following essentials:

1. Every proposal must be communicated

2. It must be made with an intention to create legal relationship

3. It must be certain and definite

1. Offer must be communicated

According to Sec 2(a) of the Indian Contract Act 1872 it is clearly said that
the offer made should be communicate to the other party. Communication may not
be always being in express form.

Sec 9 provides “In so far as the proposal or acceptance of any promise is

made in words, the promise is said to be express. In so far as such proposal or
acceptance is made otherwise than in words the promise is said to be implied”.

Express Offer

An offer would be an express offer when it is made by words of mouth or by

writing.

Illustration

A writes a letter to B, willingness to sell his horse for the consideration of

Rs. 2000, this is an example for express offer.
Implied offer

An offer made otherwise than in words is said to be an implied offer. it is an

offer inferred from the conduct of the party.

Illustration

Where a tramway company runs trams on a particular route, the company is

said to make an offer to carry intending passengers over the route at scheduled
fares. The offer of the company is an implied offer.

Case: Wilkie Vs London Passenger Transport Board

In this case it was held that a person who boards a bus or who heirs a taxi,
hereby he undertakes to pay the fare to his destination even though he makes no
express promise to do so.

Case: Haji Mohd. Ishaq Vs Mohd. Iqbal

In this case the plaintiffs supplied certain goods to defendants on orders

given by the go-between man. The defendants accepted the same and also paid the
part payment of price. A liability to pay the balance was held to have arisen. The
Apex Court held that the defendants by their clear conduct of accepting the goods
and never repudiating any of the numerous letters and telegrams of the plaintiff
demanding the money from them, clearly showed that a direct contract which in
law was called an implied contract by conduct was brought about between them.

When communication of offer completes?

If an offer to be valid, it must be communicated to the person or persons to

whom it is made.

Sec 4 of the Indian Contract Act 1872, says that “the communication of offer
is complete when it comes to the knowledge of the person to whom it is made”.
Case: Lalman Shukla Vs Gauri Dutt

The defendant’s nephew was absconded from home. The plaintiff, who was
defendant’s servant, was sent in search of that missing boy. Later on th defendant
through hand bills offered a reward of Rs.501 to anyone who might find out the
boy. The plaintiff, who was ignorant of this reward was successful in searching of
boy. When he came to know of the reward, which had been announced in his
absence, he brought an action against the defendant to claim this reward.

It was held that since the plaintiff was ignorant of the offer of reward, his act
of bringing the lost boy did not amount to the acceptance of the offer, and therefore
he was not entitled to claim the reward.

Offer and Invitation to treat distinguished

Sometimes a person may not offer to sell his goods, but make some
statement or give information with a view to invite others to make offers on that
basis.

Example:

A book seller sends catalogue of books indicating prices of various books to

many persons. This catalogue is not an offer to sell those books at prices indicated
against those books. This is an invitation to treat. If any person is intended to buy
those books then he has to make offer to that person who circulated it. The person
who circulates the catalogue has discretion to accept or not to accept the offer.

Case: Pharmaceuticals Society of Great Britain Vs Boots Cash Chemists Ltd

The defendants were having the business of retail sale of drugs. Medicines
were displayed on the shelves and their retail prices were also indicated. They had
a “self-service” system. On entry in to the shop a customer was given a wire
basket. After selecting the articles needed by a customer he could put them in the
basket and take them to cash desk. The defendants had put a registered pharmacist
near the cash counter, who had been authorized to stop any customer removing any
drug from the premises.
 It was held that if an intending buyer was willing to purchase the goods at a
price mentioned on the tag he could make an offer to buy the goods. The
shopkeeper had the option to accept the offer or to reject the same. The contract
would arise only when the offer is accepted. No customer can force the shopkeeper
to sell the goods at the price mentioned on the tag.

2. Intention to create legal relationship

It is not sufficient that offer to be communicated but it also essential that

it must be made with the intention to create legal relationship.

Example:

If a father promises to his daughter while going out of station that he will
bring a camera for her, it cannot said to be valid offer because he does not intend to
bind himself legally nor does he make it with a view to obtain the assent of his
daughter.

Case: Balfour Vs Balfour

In this case, the defendant was employed on a government job in Ceylon. He

went to England with his wife on leave. Wife she was not able to accompany her
husband while he was back to Ceylon because of health reason. The husband
promised to pay pound 30 per month as maintenance for the period she lived apart.
He failed to pay this amount and wife sued against him for the same.

It was held that there being no intention to create legal relationship, the
husband was not liable.

Conclusion:

The combination of offer and acceptance results in agreement. A person

must show his willingness to do or to abstain from doing anything to another. Most
of the people are confused with offer and invitation to offer. In invitation to offer
the persons are invited to make offer like inviting tenders or persons to an auction
etc… The person who is giving offer must have intention to create legal
relationship.

OR
A stranger to the Consideration may sue on the contract but not a stranger to
the contract. Discuss.

Ans:

Introduction

Consideration is one of the essentials of valid contract. The contract without

consideration is void. So there must be something in return to the benefit. There is
no rule that consideration to the contract must be adequate. But there must be
something called consideration to the contract without which the contract becomes
unenforceable. But there are some exceptions where the agreement without
consideration is valid, viz. contracts of gifts, compensation for voluntary services
etc… At the desire of the promissory the promise or any other person can give
consideration for the contract, so he has got the right to sue for enforcement. But a
person who is stranger to the contract cannot sue for the enforcement of the
contract.

Section 2(d) of Indian Contract Act, 1872 defines consideration as follows:

“When at the desire of the promisor, the promisee or any other person has
done or abstained from doing something or does or abstains from doing something
or promises to do or abstain from doing something, such act or abstinence or
promise is called a consideration for the promise”.

Price paid by the one party for the promise of the other Technical word
meaning QUID-PRO-QUO i.e. something in return.

So the essential of valid consideration can be said as follows:

1. Consideration is given at the desire of the promisor
 2. Consideration may be given by the promisee or any other person

3. The consideration is past, present or future

a. has done or abstained from doing something or

b. does or abstains from doing something or
c. promises to do or abstain from doing something,

4. There should be some act or abstinence or the promise by the promise.

Privity of Consideration

The second essential element of consideration is consideration by promisee

or any other person i.e., ‘Privity of Consideration’. In India there is possibility that
consideration for the promise may move from the promisee but a third person, who
is not a party to the contract. In England the position is different. There the rule is
that consideration must move from the promisee and nobody else it was held in the
case Thomas Vs Thomas.

Illustration
‘A’ promises to give his watch to ‘B’ and a consideration of Rs. 2000 for the
same is given to A by X and not by B. This will not constitute a valid contract in
England as consideration for A’s promise in favour of B was not provided by the
promisee B himself but by somebody else. Such a contract will be valid in India as
Section 2(d) clearly provides it can be given by the promisor or any other person.

Case: Chinnaya vs. Ramaya

Facts: A, an old lady granted an estate to her daughter (the defendant) with a
direction that the daughter should pay an annuity of Rs.653 to A’s brothers (the
plaintiffs). On the same day defendant promised the plaintiffs that she would pay
the annuity as directed by A. the defendant failed to pay the stipulated amount so
an action was brought by the plaintiffs for the execution of the contract. The
defendant contended that since plaintiffs themselves had furnished no
consideration, they had no right of action.
It was held by Madras High Court that, in this agreement i.e. between defendant
and plaintiffs, the consideration has been furnished by the defendant’s mother is
enough consideration to enforce the promise between the plaintiffs and the
defendant.

In the above case it has been noticed that A has entered into a contract with
B, but A himself has not given any consideration to B, but consideration has been
given by a third party, C to B. Although A is stranger to consideration, he can still
enforce the contract against B. this is because of rule under the Indian law which
permits consideration to be provided either by the promisee or by any other person.
But in England consideration must be moved from promisee not by any other
person, and they cannot maintain an action.

Privity of Contract

The doctrine of Privity of Contract means that only those persons to the
contract can enforce the same. A stranger to the contract cannot enforce a contract
even though the contract may have been entered into for his benefits. If in a
contract between A and B some benefits has been conferred upon X, X cannot file
a suit to enforce the contract because A and B are the only parties to the contract
where as X is a stranger to the contract.

English Law
According to English law only the parties to the contract can sue each other
but a stranger to a contract or consideration cannot sue for enforcement.

Case; Tweddle Vs Atkinson

Facts: A married a girl, B. after this marriage there was a contract in writing
between A’s father and B’s father that each would pay a certain sum of money to
A and that A will have the power to sue for such sums. After the death of two
fathers, A brought an action against the executors of B’s father to recover the
promised amount.
It was held that A could not sue for the same, as plaintiff is stranger to both
consideration and contract.

Indian Law
The rule that “Privity of Contract” is needed and a stranger to the contract
cannot bring an action is equally applicable in India as in England. But in India
stranger to consideration has right to sue for enforcement.
Case; Jaman Das Vs. Ram Avtar
Facts: A had mortgaged some property to X. A then sold this property to B, B
having agreed with A to pay off the mortgage debt to X. X brought an action
against B to recover the mortgage money.

It was held by the Privy Council that since there was no contract between X
and B, X could not enforce the contract to recover the amount from B.

Conclusion:

Under Indian Law the consideration may be moved by the promisee or any
other person and the stranger to such consideration has a right of action. But any
stranger to the contract has not got right of action. Under English law both stranger
to contract and consideration has no right of action.

b. Solve the following problems:

“A” out of natural love and affection promises to give his son
“B” Rs. 1,000 under a registered document. Is it a valid contract?
Solution:
Yes it is a valid contract.
If any promise has been done due to natural affection and love, it is valid
contract even though there is no consideration for such promise. Section 25 of
Indian Contract Act 1872, gives a general rule which declares agreements without
consideration is void. The section however mentions the following three
exceptions:
1. Promise due to natural love and affection
2. Compensation for past voluntary services
3. Promise to pay a time barred debt.

