law of contracts pgdm 15 - 1

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The Indian contract Act 1872 Business Law developed with the changing practices of trade

and commerce. The Indian Contract Act, 1872 is the foundation on which all

business relations rest. It is the branch of law which determines the circumstances in

which promises made b the parties to a contract shall be legally binding.

It also defines the remedies that are available against a person who fails to perform his contract, and prescribes conditions under the which the remedies are available.

The Act originally had XI chapters and 238 sections. Chapter VII on Sale of goods Sections 73 to 123 has been

repealed and new enactment Sale of goods Act came into existence.

Chapter XI on Partnership (Sections 239 to 266) also was repealed.PGDM 15 – LAW OF CONTRACT

What are Contracts ?An Agreement enforceable by Law is a Contract. - S.2(h)

Every promise and every set of promises, forming the consideration for each other, is an Agreement . - S.2(e)

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 - S.2(b)

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. - S.2(a)

A person making the Proposal is called the “Promisor” and the person accepting the proposal is called the “Promisee”.- S. 2(a)

PGDM 15 – LAW OF CONTRACT

Formation of a contract

ENFORCEABLE BY LAW

ACCEPTEDProposal or Offer

SET OF PROMISES

- MUTUAL CONSIDERATION

Agreement

Promise

Contract

Offer or Proposal

An offer is an expression by one party of

his assent to certain definitive terms,

which looks forward to acceptance by the other to the exact same terms.

Offeror: the one making the offer. Offeree: the one to whom the offer is

made.

PGDM 15 – LAW OF CONTRACT 6

Pall Mall Gazette

£ 100 REWARD Carbolic smoke ball co

£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ballOne carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5sAddress: Carbolic Smoke Ball Company, 27, Princes Street, Hanover Square, London.

Pall Mall Gazette

November 13, 1891


Carlill v Carbolic Smoke Ball Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

The defendants issued an ad offering a £100 reward to anyone who used their product – smoke Ball - according to the directions and still managed to catch the flu. The ad said that they had deposited £1000 in a bank to show their sincerity in the matter. Mrs. Elizabeth Carlill used the ball exactly according to instructions from Nov. to Jan., but she caught the flu. She sued for £100.


1.The advertisement was not correctly stated; 2.She had not acted in reliance on the Ad.; 3.She had not used the device as directed; 4.She had not contracted influenza; 5. The Co. had no notice of her purchase of the Ball; 6. There was no valid contract; 7. It was a gaming contract and not enforceable; 8. The advertisement was not a contractual offer or,

if it was, it was not accepted; and, 9. If a contract, it was against public policy - void

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 - Defense Arguments


Reward doubled

Communication, Acceptance and Revocation

The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.

- S.3

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Section 3 of Indian contact ActThe communication of

proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively,

are deemed to be made by any act or omission of the party

proposing, accepting or revoking,

by which he intends to communicate

such proposal, acceptance or revocation,

or which has the effect of communicating it.


of what?

Which party?What act ?

Communicate what ?

Effect of the act ?

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Section 3 rearrangedThe communication of




by which he intends to communicate

such proposal, acceptance or revocation,



13





by which he intends to communicate such proposal, acceptance or revocation,


Section 3 divided

are deemed to be made by any act or omission of the Proposer


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proposals,

the acceptance of proposals, and the revocation of proposals and acceptances, respectively,


proposing,

accepting or revoking,

by which he intends to communicate such proposal,

acceptance or revocation,


Section 3 Modified


Acceptance of Offer A boy ran away from his house. Father issued a pamphlet,

offering a reward to any body who finds the boy. One man did not see the pamphlet, but over heard part of a conversation and found the missing boy. Can he claim the reward offered ?

Har Bhajan Lal Vs. Haricharan Lal AIR 1925 All 539.

