Law of Contract

Issues to be discussed
• Definition of a contract, agreement, offer,
acceptance, promise
• Kinds of a contract under the law of contract
• Essentials of a valid contract
• Capacity of parties to a contract
• Consent of parties as an element of a valid
contract
• Consideration, kinds of consideration, legality of
object and consideration
 Definition of a contract, agreement, offer,
acceptance, promise
Definition of a contract

According to Section 2 (h) the Contract Act,1872 “ An

agreement enforceable by law is a contract”.

To be a contract, it has to be an agreement that creates

legal obligation and protected by the law
 To be continued…

Definition of an agreement
Section 2(e): “Every Promise and set of
promises, forming consideration for each other
is an agreement”.
When a proposal made by a party is accepted by
other party, it is called a promise.
The person making the proposal is called the
“promisor” and the person accepting the
proposal is called “promisee”.
 Definition of a proposal

• The words ‘proposal’ and ‘offer’ are synonymous and used

interchangeably.

• Section 2 (a) of the Contract Act defines a ‘proposal’

as,
“ when one person signifies to another his willingness
to do or to abstain from doing any thing, with a view
to obtaining the assent of that other or to such act or
abstinence, he is said to make a proposal”.
 To be continued…

• Three essentials of a proposal:

(1) an expression of willingness to do or abstain
from doing something;
(2) expression of willingness must be made to
another person; and
(3) The expression of will must be made with a
view to obtaining the assent of the person to
such act or abstinence.
 Legal rules regarding proposal

• An offer may be ‘express’ or ‘implied’.

• An offer must be intended to create a legal consequence and
be capable of creating legal relations.
• An offer may be ‘specific’ or ‘general’.
• An offer must be communicated to the offeree.
• An invitation to an offer is not offer.
( for examples, an advertisement for sale of goods by auction,
quotations, catalogues of price or display of goods with prices
marked thereon)
 Definition and legal rules regarding a valid
acceptance
• Section 2(b) defines ‘acceptance’ as “ when the person to
whom the proposal is made signifies his or her assent thereto,
the proposal is said to be accepted”
• Acceptance must be given only by persons to whom the offer
is made.
• Acceptance must be communicated by the acceptor.
• Mental acceptance is not effectual
• Acceptance must be given within reasonable time and before
the offer lapses
• Acceptance must be absolute and unqualified.
 Definition of consideration

• Section 2 (d) of the Contract Act,1872 defines consideration

as-
“ when at the desire of the promisor, the promisee or any other
person has done or abstained from doing , or does or abstain
from doing or promises to do or abstain from doing
something, such act or abstinence or promise is called a
consideration for the promise”.
• When a promise is made in return of something from the
promisee, this ‘something’ in return is the consideration for
the promise.
 Kinds of a contract under the law of
contract
A contract primarily of three kinds:
• Valid
• Voidable
• Void
 To be continued…

Valid Contract

“ An agreement enforceable by law is a valid

contract”.
In another words, every agreement made according to
the law of contract and enforceable by it is a valid
contract”.
So all agreements are not valid contract.
 To be concluded
• All agreements are enforceable if they are
made by
1. the free consent of the parties competent
to contract;
2. for a lawful consideration and with a
lawful object; and
3. not declared expressly void under this law
( Section 10, Contract Act 1872)
 To be continued…
• Major essentials of a valid contract:
1.Free consent of the parties to contract
2.Competence of parties to contract
3.Lawful consideration and object
4.Not expressly declared void under any law
 To be continued…
• When is a consent said to be free ?

A consent is said to be free if it is not caused by-

(1) coercion;
(2) undue influence;
(3) fraud;
(4) misrepresentation; and
(5) mistake.
 Competence of parties
• What is called the competence of parties to a contract
or who are competent to a contract ?

