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Section 1 -> Introduction, Enacted by: Indian parliament, Date enacted: 25th April 1872, Date commenced: 1st September 1872, Applicable to all over the country., Specifically mention that it shall not affect practice commonly followed by parties, or any statute, act, nor any incident of any contract not against the provision of this act., Section 2 -> Definitions, OFFER -> 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., {Train of GUN-POWDER}, Types of Offer:, General Offer, Eg. Carlil used the smoke balls for the treatment of influenza as per the advertisement of the smoke ball company that it’ll provide compensation if the patient is not cured in 2 weeks., Eg. G offered to pay Rs.10000 to anyone who finds his lost nephew. L found the boy but he was unaware of the offer. Hence, he cannot claim for the reward., Specific Offer, Eg. A luxury bus offered 10% discount to all the Doctors serving in COVID hospitals., Cross Offer, Eg. Gauri offered Sakshi to pay Rs.1000 for Sakshi’s cycle. Sakshi offered Gauri her cycle for IDENTICAL Rs.1000., Counter Offer, Eg. Yash offered to sell his horse for Rs.100000 for which Zayn counter offered to buy horse for Rs.80000., Standing Offer, Eg. Onkar offered Hardik for selling his bike. Offer was valid for 1 week only., Social Offer, Eg. A invited B for dinner at his house., Legal Rules as to offer:, Made with a view of obtaining the assent, Eg. A offers B Rs.10 for a taxi from Cidco to Akashwani. Here, A is asking for B’s assent., Communication is important, Eg. Devaki offers Dipak for a marriage with Devraj, who is unknown of this offer. Here, offer is not valid., Giving rise to legal relationship, Eg. Mr.Balfour offers Mrs.Balfour that he would pay a certain amount for household expenses. Here, if Mr.Balfour fails, Mrs. cannot file suit., Certain & definite, Eg. Raman offered Nagesh that I would pay you according to your luck if you work as a manager with me., Should not contain a term non-compliance of which may amount to acceptance, Eg. A says to B, “I’ll assume you accepted the offer of buying my gun if you do not reply.”, Mere declaration is not an offer, Eg. An auction was announced in Kolkata. Rafiq from Mumbai reached on the stated date, but it was found that the auction has been cancelled. Here, Rafiq cannot claim for the travel expenses to the auction committee., Invitation to offer is different from offer, Statement of price is not an offer, Eg. There was a tag of Rs.10000 on Nike shoes. Raghu asked for buying it to the shopkeeper but he denied. Raghu cannot force him as statement of price is just an invitation., Offer is a final willingness and Invitation to offer is a negotiation stage., Tender is an offer in response to an invitation to offer., Definite offer:- Eg. BMC gave an advertisement for getting an architect for a project. Amit offered an amount of Rs.3 cr. to BMC in exchange of his services. When invitation is made for specific goods or services, tender made against is considered definite offer. So, there is only one contract & it cannot be revoked., Standing offer:- Eg. BMC gave an advertisement for getting a coal supplier. Amit sent a letter that he is ready to supply as much as order is placed for next 12 months if he gets the contract. BMC accepts the offer. Amit supplied for 6 months & later revoked his offer before order was placed. BMC cannot force him to supply after revocation. When invitation is made for certain period, the tender made against it is a standing offer which is continuous. Every order placement is a separate contract. Such tender can be revoked before the order is placed., PROMISE /ACCEPTENCE -> When the person to whom the Proposal is made signifies his assent there to, the proposal, when accept, becomes a promise. (Sec.7-8), One who makes promise is called as promisor and one who accepts promise is called promisee., Eg. X promises to pay rent for the land to Y., Here, X is the promisor & Y is the promisee., CONSIDERATION -> When at the desire of the promisor, 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 consideration., {SOMETHING IN RETURN}, Legal Rules as to consideration:, Must move at the desire of the promisor, Eg. Sakshi was touring for 2 days. Prem wanted to surprise her before she returns. So, he contracted with a gardener for the creation of a beautiful garden outside her house. Sakshi was entitled for payment when she returns. Held, she is not liable to pay since she never promised to gardener. Prem has to pay the amount., May move from the promisee or any other person, Eg. An old lady gifted her business to her girl with the direction that she must pay a certain amount to X. After death of old lady, girl stopped paying the amount to X. X may file suit against girl since consideration moved from old lady to X., May be past, present, future., Eg. Motu saved Patlu from robbers. Against this act, Patlu promised to pay Motu Rs.2000, which he later denied. Motu can get Rs.2000 since it was based on past voluntary services., Eg. Motu agreed to sell his land in a month to Patlu for which Patlu is going to pay on the present day. Here, land is a future consideration., May be an act or abstinence, Eg. Pritam unlawfully copied Arko’s song lyrics. Arko told Pritam that he should immediately stop copying or else suit would be filed against him. Pritam paid 4$ lacs for not to sue against him. Held, not to sue can be good consideration., It need not be adequate provided the consent is free., Eg. Trump by his will worked for Rs.20000 at a office which could have paid him Rs.20 lacs., It must not be illusory or unreal, Eg. A contracted with B that B will put life in A’s dead mother against which A will sell his 10 acres land to B., It must not be for something which promisor is already bound to do, Eg. A lawyer was paid Rs.1 lac for fighting a case & also excess Rs.20000 for winning the same. Later amount is void., It may be compromised or settled, Eg. Amit’s book showed Rs.200 to be arrears from Sumit. Sumit’s book showed Rs.100 liability to Amit. This amount was settled at Rs.150 by their mutual agreement., AGREEMENT -> Every promise and every set of promises, forming the consideration for each other., Eg. A sells goods of Rs.10000 to B., RECIPROCAL PROMISES -> Promises which form consideration or part of the consideration for each other, Eg. A shopkeeper promised to provide 2 kg of wheat against whom X promised to pay Rs 40 per kg., VOID AGREEMENT -> Agreement not enforceable by law., Eg. A minor contracted with a shopkeeper., CONTRACT -> Agreement enforceable by law., AGREEMENT + ENFORCEABLE, VOIDABLE AGREEMENT -> An agreement which is enforceable by law at the option of one or more of the parties, but not at the option of the other or others., Eg. Singham – Jaykant shikre forcefully bought a land of Rs.1 cr. from Takluram for Rs.40 lacs. This contract can be avoided on the grounds of coercion by Takluram., VOID CONTRACT -> A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable., Eg. A dancer contracted with a club owner night before a performance, she had an accident. This caused her not being able to perform on the fixed date. Hence, the contract becomes void., Eg. A farmer contracted with a plastic trader for polythene bags. The next day plastic was banned all over country. Hence, the contract becomes void., Section 3 -> Communication of proposal, acceptance & revocation, Communication of offer, acceptance & revocation are deemed to be made by any act (words or non-verbal cues) or omission (conduct) by which that person intends to communicate or which has effect of communicating it., Eg. Vyanku drops a coin in a weighing machine. This is an acceptance by conduct against the offer of company keeping that machine., Contracts over letter, telephone, telex, or internet:, Eg. Raj agreed to sell his table to Bharat for Rs.200 while talking on a call (same for telex, internet). Bharat could not hear this properly. Held, offer is not considered accepted., Eg. Similarly, this contract took place via letters. Held, offer will be considered accepted despite of loss of letter in transit provided that the letter is sufficiently stamped and correctly addressed., Communication in special conditions (Tickets):, In such case, it is assumed that the acceptor has accepted the conditions on tickets as soon as he gave the acceptance to the offer., One cannot avoid the conditions just by saying that he was unaware of the conditions; provided the tickets must have information with reasonable notice about where the conditions are mentioned. Following are the exceptions:, Where notice of terms is insufficient, Eg. Ticket of a zoo sold was folded by seller before the sale in such a way that the buyer could not read the conditions given., Where there are unreasonable terms, Eg. Laundry owner declared that he will pay 8% of amount in case of loss of clothes to be served in the laundry., When there is misrepresentation or fraud, Where the conditions are made after the formation of contract, Eg. A honeymoon couple booked a room in a hotel. There was a condition made on the walls of their room that there will be no liability of owner in case of loss of property. This condition is not valid since it has been made after the formation of contract., Section 4 -> Communication when complete, Communication of offer completes when it comes to the knowledge of the person to whom it is made. Eg. Babu sent a letter of offer to sell his horse to Shona on 14th Nov. It reached Shona on 20th Nov. Communication of offer completes on 20th Nov., Communication of acceptance completes -, Against the offeror – when the acceptance is put into course of transmission to offeror, which means out of the power of acceptor. Eg. Shona puts the letter of acceptance in the post box on 21rst Nov., Against the acceptor – when the acceptance reaches to the offeror. Eg. Acceptance letter reaches Babu on 27th Nov., Section 5 -> Communication of Revocation, Revocation of offer – It is complete when the revocation reaches the offeree before the offer. Eg. If Babu’s letter of revocation reaches Shona on any day before 20th Nov., then the offer will be revoked for Shona., Revocation of acceptance – It is complete when the revocation reaches the offeror before the acceptance. Eg. If Shona’s letter of revocation reaches Babu on any day before 27th Nov., then the acceptance will be revoked for Babu., Section 6 -> Offer can be lapsed –, Before the communication of acceptance is complete against the offeror., By lapse of time given or within reasonable time. Eg. A offered B for marriage, against which, B answered after 2 years. Held, offer has lapsed., By the failure of the acceptor to fulfill a condition precedent to acceptance. Eg. Rose will sell her house for Rs.5 lacs to Jack provided Jack leases his car to Rose. Held, offer has lapsed if Jack cannot lease his car., By death or insanity of offeror provided the offeree comes to know before acceptance. Eg. Roy offered Shetty goods of Rs.30000. The next day, Roy died. Shetty came to his funeral &later gave a letter to his son that he has accepted the offer. Held, offer has lapsed., If counter offer is made to an offer, If the law is changed, If an offer is not accepted in the prescribed mode. Eg. It was asked to accept the offer through email by X to Y. But, Y accepted it through whatsapp, which X also found enough. Held, offer has not lapsed since X has no problem with the change in mode., Section 7 -> Acceptance, Must be absolute & unqualified – Eg. Ram asked B if he wants to buy his bicycle for Rs.1200. B replied, “I am ready to buy your bicycle for Rs.1000.” This is not acceptance but counter offer., Must be communicated to offeror – Eg. Krishna offered Radha to marry him. Radha agreed about this to Balram but not Krishna. This is not an acceptance., Must be in reasonable time – Eg. After 5 years, Radha accepted to marry Krishna. This is not an acceptance., Must be in prescribed mode – Eg. If Krishna has mentioned to get acceptance through letter, then Radha must write a letter. If Krishna accepts any other mode used by Radha, then it is still valid acceptance., Cannot precede an offer – Eg. Radha accepted every offer made by Krishna before he could utter any word. This cannot form a contract., Cannot be implied from silence unless such conduct means acceptance – Eg. Radha applies for a life insurance policy by paying the premium. Insurance company has not communicated about the acceptance. Held, there is no contract between them., Acceptance subject to contract: Negotiation stage, Eg. Krishna asked Radha to marry him. Radha said, I’ll ask my mother & then tell you. Later, Krishna married Vrukhmani. Held, the agreement is valid since Radha has not accepted but took the contract in negotiation stage., Section 8 -> Acceptance by performing condition, Eg. Sujata offered Neema for selling a set of cosmetic of Rs.10550 if Neema repairs her weaving machine. Neema repaired her machine which is equivalent to acceptance., Section 9 -> Implied & Expressed Contracts, E-Contracts: Contracts which are formed using electronic means. Also called Cyber contracts or mouse-click contracts., Eg. Contracts on any online shopping app., Section 10 ->, Competency of Parties to contract, Section 11 -> Who are competent?, Every person is competent to contract to which he is subject who is -, 18+ years old, (21 years in case of Guardians & Wards Act), Contracts with a minor are void ab initio., A minor can be a beneficiary only., A minor cannot be asked to compensate for anything., A