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LAW OF CONTRACT

MEANING OF BUSINESS LAW : Business Law is that branch of law, which comprises of laws concerning trade, Industry and Commerce. BL is that portion of the legal system which guarantees an orderly conduct of business affairs and the settlement of legitimate dispute in a just manner. INDIAN CONTRACT ACT, 1872 ICA, 1872, based mainly on English law, which is to a large extent made up of judicial precedents. It extends to the whole of India except the state of Jammu and Kashmir. The law of Contract is contained in the ICA, 1872 which Deals with general principles of law of governing all contracts, and Covers special provisions to special contracts like Bailment, Pledge (Pawn) , Guarantee and Agency. The ICA can be divided into two parts: Part 1. (Section.1 to 75) deals with the general principles of law contract. Part 2. (Sec. 124 To 238) deals with certain special types of contracts namely contract of Indemnity, Guarantee, Bailment Pledge and Agency. Law of contract creates Right in Personam (. right against a particular person or group.), Not Right in Rem (right against whole world) E.g. B has given loan of Rs. 1000.to A. B has right to collect Rs.1000. from a only. (Right in personam.) X purchased property from Y. X has a right of quiet possession against whole world. (Right in Rem) CONTRACT: Section 2(h) of ICA An agreement enforceable by law is known as contract Some other definitions of the contract are: An agreement as a source of a legal contracts imports that one party shall be bound to some performance which the other shall have a legal right to enforce --- Leak An agreement creating and defining obligations between the parties -----Salmond.

A contract is an agreement enforceable at law made between two or more person, by which rights are acquired by one or more to act or forbearances on the part of the other or others -- Anson A promise or set of promises, for the breach of which the law gives a remedy, or the performance of which the law in some other way recognize as a duty. After analysing these definitions, we can state that the contract has two major elements: There should be an agreement between two or more persons defining their roles and obligations against each other, and The agreement should be enforceable by law.

Definition of an AGREEMENT Sec.2 (e) of ICA Every promise and every set of promises, forming the consideration for each other. Sec.2 (b) of ICA defines PROMISE as 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 On analysing the above definitions of agreement, the following definitions of an agreement are Plurality of persons: There must be two or more persons to make a contract because one person cannot enter into an agreement with himself. Consensus-ad-idem: Both the parties to an agreement must agree about the subject matter of the agreement in the same sense and at the same time. Legal Obligation Or Enforceability: An agreement is said to be enforceable if it is recognize by the courts.

Salmond observes, The contract is not the whole law of agreement, nor is it the whole law of obligations. It is the law of those agreements which creates obligations, and those obligations, which have their source in agreement. Sec.10 of ICA All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with lawful object not hereby expressly declared to void Therefore the law restricts the use words contract and agreement eg. Wagering agreement, not wagering contract.

ESSENTIALS OF VALID CONTRACT Sec.(10) of ICA ,1872 Every agreement is a contract if it is made by the free consent of parties, competent to contract for a lawful consideration and with lawful object and not hereby expressly declared to be void. Following are the essentials of a valid or complete contact: Plurality of persons. Consensus-ad-idem. Valid offer and acceptance. Capacity of parties. Free Consent. Lawful Consideration. Lawful Object. Agreement Not Expressly Declared Void. Legal formalities. Certainty. Possibility of performance. Intention to create Legal Relationship.

Explanation of above essentials: 1. Plurality of persons : There must be two or more persons to make a contract because one person cannot enter into a contract with himself. 2. . 3. Consensus-ad-idem : Both the parties to a contract must agree about the subject matter of a contract in the same sense and at the same time. i.e. meeting of minds. 3.Valid Offer and Acceptance : There should be atleast two parties one is offerer and offeree. An offer to be valid must fulfill certain conditions, such as it must tend to create legal relations , its terms should be certain and unambiguous , it must be communicated to the offeree e.t.c. An acceptance must fulfill certain conditions such as it must be absolute and unqualified, in a prescribed manner, communicated by an authorized person before the offer lapses. 4.Capacity of Parties : Sec.11 of ICA Every person is competent to contract who is of the age of Majority and who is of sound mind and must not be declared Disqualified from contracting by any law to which he is subject.

5. Free consent : Consent means that the parties must have agreed upon the same thing in the same sense. There is absence of free consent, if the agreement is induced by a. Coercion. b. Undue Influence. c. Misrepresentation. d. Fraud. or 5. Mistake. If the agreement is vitiated by any of the first four factors, the contract would be voidable and can not be enforced by the party guilty of coercion or undue influence etc. 6.Lawful Consideration : Consideration is something in return. No consideration, no contract .A promise to do something or to give something for nothing in return is not enforceable by law. With certain exceptions. The consideration is lawful if it is Forbidden by law, or Such a nature that it would defeat the provisions of any law, or Fraudulent ,or