Ans. The persons must be of

1. the age of majority;
2. of sound mind;
3. is not disqualified under this law (Section 11)
 To be continued…
• A person who has not attained the age of
majority is a minor.
• Age of majority is determined by the Indian
Majority Act 1875, this is 18 years.
Accordingly every person who has completed
the age of 18 yrs is a major. Less than 18 yrs
is a minor.
 Rules relating to minor’s agreement

• An agreement with minor is absolutely void

and inoperative against him.
• Beneficial agreements are valid contract.
• Contract of apprenticeship and service by a
minor is valid.
• No ratification on attaining the age of majority
( An agreement void ab-initio can not be
ratified by the minor by subsequent
ratification.)
 Rules relating to minor’s
agreement
• An agreement by a minor is absolutely void and
inoperative as against him.
• Beneficial agreements are valid contracts.
• The Contract of apprenticeship and service by a
minor.
• No ratification on attaining the age of majority
• The rule of estoppel does not apply to a minor.
• Minor’s liability for necessaries ( What is necessary
article is to be determined with reference to the status
and circumstances of the particular minor)
 To be continued…

• Section 115 of the Evidence Act explains “ Estoppel” as

follows: “ where on person has, by his declaration, act or
omission , intentionally caused or permitted another person to
believe a thing to be true and to act upon such belief, neither
he nor his representatives shall be allowed, in any suit or
proceeding between himself and such person or his
representative, to deny truth of that thing”.
• A minor is not stopped from pleading his infancy in order to
avoid a contract, even he has entered into an agreement by
falsely representing that he was of full age ( Sadiq Ali Khan v.
Jai Kishor,1928).
 Who is a sound mind ?
• Section 12 of the Contract Act 1872 :
A person is said to be of sound mind if , when at the
time of making a contract, he is
1. capable of understanding it ( meaning what is he
doing ) and
2. Capable of forming a rational judgment as to its
effects upon his interests.
 To be continued….
• Who are usually having unsoundness of mind ?

The following are recognized as having unsoundness of

mind:
• Idiot
• Lunatic or insane
• Drunken
• Mental decay on account old age
• Persons hipnotised
 To be continued…
• The underlying principles
1. An agreement entered into by a person of unsound
is void and inoperative as against him, but he can
derive benefit from it.
2. The property of a person of unsound mind is
however always liable for necessaries supplied to him
3. A person who is usually of unsound mind , but
occasionally of sound mind may make a contract
when he is sound.
 To be continued…
• A person who is usually of sound mind, but
occasionally of unsound mind, may not make
a contract when he is of unsound mind.
 Voidable contract

• Definition of Voidable contract

An agreement which is enforceable by law at the option of one

or more parties thereto, but not at the option of other or
other.
• Examples of voidable contract
1. Agreement where consent is obtained by coercion
2. Agreement where consent is obtained by undue influence
3. Agreement where consent is obtained by fraud
4. Agreement where consent is obtained by misrepresentation
5. Agreement where consent is obtained by the mistake of fact.
 To be continued…
• Coercion is ( sec.15)
(1)committing or threatening to commit , any act forbidden by
the Penal Code, or
(2) unlawful detaining or threatening to detain any property to
the prejudice of any person whatever, with the intention of
causing any person to enter into an agreement ( Sec.15)
(3)The act constituting coercion may be directed at any person,
and not necessarily at the other party to the agreement.
Likewise it may proceed from a stranger to the contract.
(4)The burden of proof that coercion was used lies on the party
who wants to set aside on the plea of coercion.
 To be continued…

• Undue Influence
“ A contract is said to be induced by undue influence where (i)
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 (ii) he uses the position to obtain an unfair advantage over
the other (Sec. 16.1).”
Meaning of the Phrase “ in a position to dominate the will of the
other”
A person is said to said to be…
(a) Where he holds a real or apparent authority over the other,
such as the relationship between master and the servant, police
officer and the accused;
 To be continued…

