CONTRACT LAWS

UNIT-2
Indian Contract
Act,1872
Indian Contract Act,1872
•Came into force on the first day of September.
•It was extended to the whole of India except the State of Jammu and
Kashmir
•On 5 August 2019, the Government of India issued a Presidential Order
superseding the 1954 order and making all the provisions of the Indian
constitution applicable to Jammu and Kashmir.
 The plaintiff is the person or entity that initiates a lawsuit by filing a complaint in court. They claim to have been harmed
and seek a legal remedy.
•Example: Jane files a lawsuit against her neighbor Tom, claiming he damaged her property. Jane is the plaintiff.

Plaintiff Defendant
Vs.

The defendant is the person or entity being sued or accused in a lawsuit. They defend themselves against the
plaintiff's allegations.
•Example: In the same scenario, Tom, the neighbor accused of property damage, is the defendant.
The appellant is the party that appeals a court decision because they are dissatisfied with the outcome.
They ask a higher court to review and change a lower court’s decision.
Example: If Jane (the plaintiff) loses her case in the trial court and believes the decision was unfair, she can appeal.
In the appeal, Jane becomes the appellant.

Appellant Respondent
Vs.

The respondent is the party that responds to an appeal. They defend the lower court's decision in the appellate court.
Example: If Tom (the defendant) won in the trial court and Jane appeals, Tom becomes the respondent in the appellate
court.
 To conclude……….
•Jane sues Tom for property damage:
•Plaintiff: Jane
•Defendant: Tom

•The trial court rules in favor of Tom. Jane appeals:

•Appellant: Jane (because she is appealing the decision)
•Respondent: Tom (because he is responding to the appeal).
Section 2
PROPOSAL/OFFER

(a) 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;
Promise

(b) When a person to whom the proposal is made,

signifies his assent thereto, the proposal is said to be
accepted. A proposal, when accepted, becomes a
promise;
Every promise and every set of promises, forming the
consideration for each other, is an agreement.

An agreement enforceable by law is a contract

 5. Contract

4.Agreement + Enforceable by Law

3. Promise + Consideration

2. Accepted Proposal

1. Proposal + Acceptance
Void and Voidable
Contract
Section 2 (i) An agreement which is enforceable
by law at the option of one or more of the
parties thereto, but not at the option of the
other or others, is a voidable contract;
Section 2 (j) A contract which ceases to be
enforceable by law becomes void when it
ceases to be enforceable.
Void contract – Taylor vs. Caldwell-1863
Overview-CASE
•Mr. Taylor (Plaintiff): An ambitious concert promoter, excited for his
upcoming events.
•Mr. Caldwell (Defendant): The owner of the Surrey Gardens and Music
Hall, a man of business.
•Justice Blackburn: The wise judge who delivers the landmark ruling.
•Sims Reeves: A famous singer, whose performance is central to Taylor's
plans.
•The Surrey Gardens and Music Hall: A beautiful, but ultimately
flammable, building.
The grand Justice A landmark
A night of Legal battle Blackburn’s ruling
plan fire wisdom
Summary- CASE
◦Defendant: owner of a theatre
◦Plaintiff wanted to perform a musical performance.
◦Previous day of performance, theatre burnt down
◦Taylor asks Caldwell for compensation for loss
◦Court: no compensation as the contract is impossible to perform
Conclusion-CASE

•The venue, which was essential for the performance of the

contract, was destroyed.
•The destruction of the venue made it impossible for the contract
to be performed as intended.
•The parties' intention, inferred from the agreement, was that the
existence of the music hall was a fundamental assumption for
the contract. Without the hall, the contract could not proceed.
Basis of difference Void Contract Voidable Contract

Contract ceases to be Contract is enforceable at the

Definition
enforceable by law. option of the aggrieved party.

Contract becomes void either

Contract becomes voidable when it
because of sudden and
is caused by coercion, undue
Nature unexpected events or of law
influence, fraud and
changes, before the
misrepresentation.
performance becomes due.

