Contract I

KAMKUS COLLEGE OF LAW ( BHAGIRATH GROUP OF INSTITUTIONS) (Affiliated to CCS University, Meerut & Approved by Bar council of India, New Delhi

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(An e-initiative by KCL)

NOTES

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Code : 102

Subject : Contract-I

Course : II

Class : LL.B. 1st Yr

Note : Only KCL students are authorized to download the notes


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Contract 1st ( LL.B. – Ist Year )

Q.1 Define a contract, what are the essentials of a valid contract.

- “ all Contract are Agreement, but all agreement are not contract” Discuss.

Ans. Definition of Contract :-

(i) According to Anson – “A contract is an Agreement enforceable by law made between

two or more persons by which rights are acquired by one or more to acts or forbearances

on the part of the other or other‟s”.

(ii) According to Salmond – “Contract is an Agreement, creating and defining obligations

between the parties”

(iii) According to Sec.2 (h) of Contract Act – “ An Agreement enforceable by law is a

contract”.

Essentials of a valid Contract :- The essentials of a valid Contract are inherent in the

Section 10 of the Indian Contract act. Which says –

Sec.10 – Which agreement are Contracts –

All Agreements are Contracts if they are made by the free consent of Parties,

Competent to Contract, for a lawfull consideration and with a lawful object, and are not

hereby expressly declared to be void.

So the essentials for a valid contract are as follows :-

1. More than one party.

2. An Agreement Between the parties

3. Free consent of parties.

4. Parties Should be Competent to contract.

5. Consideration should be lawful.

6. The object of contract should be lawful.

7. Such contract should not be declared void.

Contract – Sec-2 (h)

According to Sec 2 (h). Contract is an Agreement which is enforceable by law. In order

that an agreement becomes a contract it has to satisfy all the essentials of a valid contract as

mentioned in Sec-10.

1. There must be an Agreement – The first and foremost essential of a valid contract is that there

must be an Agreement, According to Sec-2(e) “Every Promise and every set of promises, forming the


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consideration for each other is an Agreement” The Agreement consists of two Basic elements (1)

Proposal (Offer), (2) Acceptance

(1) Proposal – A proposal and its acceptance is the universally acknowledged process for the

making of an agreement. The Proposal is the starting point, Sec-2 (a) defines „Proposal‟ 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 act or abstinence, he is said to make a proposal.

(ii) Acceptance – Sec-2 (b) “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.

(2) The Agreement must be made by Competent parties :- A contract is valid only if it has been

made by the parties who are competent to make it. See 11 of the act.

The following persons are competent to enter into a contract -

i) Who are Major

ii) Who are of sound mind

iii) Who are not disqualified from contracting by any law to which they are subject.

Thus, according to Sec-11 of the act, any person who is a minor or is of unsound mind or has

been declared disqualified by any law is not competent to enter into a contract and if an

Agreement is made by any of such persons, it is void.

(3) Agreement must be made by the free Consent of parties :- Another requirement for a valid

contract is that the Agreement must have been made with the free consent of the parties, if consent is

not free, the contract becomes voidable – In Mikol Bottlers Ltd. Vs. M/S Dhillon Kool Drinks, AIR

1995, the Delhi High Court held that an Agreement to be valid should be made by free consent of the

parties apart from other requirement.

(4) The Agreement must be made for lawful consideration :- To constitute a valid contract, it is

essential that agreement is made for a lawful consideration. According to Sec-23 of the Act, if the

Agreement is not for a lawful consideration the agreement is void. In Nutan Kumar vs. IInd.

Additional District judge – AIR 1994 ALL 299

(5) The agreement must be made for lawful object :-

The object of the Agreement must be lawful otherwise the Agreement becomes void and an important

element of a valid contract is that the Agreement is made for a lawful object Sec-23


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(6) The agreement must not have been declared to be void by contract Act or any other Act – another

important element for a valid contract is that the agreement should not be from amongst, such

agreement which have been specifically declared void as per Sec-26, 27, 28, 29, 30 and 56 of the

Act.

Q.2 Define “Proposal” and explain their essentials and discuss the kinds of offer.

Ans. Proposal – Sec 2 (a) “When one person signifies to another, his willingness to do or to

abstain from doing anything. With a view to obtaining the assent or that other to such act

or abstinence, he is said to make a proposal.

“these are some essentials of a offer”

1. Communication of offer is Necessary – (Sec.4) The Communication of a Proposal is

complete when it comes to the knowledge of the person to whom it is made, It is to be

remembered that there is no offer till it is communicated to the offeree as otherwise he cannot

accept it, being completely unaware of it, it is, therefore – Necessary that a person must have

knowledge of the offer at the time of its acceptance, doing anything in ignorance of the offer

can never be treated as its acceptance.

In Lalman Shukal vs. Gauri Dutt (1913)” A.L.J. 489 – In this case the plaintiff Lalman Shukla,

was serving as a munim in the firm of defendant Gauri dutt. The Nephew of Gauri Dutt ran

away from his house and no trace of him was found for some time. On 21st Jan.1912

defendant sent the plaintiff to Hardwar for tracing the boy and paid him his travelling

expenses. After sending the plaintiff to Hardwar the defendant by hand bills advertised that a

reward of Rs.501 would be paid to any one who would find the boy. The plaintiff had no

knowledge of the reward advertised, he found the bay at Rishikesh and brought him back on

25th of Jan.1912.

The plaintiff filed a suit for the recovery of the reward advertised, it was held that since

the plaintiff was ignorant of the offer of reward his act of bringing the last boy did not amount to

the acceptance of the offer and therefore, he was not entitled to claim the reward.