Involves or implies injury to the person or property of another, or Oppose to Public Policy. 7. Agreement Not Expressly Declared Void : The ICA itself has declared some agreements specifically void under section 24 to 30 and 56. Agreements like in restraints of marriage in restraint of trade in restraint of legal proceeding , involving uncertainty; wagering and impossible are void. 8. Legal Formalities : A contract must be oral or in writing. And in some cases it must be in wrtting and registered. Eg To make gift for natural love and affection. Exceptions: Implied contracts, Quasi contracts 9. Certainty: The contract must be certain or at least must be made certain. Eg. Quality or quatity of subject matter. 10. Possibility of Performance : The agreement must be capable of being performed. This is based on Latin maxim lex non cogit ad impossiblia which means law does not compel to do what is impossible. Impossibility can be Pre contractual impossibility : Agreement is void ab initio. Post contractual impossibility : Contract becomes void. Known as Doctrine of Supervening Impossibility or Doctrine of Frustration

11.Intention to Create Legal relationship : The intention of both the parties entering into an agreement must be to create legal relationship among them. Agreements of social or domestic nature do not create legal relations. Eg. If D agrees to go to cinema with B ,this is not a contract enforceable by law. Social obligations are not enforceable by law. The elements mentioned above must all be present. If any one of them is absent, the agreement does not become a contract.( With certain exceptions).From this it follows that Every contract is an agreement but all agreements are not contracts.

TYPES OR CLASSIFICATION OF CONTRACTS Contracts may be classified on the basis of Validity, Formation, and Performance in the following way: A. Classification on the Basis of Validity : 1. Valid or Complete Contracts . 2. Void Contracts. i. Voidable contracts.
ii. unenforceable Contracts.

3. Illegal Contract. B. Classification on the Basis of Formation: 1. Express Contract. 2. Implied Contracts. 3. Quasi Contracts or Constructive Contrtacts. C. Classification on the Basis of Performance: 1. Executed Contract. 2. Executory Contracts. 3. Unilateral Contracts. 4. Bilateral Contracts.

Explanation

. Classification on the Basis of Validity.


Valid Contract: A valid contract has all the essential elements. Namely offer acceptance, free consent, lawful object etc. Void Contract: Sec.2 (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable i.e. a contract which can not be enforceable by either party. Voidable Contract: Sec.2 (i) an agreement which is enforceable by law at the option of one or more of the parties there on but not at the option of the other or others, is a voidable contract. E.g. X threatens to kill Y if he does not sell his house for Rs. 10,000 to X. Y sells his house to X and receives payment. Here Ys consent has been obtain by coercion, hence this contract is voidable at the option of Y ,the aggrieved party.

Unenforceable Contracts: is one is valid in itself, but it is not enforceable in a court of law because of some technical defect such as absence of writing, registration, requisite stamp etc. Illegal Contracts: contracts which are either prohibited by law or otherwise against the policy of law is an illegal contract. E.g. contract to commit dacoity is illegal contract. Every illegal contract is void contract but every void contract is not illegal contract. E.g. A Wagering agreement is void but not illegal or an agreement with a Minor is void but not illegal. Every void contract is not illegal unless its object or consideration is (a) Immoral. (b) Oppose to public policy etc. CLASSIFICATION ON THE BASIS OF FORMATION :

Express Contracts : If the terms of the contract are expressly agreed upon whether by words or written at the time of formation of the contract , the contract is said to be Express Contract Implied Contract : is a contract in which the evidence of agreement is not shown by words, written or spoken, but acts and conducts of parties. E.g. Cooley in railway station carries our baggage without any expressions. Quasi Contract or Constructive Contract: It is a contract in which there is no intention on either side to make a contract , but the law imposes a contract. That is rights and obligations not arise by agreement between the parties but by operation of law. E.g. Finder of lost goods. CLASSIFICATION ON THE BASIS OF PERFORMANCE : Executed Contract : An executed contract is one where both the parties to the contract discharged their respective obligations by performing them. E.g. X agrees to sell his car for Rs. 75,000 to Y. When X delivers the car to Y pays Rs. 75,000 to X. All transactions of cash sales are good examples of executed contract. Executory Contract: Executory means that which remains to be carried into effect. An executory contract is one in which both the parties have yet to perform their obligations. E.g. if A agrees to engage B as his servant from the next month, the contract is executory Unilateral Contract: A unilateral contract is one in which a promise one side is exchanged for act on the other side. In such contract, one party to the contract has performed his part an obligation is outstanding against the other party. Bilateral Contract: A Bilateral contract is one in which the obligations on the part of both the parties to the contract are outstanding at the time of the formation of the contract. Bilateral contracts are similar to executory contracts and are also known as contracts with executory considerations. OFFER OR PROPOSAL Sec.2(a) of ICA defines OFFER as 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 an act or abstinence , he is said to make an offer (proposal). For a lawful offer , the following conditions (Nature/Features ) must be fulfilled . There shall be atleast two persons ( Offeror and Offeree) who are competent to contract.