Does not provide any legal The aggrieved gets a right to

Rights remedy for the parties to the rescind the contract and to declare
contract. it void otherwise it remains valid.
Definition of CONTRACT
“A contract is an agreement between two or more persons
which is intended to be enforceable at law and is
constituted by the acceptance of one party of an offer made
to him by the other party to do or abstain from doing some
act” - Halsbury.
Essentials of a Valid Contract
Section 10
All agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby
expressly declared to be void.
Essentials of a Valid Contract

Offer and Lawful

Lawful object
Acceptance Consideration

Contractual
Free Consent
Capacity
1. OFFER AND
ACCEPTANCE
Offer/Proposal
Offeror/
Promiser
Offer/
Proposal

Offeree/
Promisee
TYPES
Specific Offer
◦Where an offer is made to a particular and specified person.
◦Only that person can accept such specific offer
◦Example : Sandhya offer to buy a car from Sona
for Rs. 10 lakh. Thus, a specific offer is made to a
specific person , and only Sona can accept the offer.
General Offer
◦ It is an offer made to public at large with or without any time limit
◦ Anyone performing the conditions of the offer can be considered to have
accepted the offer
◦ Until the general offer is retracted or withdrawn, it can be accepted by
anyone at any time as it is a continuing offer.
◦For example, an offer to give reward to anybody who
finds the lost dog is a general offer. Though the general
offer is made to the public at large, the contract in this case
comes to an end when any person acts upon the conditions
of the offer.
Carlill v. Carbolic Smoke Ball Co. (1893)
Overview
The case of Carlill v. Carbolic Smoke Ball Co. (1893) is a landmark case in English
contract law that established important principles regarding unilateral contracts,
acceptance, and intention to create legal relation.
Product: Carbolic Smoke ball
Cures: Influenza
Advertisement: “£100 reward will be paid by the Carbolic Smoke Ball Co. to any
person who contracts influenza after having used the ball three times daily for
two weeks according to the printed directions.”
 Carlill vs. Carbolic Smoke Ball Co

Advertisement: £100 given to anyone who contracts influenza even after using
smoke balls in the prescribed manner
£1000 is deposited with the Alliance Bank showing our sincerity in the matter.
Mrs. Louisa Carlill used the product according to the directions but still
contracted influenza; however, the company refused the compensation.
Reason: “Advertisement was not a binding contract”.
Cross Offer
◦ Occurs when parties make identical offers to each other in ignorance of each
others offer.
◦ A cross offer cannot be treated as mutual acceptance and therefore no binding
contract.
◦Example: if A makes an offer to sell his car for 7 lakhs to B
and B in ignorance of that makes an offer to buy the same
car for 7 Lakhs, they are said to make a cross offer, and there is
no acceptance in this case, hence it cannot be a mutual
acceptance.
Counter Offer
◦ The offeree on receiving the offer imposes conditions.
◦ Modifies offer 🡪 counter offer
◦ Amounts to rejecting the first offer
◦For example, a seller wants to sell a vehicle for Rs
20,000. A buyer arrives and offers Rs 15,000 for the vehicle.
The offerer provides a counteroffer, asking for Rs 16,000 with
the objective of obtaining a higher price.
Open Offer
◦Made to Public at large, open for a certain period of time
◦For example, when ABC Co. wanted to increase its
stake in India, it made a voluntary public offer to
the Public shareholders.
Balfour V. Balfour(1919)
Decision- Social/domestic
agreements
Plaintiff (Mrs. Balfour) and Defendant (Mr. Balfour)
The court ruled that the agreement between the couple
was not legally enforceable because they did not intend
to create legal relations. The court established that there
is a presumption that domestic agreements between
spouses are not intended to be legally binding, unless
there is clear evidence to the contrary.
 Essentials of an Offer/Proposal
1. Intention to create Legal Relationship.
2. Certainty of terms
◦ Terms of offer must be definite/certain
◦ Vague and ambiguous terms 🡪 invalid offer
Guthing Vs. Lynn (1831)
Guthing Vs. Lynn- 1831
◦ Person decided to buy a horse- 63 pounds.
◦ When he bought it he said “ If the horse proves to be lucky, I will pay 5 pounds extra”
◦ Though the horse won in many races, Later refused to pay
◦ Court: lucky not certain as it is subjective.
◦ Ruled in favour of defendant.

