contract law in india

8/8/2019 Contract Law in India

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Indian Contract Act


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Nature of Contract Law

Q. No. 01: What was the nature of the Law of Contract before passing the Indian ContractAct, 1872 ?

Ans.: Nature of the Contract Law in India before 1872 was as mentioned below:

1. No uniformity of the law.

2. Uncertainty in its application outside the originaljurisdiction of the High Court.

3. Judges of Mofussil Court had no guidelines.

4. Decisions were taken on the basis of principle of justice,

equity and good conscience.5. Administration of Law of England with modifications by theSupreme Court of India established by the RoyalCharter.


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Contd. Nature of Contract Law

Nature of the Contract Law in India before 1872 was as mentioned

below:6. Law of England administered by the Supreme Court of Justiceat Bombay, Madras and Calcutta was not found favourable onaccount of its foreign nature.

7. Supreme Court of Calcutta and Bombay were empowered in1781 and 1797 respectively with application of Hindu ContractLaw for both the parties are Hindus and Muslim Contract Lawfor both parties are Muslims.

8. Application of Law of Defendant where one party was Hinduand other Muslim.

9. Establishment of Calcutta, Bombay and Madras High Courts in1862 and application of same law of contract.

10. Remedy by Indian Law Commissioners in 1866, whichbecame Indian Contract Act, 1872.


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Indian Contract Act, 1872

Q. No. 02: What is the Nature of the Contract Law in

India after enactment of Indian Contract Act, 1872?

Ans.: The Nature of Contract Law in India after 1872 isas mentioned below:

1.The Act came into force w.e.f. 01.09.1872:

2.It extends to whole of India exce p t J & K.


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Indian Contract Act, 18723. It is not retrospective in its operation

4. Neither whole Law of Agreements nor whole Law

of Obligations: There are several agreements, whichdo not carry any legal obligation i.e. agreement to

have dinner together at some pre-decided place, so

such types of agreements cannot be called as

contracts.


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Indian Contract Act, 18724. Neither whole Law ofAgreementsnor whole Law

ofObligations: (Contd..)

Similarly, there are certain obligations which do notnecessarily spring from any agreement and are not

contractual in nature, but they are enforceable by law

e.g. Tort or civil wrongs, quasi contracts, judgements

of courts.


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Indian Contract Act, 1872 4. Neither whole Law ofAgreementsnor whole

Law ofObligations: (Contd..)

Salmond has rightly said that the law of contract isneither the whole law of agreements nor law of

obligations.It is the law of those agreements which

create obligations, and those obligations have their

source in agreements.

It excludes from its purview all obligations which

are not contractual in nature and agreements which

are social in nature.


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Indian Contract Act, 18725. Consensus ad idem: Understanding andinterpretation of the facts of subject matter by both

the parties entering into a contract must be same.

The agreement as defined in Sec. 2(e) is essential andexclusively consensual in nature. Before any

agreement between two parties there must be

consensus ad idem means th

at th

e parties to th

eagreement must have agreed about the subject

matter of the agreement in the same sense and at the

same time. Unless there is consensus ad idem, there

can be no contract.


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Indian Contract Act, 18726. Law ofContract Creates jus in rem as distinguished

from jus in personam : Jus in rem means a right

against or in respect of a thing and jus in personam

means a right against or in respect of some specific

person.


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Indian Contract Act, 18727. The Act is not intended to deal exhaustively with

whole Branch of Law of Contract: It only defines and

amends certain parts of the law relating to contract. It

saves from its operation (i) all Statutes, Acts or

Regulations not expressly repealed by the Act (ii) Any

usage or custom of the trade (iii) Any incident of any

contract not inconsistent with provision of theContract Act.


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Indian Contract Act, 18728. Deals with General Principle of Law ofContract as

well as special form of contract: The contract Act

deals with total eleven chapters. First six chapters

deal with General principle of law of contract and

remaining chapters deal with special form of contract

such as guarantee, bailments and agency. Chapter VII

on Sales and Chapter XI on Partnership have beenrepealed by Sale ofGoods Act, 1930 and Partnership

Act, 1932 respectively.