2. Intention to create legal relationship – It is necessary that the offer should be made with an

intention to create legal relationship, Promise in the case of social engagements is generally

without an intention to create legal relationship, such an agreement can not be considered to


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be a contract, so an agreement to go for a walk, to go to a movie, to play same game or

entertain another person with a dinner cannot be enforced in a court of law.

In Balfour v. Balfour :- An intention not to create legal relationship was implied. It

was held that in this case, there being no intention to create legal relationship, the

husband was not liable.

3. Offer must be certain :- An offer must be certain and definite Its terms should not be so

vague so as to prevent a contract being formed. Example –

(i) „A‟ Agree to sell to „B‟ a Hundred tons of oil. There is nothing whatever to show

as to what kind of oil was intended, hence the agreement is void for uncertainly.

(ii) „A‟ agree to sell „B‟ “My white horse for five hundred rupees or one thousand.

The agreement will be void because there is nothing to show which at the two

prices was to be given”.

Kinds of offer

(i) Cross offer

(ii) Counter offer

(iii) Specific and General offer

(iv) Standing offer

(v) Offer and invitation of offer

(vi) Offer may be express or implied

(vii) Offer may be positive or negative

(viii) Offer may be conditional or unconditional.

Q.3 Define the acceptance. Explain its legal rules with the help of decided cases.

Ans. Sec-2 (b) When the person to whom the proposal is made signifies his assent thereto,

the proposal is said to be accepted, A proposal when accepted, become a promise.

A person , when accepted results in an agreement, after the acceptance of the

proposal a contract between two parties can arise.


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“ Effect of Acceptance”

A contract is created only after an offer is accepted.

Anson. Explained the effect of acceptance as – “Acceptance is to an offer what

alighted is to a train of Gunpowder.”

Essentials of a Valid Acceptance

I Acceptance should be Communicated:-It means that the offree must signify

his assent or communicate the acceptance. The communication of acceptance is

deemed to be made by any act or omission of the party accepting, by which he

intends to communicate such acceptance Sec 3. Communication may be oral, by

post, by telegram, by a massage on phone, through a messenger or in any other

reasonable manner, sometimes the conduct of a person might indicate his assent

e.g. a passenger travels in bus.

- Felt house V. Bindley – it was held that since the nephew had not

communicated the acceptance to Felt House, no contract had arisen in this case

and therefore felt house had not become the owner of the horse, [ this is absence

of acceptance,]

2. Acceptance may be express or implied :- An acceptance of an offer may be

express or implied, Where an offer is accepted by words, written or oral, the

acceptance is called express. When an offer is accepted by conduct, the

acceptance is called implied. In Carlill Vs. Cabrolic Snake Ball Co.(1893)

3. Acceptance must be absolute and unqualified :- The first and foremost

essential of a valid acceptance is that it must be absolute and unconditional. In

this regard Sec-7 says that in order to convert a proposal into a promise the

acceptance must be absolute and unqualified.


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In Hyde vs. Wrench (1840) 3 Beav.334 – the defendant offered to sell his

farm to the plaintiff for £ 1000 only. But the plaintiff said he would buy it for £

950 only . Later on he agreed to buy the farm for £ 1000. But then the defendant

refused to sell the farm. The plaintiff sued the defendant for specific performance

of contract. The court dismissed his suit by holding that no contract is made

because the plaintiff’s offer for £ 950 was in fact a counter offer which destroyed

the original offer.

4. Communication of acceptance must be made by the acceptor or his

authorized agent – A communication of acceptance to be made valid, must be

either by the offeree himself or his authorized agent. A communication of

acceptance by any other person will not be valid.

In Powell Vs. Lee -

5. The acceptance must be expressed in some usual and reasonable manner :-

Sec-7 the acceptance must be expressed in some usual and reasonable manner.

Unless the proposal prescribes the manner in which it is to be accepted, If the

proposal prescribes a manner in which it is to be accepted and the acceptance is

not made in such manner – the proposer may, within a reasonable time after the

acceptance is communicated to him, insist that his proposal shall be accepted in

the prescribed manner, and not otherwise If he fails to do so, he accepts the

acceptance.

for example :- A offers to B to sell his watch for Rs. 100/-

- ‘B’ may accept this offer orally or by writing a letter or by sending a telegram.

But if A says in his offer that acceptance is to be communicated only by a telegram

then ‘B’ should accept it by sending a telegram, if ‘B’ sends a post card for

acceptance. A can object to it and insist that his offer shall be accepted only by a

telegram, but if A does not insist upon it, he accepts the acceptance as actually

communicated.


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6. Acceptance should be made while the offer is still subsisting :-

It has already been Noted that the offeror is free to withdraw the offer or the

offer is revoked under various circumstances mentioned in Sec-6. After the offer has

been withdrawn or has lapsed, there is nothing which can be accepted it is therefore

necessary that the acceptance should be made while the offer is still alive and

subsisting. Acceptance of the offer is deemed to have ended by rejection of the

original offer or a counter offer. In such a case also, once the offer has lapsed, an

attempt to accept the same would not give rise to any legal obligation.

Q.4 What is consideration and define the Present, Past, Future Consideration?

Ans. Definition of Consideration – the term consideration has been defined by different jurists

in a different manner as follows. According to Blackstone :- “Consideration is the

recompense given by the party contracting to the other”

According to Pollock :- “Consideration is the Price for which the promise of the other is

bought and the promise thus given for value is enforceable”

Thus, consideration is the price for the promise.