minor can use minority as excuse even when he had entered into contract by false representation., E.g. A minor mortgaged his house in favour of a moneylender to secure a loan of Rs.20,000. Later on the moneylender insisted setting aside the mortgage, stating that he was underage when he executed the mortgage. Held, the mortgage was void and therefore, it was cancelled. Further the moneylender’s request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not done., Guardians can enter into contract on behalf of minor only if it is in benefit of the minor & in the authority of guardians., Guardians are not liable for the acts of minor., Eg. If minor contracts with a showroom owner for Mercedez, then guardians aren’t liable for it. But, if minor acts as an agent, then guardians are liable., A minor can be an agent without incurring any liability., Eg. A minor was playing Cricket in colony. His friend X, who was a major, asked him if there was any builder known to him. Minor immediately located a builder’s house for Rs.300. Later, there was a contract between X & Y. Y did not work as per the standard. Now, X can recover any damages from Y but not minor., A minor cannot enter into partnership for profits only., A minor cannot be adjudged as insolvent., A minor, after becoming major, cannot be held liable for the agreements before attaining majority., Of sound mind, Not disqualified by any law, Alien enemies cannot be contracted as it is against public policy., Convicts (Persons on ‘ticket of leave’ are allowed)., Insolvents (Official assignee allowed)., Company working beyond its power mentioned in memorandum., Foreign Sovereigns (Central govt. sanction required), Section 12 -> Sound mind, Every person at the time of contract who is capable of understanding the terms of the contract as well as making rational judgements as to its effects on his interests is considered a person of sound mind., Intoxicated persons -> Eg. Drug addicts, Alcoholics., Lunatics -> A person who is of sound mind for sometime & of unsound mind for the other. He can enter into a contract when is of sound mind., Idiots -> A person who is mentally powerless., Free & Genuine Consent, Section 13 -> Consent, It is essential for a contract that the parties agree upon the same thing in the same sense at same time. When there is no consent, there is no contract., Eg. An illiterate old woman was made to sign property papers by his nephew by saying it is a mere bills of exchange. This contract is without consent & hence, voidable at her option., Section 14 -> Free Consent, Consent is said to be free when it is not caused by – Coercion, Undue influence, Fraud, Misrepresentation, Mistake., Section 15 -> Coercion, Coercion is the committing or threatening to commit, any act forbidden by the IPC 1860 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., Eg. Jaykant shikre forcefully bought a land of Rs.1 cr. from Takluram for Rs.40 lacs. This contract can be avoided on the grounds of coercion by Takluram., Eg. Rawan was standing with a match-stick after spreading petrol over Ram’s goods. He wanted Ram to get into a contract for sell of his road-side land. Ram entered into the contract but under coercion., Brief:, Coercion involves threat of any act to the prejudice of a person’s life or property & can be done by third party. Such threat involves physical involvement., Contract can be avoided by the injured party & only injured party has to prove it., Amount or anything delivered by any party in case of coercion must be repaid to the respective party., Suicide or attempting to suicide is also considered as coercion. Attempt to suicide is punished under IPC 1860., Eg. A student asked his father to buy him a car which his father refused. He told his father that he would cut his own throat, if his demand wasn’t fulfilled. Father immediately agreed., In English Law, Duress means actual violence over the person related to another in order to get the consent of that person in an agreement., Section 16 -> Undue influence, A contract is said to be induced by undue influence when the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other & uses that position to obtain an unfair advantage over the other., Brief:, There must be some relationship between the persons in the contract., Real -> Eg. Master & servant, father & son, etc, Fiduciary -> Eg. Doctor & patient, solicitor & client, etc, Person whose mentality has been affected due to old age, illness, temporary distress., Eg. A surgeon, during surgery, asked the patient for a contract of patient’s land for Rs.2.2 Cr. (Rs.2 Cr.)., Unconscionable Bargains, Eg. A helpless widow was given 80% p.a. loan by moneylender., A party must be in a position to dominate the other’s will., The party enforcing undue influence could get unfair advantage., If any of the above conditions appear in a contract, then it is voidable at the option of injured party & only injured party has to prove the undue influence., It is at the decision of the court to direct the injured party for the refund., Section 17 -> Fraud (Intentional), Any of the following acts done by a party to a contract or his agent with intent to deceive a person to enter a contract:, Suggesting a fact to be true when it is not true., Eg. John agreed with Peter for a contract of sale of motorbike, whose average was mentioned 45km/hr (25km/hr = true)., Active concealment of material fact, Eg. A bakery owner was suffering losses continuously from last 3 months (Except the current). He decided to sell his business to G. G was unaware of the fact and hence he bought the business. It was owner’s duty to speak about the losses., A promise made without intention of performing it., Eg. Laxmi Chit fund started a business where investors will get double amount of their investment in span of 21 days. After 21 days, the directors flew abroad., Any other act fitted to deceive, Eg. Anand was told by court not to buy that house. Later, he told his friend to buy that house which he will then buy from him., Any act or omission specially declared fraudulent by law., Eg. ABC ltd. didn’t mention in their prospectus that they were in a process of getting permission from SEBI. Such omission is declared to be fraudulent by law., There must be a false representation of a material fact before the conclusion of contract & other party must have entered into the contract on that belief & that party must have suffered due to that very fact., Eg. Mr.Y bought a truck from Mr.X. Later, he wanted to avoid the contract on the ground of fraud of not telling about bad condition of the horn. This fact is not material; hence, contract cannot be avoided., Eg. Mr.Z told Mr.Y that the black car had an average of 45km/ltr. which was false. However, Mr.Y bought the car since it was black. Later, Mr.Y