This above case falls under the first exception i.e. promise due to natural love
and affection and same is valid.
The following requirements have to be satisfied in order that the case is covered
under this section:
1. The parties to the agreement must be standing in a near relationship to each
other.
2. The promise should be made by one party out of natural love and affection
for the other.
3. The promise should be in writing and registered.
 The above case satisfies these three requirements. Here A and B are closely
related i.e. father and son. He promised it with natural love and affection and the
document has been written and registered. Thus we can say that it is valid contract.
In case Bhiwa vs. Sivaram, parties were the brothers. The defendant gives ½ share
of the property to his brother due to natural love and affection, which was not the
ancestral property and plaintiff has not got any right of share. Then the plaintiff
sued for the enforcement of the contract. The Bombay High court decided in
favour of plaintiff on the ground that the agreement in question had been out of
love and affection between the parties who were in near relation to each other. It
was natural love and affection which prompted the defendant to give ½ share of the
property to his brother.

Thus we can say that in the above given case the contract is said to be valid.

OR

‘X’ a lady agreed for consideration to live in adultery with ‘Y’ Subsequent to
the agreement, ‘X’ had performed the promise. ‘Y’ commits breach. Advice
‘X’.
Solution:
In this case ‘X’ has not got any right to sue for consideration as the
agreement entered between the parties is illegal and immoral.
This case falls under legality of consideration. In any contract there must be
lawful object and consideration. The Section 23 of Indian contract Act speaks
about what consideration and object are lawful. The consideration or object of an
agreement is lawful, unless-
a. It is forbidden by law; or
b. Is of such a nature that, if permitted it would defeat the provisions of law; or
c. If fraudulent; or
d. Involves or implies injury to the person of another or the court regards it as
immoral, or opposed to public policy.
In each case, the consideration or object of an agreement is said to be
unlawful. Every agreement of which the object or consideration is unlawful
is void.
Immoral agreements are those agreements when the consideration or object
of an agreement is regarded by the court to be immoral or opposed to public
policy. These agreements are considered to be unlawful and same has also
been declared void by Section 23.
 In the case, Manicka Vs. Muniammal, the defendant executed a
promissory note in favour of the plaintiff, a married women, in consideration
for her having had a cohabitation with him. In this case since the plaintiff
was a married woman, the illicit cohabitation with the defendant had
amounted to adultery. It was held that there can be no doubt whatever that
where the illicit cohabitation is adulterous intercourse and, therefore, it is
opposed to law, it cannot possibly sustain a promise to pay, or constitute a
valid consideration. The plaintiff’s claim for enforcing promissory note was
rejected.
So in the above mentioned case, the facts are as similar to the problem
given. Thus it can be decided that in above case it is unlawful consideration
and a lady ‘X’ has not got any right to sue for such amount.

UNIT-II

2.a. Define ‘Free consent’. What are the elements of fraud? Cite leading cases.

Ans:
Introduction

Free consent is one of the essentials of valid contract under Section 10 of

Indian contract Act 1872. If any party to the contract gives his assent to the
contract by coercion, undue influence, fraud or misrepresentation then the
agreement is said to be voidable. If the contract is entered to the contract by
mistake, then the agreement is held to be void. Under voidable contracts one of the
parties to the contract at his option can execute or refuse the agreement. If it is
under mistake it is not enforceable under law as it is void agreement.

Meaning and definition:

Section 14, of Indian Contract Act 1872, consent is said to be free when it is
not caused by-
1. Coercion as defined by Section 15, or
2. Undue Influence, as defined in Section 16, or
3. Fraud, as defined under Section 17, or
4. Misrepresentation as defined in Section 18, or
5. Mistake, subject to the provisions of Section 20, 21 and 22.
 If consent of a party to the contract is not free, i.e. which falls under the above
mentioned section, then it is not called valid contract. When an agreement is
caused due to coercion, undue influence, fraud or misrepresentation then the
agreement is said to be voidable at the option of the party whose consent was so
caused. If, however, the consent is caused by mistake, the agreement is Void.

Illustration for voidable contracts:

A threatens to shoot B if does not agree to sell his property to A at a stated

price, B’s consent in this case has been taken by coercion.

Illustration for void contracts:

X agrees to buy from Y a certain horse. It turns out that the horse was dead
at the time of negotiation, though neither party was aware of the fact. The
agreement is void.

FRAUD

When consent of a party to the contract has been obtained by fraud, the
consent is not free consent which is necessary for valid contract. In such case the
agreement is voidable at the option of that party from whom the consent was
obtained by fraud.

Section 17 of Indian Contract Act 1872, defines fraud as, “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 intent to deceive another party thereto or his
agent, or to induce him, to enter into the contract:

1) The suggestion, as to a fact, of that which is not true by one who does not
believe it to be true;
2) The active concealment of a fact by one having knowledge or belief of the
fact;
3) A promise made with any intention of performing it;
4) Any other act fitted to deceive;
5) Any such act or omission as the law specially declares to be fraudulent.

Explanation:
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.

1) False statement of fact [Section 17(1)]

In order to constitute fraud, it is necessary that there should be a
statement of fact which is not true. The person making such statement
believes it not to be true. Mere expression of opinion will not consider
as fraud.

Illustration
‘A’ a person aged about 60, who is beyond insurable age represents
himself as of age 48 and entered in to an agreement of insurance. This
amounts to fraud and the insurer is entitled to avoid the policy.

Case: Edington Vs. Fitzmaurice

In this case a company was in great difficulties and needed funds to
pay some pressing liabilities. The company raised the amount by issue
of debentures. While raising the loan, the directors stated that the
amount was needed by the company for its development, purchasing
assets and completing buildings. It was held that the directors had
committed a fraud.

Mere silence is no fraud

To constitute fraud there must be some representation as to
certain untrue facts. Active concealment is also considered to be
equivalent to a statement because in that case, there is a positive effort
to conceal the truth and create untrue impression on the mind of the
other. Mere silence, as to facts is no fraud.

Case: Keates Vs. Lord Cadogan

A let his house to B which he knew was in ruinous condition.
He also knew that the house is going to be occupied by B
immediately. A did not disclose the condition of the house to B. It was
held that he had committed no fraud.
When there is duty to speak in some cases, the person keeping
silence to speak, it amounts to fraud. If there is any material change
then it is the duty to tell the other party, or it amounts to fraud. When
silence being equivalent to speech, means keeping silent as to facts
which create impression as to existence of the situation.
2) Active Concealment [Section 17(2)]
When there is an active concealment of a fact by one having
knowledge or belief of the fact, that can also be considered to be
equivalent to a statement of fact and amount to fraud. By an active
concealment of certain facts, there is an effort to see that the other
party is not able to know the truth and he is made to believe as true
which is in fact not so.

Illustration:
B, having discovered a vein of ore on the estate of A, adopts
means to conceal, and does conceal, the existence of the ore from A.
Through A’s ignorance, B is enabled to buy the estate on an under
value. The contract is voidable at the option of A.

Case: With Vs. O’Flangan

In this case a medical practitioner started negotiation in January, 1934
for the sale of his practice. He stated that his average practice was
worth pond 2,000 per annum. The contract for the sale of practice was
signed on May 1, 1934, but by that time the position of his practice
had changed as his practice had fallen considerably owing to his
illness and consequent absence from practice. These changed
circumstance were not disclosed to the purchasers of practice and
when they took charge, they found that the practice was practically
non-existent. They brought an action for the rescission of the contract
on the ground that the changed circumstances were not communicated
to them.
It was held that the representation made in this case to induce
the other party to the contract to enter into the contract was a
continuing one and it was the duty of the vendor to notify the change
of circumstances to the purchaser if the same occurred before the
contract was signed. Under these circumstances, the plaintiffs were
entitled to rescind the contract.

3) Promise made without any intention to perform it [Section 17(3)]

When a person makes a promise, there is deemed to be an undertaking
by him to perform it. If there is no such intention when the contract is
being made, it amounts to fraud. If any person takes loan without
having intention to repay it amounts to fraud.
 4) Any other act fitted to deceive [Section 17(4)]
This clause is general and is intended to include such cases of fraud
which would not otherwise come within the purview of the earlier
clauses such as (1), (2) and (3) of Section 17.

5) Any act or omission which the law declares as fraudulent [Section 17(5)]
Fraud also includes any such act or omission as the law specially
declares to be fraudulent. In some cases, the law requires certain
duties to be performed, failure to do which is expressly declared as a
fraud. Under section 55 of Transfer of property Act, 1882 declares
certain kinds of omission on the part of the seller or the buyer as
fraudulent. It provides that:
1. The seller of immovable property is bound to disclose to the buyer
any material defect in the property or in the seller’s title thereto of
which the seller is, and the buyer is not aware, and which the buyer
could not with ordinary care discover, and
2. The buyer of the immovable property is bound to disclose to the
seller any fact as to the nature or extent of the seller’s interest in
the property of which the buyer is aware, but of which he has
reason to believe that the seller is not aware and which materially
increases the value of such interest, and on omission to make the
above stated disclosure is fraudulent.

Case: Akhtar Jahan begum Vs. Hazarilal

A sold some property to B stating in the sale deed that he would
not be liable to B if he suffered any loss owing to A’s defective
title. A had, earlier to this transaction, sold this property to
somebody else, but did not inform B about it. it was held that A
had committed fraud and the contract was voidable at the option of
B.