The definition of consideration as a “Price of the Promise” has been

commended by Cheshire and Fifoat. According to them it is easier to understand it

corresponds mere happily to the normal exchange of promises and it emphasizes the

commercial character of the English contract. According to Sec-2 (d)–“When, at the

desire of the Promiser, the promisee or any other person has done or abstained from

doing, or does or abstains from doing, or promises to do or to abstain from doing,

something. Such act or abstinence or promise is called a consideration for the promise.”

Meaning of Consideration :- In the ordinary course, when a person makes a

promise to another, he does so with the intention to desire some advantage


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which the person to whom the proposal is made is capable of conferring

upon him. At the desire of the promisor, the promise or any other person has

either.

(i) Done something or abstained from doing something.

(ii) Does or abstains from doing something

(iii) Promises to do or to abstain from doing something, this act which is done or promised

to be done is known as consideration.

Nature of Consideration :- Consideration is an important requisite at a contract. An

analysis of any contract will show that it consists of two clearly

separable parts

(i) Promise on the one hand

(ii) Consideration for the promise on the other hand,

A person who makes a promise to do or refrain from doing something as a legal duty –

usually does so as a return or equivalent of some benefit

according to him or as a return or equivalent of some class damage or in convenience

that may occasion, or may have been occasioned, to the other party in respect of the

promise. The benefit so received or the loss damage or inconvenience so caused is

regarded in law as consideration of the promise, it may be described as something

accepted or agreed upon as a return or equivalent for the promise made.

- Definition of Consideration Analysed :- Sec-2 (d)

(1) „At the desire of the Promisar’ – The Act or forbearance must be at the desire of the

promisar – it is to be remembered that the act or forbearance must be done at the desire of


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the promisar , if it is done at the instance of a third party, or without the desire of the

promisare, it is no consideration – Durga Prasad Vs. Baldeo (1880) 3 All 221.

(2) The Promisee or any other person – it is a well-settled rule of English Law that

consideration must move from the promisee alone. It means that the act or abstinence or

promise constituting the consideration must be done suffered or made by the promise

himself and at the request of the promisor.

Chinnaya Vs. Ramaya (1882) 4 Mad 137 –

Yamuna Das Vs. Rani Auttar – (1911) 30 – In this case A mortgages his property to B and

B promises to pay „A‟, debt to C, „C‟ cannot file a suit against B to enforce B‟s promises C,

is not a party to the Contract between A and B.

(3) Consideration may consist of an act or abstinence :-

Consideration may consist of a positive act or an abstinence, i.e. e Negative act. Thus, an

agreement between A and B under which A promises not to file suit against B for another

two years in consideration of B promising to raise the rote of interest from 60% to 90% is a

good contract. A‟s abstinence being the consideration for B‟s promise.

(4) Consideration is three types :-

(i) Past Consideration (has done or abstained from doing)

(ii) Present Consideration (does or abstains from doing)

(iii) Future Consideration (Promises to do or to abstain from doing

(i) Past Consideration – It means that the consideration for any promise was given earlier

and the promise is made thereafter.

Example – „A‟ requests to „B‟ to find his lost dog. After „B‟ have done the same, if „A‟

promise to pay „B‟ Rs. 100 for that it is past consideration.

A finds B‟s purse and gives it to him, B promise to pay A Rs.50. This is a contract

(ii) Present or executed Consideration – When one of the parties to the contact has

performed his part of the promise which constitutes the consideration for the promise by the

other sides it is knows as executed consideration – for example, „A‟ makes an offer of reward

of Rs.100 to any one finds his lost dog and brings the same to him. „B‟ finds the lost dog and

brings the same to him. „B‟ finds the last dog and delivers the same to „A‟. When „B‟ does so,


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that amounts to both the acceptance of the offer which results in a binding contract under

which „A‟ is bound to pay Rs.100 to „B‟ and also simultaneously giving consideration for the

contract. The consideration in this present.

(iii) Future or Executory - When one person makes a promise in exchange for the

promise by the other side, the performance of the obligation by each side, to be made

subsequent to the making of the contract, the consideration is know as executor, for

example – „A‟ agrees to supply certain goods to „B‟ and „B‟ agrees to pay for them on a

future date, this is a case of executory consideration.

“ Difference between English and Indian law of Consideration’

(ii) English Law - Indian Law

1. Under English Law past 1. But Indian law past consideration

Consideration is no consideration is a good consideration.

2. English Law consideration should 2. But under the Indian law

move from the promise and consideration can move either

Promise alone and not from a from the promise or any other

Third person person but it must proceed at

the desire of the Promisor.

3. In English Law real consideration 3. Consideration need not be

is necessary adequate of Indian

Q.5 Define “An Agreement Made without Consideration is Void”

Ans. “An Agreement made without consideration is void” Section-25 of the Indian Contract Act

declares the General rule that an Agreement made without consideration is void. Section,10

also says that an Agreement becomes a Contract only when there is some lawful

Consideration for it. Thus the Cumulative effect of these two Sections is that every Agreement

must be Supported by Consideration.

Exceptions to the General Rule


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Natural love and affection-Section25 (1) says that an agreement made without Consideration

is that Void.

Promise to Compensate for something done Voluntarity.Section25 (2).

Promise to pay a time barred dept-Section25 (3).

No Consideration is Necessary to Completed Gifts.

No Consideration is necessary to dispenses with or remit the performance of Contract Wholly

or in part.