cannot avoid the contract as he has entered into the contract on the belief of black color., Eg. Maaza ltd. issued in its prospectus that Ambani was its capital provider. Shivraj came to know about this fact from Tejas. He immediately bought the shares. Later, he found that the company lied about Ambani. He cannot avoid the contract since he had relied upon the fact given by Tejas & not the prospectus., Eg. X sold a memory card of 8 gb storage capacity to Y, who told seller about his purpose of buying. When Y used this memory card, he found it only had a space of 7.12 gb (usually cards lesser than its actual value). This unapparent defect must be informed by X. Hence, Y can avoid the contract., Eg. On 1rst May, Gaurang contracted for sale of his business at the year end. He informed buyer that he earned Rs.3000 p.m. Later, Gaurang’s business continued losses till the end of year. This fact change in circumstances must be informed to Ganesh., Silence as to facts: A person before entering into a contract doesn’t need to disclose all material facts which other party already knows., Exceptions:, It is the duty of the person to disclose all material facts if there is a fiduciary relationship (Uberrimae fidei):, A cancer patient must tell about his disease to insurance company while policy contract., Father must tell his daughter about the unsoundness of the horse., Contracts of immovable property, Liabilities of company were not mentioned in its prospectus. Anyone who has been allotted shares on the basis of such prospectus can avoid the contract., Contract of family settlement, If silence is equivalent to speech, Eg. “If you don’t say anything, I’ll assume that the cow is sound.” X said to Y. In this case, Y’s silence may amount to fraud if cow isn’t sound., Effect of fraud:, Contract can be avoided by the injured party unless the innocent third party got interest in the property., Eg. Hiralal sold a necklace to Keshav under the belief that he was the son of chief minister of state (fraud act of Keshav). Keshav sold this necklace to a jeweler. Later, Hiralal cannot avoid the contract as third party got interest in its title., He can file suit for damages., Section 18 -> Misrepresentation (Unintentional), Any act of a person in following case is misrepresentation:, When a person is unaware of a fact being false & believes it to be true., Eg. Company prospectus showed that permission from govt. to run liquor business will be provided in 2 days. But this permission was not provided., Breach of duty by a person due to whom the fact provided in the contract turns out to be false., Eg. Seller of second-hand tempo promised for 3 free washing of tempo from a well-known washing centre. He didn’t know at the time of promise that washing centre has shut the very last month., Mistake by a third party resulting to misrepresentation., Eg. Vyanku took his tractor to a garage. The garage owner mistakenly showed the loading capacity more than normal. Later, Vyanku contracted with Sarthak, who wanted the tractor for his loading business. He entered into contract on the basis of loading capacity of tractor., There must be a representation of a material fact before the conclusion of contract which becomes untrue due to above cases & other party must have entered into the contract on that belief., Effect of misrepresentation:, Contract can be avoided by the injured party, except:, Innocent third party gets interest in the property., Goods are perished., Eg. A man bought mango from a vendor, who said it was Alfonso mango. Vendor was told by his wholeseller the same. After consuming the mangos, man came to know that they were not Alfonso. Here, contract cannot be avoided., If injured party takes benefit after becoming aware of misrepresentation., Eg. Ram asked his employee to give Sohel 2 kg rice for Rs.50/kg from his godown. Employee mistakenly gave low quality rice to Sohel. When Sohel came to know about this, he communicated this to Ram, who gave back 50% refund to Sohel. After this, Sohel cannot rescind the contract on this ground again., He can file suit for damages., Section 19 ->, Agreement without free consent is contract voidable at the option of the injured party., Party may insist other party to perform the original terms as per the contract in case of fraud or misrepresentation., If the truth could have been discovered through ordinary diligence, then the contract cannot be rescinded in case of fraud or misrepresentation., Eg. Manu wanted to sell his factory to Tanu. He presented the books of accounts to her. Tanu bought the factory & subsequently asked to avoid the contract as the company was not profitable at all. Here, she cannot avoid the contract as she needs to be diligent here., Section 20 -> Bilateral Mistake, Bilateral Mistake as to fact makes contract void., Eg. Swami & Sakha both agreed for contract of a gold watch worth Rs.400000. They both had no idea that the watch not made of gold at all. The contract becomes void as both the parties were unaware of this fact., Section 21 -> Mistake of Law, A contract cannot be said to be voidable just because one of the parties to the contract was under a mistake as to a matter of law concerned to the contract., Eg. A man was caught by a T.C. for traveling without ticket. Held, that man cannot avoid the contract just because he was not aware of requirement of ticket., Exceptions: Foreign law (Bilateral Mistake) –> Eg. An Indian Co. agrees to sell an American Co. 200 cans of a mixture containing 45% sulphuric acid. The law of America had banned such concentration of chemicals. This is considered to be a mistake of foreign law & therefore, the contract is void., Section 22 -> Unilateral Mistake as to fact, Unilateral mistake as to fact doesn’t make the contract void., Eg. Sunita bought a kitchen set on the belief that it had warranty of 6 months which seller didn’t mention at all. When she came to know about the fact, she said the contract was void. Held, it was not., Exceptions:, Mistake as to nature of contract is considered void., Eg. An old illiterate man was made to sign his property papers which he believed to be bills of exchanges., Where identity of the person contracted with is important, the contract becomes void., Eg. Natthu Halwai sold his business to Gattu Halwai. Rajesh, Natthu’s old customer who was unaware of this contract, called at the business place to order some sweets. Call was picked up by Gattu & he delivered sweets as per the order. Held, the contract is void as identity of party is important., Section 23 -> Lawful consideration & object, Effects of unlawful & illegal agreements:, If the base cause of any agreement is void, then it cannot be enforced by law., In case of equal guilt, the defendant is in a better position., Eg. Raju, Farhan & Rancho were robbers. They decided to divide their robbery amount equally. The very object of equal division is fraudulent. If Raju runs away with whole amount, other two cannot claim their suit in the court. Hence, Raju is in better position., Consideration or object is lawful unless:, It is forbidden by law (illegal agreement), Eg. A agreed with B to kill C for Rs.2 cr., Eg. Shan ltd. copied the trademark of Bam ltd., Any agreement collateral to illegal agreement is void., Illegal agreements are punished under IPC 1860, It is of such a nature that, if permitted, it would defeat the provisions of any law, Eg. Jay told Vijay to buy his house which would be auctioned by court & later sell him., If it is fraudulent, Eg. Doctor asks Sakharam to pay Rs.1 lacs as gift which is in fact a consideration for surgery to evade tax revenue., If it involves or implies injury to the person or property of another, Eg. Shyam borrowed certain amount of money from a moneylender. He failed to pay the amount on time. To fulfill the loan, moneylender asked him to be servant without salary for next 6 months. Contract here is void., Eg. Abhi offered Rs.4300 to Subhash if he throws ink on a well-known politician. Such contracts are void., If the court regards it as immoral, Where consideration is of sexual immorality:, Eg. B allows K, a prostitute, a flat on hire, knowing that it would be used for immoral purposes., Eg. Agreements of cohabitation/prostitution, Where the object of the agreement is the furtherance of sexual immorality, Eg. Sada lent a loan to a prostitute to help in her trade., Where it is opposed to public policy, Agreement which interferes with administration of justice., Interference with the course of justice, Eg. Chief Judge Mr.Loya was given Rs.100 cr. to change his decision in the court. This is void., A person committing crime shall not be compromised, Eg. A thief was caught red-handed by a man but the thief agreed to sell his land for not filing the suit., In case of compoundable offence, compromise is valid., Eg. Trespassing any restricted zones, defamatory matters., If motive is to genuinely help other or get a fair share from the proceedings then below contracts are valid., Corruption in public offices, Eg. Chaubeji, a minister of state, posted his son-in-law to clerk post in a govt. office without any asking for degree by paying the interviewer a bonus of Rs.3200. This is void., Sale or transfer of titles such as Parma Veer Chakra, Bharat ratna, etc. is considered opposed to public policy., Agreements tending to create interest opposed to duty, Eg. A newspaper agreed to publish something wrong against ruling govt. upon heavy payment of opposition., Eg. Radha, agent of Hari, sold land of Hari to her friend without consent of Hari. Here, she fraudulently used her rights as well as it created interest opposed duty., Agreements in restraint of parental rights are void, Eg. Abhay agreed with Anita for transfer of guardianship of his only son. This is void., Agreements interfering with marital duties are void., Married person cannot promise to marry anybody else., Agreement in contemplation of divorce., Eg. Malaika promised Arjun a loan of Rs.76000 if Arjun dissolves her marriage & he marries her., Agreement to stay forever at wife’s parent’s house., Eg. Govinda was offered a loan by his wife, if he always stays with her at her parent’s house., Agreement between a married couple about past or future separation is unlawful., Agreements tending to create monopolies are void., Eg. Goli & Gotya contracted to work in 2 different fields so that there is no competition for them., Knock out agreements are usually valid. However, illegal in case intention is to defraud third party., Eg. Satyam & Shivam (brothers) didn’t raise any bid in an auction against each other. This is valid., Section 24 -> Consideration or object which is unlawful in parts, If the consideration or object in the contract is partly unlawful, then the agreement is void to the extent of that part only., Eg. Tukaram had a salary of Rs.34000 for working in a sugar factory & unlicensed tobacco factory. Here, agreement cannot be parted. Hence, the agreement is void completely., Section 25 -> Contract without consideration, Natural love & affection: Eg. Rohit agreed with his wife to buy a necklace to her. Agreement was written. This contract can be enforced by his wife since there is nearness in their relationship., Past voluntary services: Eg. Adi took care of an old stranger, whom he met during a sea voyage. He soon died. His son called Adi for payment of all the medical expenses but later refused. Held, he is not liable for payment at all. Services should be rendered to the promisor voluntarily & he must be alive at the time of such contract., Time-barred debts: Eg. Dev had bad debts from Das. Still, Das wanted to pay to Dev without consideration. This contract is still valid., Gifts: Eg. Sachin gifted a Ferrari car to Sehwag., Charity: Eg. Kadarnath refused to pay Rs.2000 to a mosque as charity for its construction (which he earlier promised). G.Khan had contracted with a mason on the basis of this charity. Held, Kadarnath has to pay the amount., Bailment (148) & Agency (185): Both of such contracts require no consideration & are still valid., Section 26 -> Since marriage is the birth right of every individual, agreement in restraint of marriage are void., Eg. Suhani promised Sawan that she will marry him & if she marries someone else, she will pay Rs.1 lac. She later, married to Sagar. Held, Sawan cannot claim anything for acts of Suhani since the agreement is void ab-initio., Any agreement of marriage in return of monetary consideration is also void., Eg. Ravi allowed his daughter to marry to Shani, a money lender, in return of which all the liabilities on Ravi would be waived off., Marriage brokerage agreements are valid because they transfer the information of bachelors., Section 27 -> Agreements in Restraint of Trade, Any agreement in restraint of trade for unreasonable terms is a void agreement., Eg. Subodh agreed with Pramod for not selling any product below a certain price. This is valid., Eg. Swara agreed with Tara for not carrying a ladies salon business for next 1 year in a specific area. Held, the agreement is valid., Exceptions:, A buyer of goodwill may ask the seller to stop running similar business so that he can enjoy entire goodwill., A partnership firm may restrict its partner(s) from carrying any other business while they are partners or even after., A trade group may restrict its members from carrying on any business for a valid period., Sole agreements of not to sell products of any manufacturer other than a particular manufacturer are valid., Service agreements are valid where an employee is restricted to carry on any