“ Performance of the conditions of the proposal, or the acceptance of any consideration for the reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.” – S. 8

Display of goods at a shop with price tags attached. - Is it an offer? Pharmaceutical Society of G.Britain Vs. Boots cash chemists

Ltd. All ER 482 (CA) Display of goods is only an invitation to offer. Banks Catalogue of Charges is not an offer State Aided Bank of

Travancore Vs. Dhirt Ram AIR 1942 PC 6

On 7th July, a Building society handed over a written offer to sell a house A. Acceptance was to be by post. On 8th July 12.30 PM, The society sent a letter revoking the offer. At 3.50 PM on the same day, A posted a letter accepting the offer, He received the letter of revocation at 5.30 PM. Henthorn v Fraser (1892) 2.Ch.27. “where the circumstances are such that ,according to ordincry usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted. “

The communication of an acceptance is complete, as against the proposer when it is put in a course of transmission to

him, so as to be out of the power of the acceptor , as against the acceptor, when it comes to the knowledge of the

proposer.( S.4)Ramdas chakrabarti Vs. Cotton ginning Co Ltd (1887) 9 All 36 Share allotment

When communication is complete ?

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards - [S.5]

• How Carbolic Smoke Co can revoke the offer ?

Revocation of Proposals & acceptance

Revocation of a Proposal A proposal is revoked –

(1) by the communication of notice of revocation by the proposer to the other party;(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge of the acceptor before acceptance. - [S.6]


What Agreements are Contracts ?

All agreements are contracts if they are made - by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in

force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. - S.10

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Discharge of contracts


Consent and Free consent Two or more persons are said to consent when they

agree upon the same thing in the same sense. - [S.13]

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 S. 20,21& 22.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake.

- [S.14] What agreements are contracts ?


Coercion "Coercion" is the committing, or threatening to

commit, any act forbidden by the IPC 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. - [S.15]

A threatened to commit suicide and induced his wife to release certain rights in an immovable property in favour of his brother.Chikham Amiraju V Chikham Seshamma- (1917) 41 Mad 33 Held voidable, though suicide is not punishable under IPC,

C threatened to initiate criminal action and induced B to sign an agreement. Is this coercion?

Askari Mirza Vbibi Jai kishori (1912) 16 IC 344 – to threaten a criminal prosecution is not per se an act forbidden by IPC.

Consent


Undue Influence(1) A contract is said to be induced by "under 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.

(2) In particular and without prejudice to the generally of the foregoing principle, a person is deemed to be in a position to dominate the will of another –

(a) where he hold a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

(b) 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. - [S.16(1)&(2)]

……Contd. 22


Undue Influence Contd..(3) Where a person who is in a position to dominate

the will of another, enters into a contract with him, and the transaction appears, on the face of it or

on the evidence adduced, to be unconscionable, the burden of proving that such contract was not

induced by undue influence shall be upon the person in a position to dominate the will

of the other. - [S.16 (3)]

Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 -[S.16 (Proviso)]

Case: Allcard v Skinner 1887 36 Ch.d 145 Consent


Fraud "Fraud" means and includes any of the following acts committed by a

party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract;

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

2. the active concealment of 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;

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. - [S.16]

……Contd.

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Illustrations and Cases on Fraud

A sells, by way of auction, to B, a horse which A knows to be unsound. A conceals the fact from B.

In the above case, B is A’s daughter, and has just come of age. The relation between parties would make it A’s duty to disclose.

Derry Vs. Peek (1889) 14 App Cas 337 believed to be true. Intentional misrepresentation is of the essence of fraud. Amina Vs Hasan koya AIR 2004 SC 1227 pregnancy evident. P. Sarojam V LIC AIR 1996 Ker 201 non disclosure in the

Proposal for Insurance. Duty to speak – Uberrima fides PL Raju V Dr. Nandan Singh (2205) 5 ALD 402 (AP): seller did

not disclose pending litigation abut the property. Buyer allowed refund of money with interest.