No Consideration is Necessary to extend the time for the performance of Contract.

No Consideration is necessary to accept any satisfaction instead of the whole claim.

No Consideration is necessary for the Gratuitous bailments.

No Consideration is necessary to create on agency.

Natural lone and affection- Section.25 says that an Agreement made without Consideration

is not Void.

Provided – “it is expressed in writing and registered under the law for the time being in

force for the Registration of documents and is made on account of natural lone and

affection between parties standing in a near relation to each other.

Example- A for Natural lone and affection Promise to give his son „B‟ Rs. 1000.A puts his

promise to „B‟ into writing and registers it, this will be a valid. Contract even when made

without Consideration.

Promise to Compensate for something done voluntarily.Section.25 (2) an Agreement

made without Consideration is not void, provided,‟‟ it is a promise to Compensate wholly or in

part, a person who has already voluntarily done something for the Promisor or something

which the Promisor was legally Compellable to do.”

Example- „A‟ finds „B‟s purse and give it to him B promise to pay A Rs.50. This

promise can be enforced similarly, if A has supported B‟s son and Subsequently B

Promises to Pay A‟s expenses in so doing. A is entitled to sue and get the said

Promise enforced.

Promise to Pay a time-barred dept- Section25 (3) says that an Agreement made without

Consideration is not void. Provided - it is a Promise made in Writing and signed by the person

to be charged there with, or by his agent generally or specially authorized in that behalf - to


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Pay Wholly or in part a dept which the creditor might have enforced payment but for the law for

the limitation of suits.”

Example- A owes B Rs 1000 but the dept is barred by the Limitation Act. A signs a written

Promise to pay B Rs.500 an account of the dept. This will be a valid contract and shall not be

Void for want of Consideration.

No Consideration is Necessary to completed gifts -Section.25 Provides that as between

the donor and the donee any Gift actually made will be valid through there be no registered

deed. Nearness of relationship or natural love. In order to bring into operation this explanation

the gift must be completed. Thus if a person gives a gift of certain properties to another

according to the Provisions of the Transfer of Property Act, he cannot Subsequently demand

the Property back on the ground of want of Consideration. Because Gift is Complete.

No Consideration is necessary to dispense with or remit the performance of contract

Wholly or in part- Sec.63 provides in the first place that “ every Promisee may dispense with

or remit, Wholly or in part, the performance of the Promise made to him” for example-

„A‟ Promises to paint a picture for B.B afterwards for bids him to do so. „A‟ is no longer bound

to perform the Promise.

No Consideration is Necessary to extend the time for the Performance of Contract-

Section. 63 Provides in the second place that “every Promisee may extend the time for the

Performance of contract without requiring any Consideration to support such an Agreement.”

No Consideration is Necessary to accept any Satisfaction instead of the whole claim-

Sec.63 provides in the third Place that every Promise may accept any Satisfaction which he

thin fit instead of the whole claim under the contract for example- A owes b 5,000 rupees. A

pays to B 1,000 rupees and B accepts them in satisfaction of his whole claim on A. This

payment is a discharge of the whole claim.

In Kapoor Chand Godha Vs. Mir Nawab Himayat Ali Khan, A.I.R (1963) S.C.250-in this

Case the debtor offered Rs.20 Lakhs to the creditor in full Satisfaction of a liability of Rs.27

Lakhs. The creditor accepted it. Subsequently , the creditor Sued the debtor for the balance.

The Court held that the Case was completely covered by illustration (e) to Section.63 and the


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creditor having accepted 20 Lakhs in full Satisfaction of his claim of Rs.27 Lakhs was not

entitled to sue to recover the Balance.

No Consideration is Necessary for the Gratuitous bailments Bailments may be divided into

three kinds- i.e.

Bailments for the Benefit of the Bailer.

Bailment for the Benefit of the Bailee.

Bailment for the Natural benefit of both, the bailer and bailee.

A bailment for the benefit of the bailee is called the Gratuitous Baliment. A gratuitous bailment

is one in which a loan of article is made without any charge, detriment or Consideration. The

Gratuitous Bailment is bost exemplified by a loan of some article. Thus, A example- A barrous

B‟s scooter to use for a day . the bailment is one for the sole benefit of A even if no

Consideration is paid.

No Consideration is Necessary to create an Agency- Lastly, S. 185 Provides that no

Consideration is necessary to create a contract of an agency .Generally an agent is

remunerated by way of Commission for Services rendered but no Consideration is immediately

necessary at the of the Appointment.

Q.6 “Minor’s are incapable of entering into a valid Contract” discuss.

Ans. Sec 11 says that “Every person is competent to contract who is of the age of majority

according to the law to which he is subject, and who is of sound mind and is not

disqualified from Contracting by any law to which he is subject “Thus, the Section declares

the following persons to be in competent to contract.

Minors

Person of “Unsound” Mind,

Person “disqualified” by law to which they are subject.

Who is a Minor ? According to the Indian Majority Act, 1875, “A Minor is one who has not

completed 18 year of age, But in the case of Minors of whose person or property (or both) a

Guardian is appointed by Court of wards, the Minority continues up to the age of twenty one”.


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Indian Contract Act, Majority of the contracting parties is a necessary element for the

validity of the contracts.