(b) Where he stands in a fiduciary relation to the other. Fiduciary

relation means a relation of mutual trust and confidence, such
as the relationship between father and son, guardian and ward,
solicitor and client, doctor and patient, Guru and disciple,
trustee and beneficiary; or
(c ) Where he makes a contract with a person whose mental
capacity is temporarily or permanently affected by the reason
of age, illness or mental or bodily distress.
.
 To be continued…
• Note: In cases where there is a presumption of undue
influence the burden of proving that the person who
was in a position to dominate the will of another, did
not use his position to obtain an unfair advantage,
will lie upon the person who was in a position to
dominate the will of the other. He can rebut or oppose
the presumption by arguing the full disclosure of the
fact, payment of adequate price, other party’s consent
was free.
 To be continued…

• Effect of Undue Influence

“ When consent to an agreement is caused by undue influence,
the agreement is a contract voidable at the option of the party
whose consent was so caused. Any such contract may be set
aside either absolutely or if the party who was entitled to avoid
has received any benefit there under, upon such terms and
conditions as the court may seem just”.
 Misrepresentation ( Sec.18)

• Positive assertion of unwarranted statements of material facts

believing them to be true, though it is not true
if a person makes an explicit statement of fact not warranted by his
information ( without any reasonable ground), under an honest belief as to
its truth, though it is not true, there is misrepresentation.
Example: A says to B who intends to purchase his land, “ my land
produces 10 quintals of which per acre….
 To be continued…

• Breach of duty which brings an advantage to the person

committing it by misleading other to his prejudice.
It covers those cases where a statement when made was true but
subsequently before it was acted upon, it becomes false to the knowledge
of person making it. In such a case, the person making the statement comes
under an obligation to disclose the change in circumstances to other party,
otherwise he will be the guilty of misrepresentation.
• A partial non-disclosure may also constitute a
misrepresentation.
( Where a vendor of land told a purchaser that all farms on the land were
fully let, but unintentionally omitted to inform him that the tenants were
given notice to quit, he was held guilty of misrepresentation)
 To be continued…

• Causing mistake about subject-matter innocently

If one of the parties induces the other, though innocently, to
commit a mistake as to the quality or nature of the thing
bargained, there is misrepresentation.

Example; In a contract of 500 bags wheat, the seller made a representation

that no sulphur had been used in the cultivation wheat. Sulphur, however,
had been used in 5 out of 200 acres of land. The buyer would not have
purchased the wheat but for misrepresentation. This is a misrepresentation.
 To be continued…

• Essentials of misrepresentation

a. There should be a representation , made innocently, with an

honest belief as to its truth and without any desire to deceive
the other party, either expressly or impliedly.
b. The representation must relate to facts material to the contract
and not a mere opinion.
c. The representation must be, or must have become untrue.
d. The representation must have been instrumental in inducing
other party to enter into a contract.
 To be continued…

• Effects of misrepresentation
In case of misrepresentation, the aggrieved party has two alternative
courses open to him—
a. he can rescind the contract, treating the contract as voidable; or
b. he may affirm the contract and insist that he shall be put in the
position in which he would have been , if representation made had
been true. Misrepresentation does not entitle the aggrieved party to
claim damages by interest or otherwise for expenses incurred.
Exception: The above remedy is lost, if party whose consent is caused
by misrepresentation, had the means of discovering the truth.
 Fraud ( Sec.17)

• Fraud means and includes any of the following acts

committed by a party to a contract, or with his connivance, or
by agent, with an intent to deceive or to induce other party
thereto or his agent to enter into a contract:

1. The suggestion that a fact is true when it is not true by one

who does not believe it to be true ( a false statement
intentionally made is fraud). Lord Herscell gave the
definition of fraud in Derry vs Peek as “ a false statement
made knowingly, or without belief in its truth, or recklessly
careless whether it to be true or false”.
 To be continued…

2. The active concealment of a fact by a person who has knowledge

or belief of the fact. (Active concealment of a material fact is
taken as much a fraud as if the existence of such fact was
expressly denied or the reverse of it expressly stated. )
• Mere non-disclosure is not fraud. Principle of ‘Caveat Emptor’
( Buyer Beware)

3. A promise made without any intention of performing it. Mere

failure to perform, where there is no dishonest intention , is not
fraud.