DDA V Skipper Construction Co (P) Ltd : Promise made without the intention of performing – overbooking of accommodation units by a builder.

Consent


Misrepresentation 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

- [S.18]Consent


Mistake Where both the parties to an agreement are under

mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation : An erroneous opinion as to the value of the things which forms the subject-matter of the agreement is not be deemed a mistake as to a matter of fact - [S.20]

Effect of mistake as to law - A contract is not voidable because it was caused by a mistake as to any law in force in India; but mistake as to a law not in force in India has the same effect as a mistake of fact. - [S.21]

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. - [S.22]

Consent


Who are Competent to Contract ?

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. - [S.11] If a person, incapable of entering into a

contract is supplied with necessaries in life, the person who supplies is entitled to be reimbursed - [S.68]

Doyle v White City Stadium [1935 1 KB 110]What agreements are contracts ?

Quasi contract

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What are necessaries?Ryder v Wombwell (1868) LR 4 Exch 32 “Earrings for a male, spectacles for a blind person, a wild animal, daily dinner

with turtle and venison for a clerk with a salary of £1 a week are not necessaries”.

A pair of Chrystal, ruby, and diamond solitaires, and an antique goblet in silver gilt were not necessaries of a minor with an income of £500 a year, even though he was the son of deceased baronet and moved in the highest society.

Mohiri Bibee v Dharmodas Ghosh (1903) 30 IA 114:30 Cal 539:. Dharmodas a minor, entered into a contract to borrow of Rs. 20,000. The lender

advanced Rs. 8,000 to him and Dharmodas executed a mortgage of his property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. The Privy Council held that sections 10 and 11 of the Indian Contract Act make the minor's contract void and therefore the mortgage was not valid.

The privy council further held that as a minor's contract was void, any money advanced to him could not be recovered.

Srikakulam Subrahmanyam v Kurra Sabha Rao (1949) 75 IA 115: minor son and his mother sold a piece of land to the to pay of his fathers debt. Transaction was for the benefit of the minor and the guardian had the capacity to contract on his behalf.


Competent to contract


Unsound mind 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

judgment as to its effect upon his interest. A person who is usually of unsound mind, but occasionally of

sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of

unsound mind, may not make a contract when he is of unsound mind. - [S.12]

A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of contract or form a rational judgment as to its effect on his interest, cannot contract whilst such delirium or drunkenness lasts. - [S.12- illustration]

Competent to contract


Consideration 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 -[S.2(d)]

Contd….


Consideration and exceptions An agreement made without consideration is void, unless:

(1) it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless

(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract. – [S.25]

Contd….Void agreements

What agreements are contracts ?


Exceptions to consideration Contd.

Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2 : An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

Surendra Behari Lal v Jodonath 1984 All LJ 21 : transfer of property to brother in law held void for want of consideration.


Void agreements

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Legality of object and consideration

The consideration or object of an agreement is lawful, unless – It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said

to be unlawful.

Every agreement of which the object or consideration is unlawful is void.

- [S.23]

Pierce v Brooks (1866) LR 1 Ex 213: The defendant, a prostitute, was sued by the plaintiffs, coach-builders, for

the hire of a brougham. The jury found that they knew her to be a

prostitute, and supplied the brougham with a knowledge that it would be,

as in fact it was, used by her as part of her display to attract men. The

contract for immoral purpose is void.PGDM 15 – LAW OF CONTRACT


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Void agreements

An agreement not enforceable by law is said to be void; [S.2(g)]

The following types of agreements are declared to be void:

1) Agreements of which consideration and objects are unlawful in part. –S. 24

2) Agreements without consideration - S. 25

3) Agreements in restraint of marriage – S. 26

4) Agreements in restraint of trade. – S. 27

5) Agreements in restraint of legal proceedings – S. 28

6) Unmeaning Agreements – S. 29

7) Wagering Agreements – S. 30

8) Agreements to do impossible acts. – S. 56


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Consideration and objects are unlawful in part

Agreement void, if considerations and objects unlawful in part.-If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

Illustration : A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A's promise, and the consideration for B's promise, being in part unlawful.