Wrongful Intention
In order to constitute a fraud, it is necessary that a person should
intentionally make a false statement with intent to deceive another party thereto to
induce him to enter in to contract. If there is no such intention to deceive a person
then it will not constitute fraud.
Case: Derry vs. Peek
The directors of the company issued a prospectus stating that they had got
the authority to run tramways with stem or mechanical power instead of animal
power. In fact, a plan has been submitted for the same and the directors honestly
believed that the Board of Trade, who had to accord its sanction for the same,
would do so as a matter of course. The Board of Trade refused the sanction and the
company had to wound up. The respondents who had share in this company
brought an action against the directors of the company that they have made deceit.
But in this case the House of Lords held that here the directors are not done any
fraud. As to constitute fraud there must be false representation and must have done
with wrongful intention.

Conclusion
Any party to the contract must give his free consent to a contract as to make
such contract valid. If any person because of fraud entered in to a contract then
those contracts are voidable contract. The person who makes false representation
which he believes it to be false and make other person enter in to contact
constitutes fraud. So it is left to the other party who gave his consent as such to
execute or to reject the same.

OR

What is capacity to contract? Briefly explain its various aspects.

Ans:
Introduction
To enter into any contract the parties must be competent to enter in to the
contract, i.e. one who is major, of sound mind and who is not barred by law not to
enter in to contract. If any party is not competent to enter in to contract then such
contracts are void contracts.

Capacity to contract

Definition

According to Section 11, “Every person is competent to enter into contract

who is of the age of majority according to the law to which he is subject, and who
is of sound mind, and is not disqualified from contracting by any law to which he
is subject.”
 Categories of persons are not competent to enter in to a contract;

The following three persons are not competent to enter in to contract:

1. A person who has not attained the age of majority, i.e., one who is a
minor.
2. A person who is of unsound mind.
3. A person who has been disqualified from contracting by some law.

1. Minor
A person who is a minor is not competent to enter in to contract,
except in cases of necessaries. The minor’s contracts are held to be Void ab
initio. Section 3 of Indian majority Act, 1875 provides about the age of
majority. It states that a person is deemed to have attained the age of
majority when he completes the age of 18 years, except in case of a person
of whose person or property a guardian has been appointed by the court, in
which case the age of majority is 21 years.

Nature of minor’s agreement

Minor is not competent to enter into contract, the minor’s agreement
is void.

Case: Mohori Bibee Vs. Dharmodas Ghose

In this case it was held that agreement by minor was void.
Facts: The plaintiff Dharmodas Ghose, while he was a minor, mortgaged his
property in favour of the defendant, Brahmo Dutta, who was money lender
to secure a loan. At the time of the transaction the attorney, who acted on
behalf of the money lender, had the knowledge that the plaintiff was a
minor.
The minor brought an action against the money-lender stating that he
was a minor when the mortgage was executed by him and, therefore, the
mortgage was void and inoperative and the same should be cancelled. By the
time of Appeal to the Privy Council the defendant, Brahmo Dutt died and
the Appeal was prosecuted by his executors.

The defendant’s contention that the minor misrepresented himself as a

major so no relief should be given to him. If the mortgage cancelled then he
should be asked to refund of Rs. 10,500/-.
In this case the defendant contention was rejected and held void, and it was
held that minor could not be asked to repay the loan taken by him.

Restoration or compensation by a fraudulent minor

English Law
Under English Law if any minor obtained undue benefit in any
transaction, he is required to restore back the benefit so received by him,
under the equitable doctrine of restitution.

Case: Leslie Vs. Sheill

In this case, the defendant, a minor, falsely misrepresented himself to
a major, and obtained two loans of pound 200 each from the plaintiffs, who
were money-lenders. The plaintiffs brought an action to recover pound 475,
being the amount of loan taken and interest thereon. It was held that the
money could not be recovered. If that were allowed, that would amount to
enforcing the agreement to repay loan, which is void under the Infant’s
Relief Act, 1874.

Under doctrine of restitution the restoration of ill gotten gains may be

restored back. In case of money paid it cannot be traced and with regard to
restitution of money is concerned the doctrine of restitution does not help.

Indian Law
Under Indian Law compensation cannot be claimed under Section 64,
65 and 70 of Indian Contract Act. Can Compensation under Section 39 and
41 of Specific Relief Act, 1877 claimed? There are two different views by
different High Courts.

Lahore High Court

In case Khan Gul vs. Lakha Singh, the minor was held liable to refund the
same.

Allahabad High Court

Ajudhia Prasad Vs. Chandan Lal
In this case it was held that the minor cannot be asked to give
compensation but if the ill-gotten gains can be traced then he may be
compelled to restore it back.
Minors Liability for Necessaries
The reimbursement is permitted for the necessaries supplied to the
minor from his property. The minor cannot be personally held liable but the
reimbursement can be done from his property.

Kunwarlal vs. Surajmal

In this case it was held that the house given to a minor on rent for
living and continuing his studies is deemed to be supply of necessaries
suited to the minor’s condition in life, and the rent for the house can be
recovered.

Under English law, an infant is bound by the contract of

apprenticeship or services because such contracts are beneficial o him in
earning his livelihood.

Case: Doyle Vs. White City

In this case the plaintiff was a minor and applied for licence as a
boxer. In contract this minor declared that he will abide by the rules. A
licence was duly granted to him and renewed thereafter. According with
rules the plaintiff was disqualified, as in one of the contests for hitting below
the belt and a sum of pound 3,000 due to him was withheld. The infant sued
to recover the amount.

It was held that the infant’s contract with the Board of Control closely
connected with the contract of service that the same was binding against
him, and therefore, he could not recover the amount.

Under Indian Law there are different rules for Contract service and
apprenticeship. Minor’s contract of service is void, whereas that of
apprenticeship is valid.

The minor’s contract for apprenticeship is void, it can be explained

this following case law.

Raj Rani Vs Prem Adib

Facts: The father of Raj Rani who was a minor, entered in to a
contract on her behalf with Prem Adib, a film producer. According to the
contract, Raj Rani who was to act as a film actress in the defendant’s studio,
on payment of a certain amount. Raj Rani was not given any work. She sued
the producer for the breach of contract. It was held that the plaintiff, being a
minor, the contract was void. It was observed that the contract of service
entered into by the father on behalf of the minor daughter is void.

The position of a person of unsound mind

Section 11 clearly speaks that only the person who is of sound mind
can enter in to a contract. The person who is of unsound mind is not
competent to enter in to contract. He is not capable of transferring any
property by a deed of gift, etc., and a transfer by him would be void ab
initio.

What is sound mind for the purpose of entering in to the contract is

clearly defined in the Section 12, “A person is said to be of sound mind for
the purpose of making a contract if, at the time when he makes it, he is
capable of understanding it and of forming a rational judgement as to its
effect upon his interest”.

Soundness of mind is required while entering into the contract. It is

possible that a person, who is usually of unsound mind, but occasionally of
sound mind, may make a contract when he is of sound mind. Thus, a patient
in a lunatic asylum, who is at intervals of sound mind, may contract during
those intervals.

A person who is usually of sound mind but occasionally of unsound

mind may not make contract when he is of unsound mind. Thus, a sane man,
who is delirious from fever or who is so drunk that he cannot understand the
terms of the contract or form a rational judgement as to its effect on his
interests, cannot contract while such delirium or drunkenness lasts.

Case: Indar Singh Vs. Parameshwaradhari Singh

Facts: in this case on the death of his father, the defendant No.1
purported to sell some properties to the plaintiff for a consideration of
Rs.7,000 and executed a sale deed for the purpose. The property purported to
sold under sale deed were worth 25,000. Mother of the defendant No.1
pleaded that her son was a congenital idiot, incapable of understanding
transactions relating to the transfer of properties, and he is of unsound mind
wonders here and there, therefore the contract made by him is void.
It was held that the defendant No.1 was incapable of understanding the
business and forming a rational judgment as to its effect upon his interest at
the relevant time and, therefore, the sale deed executed by him in favour of
plaintiff was void and will not confer any title on them.

Onus to prove Unsoundness

It is settled law that onus of proving unsoundness of mind of a person
always rests upon him who alleges such state of mind of person.

Case Jyotindra Bhattacharjee Vs. Mrs. Sona Balon Bora

Late Bora a Hindu, governed by Dayabhaga School, and absolute
owner of the suit property, sold the said property. The appellant by dint sale
deed as well as mutation order, got possession of property. The wife of Bora,
sons and daughters objected to the said sale and challenged the transaction.
One of the contention raised by the respondents was that late Bora was not
of sound mind at the time of execution of the sale deed.
In this case the onus of proof was laid on wife and children of Late
Bora. They failed to establish that late Bora was not a normal person.
Nothing was there on record to prove that late Bora was ever medically
examined to support the contention of the respondents that he was of
unsound mind.

Conclusion
Thus any person can enter in to a contract if he is of age of majority,
of sound mind and a person who is not disqualified to enter in to a contract.
In case of minor the contact of minors are void ab initio. If any minor
misrepresents himself as a major and make contract then the other party has
got the right to recover such ill-gotten gains or the compensation by the
minor. If the other party knows that the minor entering in to the contact, then
he cannot seek for the remedies of its breach. In case of a person of unsound
mind, if he enters into a contract then it is void contracts and the onus of
proving that he is of unsound mind relies upon the party who alleges such
state of mind.

b. Write short notes on:

Misrepresentation
If any person enter in to a contract on the basis of false statement
given by other party is voidable contract. An innocent misstatement or false
statement is known as misrepresentation. Section 18 of Indian Contract Act,
1872 defines “Misrepresentation” as under:
“Misrepresentation means and includes-
 1. 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;
2. Any breach of duty which, without an intent to deceive, gains an
advantage to the person committing it, or anyone claiming under
him, by misleading another to his prejudice or to the prejudice of
anyone claiming under him;
3. Causing, however innocently, a party to an agreement, to make a
mistake as to the substance of the thing which is the subject of the
agreement.”