.
 To be continued…

4. Any other act fitted to deceive. All surprise,

trick, cunning , dissembling and other unfair
way that is used to cheat anyone is considered
fraud.
5. Any such act or omission as the law specially
declares to be fraudulent ( For example, in the
case of a contract of the sale of immovable property ,
The must disclose all material facts, otherwise it will be
fraudulent, see section 55 of the Transfer Property Act)
 To be continued…
Can silence be fraudulent ?

Sec.17
Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud unless-
(i) the circumstances of the case are such that , regard being had
to them, it is the duty of the person keeping silence to speak
or
(ii) silence is in itself, equivalent to speech.
 Explanation of ‘ it is the duty of the person
keeping silence to speak
• In cases of contracts of ‘uberrimae fidei’ that mean contracts of
‘utmost good faith’ silence is fraudulent. Here, law imposes a duty of
disclosure on one of the parties thereto.
• Examples of ‘ contracts of utmost good faith’ are as follows:
a. Contract where there is a fiduciary relationship between the parties;
b. Contracts of insurance;
c. Contract of marriage engagement;
d. Contract of family settlements
e. Share allotment contracts
 To be continued…
Effect of fraud
A party who has been induced to enter into a contract by
fraud has the following remedies open to him:
1. He can rescind the contract; contract being voidable at the
option.
2. He can ask for restitution and insist that the contract shall be
performed, and that he shall be put in the position in which
he would have been , if the representation made had been
true. (sec.19)
3. The aggrieved party can also sue for damages.
 Mistake ( sec.21)

• Mistake is of two kinds:

a. Mistake of law
b. Mistake of fact
• Mistake of law
a. Mistake of law of the country does not give right to the parties
to avoid the contract. A contract is not voidable because it is
caused by a mistake as to any law in force in Bangladesh)
b. Mistake of foreign law stands on the same footing as ‘the
mistake of fact’.
 To be continued…

Mistake of fact
a. Bilateral mistake
( Where the parties to an agreement misunderstood each other and are
at cross purposes, there is a bilateral mistake. In such cases, there is
no agreement at all, there being entire absence of consent. ) There
are three conditions to be fulfilled:
i. Both the parties must be under a mistake ( mutually)
ii. Mistake must relate to some fact and not to a judgment or opinion.
iii. The fact must be essential to the agreement such as (a) mistake as
to the existence of the subject-matter of the agreement; (b) mistake
as to the identity of the subject-matter ; (c) mistake as to the identity
of the subject-matter; (d) mistake as to the quantity of the subject-
matter.
 To be continued…
• Unilateral mistake
Where only one of the contracting parties is mistaken as
to a matter of fact, the mistake is a unilateral mistake.
• Legal effect of unilateral mistake
According to section 22 of the Contract Act, it is not
voidable merely because it was caused by one of the
parties to it being under a mistake as to a matter of fact
unless the mistake is caused by misrepresentation or
fraud, in which case the contract is voidable at the
option of aggrieved party.
 Consideration and object must be
lawful
• Definition of consideration ( section 2.D of the Contract Act)
“ When at the desire of the promisor, the promisee or any other
person has done or abstained from doing or does or abstain
from doing , or promises to do or abstain from doing
something, such act or abstinence is called a consideration for
the promise”.
• It is something in return is the consideration for the promise.
 To be continued…

It consists of four following components:

1. the
act or abstinence or promise which forms the consideration must
be done at the desire of the promisor;

2. it may be done by the promisee or any other person;

3. it may have been already executed or in the process of being done

or may be still executory;

4. it must be something to which the law attaches a value.

 To be continued…
• Agreement with unlawful consideration and objects ( sec. 23)

What considerations and objects are unlawful ?