Guthing-seller(plaintiff) v. Lynn(defendant-buyer (1831) is a

foundational case in English contract law that deals with the
principle of certainty in contract terms. The case establishes that an
agreement cannot be enforced as a contract if its terms are vague,
uncertain, or lack specificity.
 Legal Principles Established:
1.Certainty in Contractual Terms:
1. A valid and enforceable contract requires all terms to be clear, precise, and
definite.
2. Vague or ambiguous terms cannot form the basis of a binding contract.
2.Subjective Conditions Are Unenforceable:
1. Subjective terms, such as "if the horse is lucky," that depend on personal
interpretation or opinion are not enforceable.
3. Statement of Intention and Invitation to Offer

◦Mere statement of intention not an Offer

◦Invitation to offer is not an offer
◦Invitation to offer 🡪 done to negotiate terms of offer
Harvey Vs. Facie-1893
 FACTS- offer and invitation to offer
Note: Bumper hall pen- property in Jamaica traditionally used for cattle grazing/farm/estate.

•Harvey, the appellant, sent a telegram to Facey, the respondent, stating:

•“Will you sell us Bumper Hall Pen? Telegraph lowest cash price.”
•Facey replied via telegram:
•“Lowest price for Bumper Hall Pen £900.”
•Harvey responded:
•“We agree to buy Bumper Hall Pen for £900 asked by you.”
•Facey refused to sell the property, and Harvey sued, claiming that a binding
contract had been formed.
1. Facey’s Statement Was Not an Offer:
1. The reply stating the lowest price (£900) was merely a response to a request for
information, not an offer to sell.
2. It lacked the intention to be bound, which is a key element of an offer.

2. No Acceptance of an Offer:
1. Harvey’s telegram attempting to "accept" was invalid because there was no offer in the
first place.

3. Intention to Create Legal Relations:

1. A binding contract requires a clear offer, acceptance, consideration, and the intention to
create legal relations. In this case, the communication lacked a definite offer.
Legal principles
An offer is a clear, definite, and final expression of
willingness to enter into a contract, capable of being
accepted.
An invitation to treat is a mere indication of willingness to
negotiate (e.g., advertisements, price quotations).
4. Offer must be Communicated
◦For an offer to be complete 🡪 communicate to person to whom
it is made.
Acceptance
Assent given to a proposal
Converts proposal into a promise
Sec 2(b)
 Essentials of a Valid Acceptance
1. Acceptance must be communicated 🡪 if not communicated to
offerer then no contract created.
2. Acceptance must be absolute and unqualified.
◦ Acceptance with conditions attached is a counteroffer
3. Acceptance when an offer is in force.
4. Acceptance can be expressed or Implied
◦Express – communicated in words (spoken/written)
◦Implied - acceptance inferred from surrounding circumstance or conduct
of parties
◦Eg: Ramanbhai M. Nilkanth v. Ghashiram Ladli Prasad
◦Hargopal-appellent vs. People’s Bank of Northern India Ltd(respondent)
5. Acceptance through prescribed or reasonable mode
6. Mere mental acceptance is no acceptance
7. Acceptance by definite person : Powell vs. Lee(1904)-
acceptance and communication of acceptance.
8. It cannot precede an offer.
 Powell vs. Lee(1904)
1.Plaintiff (Powell): Applied for the position of headmaster at a school.
2.Defendant (Lee): A representative of the school's governing body.
3.Powell's application was reviewed by the school board, which unanimously decided to appoint
him as the headmaster.
4.However, the decision of the board was not communicated directly to Powell in an official
capacity.
5.An individual (unofficially and without authority) informed Powell that he had been appointed.
6.Later, the school board changed its decision and decided not to hire Powell.
7.Powell brought a lawsuit, claiming there was a binding contract since the offer of employment
had been accepted.
1.Lack of Proper Communication of Acceptance: The acceptance of Powell's
appointment had not been officially communicated by an authorized
representative of the school board.
1. Communication of acceptance is a key element in forming a contract.
2. In this case, the person who informed Powell of his appointment did not have the
authority to do so.