business similar to that entity since he has knowledge about trade secrets of that entity. He can still perform his services after expiry of reasonable time & limits., Section 28 -> Agreements in restraint of legal proceedings, Agreements which restraint enforcement of rights (Except: arbitration) as well as personal liberty are void., Eg. A money lender gave a loan to a widow so that she could run a stitching class but stopped her from leaving city. This agreement restrains liberty of movement., Eg. A retailer bought some goods from wholesaler on the agreed condition that there won’t be any suit against him for non-payment of money., Agreements against law of limitation are void., Eg. An insurance company made a policy with a client that the company shall pay claims of a period of 1 year only., Section 29 -> Any agreement with uncertain terms is void., Eg. A offered to B for a job on which reasonable payment will be made. Here, amount of payment is not certain & hence agreement is void., Agreement to be made in future:, Eg. Santosh agreed with Sachin to form a partnership firm carrying an Exp-Imp business in future. They planned about their roles but there was no term in exact no. Held, the agreement is void., Section 30 -> Wagering agreement (Gambling), An agreement between two parties by which one promises to pay money or money’s worth in the happening of some uncertain event and the other person to pay if the event does not happen. Such agreements are void (also illegal in some states)., Eg. Abhi promised Rhishi that if Varun dies of Corona, he will pay Rs.20000 to Rhishi & vice-versa. Here, Abhi has no interest in Varun’s life & loser of the agreement has no consideration. Held, it is not only contingent contract but also wagering. Eg. Lottery, Horse race (above Rs.500), coupon collection, crossword., Exceptions:, Chit fund, Share market transactions (Speculations mostly), Games of skill & Athletics, Contract of Insurance, CONTINGENT CONTRACTS, Section 31-> Contingent Contract is a contract to do or not to do something if some event collateral to such contract does or does not happen. Eg. Construction bricks will be provided, if it does not rain tomorrow., Section 32 -> Happening of collateral event., Eg. If ship safely arrives, I will mortgage my goods to bank for loan., Section 33 -> Non-happening of collateral event., Eg. If ship does not arrive safely, insurance company will provide compensation., Section 34 -> Future conduct of a person, Eg. Rashmi promises to pay Rs.2000 if Kartik marries to Meera. The contract became impossible since Meera married Shyam., Section 35 -> Happening or non–happening of an event within a fixed time., Eg. Bank agreed to grant a loan to Titanic, if his ship arrives safely within a month., Section 36 -> Contract of impossible events, Eg. A will provide B a loan, if B can intersect to parallel lines., Performance of contract, Section 37 -> 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 provisions of the Contract Act or of any other law., Actual performance & attempted performance are equivalent., Section 38 ->, In case of reasonable attempted performance, promisor is excused from further performance., Eg. Abbas promised to paint house of Onkar for an advance of Rs.4000. On reaching his house on scheduled day, Onkar had left to pilgrimage. Held, Abbas doesn’t need to perform again., B. When attempted performance is not accepted by promisee, promisor does not lose his rights under the contract., Eg. Abbas paid an amount of Rs.4000 to get a Nikon camera from Prabhas. Prabhas provided a local brand camera. Abbas refused to take delivery. Prabhas has to perform this again., Section 39 -> Promisee can put an end to a contract on refusal to perform a promise by promisor unless he has signified, by words or conduct, his consent in its continuance., Eg. A dancer contracted with a club owner that she’ll perform for 10 nights in the club for an exchange of Rs.100000 per night. She performed for 3 nights & was absent for the 4rth night. Now, club owner can avoid the contract here itself. If he doesn’t question anything & allows her to perform on the 5th night, then the contract cannot be cancelled on the basis of same (4rth) night’s guilt., Section 40 -> Performance made by promisor, agent & legal representative, Section 41 -> Performance made by third party, Eg. Jethalal delivered TV sets to Sodhi for Rs.30000. Sodhi was unable to make this payment. Tarak paid entire amount on his behalf., Eg. Jethalal, Tarak & Sodhi went in a 5-star hotel (Hotel manager - Sundar) of Ahmedabad for dinner worth Rs.3000. (Refer this incident for below analysis of Sec.42-44), Section 42 -> Performance by Joint promisor, Eg. They will pay the amount according to the promise. If anyone of them dies, his legal representative has to pay with the survivors., Section 43 ->, When 2 or more persons make a joint promise, then promisee may compel anyone of them to pay the liability alone., Every promisor may compel other promisors for contribution, If anyone of the joint promisors fails to contribute his share, then the default must be shared by remaining joint promisors., Eg. Inititally, Sundar compelled Jethalal alone to pay for entire amount because he was in the same city. Jethalal asked for the contribution to Sodhi & Tarak by online payment. It was then found that Sodhi had became insolvent. Now, entire amount must be paid by Jethalal & Tarak., Section 44 -> Effect of release of one joint promisor, Eg. Sundar came to know that Jethalal was his relative and hence he released Jethalal from the payment. Now, Tarak alone is liable to pay entire amount. Still, Tarak can recover his money from Jethalal., Section 45 -> Devolution of Joint rights, When a person has made a promise to joint promisees, the right to claim performance rests with all of the joint promisees. If they all die, their legal representatives may jointly claim performance., Time & place OF Performance, Section 46 -> Where a promisor has to perform his promise without asking his promisee on a reasonable time since it has no specific time mentioned., Eg. Popatlal used to work from 6pm-7am at a call centre, whereas, Sodhi used to work from 7am-5pm during the day. They entered into a contract. As per the situation, 5pm-6pm is the most reasonable time for performance., Section 47 -> Where promisor has no need to apply to the promisee, he can perform his promise during business hours., Eg. Bhide agreed with Sodhi to deliver a pickle jar on a Friday at his garage. He can deliver goods from 10am-5pm., Section 48 -> Promisee must ensure that the promisor performs the promise at proper place & time., Eg. Sodhi & Bhide entered a contract where Sodhi promises to fix Bhide’s scooty whenever he asks him to. He also takes advance for it. When