1. If it is forbidden by law . ( Agreements declared illegal by
law)
a. when it is punishable by the criminal law of the country, or
b. When it is prohibited by special legislation or regulations
made by a competent authority under powers derived from the
legislature.
Example: Agreements for sale or purchase above the standard
price fixed by the relevant law with regard to a controlled
article are illegal
 To be continued…

2. If it is of such a nature that if permitted, it would defeat the

provisions of any law.
It refers to cases where the object and consideration of an
agreement is of such a nature that , though not directly
forbidden by law, it would indirectly lend to a violation of
law, whether enacted or otherwise.
Example: An agreement by the debtor not to raise the plea of
limitation, should a suit have to be filed.
 To be continued…

3. If it is fraudulent
( where the objective or consideration of an agreement is to
defraud others)
( For example, 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.)
4. If it involves or implies injury to the person or property of
another. ( if the object and the consideration of an agreement
is injury to the person or property of another)
 To be continued…

5. If the court regards it as immoral.

( An agreement whose object or consideration is immoral , is illegal
and therefore void. The word ‘ immoral’ here can extend to the
following :
a. sexual immorality, that means, illicit cohabitation, concubinage or
prostitution, gift deed in consideration of illicit intercourse
b. Furtherance of sexual immorality ( letting out house for
prostitution knowingly)
c. Interference with marital relations ( money advanced to a married
woman for divorce or separation, An agreement for future
separation between husband and wife)
e. such acts which are against good public morals ( an agreement for
future marriage after the death of first wife)
 To be continued…

• If the court regards it as ‘ opposed to public policy’.

An agreement which tends to promote corruption or injustice
or immorality is said to be opposed to public policy.
a. Trading with an alien enemy
b. Agreement interfering with the course of justice
c. Agreements for stifling criminal prosecution
d. Maintenance and champerty
e. Agreements creating an interest opposed to duty
f. Agreements unduly restraining personal liberty
g. agreements interfering with parental duties
Consideration partly void (sections 24,57 and
58)

1. When an agreement contains several distinct promises to

do things legal and also other things illegal, and the legal part
cannot be separated from the illegal part, the whole agreement
is illegal (24).
2. Where there is a reciprocal promises to do things legal and
also other things illegal and the legal part can be separated
from the illegal part, the legal part is contract and the illegal
part is void agreement (57).
3. In case of an alternative promise, one branch of which legal
and another illegal, the legal branch alone can be enforced
(58).
 Void Contract
• Defining void contract:
An agreement lacking one essential element of
a valid contract or declared expressly void
under the law of contract

Examples of a void contract

• Agreement with minor
• Agreement with persons of unsound mind
 To be continued…
• Agreement in restraint of marriage ( Section 26)
• Agreement in restraint of trade (Sec.27)
• Agreement in restraint of legal proceedings (Sec.28)
• Agreement. the meaning of which is uncertain (Sec.
29)
• Agreement by way of wager (Se.30)
• Agreement contingent on impossible events ( Sec.36)
• Agreements to do impossible.
 To be continued…

• Agreement in Restraint of Trade

Section 27 declares: “ every agreement by which any one is
restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void”.
Example: An agreement whereby one of the parties agrees to
close his business in consideration of the promise by the other
party to pay a certain sum of money, is void.
 To be continued…

Exceptions
1. Sale of goodwill
The seller of the ‘goodwill’ of a business can be restrained from
carrying on a similar business, within specified local limits, so long
as the buyer, or any person deriving title to the good will from him,
carries on a like business therein, provided the restraint is reasonable
in point of time and space.
• Definition of goodwill
an intangible asset that is made up of the favor or prestige which a
business has acquired beyond the mere value of what it sells due to
the personality or experience of those conducting it, their reputation
for skill or dependability, the business's location, or any other
circumstance incidental to the business that tends to draw and retain
customers.
 To be continued…