2.No Meeting of Minds (Consensus ad idem): For a contract to be formed, there

must be a clear agreement and mutual understanding between the parties.
Since the school board never officially communicated their decision to Powell,
there was no mutual agreement.
Consideration
Sec 25, “ An agreement without consideration is void”
It is the benefit falling due to the promiser
Substance of what is wanted by each side to bargain

Sec 2(d)
◦ When, at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises to
do or to abstain from doing, something, such act or abstinence or promise is
called a consideration for the promise
 Legal Rules
1. Consideration must move at the desire of the promisor
◦ Act or abstinence should be done at the desire of the
promisor and not a third party.
2. Consideration may move from the promisee or any
other person
◦ Indian Contract Act recognizes consideration moving from a
third party other than the promisee
◦ Provided it is done at the desire of promisor
◦ Case: Chinnaya v. Ramaya (1882)
Case: Chinnaya v. Ramaya
(1882)
Plaintiff (Chinnaya): Daughter of the donor.
•Defendant (Ramaya): Donee, the daughter’s brother.
•A woman (the donor) gifted a piece of land to her daughter (the donee) through a legal deed.
•As a condition of the gift, the donor required the daughter to pay an annual sum of ₹653 to the
donor’s brother, Ramaya (the plaintiff).
•The daughter accepted the gift deed and agreed to the condition.
•However, after accepting the land, the daughter refused to pay the stipulated amount to
Ramaya, claiming that there was no direct contract between herself and Ramaya.
•Ramaya, therefore, filed a lawsuit against the daughter to enforce the payment.
3. Consideration may be past , present or future
◦ Past consideration 🡪 X renders service in Jan. In March Y promises to compensate X
🡪valid according to Indian contract Act

◦ Present Consideration/Executed Consideration 🡪 moves simultaneously with

promise. X receives money from Y to deliver goods

◦ Future Consideration/Executory Consideration 🡪X will deliver goods to Y in a week

and Y will pay after 2 weeks
4. Consideration need not be adequate 🡪 need not be adequate or
equivalent to promise

5. Consideration must be real not illusionary

◦ Must have some value in the eyes of the law
◦ White v. Bluett
◦ Son took money from father and signed a promissory note
◦ Everyday complains that the father has treated the other sons better
◦ One day he said that he would stop complaining if the father agreed to forgo the money owed – Father agreed
◦ Court: Consideration not valid as it is illusionary.
7. Discharge of a pre-existing obligation is no consideration
◦ Consideration must be something more than what the promisee is already bound to
do
◦ Stilk( Sailor) v. Myrick ( Captain)

8. Consideration must not be unlawful, immoral, or opposed to public

policy
 Exceptions
An agreement made without consideration is void, unless
1. An agreement made on account of natural love and affection
◦ A written and registered agreement based on natural love and affection among
near relatives

2. Compensation paid for past voluntary services

◦ A promise to compensate wholly or in part a person who has already voluntarily done
something for the promisor does not require consideration to be enforced
3. Time barred debt:
◦ A promise in writing to pay a time barred debt is valid without consideration.
4. Agency
◦ No consideration is necessary to create an agency
5. Completed gift
◦ Nothing in this section shall affect the validity, as between the donor and donee, of
any gift actually made.
◦ For a gift, not being an agreement to make a gift, no consideration is necessary
Legality of
object/consideration
Agreements in which there is no legality of object and/or
consideration 🡪 void
The consideration or object of an agreement is lawful unless
◦ It is forbidden by law
◦ Is of such nature that, if permitted, it would defeat the provisions of any law
◦ Is fraudulent
◦ involves or implies, injury to the person or property of another
◦ The Court regards it as immoral, or opposed to public policy.
Forbidden by law
◦ Acts forbidden by law means acts that are punishable under any Statute or
Rules or Regulations made under any Statute.
◦ Eg getting into an agreement to poach tigers for fur