Nature of Minor’s Agreement – Section 10 requires that the parties to a contract must be

competent. Sec 11 declared that a Minor is not competent. But neither Sec. makes it clear as

to whether, if a Minor enters into an Agreement, would it be vaidable at his option or altogether

vaid? These Provisions had, therefore, quite naturally given rise to a controversy, about the

nature of a minor‟s Agreement. This controversy was finally settled in 1903 by the Privy

Council in Mohari Bibi Vs. Dharmodas Ghose, Where in Sir Lord North observed –

“Looking at Sec. 11 their lordships are satisfied that the Act makes it essential that are

contracting parties should be competent to contract and expressly provides that a person who

by reason of infancy is incompetent to contract cannot make a contract within the meaning of

the Act. The question whether a contract is void or voidable presupposes the existence of a

contract within the meaning of the Act, and cannot arise in the case of an infant” Ever since

this decision has not been doubted that a Minor‟s Agreement is absolutely void.

Effects of Minor’s Agreement -

Minor’s Contract cannot be specifically enforced – Since a Minor‟s contract is absolutely

void, there can be no specific performance of such a contract. Even when a contract has been

entered into by a Guardian of behalf of a Minor, there can be no specific performance by or

against Minor, so it was held that by the Privy Council in Mr. In Sarwarjan Vs. Fakruddin that

a Guardian has no power to bind a Minor by a contract for purchase of immovable property

and the Minor by a contract for purchase of immovable property, and the minor cannot enforce

the contract as there was no mutuality. In such a case even the Minor cannot enforce specific

performance, as there is no mutuality.

Minor is not liable to refund the money Gained by fraudulent misrepresentation – As it is finally

decided by the Privy Council, in the leading case of Mohari Bibi Vs. Dharmodas Ghose –

(1903)30 Cal.539 P.C. that a Minor‟s contract is void, and not merely voidable. An in fart is,

therefore, under no liability to repay the money that he has received under such a contract

even if he has falsely represented that he has attained the age of majority.

Minor’s Contract Cannot be ratified – Since a Minor‟s contract is void it follows that there

can be no question of ratifying it, and hence a promise by a person on attaining majority to


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repay money lent and advanced to him during minority cannot be enforced as the

consideration given during minority is no consideration at all.

Transfer in favour of a Minor is enforceable – There is nothing in contract Act which

prevents a Minor from being a promise or transferee. The law does not regard a minor as

incapable of accepting a Benefit, it has been held by a full bench of the Madras High Court

held that a mortgage executed in favour of a Minor who has advanced the mortgage – money

is enforceable by him or by any other person on his behalf. So also, where a Minor purchaser

of immovable property was subsequent to his purchase, dispossessed by a third party, it was

held that the minor could recover from his vendor the sum which he had paid as purchase

money, on the same Principle, it has been held by the High Court of Rangoon and Madras,

that a promissory note executed in favour of a Minor is not void and can be enforced by the

Minor.

Estoppel has no effect upon Minor’s Contract – Formerly, there were many conflicting

decisions as to whether a Minor would be liable if he had made false representation as to his

age, i.e. if he had falsely told to other party to the contract that he had attained, the age of

majority. However, now the controversy has been set at rest by the decision of the Privity

Council in Sadiq Ali Khan Vs. Jai Kishare , Where it was observed that a deed executed by

a minor is a nullity, and that, therefore, there cannot be any estoppel against a statute.

for example – In R.LesLie Ltd Vs. Shesli (1914) 3 K.B.607 the defendant,

who was an infant, induced the plaintiff to lend him 400 by falsely representing that

he was of full age. The plaintiff sued the infant to recover the money on the Ground,

(1) of fraud (1) alternatively for money had and received, it was held that the infant‟s

relief Act made the contract absolutely void and to give the plaintiff relief on either of

these two grounds would be an indirect way of enforcing a void contract, and

consequently the Action failed.

Q.7 Define the Coercion and undue influence and difference between coercion and undue

influence or fraud and misrepresentation or wagering and contingent contract.

Ans. Coercion – Indian Contract Act 1872 (Sec-15)

Coercion is the committing or threatening to commit. Any act forbidden by the I.P.C., or the

unlawful detaining or threatening to detain. Any Property to the prejudice of any person


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whatever, with the intention of causing any person to enter into an agreement.

Example – „A‟ threaten to shoot, B if he does not let-out his house to him. B agrees to

toles his house to A. The consent of A has been induced by coercion.

“ Essential Elements of Coercion”.

(1) Act Forbidden Indian Code 1860 – When the consent of a party to the contract is

obtained either by the committing or by threating to commit any act which is forbidden by

the I.P.C. the consent is said to be obtained by coercion.

Example – A on pistol paint makes „B‟ Agree to sell his scooter for Rs.1000. B did so. The

consent so obtained amounts to coercion.

(2) Unlawful detaining of property – When the consent is obtained by unlawful detaining of

any property, the consent is said to be caused by coercion.

(3) Intention of causing any person to enter into an Agreement – To prove coercion. It is

not sufficient that the committing of or the threatening to commit a „forbidden‟ act is

existent, but it is also to be established that the committing or the threat of such a forbidden

act was effectively used with the intention of compelling any person to enter into an

agreement.

Example – A gave beating to „B‟ to take revenge for his insult. The beating does not

amount to coercion as the intention of beating was not to cause him to enter into a contract.

(4) Coercion by whom and against whom – Coercion, threat may proceed from anybody.

Even from a person who is not a party to the agreement. The act of coercion may be

directed against the promisor himself or against any other person in whose welfare the

promisor is interested.

Example – A and B are negotiating to enter into a contract but A is unwilling at the

moment. X third person Y threatens to assault A if he does not enter into the contract with

B. However, B does not know about all this. A out of fear enters into a contract with B.

Here the consent has been caused by coercion.