- [S. 24] Pickering v Illfracambe – 1868 LR 3 CP 235 : “ Where you

cannot sever the legal part form the illegal part, the contract is altogether void. Otherwise, you can reject the bad part and retain the good. “

Void agreements


Agreement in restraint of marriage

Every agreement in restraint of the marriage of any person, other than a minor, is void. - [ S. 26]

Rao Rani v Gulab Rani LR 1942 All 810 : Agreement between two co- widows that if any of them remarried, she should forfeit her right to the deceased husband’s property. Held valid. all that was provided was that if a widow elected to remarry, she would be deprived of her rights”

Void agreements

Agreements in restraint of Trade Every agreement by which anyone is restrained from

exercising a lawful profession, trade or business of any kind, is to that extent void.

Exception 1 - One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, Provided that such limits appear to the court reasonable, regard

being had to the nature of the business. - [ S. 27] Other exceptions:

Agreement among partners not to carry on similar business during the continuance of partnership, on dissolution, on retirement from partnership , reasonable restrictions specifying the local limits are permissible. (S.11,36 of Partnership Act)

Trade Combinations exclusive dealer arrangements Service Agreements and bonds.

Contd….

Restraint of Trade – Cases.

Trego V Hunt (1896) Ac, 26 “ It is difficult to imagine that when the goodwill and trade

of a retail shop were sold, the vendor might the next day set up a shop within a few doors ad draw off all customers”

Gujarat Bottling co Ltd v Coca Cola Co (1995)5 SCC 545 The Agreement restrained the franchisee to manufacture,

bottle, sell, deal or otherwise be concerned with the products, beverages of any other brands or trade marks/ trade names during subsistence of the agreement including the period of one year notice.

The purpose the agreement was to promote trade and the restriction is operative only during the period the agreement is subsisting.

Held there is no restraint of Trade.

Void agreements

Restraint of Legal Proceedings

As per S.28, every agreement, which restricts absolutely from enforcing his rights under any contract, by the usual legal proceedings,

or which limits the time within which he may thus enforce his rights, is void to the extent.

Reference of future disputes and existing questions to arbitration is valid. [Ex to S. 28]

Continental drug & C0 Ltd v Chemoids & Industries Ltd – AIR 1955 CAL 161 : The contract fell under the concurrent jurisdiction of both the Bombay and Alipore courts, but the contract provided that “any dispute arising between the parties, settlement of the same legally or otherwise will be decided n Bombay” - Partial restriction is valid.

Void agreements

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Unmeaning Agreements

Agreements, the meaning of which is not certain, or capable of being made certain, are void. - [S. 29] Guthying v Lynn (1831) 2 B Ad 232 A horse was bought for a certain price coupled with a promise

to give £ 5 more if the horse proved lucky – uncertain, void.

Further, an agreement “to enter into an agreement in future” is void for uncertainty unless all the terms of the proposed agreement are agreed expressly or implicitly.

Thus, an agreement to engage a servant some time next year, at a salary to be mutually agreed upon is a void agreement.

Void agreements

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Wagering Agreements Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be

won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which may wager is made.

This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.

Nothing in this section shall be deemed to legalise any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply. – [ S.30]

Contd…

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What is Wager? In Tracker vs. Hardy Cotton, L.J., described a ‘wager’ as

follows:

“The essence of gaming and wagering is that one party is to win and the other to lose upon a future event which at the time of the contract is of an uncertain nature - that is to say, if the event turns out the other way he will win.

Features of wager: Uncertain event Mutual chances of gaining or losing. Neither party to have control over the event No other interest in the event.

Prize competitions which are games of skill are not wagers. Contract of insurance with insurable interest are not wagering

contracts. Void agreements

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Agreement to do impossible acts

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, becomes void when the act becomes impossible or unlawful.

