TAMIL NADU NATIONAL LAW SCHOOL

( A State University Established by Act No.9 of 2012 )

NavalurKuttapattu, Srirangam, Tiruchirappalli - 620 009. Tamil Nadu

I YEAR II SEMESTER B.com. LL.B. (HONS.) DEGREE

COURSE
PAPER: CONTRACTS
SUBMITTED TO
Dr. k. Govinda Rajan
(Assistant Professor in Law of Contracts)
SUBMITTED BY
H. Mohamed Abdul Raaziq
I year, B.com. LL.B. (Hons.)
Tamil Nadu National Law School
Registration Number: BC0150015
E-mail: raaziq2015@gmail.com
Cell: +91 8682059462

ACKNOWNLEDGMENT

At the outset, I take this opportunity to thank my Professor

Dr. K. Govinda Rajan from the bottom of my heart who has
been of immense help during moments of anxiety and torpidity
while the project was taking its crucial shape.
Secondly, I convey my deepest regards to the Vice
Chancellor Mr.Arun Roy and the administrative staff of Tamil
Nadu National Law School who held the project in high esteem by
providing reliable information in the form of library infrastructure
and database connections in times of need.
Thirdly, the contribution made by my parents and friends by
foregoing their precious time is unforgettable and highly solicited.
Their valuable advice and timely supervision paved the way for
the successful completion of this project.
Finally, I thank the Almighty who gave me the courage and
stamina to confront all hurdles during the making of this project.
Words

arent

sufficient

to

acknowledge

the

tremendous

contributions of various people involved in this project, as I know

Words are Poor Comforters. I once again wholeheartedly and
earnestly thank all the people who were involved directly or
indirectly during this project making which helped me to come out
with flying colours.

LAW OF CONTRACT
CHAPTER I

Definition:
An agreement creating obligations enforceable by law. The basic elements of a contract
are assent, consideration capacity and legality. In some states, the element of consideration can
be satisfied by a valid substitute. Possible remedies for breach of contract include general
damages, consequential damages, reliance damages, and specific performance.

Overview:
Contracts are promises that the law will enforce. The law provides remedies if a promise is
breached or recognizes the performance of a promise as a duty. Contracts arise when a duty does
or may come into existence, because of a promise made by one of the parties. To be legally
binding as a contract, a promise must be exchanged for adequate consideration. Adequate
consideration is a benefit or detriment which a party receives which reasonably and fairly
induces them to make the promise/contract. For example, promises that are purely gifts are not
considered enforceable because the personal satisfaction the grantor of the promise may receive
from the act of giving is normally not considered adequate consideration. Certain promises that
are not considered contracts may, in limited circumstances, be enforced if one party has relied to
his detriment on the assurances of the other party.1
Contracts are mainly governed by state statutory and common (judge-made) law and private law.
Private law principally includes the terms of the agreement between the parties who are
exchanging promises. This private law may override many of the rules otherwise established by
state law. Statutory law may require some contracts be put in writing and executed with
particular formalities. Otherwise, the parties may enter into a binding agreement without signing
a formal written document. Most of the principles of the common law of contracts are outlined in
1

https://en.wikipedia.org/wiki/Contract

the Restatement of the Law Second, Contracts, published by the American Law Institute. The
Uniform Commercial Code, whose original articles have been adopted in nearly every state,
represents a body of statutory law that governs important categories of contracts. The main
articles that deal with the law of contracts are Article 1 (General Provisions) and Article 2 (Sales)
Sections of Article 9 (Secured Transactions) govern contracts assigning the rights to payment in
security interest agreements. Contracts related to particular activities or business sectors may be
highly regulated by state and/or federal law.
In 1988, the United States joined the United Nations Convention on Contracts for the
International Sale of Goods which now governs contracts within its scope.
At common law, the elements of a contract are offer, acceptance, intention to create legal
relations, and consideration.
Not all agreements are necessarily contractual, as the parties generally must be deemed to have
an intention to be legally bound. A Gentle mans agreement is one which is not intended to be
legally enforceable, and which is "binding in honor only".

Offer and acceptance

In order for a contract to be formed, the parties must reach mutual assent . This is typically
reached through offer and an acceptance which does not vary the offer's terms, which is known
as the "mirror image rule". If a purported acceptance does vary the terms of an offer, it is not an
acceptance but a counteroffer and, therefore, simultaneously a rejection of the original offer.
The uniform code disposal disposes of the mirror image rule in 2-207, although the UCC only
governs transactions in goods in the USA. As a court cannot read minds, the intent of the parties
is interpreted objectively from the perspective of a reasonable person, as determined in the early
English case of smith vs hughes [1871]. It is important to note that where an offer specifies a
particular mode of acceptance, only an acceptance communicated via that method will be valid.
Contracts may be bilateral or unilateral. A bilateral contract is an agreement in which each of the
parties to the contract makes a promise or set of promises to each other.