Defeat provisions of any law

◦ Not directly against any law but if permitted defeat provisions of any law
◦ Eg money lent for the marriage of a minor defeats the purpose of the Child
Marriage Restraint Act 1929 hence not recoverable
3. Fraudulent – fraud being committed
4. Injurious to person or property
◦ Agreement to injure a person or another’s property
◦ ‘A’ borrowed money from ‘B’. He is unable to pay either the principal or interest.
Therefore he agrees to render manual labour for certain period failing which he
agrees to pay exorbitant interest. This agreement is void as there is ‘Injury’ caused to
A
5. Immoral
◦ Advancing money to one spouse to help finance a divorce
◦ If any service done/article sold to a prostitute to help her carry on her vocation
6. Against public policy 🡪 public interest
◦ Trading with an alien enemy- wartime
• Example: If a business in the UK agrees to supply goods to a company in an enemy nation
during wartime, the agreement is illegal and cannot be enforced in court.

◦ Stifling prosecution –
◦ Example: A person accused of theft pays the victim to drop charges in exchange for
money. Such agreements are void and unenforceable.
◦ Agreement to create monopolies
◦ Example: Two companies in the same industry agree that only one will supply certain goods
in a region, eliminating competition. Such agreements are void under anti-trust laws in
many countries.

◦ Agreement in restraint of marriage

• Example: A contract that states someone will forfeit an inheritance if they get married is
invalid.

◦ Agreement in restraint of trade

• Restrictive covenants in employment contracts or business sales may be valid if they are
reasonable and protect legitimate business interests.
Capacity to contract
Sec 11: Every person is competent to contract who is of the age of
majority according to the law to which he is subject, and who is
sound mind and is not disqualified from contracting by any law to
which he is subject.
Persons incompetent to contract
◦ Minors
◦ Persons of unsound mind
◦ Persons disqualified by law to which they are subject to
 Contractual Capacity of Minors
Contract with a minor is said to be Void ab initio

Mohori bibi(defendant) v. Dharmodas Ghose(minor)

•Dharmodas Ghose, the plaintiff, was a minor at the time of the dispute.
•Dharmodas, acting as the sole owner of certain immovable property, executed a mortgage deed in favor
of Brahmo Dutt, a moneylender, to secure a loan of Rs. 20,000.
•At the time of the transaction, Dharmodas was still a minor (below 18 years of age).
•This fact was known to Brahmo Dutt's agent, who managed the transaction.
•Dharmodas received only Rs. 8,000 out of the total loan.
•Later, Dharmodas’s mother, acting as his legal guardian, filed a suit claiming that the mortgage deed
was void because Dharmodas was a minor at the time of entering into the agreement.
 Effect of Minor’s Agreement
1. No Estoppel

◦ Indian Evidence Act 1872: When one person has, by his declaration, act or
omission, intentionally caused or permitted another person to believe a thing
to be true and to act upon such belief, neither he nor his representative shall
be allowed, in any suit or proceeding between himself and such person or his
representative, to deny the truth of that thing.
◦ No estoppel against a minor
2. No liability in contract or in Tort arising out of a contract
◦ Tort : Civil wrong that unfairly causes someone else to suffer loss or harm

3. Doctrine of restitution
◦ If a minor acquires goods/property by misrepresentation age 🡪 can be compelled to
restore if traceable in his/her possession
◦ If said goods/property has been sold or converted them 🡪 No restitution
◦ Money given to minor 🡪 no restitution
4. No ratification 🡪 ratification = validation of an agreement previously
entered by minor after attaining majority
5. Beneficial contracts 🡪 agreements entered into by a minor for his/her
benefit are vaild and enforceable.
6. Minor as an agent 🡪 not entitled to employ an agent but can be an agent
for someone else.
As an agent can represent principal and bind him to acts done in course of
agency
7. Minor as a partner 🡪 According to Partnership Act 1932, minor cannot make a
contract of partnership
May be admitted to its benefits with consent of all other partners
Cannot be held personally liable for any obligation of the firm but share in firm’s
property can be made liable