Where one person has promised to do something which he knew or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promisee sustains through the non-performance of the promise. – [S.56]

Void agreements

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S.111 Indian Evidence Act 111. Proof of good faith in transactions where one party is in relation of

active confidence.-Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.

Illustrations

(a) The good faith of a sale by a client to an attorney is in question in a suit brought by the client. The burden of proving the good faith of the transaction is on the attorney.

(b) The good faith of a sale by a son just come of age to a father is in question in a suit brought by the son. The burden of proving the good faith of the transaction is on the father.



Discharge of Contract

When the object of the contract is fulfilled, the liability of either party under the contract comes to an end. The contract is then said to be discharged.

Contract is discharged by different ways: by Performance - (S. 31 – 67) by Impossibility of Performance ( S. 56) by Agreement (S.62- 67) and by Breach.


Performance of Contract The parties to a contract must either

perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provision of this Act, or of any other law.

Promises bind the representative of the promisor in case of the death of such promisors before performance, unless a contrary intention appears from the contract. - [S.37]


Tender of PerformanceWhere a promisor has made an offer of performance to the

promisee, and the offer has not been accepted, the promisor is

not responsible for non-performance, nor does he thereby lose

his rights under the contract.

Every such offer must fulfill the following conditions –

1. it must be unconditional;

2. it must be made at a proper time and place, and under such circumstances that the other party may have a reasonable opportunity of ascertaining that he is able and willing to do the whole of what he is bound by his promise to do;

3. if the offer is to deliver anything to the promisee, he must have a reasonable opportunity of seeing that the thing offered is the same.

An offer to one of several joint promisees has the same legal

consequences as an offer to all of them. - [S.38]

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Discharge by Agreement

Novation If the parties to a contract agree to substitute a

new contract for it, or to rescind or alter it, the original contract need not be performed.- [S.62]

Appointment in response to an advertisement. The employee was placed in a scale lower than that mentioned in the advertisement. After accepting the placement, he claims the higher pay scale.

Nagendra Kumar Brijraj Singh v Hindustan Salts Ltd, (2001) 1 Guj CD 532 Novaton



Discharge by Breach

1. Anticipatory Breach: Prior to the promised date of performance, the

promisor absolutely repudiates the contract.

2. Present Breach: Failure to perform as promised or making it impossible

for the other party to perform. The innocent party is excused from performance or

from further performance. Frost v knight – (1872) LR 7 Exch 111: D

promised to marry P on the death of his father. The father still living, D broke off the engagement. Suit filed without waiting for the death of his father, Valid.


Remedies for Breach of Contract Injured party entitled to one or more of the following

remedies: Rescission of the contract:

• He need not perform his part of the contract. Suit for damages.

• For monetary compensation for the loss or injury suffered. Actual loss to be proved.

Suit upon quantum meruit• ‘quantum meruit’ means “as much as is earned”. In case of breach

after part performance of the contract, reasonable compensation is awarded for the part performed.

Suit for specific performance of the contract• Actual carrying out of the contract as agreed

Suit for injunction• Order restraining the person from doing a particular act.


Remedies for anticipatory Breach Anticipatory breach – options for the injured party is to sue at once or wait for performance. Consequences are:

1. Party repudiating may choose to perform.

2. If while the contract is open, some event happens which discharges the contract other wise than by repudiation, promisor may take advantage.

Avery v Bowden – 1855 5 E&B 714: D chartered P’s ship to load with a cargo. Before the appointed day, when the ship arrived, D requested the captain of the ship to go away since there was no cargo. The ship waited in the hope that the contract will be performed. Before the appointed day, war broke out which rendered the performance illegal.

Held that it is frustration and not breach.

3. If the contract is open, damages will be assessed at the time fixed for performance. Otherwise, the measure will be as at the time of repudiation.


Quasi Contracts Theory of unjust enrichment - Enrichment of one

person at the cost of another. Justice demands that this should be prevented.