(5) Application of the Penal Code as to the Place not necessary – An act to amount to

coercion must be such as has forbidden by the I.P.C. However it is immaterial whether the

Penal Code is or is not in force at the Place where it is performed.


18

- Meaning and Definition of undue influence.

Ans. Undue influence Sec 16 (a) – A contract is said to be induced by „Undue influence‟ where the

relations subsisting between the Parties are such that one of the Parties is in a position to

dominate the will of the other and uses that position to obtain an unfair advantage over the

other”

Essential elements of undue influence

1. There must be a Pre-existing relationship between the persons who make the contract.

2. The relationship is of such a nature that one of the two is in a position to dominate over the

will of the other person.

3. The dominant person uses his position to acquire an unfair advantage over the person in

weaker position.

Difference between coercion and undue influence

Coercion Undue influence

1. Parties to a contract may as may not be

related to each other.

2. Consent is obtained by giving a threat of

an offence or committing an offence

3. It involves physical pressure

4. It can be exercised even by a stranger to

the contract.

5. The party committing the crime may be

punishable under I.P.C.

Parties to a contract are related to each other

under some sort of relationship

Consent is obtained by dominating the will.

It involves moral pressure.

It can be exercised only by a party to contract

and not by a stranger.

It doesn‟t involve any criminal liability

Fraud and Misrepresentation

Fraud Misrepresentation

1. A wrong representation is made willfully

with the intention to deceive the other

party.

1. A wrong representation is made

innocently, i.e. without any intention to

deceive the other party


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2. The person making the wrong statement

does not believe it to be true.

3. The aggrieved party can claim damages.

2. The person making the wrong statement

believes it to be true

3. The Aggrieved party cannot claim

damages.

Wagering Contract Contingent Contract

1. Sec. 30 a „Wager is a Promise to pay

„money or money‟s worth on the

happening or not happening of an

uncertain event”

2. All wagering contracts are contingent

contracts

3. Wagering contracts are void

4. In a wager, the uncertain event is

beyond the power of both parties

5. The basis of wagering contract is mutual

chance of loss and gain of the parties

1)Sec.31 a “Contingent Contract is a contract to

do or not to do something if some event

collateral to such contract does or does not

happen.”

2)All contingent contract are not wagering

contracts.

3)Contingent contract are not void unless they

are dependant on an impossible event.

4)In a contingent contract the event may be

within the power of one of the parties

5) In a contingent contract there is no chance of

loss or gain of any party.

Q.8 Define the Anticipatory Breach of Contract. What are the remedies available on a

breach of contract.

Ans. Meaning of Anticipatory Breach of Contract :- Anticipatory breach occurs when the

party declares his intention at not performing the contract before the performance is due.

Thus, when a party refuses to perform a contract even before it is due for performance. It

is called anticipatory breach. A remedy is the means give by law for the enforcement of a

right.

Types of Breach of Contract

There are two types of Breach of contract namely.

(1) Actual beach

(2) Anticipatory or Constructive breach.


20

Remedies for Breach of contract

(1) Rescission of the Contract (Sec-39)

(2) Suit for damages (Sec-73)

Principal of damages –

Principal of damages –

(1) The compensation can be claimed only from the party who has broken the contract.

(2) If a quasi – contract is broken, the aggrieved party is entitled to receive the same

compensation from the defaulting party as would be party is entitled to receive the same

compensation from the defaulting party to such in case of any other contract.

(3) The aggrieved party is entitled to claim compensation only when he has suffered some

loss or damage by the breach of the contract.

(4) The compensation can also be claimed for any loss or damage which the parties.

Knew, at the time of making the contract to be likely to result from the breach of the

contract, in other words, special damages are also recoverable.

Rules regarding the Damages

1. The ordinary damages are recoverable.

2. The remote damages are not recoverable.

3. The aggrieved party is entitled to damages even if a quasi – contract is broken.

4. The nominal damages may be awarded at the discretion of the court.

5. The damages for loss of reputation are not generally recoverable.

Suit for a Quantum Meruit

Quantum Meruit means „As much as he has earned‟ Thus quantum Meruit means that a

person can recover compensation in Proportion to the part to work done by him. If a

contract comes to an end and one party has already performed a part of it. He is entitled to

claim compensation for the part he has performed.

Suit for specific performance – Specific performance means to carry out actual

obligations as per the terms of contract. When damages are not an adequate remedy for

breach of contract. The court can insist on the parties to carry out their agreement. It is


21

important that specific performance cannot be claimed as a matter of right and the courts

are always at discretion to grant the relief by specific performance.

Examples – A, an author contracted with B to write a book him. Later on – A refused to

write the book, here B cannot obtain the specific performance of the contract as it involves

the personnel qualification of A.

Suit for injunction – Suit for injunction means demanding courts stay order. Injunction

means on order of the Court which prohibits a persons to do a particular act. Where a

party to a contract does something which he promised not to do. The court may sue an

order prohibiting him from doing so.

Example – A, a dancer, agrees to dance at B‟s hotel at certain rid. She also agrees that

during the prescribed period she will not dance at any other hotel, later on, A contracts with

to dance at his hotel and refuses to dance at B‟s hotel B files a suit for restraining A from

dancing at it‟s hotel. Here, although A can not compelled to dance at B‟s hotel, but she can

be retrained by injunction from dancing at C‟s Hotel.

Q.9 Discuss the modes of performance of contract.

Ans. Modes of the performance of contract – there are following six rules.