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Indian Contract Act, 18729.The Acts, which are not dealt by Law ofContract Act:(1) The Negotiable Instrument Act

(2) The Transfer of Property Act

(3) The Specific Relief Act(4) The Companies Act

(5) The Sale ofGoods Act

(6) The Partnership Act

(7) The Railway Act

(8) Act IX of 1856 (bills of lading)

(9) Interest Act (XXXII of 1839)

(10) Common Carriers Act, Act III of 1865

(11) Act V of 1863 (Seamens wages)

(12) Act XI of 1863 (Emigrants)


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Indian Contract Act, 187210. Usagesand Customssavedfrom the operationof

the Contract Law:

(i)Pre-emption(ii)Attorneys lein

(iii) Arbitrators lein

(iv) Maritime Laws(v) Custom as to Hundies

(vi) Customs as to carriers

(vii) The Rule of Damdupat


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Indian Contract Act, 1872Rule ofDamdupat: The Hindu Law arrears of interest

exceeding the amount of principal amount cannot be

recovered at any one time, but it prevails only in the

Bombay Presidency and in the ordinary original civil

jurisdiction of the Calcutta High Court.


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Indian Contract Act, 187211. A wide branch of law affecting everyone & effect

of other Acts and Usages: The Law of Contract is very

wide branch of law. Every individual is affected

somehow or the other by some sort of contract.

There are so many other acts, customs and usages

which govern the terms of contract entered into by

men.12. Incomplete Code: By going into details of the

Indian Contract Act, 1872 we can say that this is not a

complete code in itself.


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Scope of the Contract Act The Preamble of the Indian Contract Act, itself says that the

act is to define and amend certain parts of the law relatingto contract.

Deals with General Principle ofLaw ofContract as well as

special form of contract: The contract Act deals with total

eleven chapters. First six chapters deal with Generalprinciple of law of contract and remaining chapters deal

with special form of contract such as guarantee, bailments

and agency. Chapter VII on Sales and Chapter XI on

Partnership have been repealed by Sale ofGoods Act, 1930and Partnership Act, 1932 respectively.

Act does not profess to be complete code on the entire law

relating to contracts.

The extends to whole of India exce t the state of J. & K.


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InterpretationofClauses:

Q. Define and Explain proposal, promise,

promisor, and promisee

Ans.: proposal, promise, promisor, and promisee

Proposal: When one person signifies to anotherhis willingness to do or to abstain from doing

anything, with a view to obtain the assent of that

other to such act or abstinence, he is said to make aproposal. It is essential that the proposer must make

the statement ofhis/ her intention to the other party

with a view to obtain the assent of the other party.


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Contdpromise, promisor, and promisee

Promise: When the person to whom theproposal is made signifies his assent

thereto, the proposal is said to be accepted

. A proposal when accepted, becomes a

promise.


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Contd promisor, and promisee

Promisor and Promisee: The personmaking the proposal is called

promisor and the person who isaccepting the proposal is called

promisee


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Conversion of Proposal into Promise

Q. What conditions are necessary for convertingproposal into promise ?

Ans.: Conversion of proposal into promise: A proposal

becomes promise when it is accepted by the personto whom it is made. Sec. 4 (b) of the Contract Act

says, When the 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.

i.e.Proposal + Acceptance = Promise


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Contd.

Before proceeding further it appears necessary to

give the definition of proposal too. Sec. 4 (a) says

When one person signifies his willingness to do orto abstain from doing anything with a view to

obtain the assent of that other to such act or

abstinence, he is said to make a proposal

Thus the proposal becomes promise only when it is

accepted by the person to whom it is made.


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Contd

As section 3 of the act the communication of the

proposal is deemed to be made by any act or

omission of the party proposing, which he intends

to communicate or which has the effect of

communication.

Binding effect of the proposal (Section 4 ): Only

when it comes to the knowledge of proposee.

The accepted proposal must give rise to the legal

duty or obligation.


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Q. What do you understand by the terms (i) Offer (ii)

Invitation to Offer and (iii) Acceptance?