8. Minor as shareholder 🡪 can hold shares through a guardian

9. Insolvency 🡪 cannot be declared insolvent

10. Liability for necessaries
Minor is liable for the necessaries supplied to him/her
Robert v. Gray(1913)
 Facts of the case:
1.Robert, a professional billiards player, entered into a contract with Gray, a minor, to tour the
country and play billiards matches against him for a fee.
2.Under the agreement, Robert was to give Gray training and the opportunity to improve his skills,
while Gray would pay for these services.
3.Gray, after initially agreeing, failed to perform his obligations under the contract.
4.Robert sued Gray for breach of contract, seeking compensation for the losses incurred due to
Gray’s failure to fulfill the terms of the agreement.
1.Contracts Beneficial to Minors:
The Court recognized that while minors generally cannot be bound by contracts,
exceptions exist for contracts that are for the minor's benefit.
1. In this case, the contract to tour and play billiards was deemed beneficial for Gray because
it provided him with an opportunity to enhance his skills and establish himself
professionally.

2.Necessaries and Benefit:

1. The Court found that the contract fell under the category of contracts for "necessaries,"
not in the strict sense of food, clothing, or shelter, but in terms of benefitting the minor in
their trade or career.
2. It was held that training and practical experience were essential for Gray to develop his
career as a billiards player, which justified the enforceability of the contract.

3.Minor’s Obligation to Perform:

1. The Court noted that if a contract is beneficial to the minor, they may be bound to
perform their obligations under it, as in this case.
11. Contract by guardian:
Valid contract can be entered into with the guardian on behalf of the minor.
The guardian must be competent to make the contract and the contract should be for the
benefit of the minor.
Sound mind
A person will be considered to be of sound mind if he at the time of entering
into a contract is capable of understanding it and forming a rational judgment as
to its effect upon his interest.

Necessaries of life supplied to a person of unsound mind

Contract by disqualified persons
Alien Enemy
Convict – while undergoing imprisonment
Insolvent
Free consent
Sec 13 defines consent
“Two or more person are said to consent when they agree upon the same thing
in the same sense “

Consensus ad idem 🡪 meeting of the minds

Sec 14 defines free consent

Consent is said to be free when it is not caused by –

(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of section 20,21, and 22.
Coercion
Threat or force used by one party against another in order to make
him/her enter into an agreement.

Sec 15 “Coercion is the committing, or threating 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.
If an agreement caused due to coercion
🡪 Voidable at the option of the party whose consent was so caused
Ranganayakamma v. Alwar Shetty (1889)

Chikkam Amiraju v. Chikkam Seshamma (1917)

Burden of Proof: lies on the party who wants to relieve himself/herself of the
consequences of coercion
Undue Influence
Consent obtained through dominating another
Sec 16(1)
A contract is said to be induced by "undue influence" where the
relations subsisting between the parties are such that one of the
parties is in a position to dominate the will of the other and uses that
position to obtain an unfair advantage over the other.
 A person is said to dominate the will of another:
a. Where he/she holds a real or apparent authority of the other eg: master and
servant, police officer and accused
b. Where he stands in a fiduciary relationship to the other 🡪 mutual trust and
confidence
c. where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress eg
doctor and patient
If an agreement caused due to undue influence
Voidable at the option of the party whose consent was so caused

Burden of proof: lies with the person who is in a position to dominate the
will of the other

Manu Singh v. Umadat Pandey (1890)

 Fraud (Sec 17)
Fraud means and includes any of the following act 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 be true;
2) the active concealment of a fact by one, having knowledge or belief of the
fact;
3) a promise made without any intention of performing it;
4) any other act fitted to deceive; and
5) any such act or omission as to law specially declared to be fraudulent
FRAUD:

Voidable at the option of the party whose consent was so caused

or

Can insist the contract be performed as if the representation had been true
Aggrieved party can sue for damages
Misrepresentation
Misrepresentation’ does not involve deception but is only an assertion of
something by a person which is not true, though he believes it to be true.
Sec 18
"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 any one 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 subject of the agreement.
Voidable at the option of the party whose consent was so caused
or
can insist the contract be performed as if representation had been true

*If the party to whom the misrepresentation had been made had means of discovering the truth with
ordinary diligence 🡪 Contract not voidable

Ordinary diligence: diligence as a reasonable prudent man would consider necessary having regard to the
nature of the transaction
 Mistake
Mistake of fact
Agreement void where both parties are under mistake as to
matter of fact essential to contract Galloway v. Galloway