Bhide asked Sodhi to fix his scooty, he was out of town for night outs., Section 49 -> When place is not fixed, it is the duty of, promisor to apply to the promisee to appoint the reasonable place for the performance of the contract., Eg. Jethalal ordered some TV sets from Sundar on a Sunday. Sundar delivered them at his house during business hours. This wasn’t right performance since Sundar should have applied to Jethalal for the place., Section 50 -> Performance of a contract can be done as prescribed by the promisee., Eg. Champaklal, Jethalal’s father, needed costly medical treatments to recover from Cancer. Iyer, who owes money to Jethalal, was asked by Jethalal for immediate payment. This is valid performance., Performance of Reciprocal Promises, Appropriation of Payments, When there are several debts of creditor from the same debtor, then following three sections should be used for the appropriation of payments., Section 59 -> Where the debtor intimates about the appropriation of his payment to the creditor expressly or impliedly, it should be appropriated in that way only., Eg. Shantaram sold a car of Rs.300000 & a machinery of Rs.25000 to Atmaram. (Refer the table for understanding), Section 60 -> Where the debtor doesn’t intimate the creditor and the circumstances are not indicative, the creditor will appropriate the payment to any lawful debt actually due., Eg. Xavior bought some goods from Zayn on three different occasions worth Rs.28000, Rs.58000 and Rs.38000 respectively. Zayn paid Rs.25000 in cash. If Xavior appropriates this amount for the payment of 2nd occasion, it is at his discretion., In case of principle & interest due, a creditor shall first cancel the interest amount & then reduce the principle., Section 61 -> Where creditor fails to appropriate the payment, then he shall credit the payment to very first due amount.(Clayton’s case), Eg. Dinesh had three different liabilities from Rajesh i.e. Rs.14000, Rs.14000, Rs.45000. Dinesh paid Rs.14000. Here, Rajesh may debit the very first liability of Dinesh because he is unable to resolve for which transaction Dinesh has paid., Contracts which Need not be performed, Assignment vs Succession:, Section 62 ->, Rescission: When contracting parties agree to rescind a contract without formation of any new contract., Eg. Akshay sold umbrellas to Twinkle. The umbrellas were not as per the quality mentioned in the contract. Hence, Twinkle rescinded the contract ., Section 63 -> Remission & Waiver, Promisee may remit or waive whole or partial consideration of contract, extend the time of contract or may instead accept any satisfaction which he thinks fit., Eg. Abhi is a regular customer of Ravi. On a day, Abhi forgot to bring his purse at the time of payment. Ravi allowed him a complete discount., Section 64 -> Restitution of Voidable Contract, Party rescinding voidable contract, if has received any benefit there under from another party to such contract, shall restore such benefit, so far as may be, to the person from whom it was received., Eg. Akshay sold umbrellas to Twinkle on cash-basis. The umbrellas were not as per the quality mentioned in the contract. Hence, Twinkle rescinded the contract & recovered the already paid amount., Section 65 -> Restitution of Void Contract, In an agreement discovered to be void or void contract, any person who has been benefitted under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it., Eg. Avi promised to wash Rakesh’s car. Avi was paid advance for it. Later, it was discovered that the car was stolen by thief. Hence, Rakesh can recover the advance., Exceptions to Restitutions:, It does not apply to void agreement., Eg. Suraj sold goods to a minor. After knowing about the minority, Suraj demanded for payment. Held, he cannot do so since the contract was already void ab initio., Reasonable amounts received as earnest money need not be refunded unless it acts like partial payment., Eg. Agni bought land of Rs.3 lacs from Jwala. Agni paid Rs.1.5 lacs as token amount. Later, he could not pay remaining amount. The contract became void. Held, Jwala has to pay back the amount except some damages., Section 66 -> Communication of Rescission, Rescission needs to be communicated to the other party in the same manner in which communication completes under section 4 of this act. Similarly, a rescission may be revoked in the same manner as a proposal is revoked., Section 67 -> Effects of neglect of promisee to afford promisor reasonable facilities for performance, Eg. Avi promised Baman for painting Baman’s house. Avi asked Baman to remove all the furniture before the paint. But when Avi reached Baman’s house, house was not ready for paint at all. Held, the performance of Avi is completely valid & doesn’t need to be further performed., QUASI CONTRACTS, Section 68 -> Necessaries supplied to incompetent parties must be paid. Necessaries must be –, Suitable to the financial status., Necessary at the time of sale & delivery., Eg. A drunkard was provided necessaries when he was wounded in a road accident. Here, drunkard’s property is liable to pay., Eg. A minor orphan wanted to pursue CA course. Here, education can be treated as necessary., Section 69 -> Involuntary payment made by an interested person in a non-gratuitous act can be reimbursed by such person., Eg. X was bounded to pay his rent. Y his friend, paid on his behalf. Here X is liable to Y Remember, contract discharge bet X & landlord. But, Y can get his money from X., Section 70 -> A party cannot enrich itself unjustly at the expenses of other party., Eg. Pizza boy delivers to room no. 402. X eats the pizza. When pizza boy returns to acknowledge his mistake, he asks X to pay to Y of room no. 204. Here, X is liable to pay., Section 71 -> Responsibility of finder of goods, Eg. Yash found a diamond ring. He searched for the real owner but couldn’t trace. Later, he gave this ring to Gauri for safety. The ring must be returned to Yash when asked by him; as he is entitled to get back the goods from everyone except the real owner., Section 72 -> Money paid by mistake or under coercion, Eg. BMC was paid extra tax payment by mistake. BMC is liable to pay back the excess amount., Eg. Jaykant Shikre paid Rs.40 lacs to Takluram by putting his gun on his head to sell the land of Rs.1 crore. Here, Takluram has to return the amount received while rescinding the contract., Breach of contract, Breach of contract means failure of the party to perform his obligation under a contract., There are no. of ways to treat a breach by a party under a contract. They are as follows:, Section 73 -> Compensation for the loss caused by breach of contract., When a party has broken the contractual obligations under a contract, other party may claim for compensation against the damages suffered., Ordinary