The person (expressing willingness) has the intention to get consent of that other person to such an act or abstinence. One person expresses (signifies) his willingness to another, A to do or b to abstain from doing anything. Offeror or promisor is the person making the proposal or offer to another. Offeree or Promisee is the person to whom offer or proposal is made. LEGAL RULES RAGARDING A VALID OFFER An offer must be Expressed or Implied . An offer must contemplate to give rise to legal consequence and be capable of creating legal relationship. That offer can be in writing or expressed in words etc. At the same time offer can be implied e. g. K.SR.T.C runs buses in different routes at the scheduled time. The terms of the offer must be certain and not vague or loose. An invitation to an offer is not an offer. An offer may be Specific or General. An offer must be communicated to the offeree. An offer should not contain a term the non compliance of which would amounts to acceptance. An offer can be made subject to any terms and conditions. Two identical cross offers do not make a contract.

The offer must disclose the intention to create legal relationship: To constitute an offer, the offeror must intend to create legal obligation. Invitation to negotiation, Social invitation, Invitation to offer, offer made in test or Excitement are the examples of a lack of contractual intention on the part of the offeror. The terms of an offer must be certain, not loose or vague: L.J. Morgan observes Unless all the material terms of the contract are agreed, there is no binding obligation. E.g. X purchased horse from Y and promise to by another if first one proves lucky. X refuse to purchase second horse Y cannot enforce. (Tailor Vs Porting ton) An invitation to an offer is not an offer :

An offer is different from Invitation to Receive offer or Invitation to Treat(judicial language), because its objective is mere Circulation of Information. E.g. (a) An advertisement for sale of goods by Auction is not an offer.( Harris Vs Nickerson ). (b) Quotations, Catalogues of prices and Display of goods . Grainer and son Vs Gough. Case: The transmission of price list does not amount to an offer to supply an un limited quantity or quality specified. An offer may be Specific or General : General offer is made to to the world at large or public in general. While Specific offer is made to some specific individual or individuals. It follows that an offer need not be made to an ascertained person, but it must be accepted by a definite person. Case : Carlill Vs Carbolic Smoke Ball Co. Reward of 100 pound to any person who contracts inluenza after consuming smoke balls.( Gen. Offer.) 6. An offer must be communicated to the offeree : Until the offer is known to the offeree there is no contract. Communication means to bring to the knowledge of the offeree.

Doing anything in ignorance of an offer can never be treated as its acceptance, for there was never a consequences of wills.This applies to to both general and specific offer. Case : Lalman shukla Vs Gauridatt. Servant found the absconded nephew of defendant without the knowledge of the reward. Plaintiff cannot claim the reward.

An offer should not contain a term the non compliance of which would amounts to acceptance : Thus, an offeror can not say that if acceptance cannot communicated up to a certain date, the offer would be presumed to have been accepted. If the offeror does not reply, there is no contract, because no obligation to reply can be imposed on him, on the ground of justice. An Offer can be made subject to any terms and conditions : An offeror may attach any terms and conditions to the offer he make. He may prescribe the mode of acceptance. By Registered Post Only Telegram Etc. Two Identical Cross Offers do not make a contract: When two parties make identical offers to each other, in ignorance of others offer, the offers are Cross Offers , which do not make a contract. Lapse and Revocation of an Offer:An offer once made can not be continued for ever. It should be accepted before it comes to an end. According to Sec. 6 of ICA, 1872, an offer or proposal comes to an end or lapse in any of the following ways: Offer Lapses by Stipulated Time or Reasonable Time : An Offer lapses by not being accepted in the Prescribed Mode or Some Usual or Reasonable Manner . An Offer Lapses by Rejection : And even lapses by Counter offer and Conditional Acceptance. Case: Hyde Vs Wrech. (H offer house for Rs. 90,000.to W. W offered Rs.80,000. H rejected. Later W offered Rs. 90,000. H not accepted. An offer lapses by Death or Insanity of the offerer or the Offeree before acceptance: An offer lapses by REVOCATION : But before acceptance.

A promise to keep on offer open for a definite period of time supported by consideration, is called as OPTION. A promise to keep an offer open for a definite period , unsupported by consideration is called as BARE PACT. Revocation of an offer must be communicated to an offeree. Otherwise revocation may not prevent from acceptance. Standing Offer (Tender) is an Open or Continuing offer E.g. Supply of specific goods and quantity at a specified period of time, at a certain rate. Revocation by non fulfillment of a Condition Precedent to Acceptance : [ Sec.6(3) ] A offers B scooter for sale Rs.10,000.If he becomes member in lions clube. An offer lapses by Subsequent Illegality or Destruction of Subject Matter. E.g. Marriage contract. Bride goes mad. Offer lapses. ACCEPTANCE Sec.2(b) of ICA A Proposal when accepted becomes Promise Acceptance defined as When the person to whom proposal is made signifies his assent thereto, the proposal is said to be accepted. Acceptance is the manifestation of offeree of his assent to the terms of the offer

Legal rules Regarding Valid Acceptance : (Essentials of Valid Acceptance )