A contract is not voidable merely because it was caused by one of the

parties to it being under a mistake as to a matter of fact.
Mistake of Law
A contract is not voidable because it was caused by a mistake as to any law in
force in India

Mistake as to a law not in force in India has the same effect as a mistake of fact.
 Effects
Coercion Voidable
Undue Influence Voidable

Fraud Voidable/Performance + Damages

Misrepresentation Voidable/Performance
(if ordinary diligence done)
Mistake Fact (bilateral) Void
Fact (unilateral) Not voidable
Law (Indian) Not voidable
Law (Foreign) voidable
Discharge of contract
Discharge of contract
When the parties to the contract fulfill their obligation , the contract is
executed.
Discharge of contract implies termination of the contractual obligation.
 Modes of Discharge of Contract
1. By performance
2. By Agreement
3. By impossibility
4. By Bar of limitation
5. By operation of law
6. By Breach of contract
1. Discharge of contract by
performance
A party to contract is said to have actually performed his promise when all
obligations under the contract are fulfilled. Within the time and manner
prescribed in the contract.
Actual Performance
◦ Both parties perform their promises. Performance 🡪 complete precise and according to terms
of agreement

Attempted Performance
◦ Tender of Performance 🡪 offer to perform obligations under contract
◦ Valid tender 🡪 contract deemed to have been performed
◦ Promisee refuses the performance- you are relieved of your liability to performance
 2. Discharge of contract by
Agreement/mutual consent
Novation (New)
◦ New contract substituted for an existing contract.
Rescission
◦ Mutual consent
◦ One party fails in obligation then the other party may rescind
Alteration
◦ Alteration of one or more contract terms (like time, place, quantity or price,
etc,.)
◦ Old contract is discharged
Remission
◦ Acceptance of lesser fulfillment of promise
Waiver
◦ Mutual abandonment
Merger
◦ An inferior right accruing to a party under a contract merges into a superior right
accruing to the same party under the same or some other contact
◦ Eg: Lessor of immovable property becomes the legal owner of the property, the
lease agreement is terminated
3. Discharge of contract by Impossibility
of Performance
Void ab initio
Impossibility of Performance

Initial Impossibility Supervening Impossibility

Doctrine of
Known to parties
Frustration

Unknown to
parties
Void
 Grounds for frustration
1. Destruction of the subject matter
◦ Subject matter of the contract subsequent to its formation is destroyed without any fault of the
parties to contract

2. Non-occurrence of an event
◦ The non-occurrence of an event contemplated by both parties as the reason for the contract
◦ Change in the state of things which formed the basis of the contract.

3. Death or incapacity of personal service/skill

4. Change of law
5. Outbreak of war
4. Discharge by limitation/ Lapse of
time
Limitations Act 1963- Aggrieved party - 3 years to file a case against
the unfulfilled obligation towards a contract.
Contract must be performed within specified period
5. Discharge by operation of law
Death
Insolvency – discharged from all liabilities prior to the adjudication
(a formal judgement on a disputed matter)
Unauthorised alteration – material alteration of terms without the
consent of the other party
6. Discharge by Breach of contract
Breach means break of contract
Actual Breach- fails to perform in the stipulated time or refuses to perform such
obligation.
Anticipatory Breach- by word of mouth or behaviour makes known his intention
not to perform his promise.
Remedies to breach of
contract
Breach: Failure, without legal excuse, to perform any promise that
comprises the whole or part of the contract

Remedies to Breach of Contract- (to non-breaching party)

1. Damages
2. Injunction
3. Specific performance
4. Quantum Meruit
1. Damages – compensation in money for loss suffered by injured party
◦ General Damage: ordinary damage that arises as a natural consequence of the breach
◦ Special Damages: Arise out of special circumstances. Said circumstance has to be
known to both parties

2. Injunction: order passed by court ordering party to do or not to do

something- breaching party from taking actions
3. Specific performance – compels the defendant to perform the contract as
per the agreement- court- Unique goods/real estate.

4. Quantum Meruit: “as much as is earned”

◦ Right to claim compensation for work already done