Ans. :

(i)Offer: The word offer of the English Law is

synonymous to the word proposal of Indian

Contract Act. (refer to definition of proposal asgiven before) e.g. (1) Tender to supply goods (2) Bids in anauction sale

(ii)Invitation to offer: Offer and Invitation to offer are

different from each other, thus the following cannot

be called as offer, but only invitation to offer: (1) ACatalogue of goods for sale (2) The mere quotation of terms by a

trader (3) Advertisement for sale/ tender etc.


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Conted. Offer

Followingsare the offer:

A tender to supply goods at a certain time

A request for a loan Bids in an auction sale


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Contd

(iii) Acceptance: When the person to whom the

proposal or offer is made signifies his assent to the

proposal is said to have accepted . The acceptance

may be made by words or conduct, but that must be

(1) Absolute (2) Unconditional (3) Unqualified and

(4) in the way prescribed by the offerer/ proposor.


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Consideration

When, at the desire of the promisor, the promisee

or any other person has 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 :


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Consideration

Consideration is the legal concept of value in

connection withcontracts. It is anything of

value in the common sense, promised to

another when making a contract. It can take

the form of money, physical objects, services,

promised actions, or even abstinence from a

future action.


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Case of consideration

A agrees to sell his house to B for Rs

5,00000.Here As promise to sell his house is

for Bs consideration to pay Rs

5,00000.Similarly Bs promise to pay Rs

500000 is for A,s consideration to sell his

house to B.


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Essentials of a valid consideration

Consideration must move at the desire of

promisor.

Consideration may be past ,present or future.

Consideration must be legal

Consideration must be something of value

Consideration need not be adequate

Consideration must be real ,not illusionary

Consideration should not be immoral or

opposed to public policy


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Essentials of a valid consideration

Consideration must move at the desire of

promisor. Consideration must be done at the

request or desire of promisor. If done at the

instance of third party or without the desire of

promisor it is not consideration.


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Case for consideration

Amar sees Bhushans house on fire and helps

in extinguishing it.Amar cannot demand

payment for his services because Bhushan

never asked him to help.


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Consideration

Consideration may be past ,present or future.

says When the consideration by the party for

th

e present promise was given in th

e past, it iscalled past consideration.

Case: A renders some service to B at Bs

desire. After a month B promises to pay A for

the service done in the past. It is past

consideration.


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Present consideration

When consideration is given simultaneously

with promise it is present consideration.In a

cash sale consideration is present.

Case

A receives Rs 5000 in return of whichhe

promises to deliver certain goods to B at the

same time. This is present consideration.


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Future Consideration

When the consideration from one party to the

other is to pass subsequently in future to the

making of the contract, it is future or

executory consideration.

Case:

D promises to deliver certain goods to p after

a week. P promises to pay after a fortnight.It

is future consideration


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Quasi contract

Quasi contract is based on the principal of

equity(fairness, moral justice, ethics)which

means no person should be allowed to enrich

himself at the expense of another.


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QUASI CONTRACT

An obligation that the law creates in the

absence of an agreement between the parties.

It is invoked by the courts where UNJUST

ENRICHMENT, which occurs when a person

retains money or benefits that in all fairness

belong to another, would exist without judicial

relief.


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Kinds ofQuasi contract

Claim for necessaries supplied to a person

incapable of contracting on his account

Case A supplies the wife and children of B ,a lunatic

with necessaries suitable to their condition in

life.A is entitled to be reimbursed from Bs

property


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Liability of a person to whom money has been

paid by mistake or coercion

Case:

A and B jointly owe Rs 1000 to C.A alone pays

the amount to C and B not knowing this fact

pays Rs 1000 over again to C. C is bound to

repay the amount to B.


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Distinctionbetween Contract and

Quasicontract

Contract

Contract results from the

will of the parties

Its an agreement

Full fledged contract and is

binding

Quasi Contract

Only an obligation

resembling that created by

a contract No agreement

Not a full fledged contract


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Agreement

Every promise and every set of promises,

forming the consideration for each other, is an

agreement.


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Reciprocal promise

Promises, which form the consideration or

part, of the consideration for each other are

called reciprocal promises.