Only a valid acceptance to a valid offer can establish legal relationship between the offeror and acceptor (offeree). Following are the essentials and legal rules of a valid acceptance: Acceptance must be given only by the person to whom offer is made.( Bolton Vs Jones )

Acceptance must be Absolute and Unqualified. Sec.7(2) Even a slightest deviation from the terms of the offer makes the acceptance invalid. Acceptance must be Expressed in some Unusual and Reasonable Manner, unless the proposal prescribes the manner in which it is Expressed or Implied ( Tacit) Acceptance. Sec.7 (2) says in case of deviated acceptance, The proposer may , within a reasonable time after the acceptance is communicated to him, insists that his proposal shall be accepted in the prescribed manner and not other wise but, if he fails to do so , he accepts the deviated offer. Mental acceptance is ineffective. Acceptance must be communicated to the offeror , otherwise it has no effect. This rule is based on Consensus Ad Idem (meeting of minds). The offeror cannot impose a condition that offerees silence will be regarded as equivalent to acceptance. Case:1. Felthouse Vs Bindley ( Sale of horse- sold in auction- no contract) Case:2. Brodge Vs Metropolitan Railway ( Letter of acceptance not posted, kept in drawer). An Acceptance must be communicated by the acceptor: Case: Powel Vs Lee ( Post of Head Master- Not informed about selectionPost canceled- No contract.) Acceptance must be given within a Reasonable Time and Before the offer Lapses or Revoked : Case: Shree Jayamahal co-op. Housing society Vs Zenith Chemical Works Limited. (Applied for share allotment till five months refuse to accept- No contract.) Acceptance must succeed the offer : E.g. Allotment of shares prior to application of shares. Rejected offer can accepted only, if Renewed:

Communication of an Offer, Acceptance and Revocation :

In Face To Face Offer and Acceptance ( Contract ) the question of Revocation of offer may not arise as offer and acceptance is instant. But when there is no Face to Face offer and acceptance (contract) and services of Post Office is used for communicating among themselves. In these cases the following rules ,as laid down in Sec. 4 and 5 will be applicable. Communication of an offer is complete when it comes to the knowledge of the person to whom it is made, when the letter reaches the offeree. Communication of an acceptance : has two aspects as against the proposer : When it is put in a course of transmission to him. as against the Acceptance : When it comes to the knowledge of the proposer i.e. when the letter of acceptance is received by the proposer Communication of Revocation : is complete As against the person who makes it, when it put into a course of transmission to the person to whom it is made, so as to be out of of the power of the person revoking i.e. when the letter of revocation is posted. As against the person to whom it is made; when it comes to his knowledge i.e. when the letter of revocation received by him. Time during which an Offer or Acceptance Can be Revoked: A Proposal or Offer may be Revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An Acceptance must be revoked at any time before the communication of the acceptance is complete as against the acceptor but not afterwards. Effect of Delay or Loss of Letter of Acceptance in Postal Transit: So far as the offeror is concerned, he is bound by the acceptance the moment the letter acceptance is posted. But the acceptor is at advantage if the letter is delayed or lost during transit. But if the offeror has given wrong address, he will be bound. CONSIDERATION

Consideration is the one of the essential element of the valid contract (sec.10). Pollock Consideration is the price for which the promise of the other is bought Sec.2 (d) of ICA defines When at the desire of the promisor, the promise or any other person has done or abstain 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. Types of Consideration : Present Consideration : Past Consideration : Future Consideration:

ESSENTIALS OF A VALID CONSIDERATION OR LEGAL RULES OF A VALID CONSIDERATION: Consideration Must Move at the Desire of the Promisor: The act or abstinence must have been done at the desire of the promisor, not at the desire of any third party. Consideration may move from the Promisee or any other person: Sec.2(d). Consideration need not move from the promise alone but may proceed from a third person. A Stranger to Consideration Can sue on a contract, provided he is a Party to the ContractCalled THE DOCTRINE OF CONSTRUCTIVE CONSIDERATION. Chinnaiah Vs Ramayya. A an old lady gifted her property to her daughter R R should pay annuity to As brother C Held that C cansue R A Stranger to Contract Cannot Sue As per The Doctrine of Privity of Contract- Privity is essential for enforcing contract ( he must be a party to the contract) stranger cannot sue.

A A mortgage his property to B in consideration of Bs promise to pay As debt to C. C cannot file a case because he is not a party to the contract. A Stranger to contract cannot Sue,but a Stranger to Consideration can sue.