• Negative stipulation in service agreements

it means a contract of service preventing the employee from
working else where during the term is not void.
• Partners’ agreements : An agreement in restraint of trade
among the partners or between any partner is valid.
• Trade combinations such as a business combination between
traders or manufacturers not to sell their goods below certain
price is valid
 To be continued…

• Agreement in restraint of legal proceedings (Sec.28)

1. An agreement by which a party is restricted absolutely from
taking usual legal proceedings, in respect of any rights arising
from a contract.
2. An agreement which limits the time within which one may
enforce his contract rights without regard to the time allowed
by the Limitation Act.
( This section applies only to rights arising from a contract. It
does not apply to cases of civil or criminal wrongs or torts. It
does not affect the law relating to arbitration)
 To be continued…

• Uncertain Agreements
“ The agreement the meaning of which is not certain, or capable
of being certain, are void”. If the words used by the parties are
vague or indefinite, the law cannot enforce the agreement. An
agreement “ to enter into agreement in future’ is void for
uncertainty unless all terms of the proposed agreement are
agreed expressly or implicitly.
 To be continued…

• Agreements by way of wager

Section 30 lays down that agreement by way of wager is
void; and no suit shall be brought for recovering anything
alleged to be won on any wager, or entrusted to any person to
abide the results of any game or other uncertain event on
which any wager is made.

Note: Wager means a ‘bet’; something stated to be lost or won

on the result of doubtful issue.
 To be continued…

• Essential features of a wager:

(a) There must be a promise to pay money or money’s worth.
(b) The promise must be conditional on an event happening or
not happening.
(c ) The happening must be uncertain one. If the one party has
the event in his own hand , the transaction is not wager.
(d) Each party must stand to win or lose under the terms of
agreement.
 To be continued…

Exception in favour of certain prizes for

horse-racing:

This section shall not be deemed to render unlawful a

subscription, or contribution, or agreement to subscribe or
contribute, made or entered into for or toward any plate, prize
or some of money, of the value or amount of five hundred taka
or upwards, to be awarded to the winner or winners of any
horse race.
 Some types of agreement

• Commercial transactions
• Lottery
• Insurance Contracts
• Crossword Puzzles
 To be continued…

• Agreements contingent on impossible events ( sec.36)

“ Contingent agreements to do or not to do anything impossible
to happen are void, whether the impossibility of the event is
known or not to the parties to the agreement at the time when it
is made”.
( Agreement to pay an amount as a loan if two straight line
should enclose a space.)
• Agreement to do impossible things (sec.56 para 1)
Agreement to do an impossible act in itself void
 Performance of a contract

• Performance means fulfilling of their respective legal

obligations created under the contract by both the promisor
and the promisee.

• Who can demand performance ?

a. Only the promisee can demand performance of the promise
under a contract.
b. A third party cannot demand performance of a contract
even if it was made for his benefit.
c. In case of the death of the promisee, the legal
representatives are entitled to enforce the performance of the
contract against the promisor.
 To be continued…

• By whom contracts must be performed ?

a. By the promisor himself
( In the case of contract involving personal skill, taste or
credit )
Section 40: If it appears from the nature of the case that it was
the intention of the parties to any contract that any promise
contained in it should be performed by the promisor himself,
such promise must be performed by the promisor.
b. By the promisor or his agent ( In the case of a contract of
impersonal nature)
 To be continued…

• By the legal representatives ( In the case of the death of the promisor

before performance, the liability of performance falls on his legal
representatives, unless a contrary intention appears from the
contract.)
“ The rule of law is “ a personal cause of actions comes to an end
with the death of the person concerned”.
• Performance by a third party
Section 41 states that if a promisee accepts performance of the promise
from a third person, he cannot afterwards enforce it against the
promisor.
Thus, where a promisee accepted lesser amount from a third party in
full satisfaction of his claim, it was held that he cannot enforce the
promise against promisor.
 Assignment of a contract