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Void Agreement

An agreement not enforceable by law is said

to bevoid:


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Contract

An agreement enforceable by law is a contract


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Voidable Contract

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:


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Void Contract

A contract which ceases to be enforceable by

law becomes void when it ceases to be

enforceable.


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CHAPTER - I

OFTHE COMMUNICATION,ACCEPTANCE AND REVOCATIONOFPROPOSALS

Sec.3 Communication, acceptance and revocation

of proposals:-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 acceptanceor revocation, or which., has the effect of

communicating it.


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Communication when complete

Sec.4. Communication when complete:-The,

communication of a proposal is complete when it

comes to the knowledge of the person to whom it is

made. 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


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The communication of a revocation is complete

As against the person who makes it, when it is

put into a course of transmission to the

person to whom it is made, so as "to be out of

the power of the person who makes it; as

against the person. to whom it is made, when

it comes. To his knowledge


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Illustrations

(a) A proposes, by letter, to sell a house to B at a certain price. The

communication of the proposal is complete when B receives the

letter.

(a) B accepts A's proposal by a letter sent by post. The communication

of the acceptance is complete, as against A when the letter is posted

as against B, when the letter is received by A.

(a) A revokes his proposal by telegram. The revocation is complete as

against A when the telegram is despatched. It is complete as against

B when B receives it. B revokes his acceptance by telegram. B's

revocation is complete as against B when the telegram is

despatched, and as against A when it reaches him.


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Revocation of proposals and acceptances

Sec.5 Revocation of proposals and acceptances:-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


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Illustrations

A proposes, by a letter sent by post, to sell his

house to B. B accepts the proposal by a letter sent

by post. A may revoke his proposal at any time

before or at the moment when B posts his letter of

acceptance, but not afterwards.

B may revoke his acceptance at any time before orat the moment when the letter communicating it

reaches A, but not afterwards.


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Revocation how made

Sec. 6 Revocation how made.-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 itsacceptance, 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 fulfil a condition precedent toacceptance ; or

(4) by the death or insanity of the proposer, if the fact of his death or

insanity comes to the knowledge of the acceptor before acceptance.


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A t b f i diti


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Acceptance by performing conditions, or

receiving consideration

Sec. 8 Acceptance by performing conditions, orreceiving consideration:-

Performance of the conditions of a proposal, or the

acceptance of any consideration for a reciprocalpromise which may be offered with a proposal, is an

acceptance of the proposal.


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Promises, express and implied.

Sec. 9 Promises, express and implied:-In so far as the

proposal or acceptance of any promise is made in

words, the promise is said to be express. In so far as

such proposal or acceptance is made otherwise than

in words, the promise is said to be implied.

C


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CHAPTER IIOF CONTRACTS, VOIDABLE CONTRACTS AND VOIDAGREEMENTS

What agreements are contracts

Sec.10 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 1*[India] and

not hereby expressly repealed by which any contractis required to be made in writing 2* or in the

presence of witnesses, or any law relating to the

registration of documents.


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Who are competent to contract

Sec.11 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, 3*and who is of sound

mind, and is not disqualified from contracting by

any law to which he is subject.


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What is a sound mind for the purposes of contracting

Sec. 12 What is a sound mind for the purposes of

contracting:-A person is said to be of sound mind forthe 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 hisinterests e.g. 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.


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Illustrations

(a) A patient in a lunatic asylum, who is at intervals of

sound mind, may contract during those intervals.

(a) A sane man, who is delirious from fever or who is

so drunk that he cannot understand the terms of a

contract or form a rational judgment as to its effect

on his interests, cannot contract whilst such

delirium or drunkenness lasts.


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"Consent" defined.

Sec. 13 "Consent" defined:-Two or more

persons are said to consent when they agree

upon the same thing in the same sense.

" " d fi d


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"Free consent" defined

"Free consent" defined:-Consent is said to be free

when it is not caused by-

(1)coercion

(2)undue influence

(3)fraud, as defined in section

(4) misrepresentation,

(5)mistake, subject to the provisions of sections

"C i "d fi d


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"Coercion"defined.