Positive Assertion, i.e., an explicit statement of fact by a person of

that which is not true, though he believes it to be true amounts to
misrepresentation. There should be a false statement made innocently, i.e.,
without any intention to deceive.
Case: Derry Vs Peek
The directors of the company issued a prospectus stating that they had
got the authority to run tramways with stem or mechanical power instead of
animal power. In fact, a plan has been submitted for the same and the
directors honestly believed that the Board of Trade, who had to accord its
sanction for the same, would do so as a matter of course. The Board of Trade
refused the sanction and the company had to wound up. The respondents
who had share in this company brought an action against the directors of the
company that they have made deceit. But in this case the House of Lords
held that here the directors are not done any fraud it is mere
misrepresentation. As to constitute fraud there must be false representation
and must have done with wrongful intention. In this case there is no such
intention to deceive.

OR

Solve the problem:

“A” tells his wife that he would commit suicide if she did not transfer
her personal asset to him. She does so under threat. Can wife avoid this
contract?
Solution:
Yes in this case the wife can avoid the contract. Here the wife entered
into the contract because of coercion. So under coercion if any people
entered in to a contract, those contracts are voidable at the option of that
party who gave his/her consent to the contract because of threat or coercion.
Section 14 of Indian Contract Act, 1872 defines about free consent. It is as
follows:
“Consent is said to be free when it is not caused by-
1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake.

If consent of one of the parties is not free when it has been caused by one
or the other factors stated above, the contract is not a valid contract. When
consent to an agreement caused by coercion, undue influence, fraud,
misrepresentation, the agreement is a contract voidable at the option of the
party whose consent was so caused. If it is caused by mistake then those
agreements are held to be void.
According to Section 15, “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.”

So threatening to do some act forbidden by Indian Penal Code is

considered to be coercion. In the above case the person threatening the other
saying that he is going to commit suicide, so suicide is an act forbidden by
Indian Penal Code. So in this case the wife entered in to contract because of
coercion and she can avoid the contract. To support my answer, like to quote
one of the case law which is similar to the problem.

Case: Chikkan Ammiraju V. Chikkam Seshama

In this case A, a Hindu, by a threat of suicide, induced his wife and
son to execute a release deed in favour of A’s brother in respect of certain
properties claimed as their own by the wife and the son. The question before
the court was whether a threat to commit suicide could be considered to be
an act forbidden by the Indian Penal Code.
It was held that a threat to commit suicide amounted to coercion
within the meaning of Section 15 and therefore the release deed was
voidable.
 Thus it can be said in this above given problem the consent is taken by
coercion and it is voidable at the option of the wife. So wife can avoid such
contract.

UNIT-III
3. a. Explain the doctrine of ‘frustration’ with reference to decided
cases.

Ans:
Introduction:
The agreement entered by the parties discharged by many ways such
as discharge by performance, by breach of contract, impossibility to perform
and by agreement and novation. Once the contract has been discharged, the
parties are ceased to bind by them.

The essential idea upon which the doctrine of frustration is based is

that of impossibility of performance of the contract; in fact impossibility and
frustration are often used as interchangeable expressions. The changed
circumstances make the performance of the contract impossible and the
parties are absolved from the further performance. They may not promise to
perform the impossibility. The ‘Doctrine of Frustration’ is really an aspect or
part of the law of discharge of contract by reason of supervening
impossibility or the illegality of the act agreed to be done and hence come
within the purview of Section 56 of the Contract Act.

When the performance of the contract becomes impossible the

purpose which the parties have in mind is frustrated. If the performance
becomes impossible because of a supervening event, the promisor is excused
from the performance of the contract. This is known as “Doctrine of
Frustration’.

Case: Taylor Vs. Caldwell

Facts: A agreed with B to give him the use of music hall and gardens for
holding concerts on four different dates. B agreed to pay a rent of £ 100 for each of
the four days. Before the date of performance arrived, the music hall was destroyed
by fire. B sued for nthe breach of contract.
It was held that the contract had become void because of the perishing of the
hall without any fault on the part of A. The performance of the contract had
become impossible and, therefore, A was not liable for the non-performance of the
contract.
In the below stated case the ‘Doctrine of Frustration is not applicable.
Case: Gujarat Housing Board vs. Vipul Corporation
The petitioner Housing Board had entered into contract with contractor for
water proofing work of houses. Petitioner had knowledge that said houses where
work was to be executed were in the possession of allottees. Held, that mere denial
by the allottees to allow work to be performed would not be such impossibility as
envisaged by Section 56 to render such contract void.

Doctrine of frustration can be explained under following situations:

1. Death or Incapacity of the parties
2. Frustration by virtue of Legislation
3. Frustration due to change of circumstance

1. Death or Incapacity of the parties

When the nature of the contract is such that it requires the personal
performance by a particular person, the contract is deemed to be
conditional upon the continued life or good health of the person so
that it is possible for him to perform the contract.

Illustration
‘A’ Promises to paint a picture for ‘B’ by a certain day at a
certain price. ‘A’ dies before the day. The contract cannot be enforced
either by ‘A’’s representative or by ‘B’.

In the above mentioned illustration the contract is based on

personal skill of the parties, the death of a party in such a case, puts an
end to the contract, and the representatives cannot be made liable to
perform such contract.

Case: Robinson vs. Davison

The defendant’s wife, who was an eminent piano player, promised to play
piano at a concert on a particular day. She was unable to give her performance due
to illness. It was held that the performance of the contract depended on the
continued good health of the defendant’s wife and the contract was discharged due
to her illness. The defendant could not be made liable to pay compensation for the
non-performance of the contract.
2. Frustration by virtue of Legislation
Where, a law promulgated after the contract is made, makes the
performance of the agreement impossible, the agreement becomes void.

Case: Rozan Mian vs. Tahera Begum

An agreement was entered into between the plaintiff and the
defendant on 3/12/1973 for sale and purchase of Thika Tenancy. The
agreement having not been carried out, the plaintiff filed a suit for
specific performance of the contract for sale on 7/2/1974. During the
pendency of the suit, the Culcutta Thika Tenancy Act, 1981, was
promulgated. Section 6 of this Act read Section 4 prohibited the transfer
of Thika tenancy rendering the performance to sell impossible and hence
void. The Apex court ruled that by virtue of the 1981 Act, the land under
the landlord had been vested in the State and the Thika Tenancy under
the landlord became the Thika Tenant under the State. The Apex court
held that agreement to sell is impossible of performance.

3. Frustration due to change of circumstance

Even though there is no physical impossibility of performance of the
contract but because of the change of circumstance made it impossible.

Case: Krell vs. Henry

In this case the defendant agreed to hire the plaintiff’s flat for June 26
and 27, 1902, the days on which the coronation procession of Edward VII
was to pass along a particular road. The defendant’s purpose for hiring
the flat on the specified dates was to have a view of the coronation
procession. The defendant’s had paid some amount as advance and pay
the balance subsequently. Due to the King’s illness, the procession was
cancelled. The defendant refused to pay the balance amount ant the
plaintiff brought an action against him. The court held that the the
purpose of the contract has not achieved because of change of
circumstances i.e., the cancellation of procession due to King’s illness.
So the contract become frustrated and the parties are discharged from
their liability. The plaintiff was held not to recover the balance of the
agreed rent.

No frustration for executed contracts

The doctrine of frustration mentioned in Section 56 applies only to

executory contracts and does not apply to executed contracts.
Case: Dhruv Dev vs. Harmohinder singh

It was held that there is clear distinction between the completed and
an executory contract, and the events which discharge an executory
contract do not invalidate the concluded transfer. In this case, A obtained
from B a lease of land in Tehsil Okara, District Montgomery for Kharif
season 1947 and Rabi season 1948. After obtaining the possession of
land from B, A carried out on agricultural operations for Kharif
cultivation and partly enjoyed the benefit there from by taking fodder,
etc. In 1947 due to partition of the country above stated land went to
Pakistan and A migrated to India. A then filed a suit to recover the rent
paid by him on the plea that the contract had been frustrated.
It was held that there was no agreement, express or implied, that the rent
was payable only if A was able to personally attend to or supervise
agricultural operations, and therefore, by the above stated event, the
transfer of property resulting from the lease granted by B to A had not
become void. It was also observed that Section 56 did not apply to
completed transfers of property. A’s action for refund of the amount was
dismissed.

Mere delay in performance or commercial difficulty of performance is

not considered to be frustration. It is necessary that the performance
become unlawful or impossible, the event in the minds of the person
should be totally upset. Mere likely delay in performance or mere
commercial difficulty will not considered to be frustration.

Conclusion:

The parties will not be binding for the contract once it is discharged.
One of the modes of discharge of contract is impossibility of
performance. When the performance of the contract becomes impossible,
the purpose which the parties have in mind is frustrated. Frustration may
be due to death of the parties, change of circumstances etc. But mere
delay in performance or mere commercial difficulty will not consider as
frustration.

OR
 State the rules relating to appropriation of payments between debtor
and creditor.

Ans:

Introduction
Appropriation of payments is done when the debtor owes several
distinct debts to a creditor, and he makes some payment which is not
enough to cover the payment of all debts; the question which, in such
case, arises is as to which particular debt the payment is to be
appropriated. The rules regarding the appropriation of payments are
contained in Section 59 to 61.