The Consideration may be Past (Executed), Present or Future: The words used in Sec.2(d) are ..has done or abstained from doing( Past), does or abstain from doing (Present) or promises to do or abstain from doing (Future Consideration). Consideration must be something of Value in the Eyes of Law: Where consideration is Physically impossible (make a dead man alive), Legally Impossible, Uncertain Consideration (uncertain or vague), Illusory or Deceptive consideration. (Promise to perform public duty or perform a contract already made with the promisor.) Consideration may be an act, abstinence or return promise: The consideration may be positive (to act) Negative (Abstinence). Consideration must be lawful: Not some illegal act, such as paying one to do crime. A Contract must be supported by Consideration: No consideration no contract. E.g. Ram involuntarily agreed to sell his bicycle for Rs. 50.( of Rs. 500) to Karan. it becomes a valid contract. There must be Mutuality: i.e. Each party must do or agree to do something. A gratuities promise, as in the case of subscription for charity, is not enforceable. EXCEPTION TO THE RULE NO CONSIDERATION NO CONTRACT. Sec.25 of ICA, specifically states that Subject to certain exceptions, agreements without consideration are void Exceptions to the Rule No Consideration no contract are as follows: Agreement made on Natural Love and Affection:

Agreement to Compensate for Past Voluntary Services: Agreement to Pay a Time Barred Debt: Completed Gift: In case of Contract of Agency: Permission by the Promisee of performance of the promise: Contribution to Charity: Explanation to above Exceptions: (1) Agreement made on account of Natural Love and Affection { Sec.25(1):

An agreement without consideration is valid provided: It is made on account of love and affection. It is between parties standing in near relation to each other. It is expressed in writing. It is registered under the law for the time being in force. All these above essentials must be present to enforce an agreement made without consideration. Case: Rajlakhi Devi Vs Bhootnath. ( Husband given property to wife due to some dispute - But not out of love and affection- Not enforceable.)

(2) Agreement to compensate for Past Voluntary Services:[Sec.25(2)] A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, is enforceable, even though without consideration. E.g. A saves B from an accident. B promises to A Rs. 1000. The contract is valid (3) Agreement to Pay a Time Barred Debt {Sec.15(3)}- is enforceable by law. Provided following should fulfill: * There must be an Expressed promise to pay a Time Barred Debt .

* The debt must be such that, the creditor might have enforced payment but for the Law of Limitation of Suit * Writing and signed. * The promisor himself must be liable for the debt. Case: Pestonji Vs Meher Bai. (Widow cannot execute her husbands promissory note. It must an express promise, In writing and Signed.) (4) Completed Gift {Sec.25}: If a person gives certain property to another according to the provision of the Transfer of Property Act He cannot subsequently demand the property back on the ground that there was no consideration. (5) In case of contract of Agency: According to Sec.185 of ICA, no consideration is required to create an Agency. (6) Remission by the promise, of performance of the promise: (Sec.63) for compromising a due debt .i.e. agreeing to accept less than what is due, no consideration is necessary. (7)Contribution to Charity : A promise to contribute to charity, though gratuitous, would be enforceable; if on the faith of the promised subscription, the promisee incur liability. Case.1: Kedarnath Vs Gorie Mohammed ( Town Hall construction- Incurred liability. (Valid contract.) Case.2: Abdul Azeez Vs Masum Ali. ( Fund for construction of MosqueLiability not incurred Cannot claim. FREE CONSENT Sec.13. of ICA defines CONSENT as Two or more persons to have said to have consented when they agree upon the same thing in the same sense Consensus Ad Idem is a condition essential to the formation of a valid contract. Absence of consent may arise from a number of causes, namelyBy reason of an error as to the identity of the party with whom the contract is entered into; By reason of an error as to the nature of the contract itself; By reason of an error as to the subject matter of the agreement.

FREE CONSENT Sec.14 define Free Consent as Consent is said to be Free when it is not caused by _ Coercion (Sec.15) Undue Influence (Sec. 16) (3) Fraud ( Sec.17) (4) Misrepresentation(Sec.18) (5) Mistake subject to the provision of Sec.20,21 and 22. In the absence of Free Consent the contract may turn out to be either Voidable or Void depending upon the nature of the flaw in consent. If the contract is caused by bilateral mistake the agreement is void. COERCION Sec.15 defines Coercion as Coercion is the committing or threatening to commit, any act forbidden by Indian Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person to enter into an agreement. In short , it can be said coercion is there when consent is obtained by Threatening to commit any act which is forbidden by the IPC. Threatening to detain any property. Committing any act which is forbidden by IPC. Unlawful detaining any property. Effect of Threat to Commit Suicide: A Suicide and a Threat to Commit Suicide are not punishable but an attempt to commit suicide is punishable under IPC. Whether a Threat to commit suicide amount to coercion or not was considered by Madras high court in the case of Chikkam Amiraju Vs Chikkam Sheshamma. In this case husband threatens to commit suicide if his wife and son did not execute a release deed in favour of his brother in respect of certain property. Effect of Threat to File a Suit: To threaten a criminal or Civil prosecution does not constitute Coercion because it is not a act forbidden by forbidden. But a threat to file a suit on a false charge constitute coercion, for such an act is forbidden by the IPC.