Damages –, Eg. Raj agreed with Ramesh for a sale of Mangos @ Rs.30/kg on 1rst Sept. When the delivery had to be made, Ramesh rejected the delivery. Hence, Raj had to sell the Mangos @ Rs.20/kg in the market on the very same day. Raj can claim for damages of Rs.10/kg from Ramesh for the compensation of losses., Measure of damages = Contract Price – Market Price on the date of breach., In case of anticipatory breach, injured party has to measure the damages on the day when the other party informed about the breach., Special Damages –, Eg. A, a businessman, had a deal with a tyre company for 10000 units of tyres. He wanted to further send these tyres to an automobile company in Dubai. This would have earned him a profit of 1 cr. But, the tyre company failed to perform the contract. A claimed for special damages of 1 cr. Held, A would only get ordinary damages., Prior notice of the purpose of the contract must be given in case of special damages., Vindictive Damages – These damages can be claimed in following situations: (Reputation related), Breach of promise to marry, Wrongful dishonouring of cheque by a banker even after having sufficient balances to the credit of customer, Nominal Damages – In some cases, there are no losses or negligible losses. However, it is necessary to ensure that the plantiff has proved the case right (won). Therefore, court may order for nominal losses (even a rupee)., Damages for deterioration caused by delay -, Eg. Ravi ordered 50 kg veggies from Sumit for which Rs.2000 had to be paid. Veggies had to be delivered on Sunday. But, Sumit delivered them on Tuesday. During that period, half of the veggies had rot. The compensation of this must be paid by Sumit to Ravi., Damages for discomfort –, Eg. A booked a luxury bus to travel from Pune to Nashik. The quality of bus was lesser than any normal luxury bus. In such case, damages for discomfort can be claimed., Section 74 ->, Pre-fixed Damages – When damages against breach by any party are fixed even before the breach of contract., Payment of interest:, If rate of interest charged on default is unreasonable, court may grant relief on such rate., If more rate of interest is charged on the default at the time of repayment of bonds, then it is not considered penalty., A lender may put compound interest on the due amount at the rate less than or equal to the rate which was provided on principle amount., Quantum Meruit:, Agreements discovered to be void -, Eg. A director worked for 4 months in a company. Later, it was found that he was not approved by shareholders. Here, director must be for 4 months of his service., Indivisible contract -, Eg. Atmaram was paid Rs.1300 & Rs.2900 against employee at sugar & unlicensed wine factory resp. Held, Atmaram can get Rs.1300., Impossibility of performance -, Eg. Mr.Thakre published half of the series of a magazine for which he entered into contract with Mr.Sanjay. Suddenly, the publication house had shut down. Mr.Sanjay must be paid half of the contract price., Bad performances -, Eg. S contracted with A for supplying Alfonso mangoes of Rs.300. However, S provided low quality mangoes. Hence, A can get back few bucks of compensation., Specific performance: When compensation is not adequate remedy, court may order the guilty party for performance of contract as specified., When the loss cannot be calculated –, Eg. Contract of a painting, artifact is breached., When the financial condition of party not performing the promise cannot make the damages., Eg. A trader contracted with a carrier to carry goods from Pune to Nagpur. Trader had given prior notice about the profit of Rs.1cr. he’ll earn if the delivery of the goods is done on next day. Carrier failed to perform as per the contract. Trader filed suit for damages. Since carrier was a poor guy, he could not pay Rs.1 cr. Hence, he was asked to perform the contract immediately., When the compensation in money is not an adequate remedy., Injunction: Where a party to the contract has breached the contract by doing something which he was restrained to do, the court may give ‘injunction orders’ to restraint them from doing so., Eg. Anushka contracted with Yash Raj films to not to work with any other production house for next 2 years since there were some trade secrets shared. However, she contracted with S.S.Rajamouli. Yash Raj films filed a suit in court for injunction., Section 75 ->, Injured party in a voidable contract is entitled to compensation against the losses which he has suffered due to non-fulfillment of the contract., Eg. Arya appointed Deep as a chef in her hotel for a month. Deep was absent on 3rd day. This made Arya to look for a temporary chef. Arya avoided the contract with Deep. However, she claimed for (excess amount paid to the temporary chef) damages of 3rd day. This is perfectly valid., Doctrine of Privity: Only contracting parties can file suit or be sued against each other provided there is no beneficiary party., Eg. Natty used to watch dramas in theatres & disturb audience. The theatre owner prohibited her entry in the theatre. Her friend bought a ticket for her. But, she was still not allowed inside. She cannot file suit against theatre owner since she was not a contracting party., Exceptions (Beneficiaries):, Trust:, Eg. Avi told his brother Ravi to donate all his property to a well-known NGO ‘Sai foundation’ after his death. Ravi transferred the property in his name instead. NGO can file suit on Ravi in such case., Marriage & family settlement:, Eg. X agreed with Y for paying a monthly allowance to Y’s daughter after marriage with X’s son. After Y’s death, X stopped paying. Held, she can file suit against X., Rule of Estoppel:, Eg. Ram gave a room on rent to Shyam, who gave the same room on rent to Raghu. If Raghu fails to pay rent, Ram may file suit against him directly., Assignment:, Eg. Official assignee can file suit against all those who came into contract with insolvent party he is appointed to., Eg. X endorsed bill drawn on Y to Z. If bill dishonors, Z may file suit against Y for non-payment., Covenants:, Eg. Kalia had a land which needed to be fenced according to govt. regulations. When he sold this land to Alia, he told her about this. Alia didn’t comply with the covenants. Govt. can file suit against her if she refuses to pay the necessary penalty., Agents:, Eg. A asked his agent, B, to sell land of A to C. B sold it as per the request. C didn’t pay the amount. A can file suit against C even though he was not the contracting party., Unenforceable Contract:, It is one which cannot be enforced in a court of law because of, some technical defect such as absence of writing or where the remedy has been barred by lapse of time. Eg. A sold his land to B for Rs.5 lacs orally. This agreement cannot be enforced.