• Assignment of contract means the transfer of contractual rights

and liabilities to a third party with or without the concurrence
of the other party to the contract. By virtue of assignment, an
assignee can bring an action on his own initiative against the
other party to contract. Contract Act, 1872 contains no specific
provisions dealing with assignment of contract. There are
some principles in this regard:
a. Contracts involving personal skill, taste or credit, etc.
cannot be assigned.
b. The obligations under a contract cannot be assigned except
with the consent of the promisee, and when such consent is
given, it is really a ‘novation’ resulting in a substitution of
liabilities.
 To be continued…

c. The rights and benefits under a contract are assignable unless

the contract is of personal nature or the rights are incapable of
assignment either under law or under an agreement between
the parties, and the assignee can demand performance against
other contracting parties.
d. Assignment by the operation of law takes place in cases of
death and insolvency. Upon the death of a party his rights and
liabilities under a contract devolve upon his heirs and legal
representatives.
 Time and place of performance

• Sections 46-50 and 55

1. Where prescribed by the promisee:
Where time and place are prescribed by the promisee, the
performance of contract must be at the specified time and place.

2.Where not prescribed by the promisee:

If no time and place are prescribed by the promisee, then the contract
must be performed-
( a) within a reasonable time, on a working day and within usual
hours of business and
(b) at a proper place
 To be continued…
• The question ‘ what is a reasonable time’ is a
question of fact, depends either on special
circumstances of each particular case or the
usage of trade or the intention of parties at the
time of entering into contract.
• at a proper place , that means at a go-down or
shop, and not at a public meeting or a fair. “
What is a proper place” is in each particular
case , a question of fact.
 To be continued…

Effects of failure to perform a contract within the stipulated

time:

1. Where ‘ time is of the essence of the contract’ and there is a

failure to perform within the fixed time, the contract becomes
voidable at the option of the promisee.

2. Where time is not essence of the contract, failure to perform

within the specified time does not make the contract voidable.
 To be continued…

3. In case of a contract voidable on account of

promisor’s failure to perform his promise within
agreed time, if the promisee , instead of rescinding
the contract, accepts the delayed performance, he
cannot afterwards claim compensation for any loss
caused by the delay, unless at the time of accepting
the delayed performance, he gives notice to the
promisor of his intention to do so.
 To be continued…

• When is the time the essence of the contract?

Time is the essence of the contract (a) if the parties to

the contract have expressly agreed to treat it as such,
or (b) if the nature of the transaction and the intention
of the parties were such that the performance within a
limited time was necessary.
 Mode or manner of performance

• Section 50
• The performance of any promise may be made
in any manner …. Which the promise
prescribes or sanctions.
 Contracts which need not to be performed

• Under the following circumstances original contracts need not

to be performed :
1. If parties to a contract agree to ‘Novation’, ‘Recision’ or
Alteration , the original contract need not be performed
( sec.62)
a. “ Novation occurs when a new contract is substituted for
existing contract, either between same parties or between
different parties, the consideration mutually being the
discharge of old contract.”
b. Alteration means change in one or more of the material
terms of a contract. A material alteration is one which alters
the legal effect of the contract.
 To be continued…

C. Rescission means when a contract is discharged, before the

date of the performance, by agreement between the parties to
the effect that it shall no longer bind them. An agreement to
excuse performance is valid, while “ an agreement not to sue
for breach” is void.
d. Remission means “ the acceptance of a lesser sum that what
was contracted for or a lesser fulfillment of the promise
made”. A promisee may remit or give up wholly or in part, the
performance of promise made to him.
e. Waiver.
 Discharge of a contract

• When the rights and obligation arising out of a contract are

extinguished, the contract is said to be discharged or
terminated. A contract may be discharged in any of the
following ways:
a. By performance, actual or attempted
b. By mutual consent or agreement
c. By subsequent or supervening impossibility or illegality
d. By the lapse of time
e. By the operation of law
f. By the breach of contract