As per Sec.64., if the aggrieved party opts to rescind the a voidable contract, he must restore any benefits received from the other party DURESS : (jures) In English law coercion is called as Duress-means illegal imprisonment or either actual or threatened violence over the person (body/ Physical) or another party or his wife or children with a view to obtain the consent of that party to the agreement. UNDUE INFLUENCE :( UI) Sec.16(1) defines UI as A contract is said to be induced by UI where the relations subsisting between the parties is in a position to dominate the will of the will other and uses that position to obtain an unfair advantage over the other. A person is Deemed to be in a position to dominate the will of the other; ( Presumption of UI) (A) where he stands in a Fiduciary Relation (relation of trust and confidence) to the other. E.g. Father and son, Solicitor and Client , Trustee and Beneficiary , Promoters and CompanyAnd Guardian and Ward. (B) Where he holds a Real or Apparent Authority over the other, e.g. Relationship between Master and Servant, Doctor and Patient , Solicitor and Client. C. Where a Party Makes a contract with a person whose Mental capacity is Temporarily, or Permanently affected by reason of age, Illness, or Mental or Bodily Distress. Presumption of UI is not there in the following cases in which UI has to be proved. Husband and Wife. Mother and Daughter. Grand son and grand father. Land lord and Tenant. Creditor and Debtor. When consent to an agreement UI the agreement is a widable contract at the option of the aggrieved party.

MISREPRESENTATION (SEC 18) A Representation is a statement or assertion made by one party to the other, before are at the time of contract, regarding some matter or circumstance essential to the formation of the contract, with an intension to induce other party to enter in to contract. A Representation when wrongly made, either innocently or intentionally is termed as Misrepresentation. Misrepresentation includes ______ a. The positive assertion in a manner not warranted by the information of the person making it, of that which is not true ; b. Any breach of duty which, without an intent to deceive, gains an advantage to person committing it; or any one claiming under him by misleading another to his prejudice or to the prejudice of any one claiming under him. C. Causing, however innocently a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Essentials of Misrepresentation: 1.In this a representation should be made innocently with an honest belief as to its truth and without any desire to deceive the other party, either expressly or Impliedly. 2.The representation must relate to facts Mterial to the contract. 3.The representation must be untrue; or must have become untrue. 4.The representation must have induces or have become instrumental in inducing the other party to enter into contract. 5. FRAUD ( Sec.17)

Definition: Fraud means and includes any of the following acts committed by a party to contract, with with his connivance or by his agent with intent to deceive another party there to or his agent ; or induce him to enter into contract.

Capacity of Parties. Sec.11.of ICA states that Every person is competent to contract who is of the age of majority according to the law to which he is a subject, and who is of sound mind, and not Disqualified from contracting by any law to which he is a subject. (f) Married Women : A women married or single, in Indian law is under no disability as regards entering into contract.Only in English law it was applicable.Since 1935 this disability is not applicable. MINOR (INFANT) Sec.3. Of ICA, a Minor is one who has not completed his 18th year of age.So a person becomes major after the completion of 18th year of life. Exception to above rule: When a minors property is taken over by court of wards for management.In either cases minority continues up to the completion of the 21st year. The Rules Governing Minors Agreements: Which are based on two principles: (1) Law protects minors against their own inexperience and against the possible improper designs of those more experienced. It has been rightly observed that the law protects minors and preserves their rights and estates, excuses their negligence or undue delay in enforcing a right such as to disentitle their counselors, the jury their servant and law is their guardian. (2) In pursuing the above object, the should not cause unnecessary hardship to persons who deal with minor.

MINORS AGREEMENTS: Indian contract act 1872, has given a specially privileged position to a minor. He is allowed to take advantage of his acts but does not incur any kind of obligation.

The law regarding the minors agreements can be summed up as follows. (1) A minors contract is altogether void and a minor therefore cannot be bind himself by a contract. (2) Minor can be a promisee or a beneficiary. (3) Minors agreement cannot be ratified by him on attaining the age of majority. (4) No rule of Estoppel applicable against minor. (5) Minor cannot asked to refund the benefit. (6) A minor can always plead minority. (7) Minors parents are not liable. (8) Minor cannot be adjudicated as Insolvent. (9) Minor cannot enter into contract of partnership. (10) Minors Estate is is liable for necessaries supped to him. (11) Minor can be a agent. (12) Minor cannot be the member of a company. (13) No specific performance of an agreement entered into by minor. (14) Surety for a minor. EXPLANATION TO ABOVE RULES . (1) A minors contract is void ab-initio: Law acts as the guardian of minor and protects their rights, because their mind is not matured enough to take the decision. The Privy council affirms this view in Mohiri bibi Vs Dharmodas Ghosh. ( Minor mortgage property for Rs. 20,000.-Received Rs.8000. It was held that the mortgage was void and repayment of advance Rs.8000 not accepted, as he has used that amount. (2) A minor can be a beneficiary or promisee: If a contract is beneficial to a minor it can be enforced by him.Thus a minor can purchase a immovable property or can execute a promissory note.