1. Where no time is specified and no application is to be made S.46.

2. Time and place of performance where time is specified but no application is to be made

Sec 47.

3. When performance to be made on certain day at proper time and place.

4. Where no place is fixed and no application is to be made for performance.

5. Performance to be made in manner or at time prescribed or sanctioned by the promise.

(1) Where no time is specified and no application is to be made Sec 46 – says that “Where by

the contract a promisor is to perform his promise without application by the promise and no

time for performance is specified the engagement must be performed within a reasonable

time.”

(2) Time and place of performance where time is specified but no application is to be made

– Sec 47 - Provides “when a promise is to be performed on a certain day, and the promisor

has undertaken to perform it without application by the promise, the promisor may perform it at


22

any time during the usual hours of business on such day and at the place at which the promise

ought to be performed”

Example – A promises to deliver goods at B‟s warehouse on the Ist January. On that day A

bring to B‟s ware house but after the usual hour from closing it and they are not received. A ha

not performed his promise.

(3) When performance to be made on certain day at proper time and place - Duty of promise

to apply for performance Sec 48 of the Act, “When a promise is to be performed on a certain

day, and the promisor has not undertaken to perform it without application by the promise, it is

the duty of the promise to apply for performance at a proper place and within the usual hours

of business”.

(4) Where no place is fixed and no application is to be made for performance – Duty of

Promisor to apply to promise to appoint place Sec 49 “ When a promise is to be performed

without application by the Promisee and no place is fixed for the performance of it, it is the duty

of the Promisor to apply to, the Promisee to appoint a reasonable place for the performance of

the promise and to perform it at such place. Example :- P undertakes to delivers one thousand

maunds of jute to M on fixed day. P must apply to B to appoint a reasonable place for the

Purpose of receiving it, and must deliver it to him at such place.

(5) Performance to be made in Manner or at time Prescribed or Sanctioned by the Promisee

Sec-50 – “The Promisor is bound to perform the Promise in any manner, or at any time which

the promise prescribes or Sanctions. Example:- A owes B 2000 rupees B accepts some of A‟s

goods in deduction of the debt. The delivery of the goods operates a part – payment.

Case

(1) Branch Manager, State Bank of Mysore v. K. Amarnath, AIR 2003 Kant 202.

(2) Jai Durga Finvest Pvt. Ltd v. State of Haryana AIR 2004 S.C. 1484

(3) Ceean International Private Limited v. Ashok Surana, AIR 2003 Cat. 263

(4) F.C.I v. Anupama Warehousing Establishment, AIR 2004 Ker. 137

(5) R.K Saxena v. Delhi Development Authority AIR 2002 S.C 2340

Q.10 What are the various modes of discharge of a contract

Ans.(1)Discharge by Performance – Each party to a contract is bound to perform his part of the


23

obligation. After the parties have made due performance of the contract. Their liability

under the contract comes to an end. In such a case, the contract is said to be discharged

by performance. Varous rules of performance of the contract have been discussed.

(2) Discharge by Breach of contract – Thus, insolvency of a party to a contract discharges

the contract. A party is released from performing his part of the contract by law e.g. an

insolvent from paying his debts, a person whose performance of a transaction is declared

by law to be illegal is also similarly excused (Sec.37)

(3) Discharge by refusing tender of performance – Where a Promisor has made an offer of

performance to the Promisee, and the offer has not been accepted, the promisor is not

responsible for non-performance, nor does he thereby lose his rights under the

contract (Sec 38)

(4) Discharge by Refusal of a Party to perform promise wholly or discharge by breach –

(Sec 39)- When a party to a contract has refused to perform, or disabled himself from

performing his promise in its entirety – the promisee may put an end to the contract,

unless he has signified (by words or conduct), his acquiescence in its continuance. Sec 39

Forms of discharge by breach –

(a) By renunciation of liability before performance is due. There are two limitations to this

(1) it must relate to the whole performance,

(2) It must be treated as a discharge (Sec.39)

(b) By impossibility created by one party before performance is due.

(c) By renunciation in the course of performance. e.g. where a purchaser of 100. Bales, after

accepting delivery of 50 bales, refuses to accept the remaining 50, the seller is discharged and

can sue for damages.

(d) By impossibility created by one party in the course of performance. e.g. where a party puts it

out of his power to continue performance of his promise.

(e) By failure of performance, which may be of the whole of the promise or of a part of it, e.g. in

case of delivery and payment by instalments.

(5) Discharge by the Act to be performed under the contract becoming impossible or unlawful

(Sec 56)


24

(6) Discharge by Agreement and Novation (Sec 62)

Deals with the effect of rescission or alteration of a contract. It runs thus if the

parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the

original contract need not be performed.

For examples –(a)

(a) A owes money to B under a contract. It is agreed between A, B and C, that B shall

thenceforth accept C as his debtor. Instead of A, the old debt of A to B is at an end, and a

new debt from C to B has been contracted.

Doctrine of Novation – The term novation has been thus defined by the house of lords –

That, there being a contract in existence. Some new contract is substituted for it either

between the same parties or between different parties, the consideration being mutually the

discharge of the old contract” In India, there is novatio when the parties are changed or the

nature of the obligation is changed.

Forms of novation – The parties to a contract may substitute new terms for the old ones, as

indicated by illustration (a) In the former case, there is a substitution of new terms for the old

ones while the parties remain the same . In the later case, a new party is substituted for old

one. In both the cases, the old debt is at an end, and a new one takes its place, the old

contract is replaced by a new contract.

or

(b) It may be agreed between the original promisor, the original promise and a third party that

the promise will look to the third party, instead of the original promisor, for the performance

of the contract as in illustration.