For example, in a contract for the sale of a home, the buyer promises to pay the seller
RS2,00,000 in exchange for the seller's promise to deliver title to the property. These common
contracts take place in the daily flow of commerce transactions, and in cases with sophisticated
or

expensive

promises

may

involve

extensive negotiation and

various condition

precedent requirements, which are requirements that must be met for the contract to be fulfilled.2
Less common are unilateral contracts in which one party makes a promise, but the other side
does not promise anything. In these cases, those accepting the offer are not required to
communicate their acceptance to the offer or.
In a reward contract, for example, a person who has lost a dog could promise a reward if the dog
is found, through publication or orally. The payment could be additionally conditioned on the
dog being returned alive. Those who learn of the reward are not required to search for the dog,
but if someone finds the dog and delivers it, the promissory is required to pay.
In the similar case of advertisements of deals or bargains, a general rule is that these are not
contractual offers but merely an "invitation to treat" (or bargain), but the applicability of this rule
is disputed and contains various exceptions. The High Court of Australia stated that the term
unilateral contract is "unscientific and misleading".
In certain circumstances, an implied contract may be created. A contract is implied in fact if the
circumstances imply that parties have reached an agreement even though they have not done so
expressly. For example, a patient may implicitly enter a contract by visiting a doctor and being
examined; if the patient refuses to pay after being examined, the patient has breached a
contract implied in fact.
A contract which is implied in law is also called a quasi-contract, because it is not in fact a
contract; rather, it is a means for the courts to remedy situations in which one party would
be were he or she not required to compensate the other. Quantum-merit claims are an example.

https://www.law.cornell.edu/wex/contract

CHAPTER II
What is legality of object ?
Section 23 of the Indian Contract Act has specified certain considerations and objects as
unlawful. The consideration or objects of an agreement is lawful, unless- it is forbidden by law;
is of such a nature that, if permitted, it would defeat the provision of any law; or is fraudulent; or
involves injury to the person or property of another; or the court regards it as immoral or
opposed to public policy.In each of the above mentioned cases the consideration or object of an
agreement is deemed to be unlawful. Every agreement in which the object or consideration is
unlawful is void
X promises to obtain for Y an employment in the public service, and Y promises to pay X Rs.
1000 for that. This agreement is void as the consideration in this case is unlawful.
X agrees to let her daughter to hire to Y as a concubine. This agreement is void as it is immoral
and as a result opposed to law.
The following agreements are considered to be against public policy:
Trade with the enemy:
An agreement between the citizens of two countries at war with each other is void and hence
inoperative.

Agreement in interference with the course of justice:

All agreements which interfere with the normal course of law and justice are deemed to be
opposed to public policy and hence are void.Agreements which injure the public services are
considered to be void.
Agreements infringing personal freedom. Agreements hindering parental duties.Agreements
hindering marital duties

The court observed that although the consideration of the contract was lawful but the object was
unlawful because the purpose of the parties was to defeat the provisions of the Insolvency Law.3

DEFINITION
The word Legality means the state of being legal Object means purpose. So the meaning
of legality of object and consideration is the state of being any reason or purpose legal.

Traditionally
1.

An agreement will not be enforced by the court if its object or the consideration is unlawful.

By the expression Object of an Agreement is meant its purpose on design. The object and the
consideration
2.

must

both

be

lawful,

otherwise

the

agreement

is

void.

The object or consideration of an agreement must be lawful. In order to make the agreement,

a valid contract, for, Section 10 lays down that all agreements are contracts if made for lawful
consideration and with a lawful object. Section 23 declares what kinds of consideration and
objects are not lawful. If the object or consideration is unlawful for one or the other of the
reasons mentioned in Section 23, the agreement is illegal and therefore void (Section 23).
3. If it is forbidden by law- If the consideration or the object of a contract were forbidden by
law, it would be unlawful and hence unenforceable.
Examplea)

A promises to pay B Rs.1000 at the end of six months, if C, who owes that sum of B, fails to

pay it. B promises to grant time to C accordingly. Here the promise of each party is a
consideration for the promise of the other party, and they are lawful considerations.
b)

Promises for a certain sum paid to him by B, to make good to be the value of his ship

wrecked on a certain voyage. Here As promise is the consideration for Bs payment and Bs
3

http://chestofbooks.com/business/law/Handbook-Law-Of-Contracts/Chapter-VIII-Legality-of-Object.html

payment

is

consideration

for

As

promise.

These

are

lawful

consideration.

PRECEDENTS:
a)

An agreement to sublet a license to sell grass issued under the Madras Abkari Act 1886

would not be enforceable, because the object of the Act is the protection of the public as well as
the revenue. Thithi Pkurudsu vs Bheemudu, (1902) 26 Mad. 930.
b)

Where a license to cut grass was given by the Forest Dept. and one of the terms of the

license was that the licensee should not assign his interest on the license without the permission
of the Forest Officer, and a fine was prescribed for a breach of this condition, it was held that
there being nothing in the Forest Act to make it obligatory upon the parties to observe the
conditions of the license the assignment would be binding upon the parties, though it was
competent to the Forest Officer to revoke the license if he thought fit to do so. It was so held
because the Act did not forbid the transaction but merely imposed a condition for administrative
purpose. Nazarali v. Baba Miya (1916) 40 Bom. 64.
Examplea)