(3) Minors agreement cannot be ratified by him on attaining majority. A minor borrowed a sum of money by executing a simple pronote for it and after attaining majority executed a second pronote is not maintainable. (4) No rule of Estoppel against a minor: Estoppel arises when one is precluded from denying the truth of anything which he has represented as a fact, although it is not a fact. When a man has, by words spoken or , written, or by conduct, induced another to believe that a certain state of things exists. (5) Minor cannot asked to refund to refund the benefit: If the minor has obtained any benefit by taking advantage of his minority, such as money on a mortgage, he cannot be asked to refund, nor can his mortgaged property be made liable. (6) A minor can always plead minority.Law protects minor from contracted liability. Even if a minor makes a fraudulent misrepresentation as to his age agreements with him are void and a minor is not precluded from setting up the plea of minority as there cannot be any estoppel against the statute.. (7) Minor parents are not liable: However he is acting as an agent of the guardian, guardian could be held liable for his act. A contract with the guardian of minor is valid and can be enforced by or against guardian,but such agreement should be for the benefit of minor and should be within authority. (8) Minor cannot be adjudicated as Insolvent : Even for necessaries of life he is not personally held responsible, only his property is liable.He cannot be declared insolvent. (9) Minor cannot enter into a contract of partnership: But under Sec.30.of Indian Partnership Act, minor can be admitted to the benefits of partnership. (10) Minors estate is liable for Necessaries supplied to him: (Sec.68)Necessaries are those things without which an individual can not reasonably exist. Things suited to the condition of the minor can be classified as Necessaries, which are as follows: (a) Wedding presents for a bride of a minor. (b) Debt incurred for performing funeral obligations of the father of a minor. ( c) Funds supplied to a minor for the marriage of a minor female in the family. (d) Expenses reasonably incurred in defending litigation threatening minors property. (f) Loan to a minor to save his property from sale in execution of a decree. (g) Things without which an individual cannot reasonably exists (h) Articles required to maintain a particular person in the state and degree in life, in which he is living.

QUASI CONTRACTS (CONSTRUCTIVE CONTRACTS OR LAW OF RESTITUTION) sec.68 72. Quasi Contracts are based on Doctrine of Unjust Enrichment" which says that a person shall not be allowed to enrich himself unjustly at the expense of another. ICA refers Quasi Contracts as Certain relations those Created by Contract. Certain types of transactions in which, there being in fact no contract between the parties, the law, by a special rule, creates roghts and obligations between them which are similar to those created by contract. Quasi Contracts includes the following : 1. Claims for Necessaries Supplied to Incapable Person (Minor, Idiot, Lunatic). 2. Reimbursement of a Person Paying Money Due by Another in Payment of which he is Interested. 3.Obligatuion of Person Enjoying Benefit of a Non-gratuitous act. 4. Rights and Liabilities of Finder of Lost Goods.Sec.71. 5. Liability of a Person to Whom Money is Paid or Things Delivered by Mistake or Under Coercion. EXPLANATION : 1.Claim for Necessaries Supplied to an Incapable Person: Sec.68. If a person, incapable of entering into a contract or any one whom legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be re-imbersed from the property of such incapable person. Incapable person means a Minor, Lunatic or Idiot etc.

E.g. A supplies wife and children of B, a lunatic with necessaries suitable to their condition in life.

2. Re-imbursement of Person Paying Money due by Another: Sec.69. A person who is interested in the payment of money which another is bound by law to pay and who therefore pays it , is entitled to be re-imbersed by the other. Abid Hussain Vs Ganga Sahai. Plaintiffs goods were wrongfully attached to realize the arrears of the government revenue due by defendant. Plaintiff pays the arrears to save the goods from being sold. He is entitled to recover the amount from defedant. ty PERFORMANCE OF CONTRACT Sec.37of ICA The parties to a contract must Either perform or offer to perform their respective promises, unless such performances is dispensed with or excused under the provision of this act, or of any other law. Types of Performance: a) Actual Performance. b) Attempted Performance. General Rules of Performance of Contract: 1.Respective obligations must be performed. 2. Performance of entire or partial obligation may be excused or dispensed with by the provision of ICA or any other law. 3.Performance of contract must be precise and exact. 4. If any party does not perform his obligation, other party may treat the contract as discharged and claim damages.

Persons By Whom Contract Must Be Performed: 1. By The Promissor. 2. By Promissors Agent. 3. By Legal Representative. 4. By Third Party. 5. By Joint Promissors. TIME AND PLACE OF PERFORMANCE ( Sec.46 to 50) 1. Where no application is to be made and no time is specified. 2. Where time is specified and no application is made. 3.Application for performance on a certain day and place. 4. Application by the promissor to the promisee to appoint place. 5. Perfomance in a manner or at time prescribed or sanctioned by the promisee. WAYS TO DISCHARGE OF CONTRACT Contract may be Discharged or Terminated by any one of the following modes: 1. Discharged by perfomance.(sec.37,38) 2. Discharged by agreement.(sec.62,63) 3. Discharged by Breach.(sec.39) 4. Discharged by Operation of Law. 5.Discharged by Lapse of time. 6.Discharged by Impossibility.(sec.56)

TERMINATION BY MUTUAL AGREEMENT 1. By Novation. 2. By alteration. 3.By Recission(free from their respective obligations) 4. By Remission. 5. By Waiver.(released from obligations) By Merger.(higher to lower right) DISCHARGED BY OPERATION By the following circumstances: By death of the promissor. By merger. By rights and liabilities vested in the same person. By Insolvency. By Un authorized Material Alteration of the contract. OF LAW

DIASCHARGE OF PERFORMANCE.