Sec. 15 "Coercion" defined:-"Coercion" is the

committing, or threatening to commit, any act

forbidden by the Indian Penal Code, or the unlawful

detaining, or threatening to detain, any property, to

the prejudice of any person whatever, with theintention of causing any person to enter into an

agreement.

Illustration


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Illustration

A is forced to sign a promissory note at the point of

pistol.A knows what he is sigining but his consent isnot free. The contract in this case is voidable at his

option.


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"Undue influence" defined

Sometimes a party is compelled to enter into

an agreement against his will as a result of

unfair persuasion by the other party.

It happens when special kind of relatioship

exists between parties and one party is in a

position to exercise undue influence over the

other.


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"Undue influence" defined

Sec.16"Undue influence"defined:-

(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 usesthat position to obtain an unfair advantage over the

other.


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Where a person makes a contract with a

person whose mental capacity is temporarily

or permanently affected by reason of

age,illness. Eg:between a medical attendentand his patient


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Case:

A, a man enfeebled by disease or age, is

induced,by B's influence over him as hismedical attendant, to agree to pay B an

unreasonable sum for his professional

services. B employs undue influence.


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Fraud" defined.-"Fraud" means and

Includes any of the following acts

committed by a party to a contract,

or with his connivance, or by his

Agent with intent to deceive another

Party to induce him to enter into the

contract


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A, intending to deceive B, falsely represents that five hundred

kilos

of indigo are made annually at As factory, and thereby

induces B to buy the factory. The contract is voidable at theoption of B.


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A, intending to deceive B, falsely represents that five hundred

kilos

of indigo are made annually at As factory, and thereby

induces B to buy the factory. The contract is voidable at theoption of B.


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Contingent Contract

A"contingent contract "isacontract todoor not todo

something,ifsome event,collateral tosuch contract,doesor

doesnot happen.

Acontracts to pay B Rs.10,000ifBs house isburnt.Thisisa

contingent contract.


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Contingent Contract

Enforcement ofcontractscontingent onan event happening

Contingent contracts todoor not todoanythingifan uncertain

future event happenscannot be enforcedbylaw unlessand untilthat event has happened.

Ifthe event becomesimpossible,such contractsbecome void.


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illustration

A makes a contract with B to buy Bs house if A

survives C.

. This contract cannot be enforced by law unless

and until C dies in As lifetime.


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Contingent Contract

Essential Characteristics of a contingent contract

Its performance depends upon the happening or nonhappening in future of some event.

The event must be uncertain

The event must be collateral i.e. incidental to contract.


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Contingent Contract

Enforcement of contracts contingent on an event happening.

Enforcement of contracts contingent on an event happening.-

Contingent contracts to do or not to do anything if an uncertain futureevent happens cannot be enforced by law unless and until that event hashappened.

If the event becomes impossible, such contracts become void.


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Contracts contingent on future conduct of a living person.

If the future event on which a contract is contingent is the way

in which a person will act at a specified time the event shall

be considered to become impossible where such person does

anything that renders it impossible

Eg:A agrees to pay B a sum of money if B marries C.C married

D.The marriage of B to C must now be considered impossible.


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Unlawful and illegal agreements

An unlawful agreement is one which , like a void

agreement is not enforceable by law.It is void

ab initio. It effects only the immediate parties

and has no further consequences

An illegalagreement on the other hand, is not

only void as between immediate parties but

has this further effect that the collateraltransaction to it also becomes tainted with

illegality.


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Everyillegalagreement is unlawfulbut every

unlawfulagreement isnot illegal

L lends Rs 5000 to B to help him to purchase

some prohibited goods from T an alien

company. If B enters into agreement with

T,the agreement will be illegal and the

agreement between B and L shall also becomeillegal


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Effects of illegality

An illegalagreement, under the common law of

contract, is one that the courts will not

enforce because the purpose of the

agreement is to achieve an illegal end. Theillegal end must result from performance of

the contract.


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Agreementsopposed to public policy

1. Agreement oftrading with enemy

2. Agreement tocommit acrime

3. Agreements which interfere with administration

ofservice.