The following are the rules regarding the Appropriation of Payments:

1. Appropriation as desired by the debtor
2. Appropriation as desired by the creditor
3. Appropriation towards debts in order of time

1. Appropriation as desired by the debtor

When the debtor indicates the application of payment to the
discharge of some particular debt, as provided in Section 59. It is as
follows:

“Where a debtor, owing several distinct debts to one person, makes a

payment to him, either with express intimation, or under
circumstances, implying that the payment is to be applied to the
discharge of some particular debt, the payment, if accepted must be
applied accordingly.”

The application of payment of debt is left entirely to the

discretion of the debtor. If, however, the debtor fails to give any
instructions, the creditor can apply the amount to any of the debts
including a time barred debt.

When debtor indicates to creditor that particular debt has to

discharged, the creditor must accordingly. If creditor does not want to
do that he must not accept the payment.
 Clayton’s case:
The debtor may either expressly mention about his intention
regarding appropriation, or it could be implied also, for example,
payment being made is of certain sum which corresponds with one
particular debt, or it is made on a certain day on which a particular
debt falls due, or is made in compliance with a demand by the creditor
as to particular debt.

2. Appropriation by the creditor

In case the debtor does not intimate the creditor either expressly
or impliedly as to which the payment is to be applied, the creditor gets
the discretion to apply it to any debt. He may even apply for the debts
whose recovery has become barred by the law of limitation in force
for the debts whose recovery has become barred by the law of
limitation in force for the time being.

Section 60 reads as follows:

“Where the debtor has omitted to intimate, and there are no

other circumstances indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any lawful debt
actually due and payable to him from the debtor, whether its recovery
is or is not barred by the law in force for the time being as to the
limitation of suits.”

Under this section it clearly states that the creditor has to

appropriate only the lawful debts even though it is a time barred debt.
He cannot make the appropriation to an illegal or void debt.

Case: Syndicate Bank vs. M/s West Bengal Cements Ltd

The plaintiff Syndicate bank filed the suit for the recovery of
Rs. 33, 39,026.75p. During the pendency of the suit the defendants
pad Rs. 7, 40,000 to the plaintiff Bank in the year 1983-84. While
paying the said amount the defendants did not give any special
instructions to the plaintiff as to how the said amount was to be
adjusted. The High Court held that the defendants in law, cannot insist
that the amount is liable to be adjusted against the principal amount in
the absence of any such instructions.
3. Application towards debts in order of time

Where neither the debtor nor the creditor make any appropriation,
then payment shall be applied in discharge in order of time. The oldest one is
to be discharged first of all, even though it may be a time barred debt.

Section 61 of the Indian Contract Act reads as follows:

“Where neither party makes any appropriation, the payment shall be
applied in discharge of the debt in order of time, whether they are or
are not barred by the law in force for the time being as to the
limitation of suits. If the debts are of equal standing, the payment shall
be applied in discharge of each proportionately.

Case: A. Ramavel vs M/s. Pandyam Automobiles Pvt. Ltd

Where in the question was that of the appropriatio0n of payments by

creditor in an open account the Madras High Court cited with approval
the Clayton’s case and held that the “first debit entry will be set off by
the first credit entry. In this case, the plaintiff used to supply material on
credit and went on debiting the account of the defendant furnishing
statement of account every month. A sum of Rs. 653 paid by the
defendant was not appropriated by the plaintiff. The court ordered the
appropriation of payment in accordance with the principle that the first
debit entry is to set off by the first credit entry.

Conclusion

If the debtor owing several distinct debts to one person i.e., creditor he
may himself direct the creditor to make discharge of particular debt or if
is not intimated then creditor can discharge any of his lawful debts, even
the time barred debts. If neither party indicated about it then the
appropriation must be done according to the time. The older debt must be
discharged first. Thus the parties or according to the time of debt the
appropriation can be done.
b. Solve the following problems:

A musical hall was agreed to be let out on certain day. But before
that, it was destroyed by fire. Is the promisor absolved from the
contract?

Solution:
Here in this above stated problem the promisor is discharged by the
contract due to frustration.

Section 56 says: “An agreement to do an act impossible in itself is

void”.
A contract to do an act which after the contract is made, becomes
impossible or, by reason of some event which the promisor could not
prevent, unlawful, becomes void when the act becomes impossible or
unlawful. In the above mentioned problem the musical hall has been
destroyed after entering in to contract. So it is impossible to perform the
contract as the subject matter of the contract is not in existing.

When the performance of the contract becomes impossible the

purpose which the parties have in mind is frustrated. If the performance
becomes impossible because of a supervening event, the promisor is excused
from the performance of the contract. This is known as “Doctrine of
Frustration”.

Frustration due to change of circumstance

Even though there is no physical impossibility of performance of the

contract but because of the change of circumstance made it impossible.

Taylor Vs. Caldwell

Facts: A agreed with B to give him the use of music hall and gardens
for holding concerts on four different dates. B agreed to pay a rent of £ 100
for each of the four days. Before the date of performance arrived, the music
hall was destroyed by fire. B sued for the breach of contract.

It was held that the contract had become void because of the perishing
of the hall without any fault on the part of A. The performance of the
 contract had become impossible and, therefore, A was not liable for the non-
performance of the contract.

The above mentioned case is similar with the given problem, thus it
can be said that the contract is impossible to perform and the promisor is
discharged from the contract.

OR

‘A’ owes to ‘B’ among other debts, the sum of Rs.500. ‘B’ demands payment
of the sum. ‘A’ sends Rs. 500. Explain how it is to be appropriated by ‘B’.

Appropriation of payments is done when the debtor owes several distinct

debts to a creditor, and he makes some payment which is not enough to cover the
payment of all debts; the question which, in such case, arises is as to which
particular debt the payment is to be appropriated.
The appropriation of payment can be done according to the rules laid down under
Section 59 to 61 of the Indian Contract Act, 1872.
The following are the rules regarding the Appropriation of Payments:
1. Appropriation as desired by the debtor
2. Appropriation as desired by the creditor
3. Appropriation towards debts in order of time

Appropriation as desired by the debtor

When the debtor indicates the application of payment to the discharge of

some particular debt, as provided in Section 59. It is as follows:

“Where a debtor, owing several distinct debts to one person, makes a

payment to him, either with express intimation, or under circumstances, implying
that the payment is to be applied to the discharge of some particular debt, the
payment, if accepted must be applied accordingly.”

When debtor indicates to creditor that particular debt has to discharged, the
creditor must accordingly. If creditor does not want to do that he must not accept
the payment.
Clayton’s case:
The debtor may either expressly mention about his intention regarding
appropriation, or it could be implied also, for example, payment being made is of
certain sum which corresponds with one particular debt, or it is made on a certain
day on which a particular debt falls due, or is made in compliance with a demand
by the creditor as to particular debt.

In the above mentioned problem among the other debts he is due of Rs. 500
to the creditor ‘B’. When the demand has been done for the payment of money he
had paid Rs. 500. So the one of the debt due by him, i.e., Rs. 500 has to be paid
first must discharge.

UNIT-IV

4. a. Explain the principle of “Remoteness of damages”, with special reference

to Hadly vs. Baxendale case.
Ans:

Introduction
A right without a remedy is no avail. For every right there is a remedy. If
any right of a person is violated then he has got remedy for such breach. There are
three remedies available for the breach of contract. They are Damages, Quantum
Meruit and specific Performance and Injunction. If any party aggrieved by breach
of contract, he can claim any of the remedy given above. In actions for Damages it
is necessary to know whether such loss or damage caused is proximate or remote
consequences of the breach of contract by the defendant.

Section 73 of the Indian Contract Act, 1872, makes the following provision
regarding the right of the injured party to recover compensation for the loss or
damage which is caused to him by the breach of contract.
Section 73, states as follows:
“when a contract has been broken, the party who suffers by such breach is entitled
to receive, from the party who has broken the contract, compensation for any loss
or damage caused to him thereby, which naturally arose in the usual course of
things from such breach, or which the parties knew, when they made the contract,
to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or
damage sustained by reason of the breach.”
In action for damages for the breach of contract, there arise two kinds of
problems:-
1. It has to be determined whether such loss suffered by the plaintiff is
proximate consequences of the breach of contract by the defendant. The
person making the breach of contract is liable only for the proximate
consequence of the breach of contract. He is not liable for damage which is
remotely connected with the breach of contract. In the other words, the first
problem is the problem of “Remoteness of Damage”.

2. If it is found that a particular damage is the proximate result of the breach of

contract rather than too remote, the next question arises is how much
compensation is to be paid for the same?

Rules regarding Remoteness of damage

In the statement given by Alderson B, in the case Hadly vs. Baxendle is as

similar to rule contained in Section 73. The rule in the Hadly vs. Baxendle consists
of two parts. On the breach of a contract such damages can be recovered:-

1. As fairly and reasonably be considered arising naturally, i.e., according to

the usual course of things from such breach; or
2. As may reasonably be supposed to have been in the contemplation of both
the parties at the time they made the contract.

The principle stated in the two branches of the rule is virtually the rule of
“Reasonable Foresight”. The liability of the party making the breach of contract
depends on the knowledge, imputed or actual, of the loss likely to arise in case of
breach of contract. The first branch of the rule allows damages for the loss arising
naturally, i.e., in the usual course of things from the breach.

The second branch of rule deals with the recovery of more loss which results
from the special circumstances of the case. Such loss is recoverable, if the
possibility of the same was actually within the knowledge of the parties,
particularly who makes a breach of the contract, at the time of making of the
contract.
 1. First branch of the rule in Hadly vs. Baxendle: Damages arising in the
usual course of things

In this branch the compensation is claimed for the loss caused due to
usual course of things from the breach of contract.