The Indian Contract Act provides for 5 kinds of ‘relations resembling those created by contract’

S. 68 - Claim for necessaries supplied to person incapable of contracting, or on his account

S. 69 - Reimbursement of person paying money due by another, in payment of which he is interested.

S. 70 - Obligation of person enjoying benefit of non-gratuitous act

S. 71 - Responsibility of finder of goods – as a bailee. S. 72 - Liability of person to whom money is paid, or

thing delivered, by mistake or under coercion


Payment by interested personsConditions: Payer must be interested in making payment.

B is lessee of certain land. For default of land revenue due to the govt. by A (owner) the land is put up for sale. B pays the dues to the govt to avoid sale. A is bound to make good.

He should not be bound to pay. A worker was injured due to negligence of the contractor. Port authority

was under statutory liability to pay compensation. Suit against the contractor under this section failed. Port authority was interested, but bound to pay.(Port Trust, Madras v Bombay Co- AIR 1967 Mad 318)

Defendant should be under legal compulsion to pay. Not moral compulsion. Must be legally compelled to pay. Bound by law

covers obligations of contract or tort. Payment should be from one to another (not to himself)

Govt. who was a tenant paid arrears of land revenue to itself and recovered from the rent. This payment is not to another and hence cuold not be recovered from the landlord, (Secy of State for India v Fernades (1907) 30 mad 375)


Payment of Non –gratuitous acts Five conditions must be satisfied:

A person should lawfully do something for another. He must not intend to act gratuitously The other party must enjoy the benefit. The beneficiary has the choice to reject the services. The services should have been rendered without request.

Neha Bhasin v Anand Raj Anand - (2006) 132 DLT 196:

Songs of N were recorded by the defendants. There was no contract between them. The defendants commercially marketed CDs of her song recordings. Held: since they did make business use of her work, a quasi contract arose under S.70, making the defendants liable to pay.

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Paid by Mistake. A person to whom money has been paid, or anything delivered,

by mistake or under coercion must repay or return it. - [S.72] Sales Tax Officer v Kanhaiya Lal saraj – AIR 1959 SC 135 : Tax

was paid under UP Sales Tax law on certain transactions, and subsequently, the High court ruled that such levies are ultra vires. Money paid under mistake of law also comes under S.72.

S. Ketrabarsappa v Indian Bank – AIR 1987 Karnt 236: Bank made a credit entry in the customers account by mistake

and the customer withdrew the money. He is bound to pay back the money along with interest.

Union bank of India v A. T. Ali Hussain & Co- AIR 1978 Cal 169 Forged cheques paid by the drawee Bank to the collecting

Banker. Collecting Banker parted with the funds. Though mistake is there, the defendant bank altered their position and there was no unjust enrichment.

2. Indian contract Act3. What are contracts ?4. Formation of contract5. Offer or Proposal6. Carbolic smoke Ball10. Communication..15. Acceptance of Offer16. Comnicatn. complete17. Revocation & Accept18. Revocation 19. Agreements & Contracts20. Free consent 21. Coercion22. Undue influence23. Undue Influence contd.24. Fraud25. Illustrations and cases26. Misrepresentation

27. Mistakes.28. competent to contract29. Necessaries30. Unsound Mind31. Consideration32. Consideration -Exceptn 33. Exception – contd.34. Legal objects etc.35. Void Agreements36. unlawful in part37. Restraint of Marriage.38. Restraint of trade.39. Cases40. Restraint of Legal action41. Unmeaning Agreements42. Wagering Agreements43. What is Wager?44. Impossible agreements

INDEX

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46. Discharge of a Contract47. Performance 48. Tender of Performance49. Discharge by agreement

50. Discharge by breach51. Remedies for breach 52. Remedies for breach 53. Quasi contracts54. Payment by interested55. Non gratuitous acts56. Paid by mistake

law of contracts pgdm 15 - 1

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