4. Agreementsin restraint oflegal proceedings

5. Traffickingin publicoffices

6. Agreementsin restraint ofparental rights7. Agreements restricting personalliberty.


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Agreementsopposed to public policy

9. Agreement in restraint of marriage

10. Agreement in restraint of trade


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Types of tenders

By public advertisement; This is usually

adopted method. Open tender falls in this

category.

By direct invitation to a limited number of

firms/contractors; These are called Limited

tenders.

By invitation to one firm/contractor only;These are termed as Single tenders.

Time and place for performance ofpromise, where


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time isspecifiedandnoapplication tobe made

When promise is to be performed on a

certain day, and the promisor has undertaken

to perform it without application by the

promisee, the promisor may perform it at anytime during the usual hours of business on

such day and at the place at which the

promise ough

t to be performed.


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Illustration

A promises to deliver goods at B's

warehouse on the first January. On that

day A brings the goods to B's warehouse, but

after the usual hour for closing it, and they are

not received. A has not performed his

promise.

li i f f i


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Applicationfor performance oncertain

day tobe at proper time and place

When a promise is to be performed on a

certain day, and the promisor has not

undertaken to perform it without application

by the promisee, it is the duty of the,promisee to apply for performance at a

proper place and within the usual hours of

business.

Place for performance ofpromise, where no


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application tobe made andno place fixedfor

performance

When a promise is to be performed without

application by the promisee, and no place is

fixed for the performance of it, it is the duty of

the promisor to apply to the promisee toappoint a reasonable place for the

performance of the promise, and to perform it

at such

place

ll


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Illustration

A undertakes to deliver a thousand maunds of

jute to B on a fixed day. A must apply to B to

appoint a reasonable place for the purpose of

receiving it, and must deliver it to him at such

place. Performance in manner or at time

prescribed or sanctioned by promisee.

Performance in manner or at time prescribed


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Performance in manner or at time prescribed

or sanctionedby promisee

The performance of any promise may be

made in any manner, or at any time which the

promisee prescribes or sanctions.

i h f


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Discharge of contract

Discharge of contract means termination of

contractual relations between parties. A

contract is said to be discharged when it

ceases to operate i.e when rights andobligations created by it come to an end.

A b di h d b


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A contract may be discharged by

1. By performance

2. By agreement or consent

3. By impossibility of performance.

4. By lapse of time

5. By operation of law

6. By breach

of contract

B f


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By performance

Discharge by Performance

A contract is usually discharged by the

performance of the terms of the agreement.

In most cases, the parties perform their

promises and the contract ceases to exist or is

thereby discharged. Nature of Performance

Performance may be the doing of an act ormaking of payment.

P f


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Performace

Actual Performance :When both the parties perform

their promises, the contract is discharged.

Performance should be complete precise and

according to th

e terms of th

e contract.Attempted Performance: Tender is not actual

performance but only an offer to perform obligation

under the contract. When the promisor offers to

perform the obligation but the promisee refuses toaccept the performane it is called tender,and tender

is equivalent to actual performance .

t d


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tender

The effect of a valid tender is that the contract is

deemed to have been performed by the

tenderer.

Discharge ofcontract


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g

Discharge by agreement or consent:

1. By expressconsent2. Byimpliedconsent

Bynovation:Old contract changed to make anew

contract.Must take place before the expiryoftime of

performace oforiginalcontract,otherwise it willbe breachofcontract.

Rescission

Alteration

Remission Waiver

Merger

Di h f t t


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Byimpossibilityofperformance

1. Known to the parties:calledabsolute impossibility.The

agreement isvoidab initio.For eg:A agrees to B todiscover

treasure by magic.

2. Unknown to the parties:When at the time ofthe contract

the partiesare ignorant ofimpossibility..Eg Asold to B

certaingoodssupposed tobe onvoyage.Goods ceased to

exist due to the perilsofthe sea.The agreement isvoid.

3. Superveningimpossibility:Impossibilty subsequent toformqtion ofcontract but beyond the controlofparties

Di h f t t


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Bylapse oftime

Discharge ofcontract


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By operation of law:

By Death:contract based on personal skill and ability By merger:lesee becoming an owner

By insolvency:Once a person becomes insolvent ,he

is absolved of all his liabilities.