Case: Hadly vs. Baxendle

The plaintiff’s mill had been stopped due to brokerage of a

crankshaft. The broken shaft had to be sent to the makers at Greenwich as a
pattern for preparing the new one. The defendants, who were common
carriers, agreed to carry the broken shaft to Greenwich. The only
information given to the carriers was that the article to be carried was
broken shaft of a mill and the plaintiffs were the millers of that mill. Owing
to the defendants’ negligence the delivery of the shaft was delayed. Due to
this delay, the mill remained stopped for a longer time than it would have
been, had the shaft been delivered at Greenwich without any delay. The
plaintiff’s brought an action to recover damages for the loss of profits
arising out of the delay.

It was held that it could not be contemplated that the mill would be
stopped in the usual course of things, by sending the shaft, as the millers
might have another shaft in reverse. Moreover, the special circumstances
were not communicated by the plaintiffs to the defendants. Therefore the
plaintiffs are not entitled to recover the loss.

Case: J.K Enterprises vs. State of M.P

A valid contract for the sale of Tendu leaves was constituted after the
respondents accepted the petitioners tender. The petitioners failed to perform the
contract. The second auction sale caused loss to the respondents. Thereafter, the
respondents forfeited the earnest money deposited by the petitioners, and also
blacklisted the petitioners for 3 years.

It was held that the forfeiture of earnest money was not unjustified but
the blacklisting of the contractor in respect of Government contracts for 3 years,
which was done without any opportunity of hearing to the petitioner was not
justified. The blacklisting of petitioner was quashed.

2. Second branch of the rule in Hadly vs. Baxendle: More loss arising from
the special circumstances.

If the loss on the breach of a contract does not arise naturally,

i.e., according to the usual course of things but it arises due to some
special circumstances. So if any person makes the breach knowing the
special circumstance is held liable for the same. The loss due to
special circumstance must bring to the knowledge of other party at the
time of making such contract.
In the case Hadly vs. Baxendle the special circumstances were not
informed to the defendants. So the defendants are not held liable for
the loss of profit.

Case: Simpson vs. London & North Western Railway Co.

In this case, the plaintiff, who was a manufacturer, used to send
sample goods for exhibition to various agricultural shows. Once he
gave some sample of his product to the agent of the defendant railway
company for carriage to Newcastle, for an exhibition. This fact was
within the knowledge of the defendant’s agent. The consignment note
stated “Must be at Newcastle Monday certain”. Due to the negligence
of the defendant, the goods reached the destination only after the
exhibition was over. The plaintiff brought an action to claim
compensation for the loss of profits owing to the non-arrival of the
goods at the show.
It was held that since the defendant company’s agent was
having the knowledge of the special circumstances that the goods
were being sent for Newcastle show, they were liable for the loss
consequent on the late arrival of the goods at the destination.

Conclusion
The one of the remedy available for the breach of contract is damages.
While awarding damages the court must see to it, is that damage caused due to
proximate or remote consequence of the breach of contract. In case Hadly vs.
Baxendle rules laid down for the recovery of compensation in two different
circumstances. Firstly where the damage caused during ordinary course of things
and the damage caused when the party having the knowledge of special
circumstance.

OR

What is meant by quasi-contract? Explain different kinds of quasi contracts.

Ans:
Introduction:

The circumstances must occur under any system of law in which it becomes
necessary to hold one person to be accountable another, without any agreement on
the part of former to be so accountable, on the ground that otherwise he would be
retaining money or some other benefit which come into his hands to which the law
regards the other person as better entitled, or on the ground that without such
accountability the other would unjustly suffer loss. The law of quasi-contract exists
to provide remedies in circumstances of this kind. If any party got unjust
enrichment out of quasi-contractual obligation his liability arises by implications of
law not by the agreement between the parties.

The contract which resembles as like contract or certain relations resembling

those created by contract is called ‘Quasi-Contract’. Section 68-72 of Indian
Contract Act, 1872 deals with Quasi Contracts. A person is obliged to compensate
another although the basis of the obligation is neither a contract between the
parties, nor any tort on the part of the person who is bound to compensate. The
basis of the obligation is that no one should have unjust benefit at the cost of
another.

Illustration

‘A’ and ‘B’ jointly owe Rs. 1000 to ‘C’, ‘A’ alone pays the amount to ‘C’
and ‘B’, not knowing this fact pays Rs. 1000 o ‘C’. ‘C’ is bound to repay the
amount of Rs. 1000 to ‘B’.

In an action for unjust benefit or enrichment, the following essentials have to be

proved:
1. The defendant has been “enriched” by the receipt of a “benefit”.
2. The enrichment is “at the expense of the plaintiff”.
3. The retention of the enrichment is “unjust”.
Types of Quasi-Contracts

The Indian Contract Act deals with the following quasi-contractual

obligation:
1. Claim for necessaries supplied to a person incompetent to contract (Section
68)
2. Reimbursement of money paid, due by another (Section 69)
3. Obligation of person enjoying benefit of non-gratuitous act (Section 70)
4. Responsibility of finder of goods (Section 71)
5. Liability of a person getting benefit under mistake or coercion (Section 72)

1. Claim for necessaries supplied to a person incompetent to contract

(Section 68)

Where one person supplies necessaries suited to his condition

of life, who is incompetent to contract such as minor or lunatic, or to
anyone whom such incompetent person is legally bound to support,
the person furnishing such supplies is entitled to be imbursement from
the property of such incompetent person.

Illustrations:
i. ‘A’ supplies ‘B’, a minor, with necessaries suitable to his
condition in life, ‘A’ is entitled to be reimbursed from ‘B’’s
property.

ii. ‘A’ supplies the wife and children of ‘B’, a lunatic, with
necessaries suitable to their condition in life. ‘A’ is entitled to
be reimbursed from ‘B’’s property.

One of the essential to enter in to contract is “Capacity to

contract”. So the person who is minor or lunatic are not competent to
enter in to a contract. So they cannot be personally held liable. But
reimbursement can be claimed from the property of such persons.

2. Reimbursement of money paid, due by another (Section 69)

Section 69 of the Indian Contract says as follows:
“A person, who is interested in the payment of money which another
is bound by law to pay, and who therefore pays it, is entitled to be
reimbursed by the other”.
 For the application of this section, the following two essentials are to
be there:
a. One person is interested in the payment of money, and therefore
pays it, while,
b. Another person is bound by law to pay the same, but he fails to
pay.

The person so making payment is entitled to be reimbursed by the person who was
bound to pay.

Illustration
‘B’ holds lands in Bengal, on a lease by ‘A’, the Zamindar. The revenue
payable by ‘A’ to the government, being in arrear, his land is advertised for sale by
the government. Under the revenue law, the consequences of such sale will be
annulment of his own lease, pays to the Government the sum due from ‘A’. ‘A’ is
to make good to ‘B’ the amount so paid.

Case: Brook’s Wharf vs. Goodman Brothers

The defendants warehoused certain goods which they had imported from
Russia, with the plaintiffs. The goods were stolen. Under the law the customs duty
on the goods could be recovered either from the owners of the goods, or from the
warehouseman. The warehouseman, i.e., the plaintiffs were called upon to pay the
custom duty which the owners of the goods, i.e., the defendants were bound by law
to pay. The plaintiffs claimed the amount of the duty paid by them from the
defendants. It was held that they were entitled to recover the same.

3. Obligation to the person enjoying benefit of non-gratuitous act

(Section 70)
According to Section 70, the following condition has to be satisfied:
a. A person should lawfully do something for another person, or
should deliver something to him;
b. The person making the payment or delivering the thing must not
do so gratuitously, i.e., he should expect payment for the same; and
c. The other person should enjoy the benefit of this payment or the
delivery of the thing.
When all the above conditions are satisfied, the person receiving the benefit
becomes bound to pay compensation to the person conferring the benefit.
Illustration:
‘A’, a tradesman, leaves goods at ‘B’’s house by mistake and ‘B’ treats the
goods of his own, ‘B’ is bound to pay ‘A’ for them.

Case: Indu Mehta vs. State of U.P

In this case, Miss Indu Mehta, an advocate, practising at the District Court,
Kanpur, was appointed as Asst. District Government Council (Criminal), in
pursuance whereof she rendered her services. The appointment was, however,
found to be void in view of Section 24 (2), Criminal procedure Code, 1973. It was
held that even though the said appointment was void, the State had enjoyed the
benefit of the services rendered by Miss Mehta; the Government was not entitled to
recover back the fees already paid to her for the services.

4. Responsibility of finder of goods (Section 71)

A finder of goods is “a person who finds the goods belonging to

another and takes the goods in to his custody”. Although as between
the finder of goods and owner of goods, there is no contract, yet the
following responsibility has been fixed by section 71, on the finder of
goods. The Section reads as follows:
“A person who finds goods belonging to another, and takes them into
his custody, is subject to the same responsibility as a bailee”.

A finder of goods has liability as like a bailee. He must take

care of the goods as a man of ordinary prudence would, under similar
circumstances, take of his own goods of the same bulk, quality and
value as the goods found by him. Like bailee the finder of goods has
the responsibility to return the goods to the true owner. He has the
right of lien and compensation. The lawful charges expended for the
safety and security of the goods and to find the true owner, can be
recovered from the owner of such goods. If he refuses to pay such
charges then the finder of goods has got right to lien over the property.

5. Liability of a person getting benefit under mistake or coercion

(Section 72)

Section 72 covers a situation where money has been paid, or

anything delivered, by one person to another either by mistake or
 under coercion. According to this section, “A person to whom money
has been paid, or anything delivered, by mistake or under coercion,
must repay or return it”.