CONTRACT

BY

IMPOSSIBILITY

OF

An agreement to do an act impossible in itself is void .(post and Pre contractual) Doctrine of Supervening Impossibility: is an excuse for the non performance in the following cases: Destruction of subject matter of the contract. Death or personal incapacity of the parties. Change of law. Declaration of war. Non existence or non occurrence of particular state of things.

DISCHARGE OF CONTRACT Discharge of contract (DoC) means termination of the contractual relationship between the parties. A contract may be discharged in of the following way. 1. By Performance: Actual or attempted.(Sec.37,38) 2. By Mutual Consent or Agreement: 3. By Subsequent or Supervening Impossibility:(S56) 4. By Lapse of Time: 5. By Operation of Law: 6. By Breach of Contract (s.39) 1.BY PERFORMANCE: a) Actual Performance b) Attempted Performance. 2.BY AGREEMENT OR CONSENT: a) By Express Consent. b) By Implied Consent: It can happen by Novation, Recession (cancellation of contract Alteration, Remission, Waiver and Merger. 3. BY IMPOSSIBILITY OF PERFORMANCE: a) Known to the Parties. b) Unknown to the Parties. c) Supervening Impossibility. Parties are excused in the following circumstances: * Destruction of Subject Matter. * Non Existence of State of Things. * Death or Incapacity for Personal Services: eg. Painting. * Change of Law. * Outbreak of war. Not an excuse : for difficulty of performance, Commercial Impossibility, Failure of Third Party, strikes ;Lockouts and Civil Disturbance. 4.BY LAPSE OF TIME : A contract should be performed within a specified period( Period of limitation) otherwise it can be cancelled. 5. BY OPERATION OF LAW : a) By Death b) Merger c) Insolvency

d) Un Authorized Alteration of terms of contract. e) Rights and Liabilities Vesting in the same person. 6. BY BREACH OF CONTRACT: A. Actual Breach : a) at the time of Performance. b) During the Performance. B. Anticipatory Breach : a) By an act of promissory making( implied repudiation) b) By Renunciation of the obligation ( Express Repudiation). TIME AND PLACE OF PERFORMANCE (Sec.46-50 & 55): A. Where Time and Place is Prescribed by the Promisee: The performance of the contract must be made at the specified Time and Place. B. Where Time and Place Not Prescribed by the Promisee. Then the contract must be performed: a) Within a Reasonable time. b) At proper Place. EFFECT OF FAILURE TO PERFORM A CONTRACT WITHIN A REASONABLE TIME : 1.When Time is the Essence of Contract (Sec.55). 2.When time is Not the Essence of Contract. ss Remedies For Breach Of Contract : A remedy means given by law for the enforcement of a right. Whenever, there is a breach of contract the injured party is entitled to any one or following remedies against the guilty party : A. Recession of the Contract. B. Suit for Damages. C. Suit for Quantum merit. D. Suit for Specific performance of the contract. E. Suit for Injunction.

A. Recession of the contract : Recession means setting aside of the contract. The Aggrieved party may be allowed by the court to treat the contract at an end and thereby, terminate all the liabilities under the contract. Example: P promises Q to supply 15 bags of rice on a certain day. Q agrees to pay the price after the receipt of goods. P does not supply the goods. Q is discharged from liability to pay the price. The court however, will now allow recession of the contract in the following cases : Where the party wishing to set aside the contract has Expressly or Impliedly ratified the contract. ^ Where without the fault of either party there is a change in the circumstances since the making of the contract, on account of which the parties cannot be substantially restored to the position in which they were before the contract was made. ^Where only a party of contract is sought to be set aside and that part cannot be separated from the rest of the contract. ^ Where during the subsistence of the contract third parties have acquired rights in the subject matter of the contract in good faith and for value. In certain cases a Suit for Recession of the contract may be filed even when no damages are claimed. For example : In case of pledge of moveable goods, say gold ornaments, if the pledger does not pay as per the agreement, the pledge may file suit for recession of the contract. Suit for Damages : Damages means Compensation must be commensurate with the injury or loss sustained, arising naturally from the breach . The foundation of modern law of damages, both in India and England, is to be found in the judgment in the case of Hadley Vs Baxendale. The facts of the case were as follows: Xs mill was stopped by the breakdown of a shaft. He delivered the shaft to Y, a common carrier, to be taken to manufacturer to copy it and make a new one. X did not make known to Y that delay would result in a loss of profits. By some neglect on the part of Y the delivery of the shaft was delayed in transit beyond a reasonable time.

It was held that___ Y was not liable for the loss of profits during the period of delay as the circumstances communicated to Y did not show that a delay in the delivery of the shaft would entitle loss of profits to the mill.