Unauthorised alteration of terms of contract:When

party to a contract makes any unauthorised changes

witout the consent of other party , the other party

can avoid th

e contract Rights and duties vested in the same person:example

when a bill gets into the hands of the acceptor.

Called Circuity of action

Di h f t t


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By breach of contract:By actual Breach

:By anticipatory breach

Destruction of subject matter

Death or incapacity of personal sevices

Non existence of state of things

Ch

ange of lawOutbreak of war

Discharge of b breach of contract


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Discharge of by breach of contract

Difficulty of performane

Commercial impossibility

Failure of third party

Stricks ,lockouts ,civil disturbances

Di h f t t b b h f t t


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Discharge of contract by breach of contract

By the act of the promisor making performance

impossible

By renunciation of obligation

Remedies for breach of contract


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Remedies for breach of contract

Where there is a right there is a remedy. A

remedy is a means given by the law for the

enforcement of a right.

Remedy


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Remedy

When a contract has been broken, the party

who suffers by such breach is entitled to

receive, from the party who has broken the

contract, compensation for any loss ordamage caused to him thereby, which

naturally arose in the usual course of things

from such

breach

, or wh

ich

th

e parties knew,when they made the contract, to be likely to

result from the breach of it.

Remedies are:


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Remedies are:

Rescission of the contract

Suit for damages

Suit upon Quantam Meruit

Suit for specific performance of the contract

Suit for injunction

Rescission


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Rescission

When a contract is broken by one party the

other party may sue to treat the contract as

rescinded and refuse further performance. In

such a case he is absolved of all his obligations

under the contract

Case:A promises to B to supply 10 bags of

cement on a certain day.B agrees to pay the

price of the goods after the receit.A doesntsupply the goods.B is discharged from the

liability to pay the price

ar y r g u y resc n ngcon rac en e ocompensation


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A, a singer, contracts with B, the manager of a

theatre, to sing at his theatre for two nights In

every week during the next two months, and

B engages to pay her 100 rupees for each

night's performance. On the sixth night, Awillfully absents herself from the theatre, and

B, in consequence, rescinds the contract. B is

entitled to claim compensation for th

edamage whichhe has sustained through the

non-fulfillment of the contract.

Damages


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Damages

Damages are the monetory compensation

allowed to a injured party by the court for the

injury suffered by him the breach of contract.

Restitutioninintegrum

Damages


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Damages

Damages arising naturally

Damages in contemplation of the parties

Nominal Damages

Damages for loss of reputation

Penalty

Cost of decree/cost of suit for damages

Special damages


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Damages other than those arising from the

breach of contract may be recovered if such

damages may reasonably be supposed to

have been in the contemplation of both theparties as a probable result of breach of

contract. These are called special damages.

These can be recovered only if brought to the

notice of other party.

Liquidated damages /penalty


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Liquidated damages /penalty

These damages represent a sum fixed by the

parties in the contract which is usually a fair

and genuine estimate of the probable loss

that might ensue as a result of breach.It isname of a sum named in the contract at the

time of its formation.It is disproportionate to

the damages likely to accrue as a result of

breach.

Quantum Meruit


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Quantum Meruit

Means as much as earned. A right to sue in

Quantum meruit arises where a contract

partly performed has become discharged by

the breach of contract of other party.The rightis founded by the other party to pay for what

has been done.

Specific Performance


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Specific Performance

In certain cases of breach of contract damages

are not an adequate remedy.The court may

direct the party in breach to carry out his

promise according to the terms of contract.Happens when the compensation in money for

its non performance is not an adequate relief.

Where there is no standard way of ascertainingdamages.

Injunction


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Injunction

Where a party is in the breach of a negative

term of a contract(i.e. where he is doing

something whichhe promised not to do)the

court may,by issuing an order restrain himfrom doing what he promised not to do.Such

an order of court is called injunction.

Case of injunction


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Case of injunction

W agreed to sing in Ls theatre and during that

period to sing nowhere else. Afterwards W

made a contract with Z to sing at another

theatre for him and refused to perform thecontract with L. Held, W could be restrained

by injunction from singing for Z.

contract law in india

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