Illustrations:
i. ‘A’ and ‘B’ jointly owe 100 rupees to ‘C’. ‘A’ alone pays the
amount to ‘C’, and ‘B’ not knowing this fact, pays 100 rupees
over again to ‘C’. ‘C’ is bound to repay the amount to ‘B’.

ii. A railway company refuses to deliver up certain goods to the

consignee except upon the payment of an illegal charge for
carriage. The consignee pays the sum charged in order to obtain
the goods. He is entitled to recover so much of the charge as
was illegally excessive.

Case: S. Kotrabasappa vs. The Indian Bank

The defendant was constituent of the plaintiff bank having his account
there. The plaintiff bank received a telegraphic transfer advice and the
confirmation telegram from one of its branches for crediting the defendant’s
account with the sum of Rs. 1,00,000/-. Instead of crediting the account of
the defendant with that sum once, the bank by mistake and oversight
credited his account with Rs. 1,00,000/- twice. The defendant withdrew this
money each time.

It was held that the defendant had utilised the additional sum of Rs. 1,
00,000/- wrongly credited to his account by mistake, he was, therefore,
bound to return the amount with interest.

Conclusion:

Thus it can be said that the relations which resembles as those created
by the contract, and those obligations are called Quasi-Contracts. In Quasi-
Contracts the obligation arises not on basis of contract between the parties
but arises by law. The basic concepts of these kinds of contracts are, no
person has to take unjust benefit or enrichment over the other. The party
who obtained such benefits bound to compensate.
 b. Solve the following problem
“X” dealer in fruits leaves a packet containing fruits at “Y”s house by
mistake. “Y” consumes those fruits. Can “X” recover money.

Solution:
Yes the dealer of fruits “X” can recover money from “Y” as the fruits
delivered by mistake and the other person i.e., “Y” treated such fruits as his
own and used it. Here it is not done gratuitously.
This kind of obligation arises from quasi-contracts. Quasi-contracts are
which resembles as contract. Section 68-72 of Indian Contract Act deals
with quasi contracts and its obligation.

A person is obliged to compensate another although the basis of the

obligation is neither a contract between the parties, nor any tort on the part
of the person who is bound to compensate. The basis of the obligation is that
no one should have unjust benefit at the cost of another.

Section 72 covers a situation where money has been paid, or anything

delivered, by one person to another either by mistake or under coercion.
According to this section, “A person to whom money has been paid or
anything delivered, by mistake or under coercion, must repay or return it”.

S. Kotrabasappa vs. The Indian Bank

The defendant was constituent of the plaintiff bank having his
account there. The plaintiff bank received a telegraphic transfer advice and
the confirmation telegram from one of its branches for crediting the
defendant’s account with the sum of Rs. 1,00,000/-. Instead of crediting the
account of the defendant with that sum once, the bank by mistake and
oversight credited his account with Rs. 1,00,000/- twice. The defendant
withdrew this money each time

In the above mentioned problem the fruits are delivered by mistake,

and “Y” had made use of such fruits for his purpose, so “X” is entitled to
compensate by “Y”.

OR
Write Short notes on:
Quantum Meruit
It is the one of the remedies for breach of contract. When the injured
party has performed a part of his obligation under the contract before the
breach of contract has occurred, he is entitled to recover the value of what he
has done, under this remedy.

Ordinarily, if a person, having agreed to do some work or render some

services, has done only a part of what he was required to do, he cannot claim
anything for what he has done. But the law recognises an important
exception to this rule by way of an action for ‘Quantum Meruit’.

Under this action, if ‘A’ and ‘B’ have entered into a contract, and ‘A’,
who has already performed a part of the contract, is then prevented by ‘B’
from performing the rest of his obligation under the contract, ‘A’ can
recover from ‘B’ reasonable remuneration for whatever he has already done.

This remedy is available only for the part of the work done by the
party other than the one making a breach of contract. If the party making a
breach of the contract has done a part of the work in connection with it, he
cannot claim anything thereof under this remedy.

Case: De Bernardy vs. Harding

The defendant, who was to erect and let seats to view the
funeral of Duke of Wellington, appointed the plaintiff as his agent to
advertise and sell tickets for the seats. The plaintiff was to be paid a
commission on the tickets sold by him. The plaintiff incurred some expense
in advertising for the tickets but before any tickets were actually sold by
him, authority to sell tickets was wrongfully revoked by the defendant.

It was held that the plaintiff was entitled to recover the expenses
already incurred by him, an action for quantum meruit.
 UNIT-V

5.a. What is meant by specific performance? Who can claim it?

Ans:
Introduction:

One of the remedy for breach of contract is seeking for specific

performance under Specific Relief Act, 1963. Specific performance means
performing the terms and conditions stated in the contract. The court can
grant for specific performance only when for such breach, it is difficult to
ascertain compensation and compensation will not be the adequate relief.

According to Halsbury, “It is a equitable relief, given by the court in

cases of breach of contract, in the form of judgement that the defendant do
actually perform the contract according to its terms and stipulations”.

The court may order for specific performance in certain cases rather
than ordering for payment of damages or compensation.
The decrees of specific enforcement are ordinarily of two types:
1. Where the subject matter of the contract is such that on the event of the
breach of contract, compensation is neither as adequate relief not it is
proper and reasonable to grant compensation.

2. Where because of the special and practical features it is difficult and

impractical to ascertain compensation.

Case: Jabalpur Cable Network Pvt. Ltd vs. E.S.P.N Software India Pvt. Ltd

The respondent No.1 i.e., E.S.P.N Software India Pvt. Ltd, entered into
agreement styled as “Star Sports Service Contract” for a period of one year, from
15/4/98 to 14/4/99, whereby electronic T.V. signals were to be supplied by the
respondent to the Appellant, i.e., Jabalpur Cable Network Pvt. Ltd. the appellant in
turn was to supply these signals to cable operators, who would further transmit
them to T.V. viewers. The Respondent No.1 has stopped the supply of agreed
signals to the appellant. The appellants sued against respondent No.1 to grant an
injunction for specific enforcement of the agreement i.e., to supply signals.
It was held that the T.V. signals were considered goods under Section 2(7) of the
Sales of Goods Act, just like electricity. It was movable property and not available
as ordinary article of commerce. Money compensation will not provide adequate
relief in case of breach of contract. Moreover, there is no standard for ascertaining
the loss caused to the appellant by not displaying the programmes of the Star
Sports channel.

The persons who can claim?

Section 15 of Specific Relief Act 1963, says who may obtain specific
performance of contract. The following persons can obtain specific performance:
1. Any party to the contract
2. A representative in Interest
3. A beneficiary under the contract

1. Any party to the contract

Any party to the contract can obtain specific performance of the
contract. A contract is an agreement enforceable by law. Obviously, it
is the party to the contract who can enforce the contract against each
other. The doctrine Privity of Contract, which says the stranger to the
contract, cannot sue for non-performance of the contract and for
specific performance of the contract.

Case: Habiba Khatoon vs. Ubaidulla Huq

Initial seller agreed to sell house property to a purchaser and on
the same day entered into a contract of reconveyance shall return the
property if the seller pays consideration of the original contract within
three years. If the seller dies within the said period, his only son and
children will be entitled for recoveyance of the property and the other
heirs of the original will not get this right, but if the situation other
heirs of the original seller will have the right of reconveyance. The
initial seller died within three years. Thereafter the son of the initial
seller assigned his right to a third party or stranger. This assignee
instituted the suit for specific performance of the contract. The
question for determination before the courts was whether the son of
the initial seller had acquired personal right which could be assigned
to any stranger.

It was held that the right of reconveyance by the initial seller

was valid.

2. A representation in interest
 A person who is a representative in interest may also obtain
specific performance of the contract. Representative in interest
includes any assignee or transferee of interest or a legal representative
viz., executor or administrator after the death of the Principal.

A legal representative may sue provided that the contract is not

dependent on the personal skill or quality of the promise.

For example, the contract to paint a picture or write a book, the

duty under the contract ends by the death and legal representatives
cannot claim specific performance.

3. A beneficiary under the contract

Any person who is a beneficiary under such contracts can sue

for specific performance of the contract. Where the contract is for
settlement of marriage or compromise of doubtful rights, between the
members of the same family, a beneficiary can claim for specific
performance.

Case: Khwaja Muhammed Khan vs. Hussaini Begum

In this case there was an agreement between the father of a boy

and father of the girl that if the girl married particular boy, the boy’s
father would pay certain personal allowance known as ‘beetle box
expenses’. It was mentioned that certain property had been set aside
by the defendant and this allowance would be paid out of the income
of that property. The plaintiff married the defendant’s son but the
defendant failed to pay the allowances as such. In an action by the
plaintiff, the defendant contended that the settlement was between
plaintiff’s father and the defendant, so here plaintiff cannot ask for
enforcement of contract as she is stranger to the contract. It was held
that the plaintiff is entitled to claim for such money as she is a
beneficiary under this contract.

Conclusion
 Specific performance means when there is breach of contract
one of the party may ask for specific performance of the contract,
when the compensation cannot be calculated or the compensation will
not put such party in that position after the completion of contract, i.e.,
the compensation is not an adequate relief.

OR

Write a note on preventive reliefs provided under the Act.

Ans:

Introduction
The parties to the contract instead of recovery of damages for the breach of
contract may have recourse to the alternative remedy of Injunction. The provisions
regarding injunction is given under Specific Relief Act, 1963. Injunction means
preventing a person from making breach of contract.

Definitions:

According to Lord Halsbury, “It is a judicial process whereby a party is

ordered to refrain from doing or to do a particular act or thing.

According to Section 36 of Specific Relief Act, it is a preventive relief

granted at the discretion of the court by injunction temporary or perpetual.

A preventive relief is an order or command of the court preventing a party

from doing something which he is under a legal duty not to do or mandating a
person to do something which he is under a legal duty to do.