A being agent for a landed proprietor, agrees for money, without the knowledge of his

principal, to obtain from B a lease of land belonging to his principal. The agreement between A
and B is void, as it implies a fraud by concealment by A on his principal to obtain for B a lease of
land belonging to his principal
PRECEDENTS:
a)

A, B and C enter into an agreement for the division among them of gains acquired, or to be

acquired, by them by fraud. The agreement is void, as its object is unlawful. [Illustration (e) to
section23].
b)

Where the object of an agreement between A and B was to obtain a contract from the

commissariat department for the benefit of court , which could not be obtained for both of them
without practicing fraud on the department, it was held that the object of the agreement was
fraudulent, and that the agreement was therefore void. Shaib Ram Vs Nagar Mel, (1884)

An agreement is not enforceable at law, and therefore does not result in a contract, if its object is
illegal.
We come now to deal with the only remaining element in the formation of a valid contract - the
legality of the matter or object of the agreement. To result in a contract, an agreement must create
an obligation and it does not create an obligation if it is such that the courts cannot enforce it. An
agreement, therefore, which is illegal or unlawful, is in fact no contract at all, though it is often
spoken of as an illegal contract.
As a rule the law does not interfere with the freedom of persons to enter into contracts, but some
limitations are imposed. Certain objects are forbidden, and though all the other elements
necessary to the formation of a valid contract may be present, yet if one of these forbidden
objects is contemplated by the parties, the courts will not enforce their agreement. The objec t
makes the agreement unlawful.4

Classification Of Unlawful Agreements

For convenience in treatment, unlawful agrement may be classified, according to their matter or
object, as
(a)Agreements in violation of positive law; and
(b)Agreements contrary to public policy.
The distinction here made between agreements in violation of positive law and agreements
contrary to public policy is in the reasons which determine the law to hold the agreement void,
and not in the nature or operation of the law itself. The nullity of the agreement itself is in every
case a matter of positive law; but in one class of cases the acts contemplated by the agreement
are prohibited by the common law or by statute, while in the other the prohibition rests more
particularly on public policy, or, as it is sometimes called, the "policy of the law." It is not always
easy to distinguish between the two classes, for frequent decisions upon certain matters of public
policy have established such definite rules regarding them that they are in effect rule of the
4

http://www.citeman.com/7416-what-is-legality-object-and-consideration.html

common law. Too much importance, therefore, must not be attached to any classification of the
subject.

CHAPTER III
Agreements in Violation of Positive Law
Any agreement which involves the doing of an act which is positively forbidden by law, or, what
amounts to the same thing, the omission to do an act which is positively enjoined by law, is
illegal and void. Acts may be so prohibited or enjoined
(a) By the rules of the common law; or
(b) By statute.
There are many acts which the law positively forbids or enjoins, and to the doing or omission of
which some penalty is attached.
1 Edgar Lumber Co. v. Cornie Stave Co., 05 Ark. 449, 130 S. W. 452; Piper v. Boston & M. R.
It., 75 N. H. 435, 75 Atl. 1041; Crigler v. Shepler, 101 Pac. 619, 23 L. R. A. (N. S.) 500, 79 Kan.
834. See "Contracts," Dec. Dig. (Key-No.) 103; Cent. Dip. 468-476.
2 Pol. Cont (3d Ed.) 251.
Whether the prohibition or injunction is by the common law or by statute is altogether
immaterial. So it does not matter whether the act to be performed is malum in se or malum
prohibitum.8 The act or omission prohibited may be some grievous crime, such as murder; or it
may be an act or omission prohibited merely as a police regulation, as in the case of statutes
regulating the conduct of a particular trade or business, with only a small fine as the penalty; or
again it may be only a civil wrong. All of these cases stand on the same footing. If the subjectmatter or object of an agreement is such that its performance would consist in an act or omission
so forbidden, or be, so connected therewith as to be in substance part of the same transaction, the
courts will not enforce it.

Some - Breach of Rules of Common Law

The agreements which are illegal because they are in breach of rules of the common law are:
(a)Agreements involving the commission of crime; and
(b) Agreements involving the commission of a civil wrong.
This classification, like that in the preceding section, is, from the nature of the subject, only
approximate, and for convenience in treatment. Many acts are prohibited by statute which was
formerly prohibited by the common law, and many acts which are prohibited by the common law
in one state are prohibited by statute in another, and in some states there are no common-law
crimes at all. For this reason, in treating of agreements in breach of rules of the common law we
must include agreements in breach of statutes which are merely declaratory of the common law.5

http://www.scribd.com/doc/27041470/Legality-of-Object-and-Consideration#scribd

References:
1.

https://en.wikipedia.org/wiki/Contract

2.

https://www.law.cornell.edu/wex/contract

3.
4.

http://chestofbooks.com/business/law/Handbook-Law-Of-Contracts/Chapter-VIII-Legality-of-Object.html

5.

http://www.scribd.com/doc/27041470/Legality-of-Object-and-Consideration#scribd

http://www.citeman.com/7416-what-is-legality-object-and-consideration.html