The jurisdiction of the court to grant injunction whether temporary or

perpetual, is discretionary. It is the discretion of the court to grant or refuse such
relief. The discretion does not mean that court can act arbitrarily. The court is to be
guided by the principles of justice, equity and good conscience. The court has to
weigh the amount of mischief done or threatened to be done to the plaintiff and
harm likely to be caused to the defendant by the issue of injunction.
 The injunction will not be issued in following circumstances:
1. Where the damages are the appropriate remedy.
2. Where the injunction is not the proper relief.
3. Where the plaintiff is not entitled to an injunction on account of his
conduct.
4. Where the contract cannot be specifically enforced.
5. Where the injunction would operate inequitably.

There are different kinds of injunctions which can be claimed by the party. They
are as follows:
1. Temporary or Interlocutory Injunction
2. Perpetual or Permanent Injunction
3. Prohibitory Injunction
4. Mandatory Injunction

1. Temporary Injunction

Section 37(1) of the Specific Relief Act speaks with regard to

temporary injunction. Temporary Injunctions are such as are to
continue until a specified time, or until the further order of court, and
they may be granted at any stage of a suit, and are regulated by the
Code of Civil Procedure, 1908. It does not finally settle the matter.
The object may be to maintain status quo, so that the alleged harm is
avoided, which could otherwise occur until the case is finally disposed
of by the court, on merit.
To obtain temporary injunction the plaintiff has to prove the
prima facie case in his favour indicating existence of a legal right
asserted by him.

Case: Sky petroleum Ltd vs. V.I.P Petroleum

The plaintiff agreed to by the petrol and diesel required for its filling stations
from the defendant. The latter stopped supply according to the evidence, the supply
of petrol was in an unusual condition and alternative supply was not possible. The
plaintiff brought an action against the defendant and sought interlocutory
injunction restraining the defendant from withholding the supplies. The court
referred to the dictum that in the sale and purchases of non-ascertained goods, no
specific performance can be granted and damages are sufficient compensation
when that was lacking as in the instant case, specific performance was granted and
hence interlocutory injunction was granted.

2. Perpetual Injunction
Section 38 speaks about the circumstances where the perpetual
injunctions are granted. It can only be granted by the decree made at the
hearing and upon the merits of the suit; the defendant is thereby perpetually
enjoyed from the assertion of a right, or from the commission of an act,
which would be contrary to the rights of the plaintiff.
Section 37(2) is a general provision stating that a perpetual injunction can
only be granted by a decree made at the hearing and upon merits of the case.

Illustration:
In the course of ‘A’’s employment as a vakil, certain papers belonging
to client ‘B’, come into his possession. A threatens to makes these papers
public, or to communicate their contents to a stranger. ‘B’ may sue for an
injunction to restrain ‘A’ from doing so.

Case: Sunil Kumar vs. Ram Prakash and others

The Supreme Court observed that a suit for permanent injunction by a

coparcener against the father for restraining him from alienating the house
property belonging to the joint Hindu family for legal necessity was not
maintainable because the coparceners has got the remedy of challenging the
sale and getting it set aside in a suit subsequent.

3. Prohibitory Injunction
A prohibitory injunction prohibits or forbids the doing of some act
and is governed by Section 38. Such injunction may be granted to the
plaintiff to prevent the breach of an obligation existing in his favour.

Illustration
‘A’, ‘B’ and ‘C’ are members of an undivided Hindu family. ‘A’ cuts
timber growing on the family-property, and threatens to destroy part
of the family house and to sell some of the family utensils. ‘B’ and
‘C’ may sue for an injunction to restrain ‘A’ from doing the
threatened act.

4. Mandatory injunction
 According to Section 39, when to prevent a breach of an
obligation it is necessary to compel the performance of certain acts
which the court is capable of enforcing, the court may in its discretion
grant an injunction to prevent the breach complained of, and also to
compel the performance of the requisites acts. Thus, in case of a
mandatory injunction the court requires the performance of the
requisite act. When the injunction compels doing of some act it is
mandatory injunction but when the direction is not to do something,
the injunction is prohibitory.

Illustration
‘A’ being ‘B’’s medical adviser, threatens to publish ‘B’’s
written communications with him, showing that ‘B’ has led an
immoral life. ‘B’ may obtain an injunction to restrain the publication.

Case: Miller vs. Jackson

The plaintiff who purchased a house close to a cricket ground in

village brought an action against the club for injunction on the ground
the cricket ball damaged the house and garden of the plaintiff and
precautionary taken by the club did not give complete protection. The
court of appeal granted the injunction preventing the club from using
the ground for playing cricket.

When the preventive relief or injunction can be refused

Section 41 and 42 of Specific Relief Act lays down some
circumstances where the preventive relief can be refused:
1. Stay of pending judicial proceeding
2. Stay of proceedings in a court not subordinate
3. Restraining any person from applying to legislative body
4. Stay of proceedings in an criminal matter
5. No issue of injunction to prevent a breach of contract
6. No injunction to prevent doubtful case of nuisance
7. No injunction to prevent continuing breach when the plaintiff has
acquiesced
8. When there arises some other efficacious relief
9. Plaintiff’s conduct may disentitle him to an injunction
10.When the plaintiff has no personal interest in the matter.
Conclusion:

Injunction is specific orders of the court whereby it prohibits a wrongful act

or enact in a wrongful course, which has already commenced or cases it direct the
things to be resorted in their prior state. Injunction is a very effective remedy
because after passing of the order of injunction, the matter becomes a matter
between the court and the defendant or the person against whom injunction has
been issued. Consequently the non-compliance by the person against whom
injunction has been issued is regarded as contempt of court and the court can
punish him for such contempt. Ordinarily, the injunctions are issued where
compensation is not an adequate relief.

b. Write Short Notes on the following:

Rectification of Instruments

The provisions relating to rectification of instruments contained in Section

26 of Specific Relief Act, 1963. When the real intention of the parties does not
express in the contract, then parties can seek for the rectification of contract.

According to Section 26, when on account of fraud or mutual mistake of the

parties a contract or some other instrument in writing does not express the real
intention of the parties, the court is empowered to rectify the instrument so as to
give effect to the real intention of the parties, and then specifically enforce the
rectified instrument.

The power to rectify an instrument does not cover the article of association
of a company as the same is governed by the provisions of the Companies Act,
1956.

Who can claim Rectification?

The following persons can claim for rectification of instruments. They are as
follows:

1. The parties or by their representatives in interest

2. The plaintiff may, in any suit in which any right arising under the instrument
is in issue
 3. The defendant to any such suit in which the right arising under the
instrument is in issue may in addition to any other defence open to him

Section 26(2) deals with the provision of discretion of the court in granting
rectification. If, in any suit in which contract or other suit is sought to be rectified,
the court finds that the instrument, through fraud or mistake, does not express the
real intention of the parties the court may in its discretion direct rectification of the
instrument so as to express the intention, so far as this can be done without
prejudice to rights acquired by third persons in good faith and for value.

Case: Jervis vs. Howle

The contract was on giving of royalty on coal. The instrument showed that 3
Pence of royalty free of taxes per every ton of coal was to be given. Thus the
parties intended that on every ton of coal net 3 Pence royalty was to be paid. But
under the statue this agreement was void. In order to validate this agreement the
court ordered its rectification and directed that in place of the said words the words
to the effect be substituted that after deducting the income tax in force from time to
time royalty on per ton of coal would be 3 Pence.

OR

Cancellation of Instruments
The present law relating to cancellation of instruments is envisaged in
Section 31 to 33 of Specific Relief Act, 1963.

When cancellation can be ordered? (Section 31)

Section 31 contains the following provision to explain when the court
may order the cancellation of an instrument:
1. Any person against whom a written instrument is void or voidable; and
2. Who has reasonable apprehension that such instrument if left outstanding
may cause him serious injury;
3. He may sue to have the instrument adjudged by the court as void or
voidable;
4. The court in such a suit may, in its discretion adjudge the instrument as void
or voidable, and order it to be delivered up and cancelled.

Illustration:
‘A’, the owner of a ship, by fraudulently representing her to be sea-worthy,
induces ‘B’, an underwriter, to insure her; ‘B’ may obtain the cancellation of
the policy.

In case the instrument is registered under Indian Registration Act,

1908, the court shall send a copy of its decree to the officer in whose office
the instrument has been so registered; and such officer shall note on the copy
of instrument contained in his books the fact of cancellation.

Case: Mahindruddin vs. Mustt. Rythun Nessa

There was sale of land by an illiterate lady. The amount of

consideration was nominal and below the market price. It was alleged by the
plaintiff that the document, which was an agreement to sell, was fraudulently
converted in to a deed of sale. The lower court came to the finding that the
defendant no.1 was guilty of fraud and fraudulently got the deed of sale at a
nominal value and had thus cheated the plaintiff. The defendant had tried to
grab the property of the pardanashin or illiterate lady worth Rs. 50,000/-
after having paid only Rs. 5000/-. The Gauhati High Court also held it to be
a case of fraud and, therefore, the document was liable to be cancelled.

What instruments may be partially cancelled (Section 32)

Where an instrument is evidence of different rights or different

obligations, the court may in a proper case, cancel it in part and allow it to
stand for the residue.
If the rights and obligations contained in an instrument are separable, in such
case the court may for cancellation of the part of the contract. If good things
are not separable from bad then the court may not order for the cancellation
of part of such instrument.

Section 33 deals with the provision of power of the court to restore

benefit or allow compensation on cancellation of an instrument. When an
instrument is cancelled, the court may require the party getting the relief to
restore the benefit received by him from the other party and to make
compensation to him which justice may require.