Effect of Novation – In cases where there is a novation, the old contract is completely,

extinguished, and a suit based on it is not maintainable. (Reference Book)

(5) Discharge by waiver of contract – Sec 63 a contract may also be discharged by way of

waiver, i.e. by the promisee dispensing with or remitting the performance of the promise made

to him. Sec 63 provides that every promisee may –

(1) Dispense with the performance of the promise made to him

(2) Remit wholly or in part.

(3) Extend the time for such performance.

(4) Accept, instead at it, any satisfaction which he thinks fit.


25

For examples – (a) A promises to paint a picture for B, B, after wards forbids him to do so, A is

no longer bound to perform the promise. .

Q.11 Discuss the modes of performance of contract.

Ans. Modes of the performance of contract – there are following six rules.

1. Where no time is specified and no application is to be made S.46.

2. Time and place of performance where time is specified but no application is to be

made Sec 47.

3. When performance to be made on certain day at proper time and place.

4. Where no place is fixed and no application is to be made for performance.

5. Performance to be made in manner or at time prescribed or sanctioned by the

promise.

(6) Where no time is specified and no application is to be made Sec 46 – says that “Where by

the contract a promisor is to perform his promise without application by the promise and no

time for performance is specified the engagement must be performed within a reasonable

time.”

(7) Time and place of performance where time is specified but no application is to be made

– Sec 47 - Provides “when a promise is to be performed on a certain day, and the promisor

has undertaken to perform it without application by the promise, the promisor may perform it at

any time during the usual hours of business on such day and at the place at which the promise

ought to be performed”

Example – A promises to deliver goods at B‟s warehouse on the Ist January. On that day A

bring to B‟s ware house but after the usual hour from closing it and they are not received. A ha

not performed his promise.

(8) When performance to be made on certain day at proper time and place - Duty of promise

to apply for performance Sec 48 of the Act, “When a promise is to be performed on a certain

day, and the promisor has not undertaken to perform it without application by the promise, it is


26

the duty of the promise to apply for performance at a proper place and within the usual hours

of business”.

(9) Where no place is fixed and no application is to be made for performance – Duty of

Promisor to apply to promise to appoint place Sec 49 “ When a promise is to be performed

without application by the Promisee and no place is fixed for the performance of it, it is the duty

of the Promisor to apply to, the Promisee to appoint a reasonable place for the performance of

the promise and to perform it at such place. Example :- P undertakes to delivers one thousand

maunds of jute to M on fixed day. P must apply to B to appoint a reasonable place for the

Purpose of receiving it, and must deliver it to him at such place.

(10) Performance to be made in Manner or at time Prescribed or Sanctioned by the

Promisee Sec-50 – “The Promisor is bound to perform the Promise in any manner, or at any

time which the promise prescribes or Sanctions. Example:- A owes B 2000 rupees B accepts

some of A‟s goods in deduction of the debt. The delivery of the goods operates a part –

payment.

Case

1. Branch Manager, State Bank of Mysore V.K. Amarnath, AIR 2003 Kant 202.

2. Jai Durga Finvest Pvt. Ltd V. State of Haryana AIR 2004 S.C. 1484

3. Ceean International Private Limited v. Ashok Surana, AIR 2003 Cat. 263

4. F.C.I v. Anupama Warehousing Establishment, AIR 2004 Ker. 137

5. R.K Saxena v. Delhi Development Authority AIR 2002 S.C 234

Q.12 What are the various modes of discharge of a contract

Ans.(1)Discharge by Performance – Each party to a contract is bound to perform his part of the

obligation. After the parties have made due performance of the contract. Their liability

under the contract comes to an end. In such a case, the contract is said to be discharged

by performance. Varous rules of performance of the contract have been discussed.

(2) Discharge by Breach of contract – Thus, insolvency of a party to a contract discharges

the contract. A party is released from performing his part of the contract by law e.g. an

insolvent from paying his debts, a person whose performance of a transaction is declared

by law to be illegal is also similarly excused (Sec.37)

(3) Discharge by refusing tender of performance – Where a Promisor has made an offer of


27

performance to the Promisee, and the offer has not been accepted, the promisor is not

responsible for non-performance, nor does he thereby lose his rights under the

contract (Sec 38)

(4) Discharge by Refusal of a Party to perform promise wholly or discharge by breach –

(Sec 39)- When a party to a contract has refused to perform, or disabled himself from

performing his promise in its entirety – the promisee may put an end to the contract,

unless he has signified (by words or conduct), his acquiescence in its continuance. Sec 39

Forms of discharge by breach –

(f) By renunciation of liability before performance is due. There are two limitations to this

(1) it must relate to the whole performance,

(3) It must be treated as a discharge (Sec.39)

(g) By impossibility created by one party before performance is due.

(h) By renunciation in the course of performance. e.g. where a purchaser of 100. Bales, after

accepting delivery of 50 bales, refuses to accept the remaining 50, the seller is discharged and

can sue for damages.

(i) By impossibility created by one party in the course of performance. e.g. where a party puts it

out of his power to continue performance of his promise.

(j) By failure of performance, which may be of the whole of the promise or of a part of it, e.g. in

case of delivery and payment by instalments.

(5) Discharge by the Act to be performed under the contract becoming impossible or unlawful

(Sec 56)

(6) Discharge by Agreement and Novation (Sec 62)

Deals with the effect of rescission or alteration of a contract. It runs thus if the

parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the

original contract need not be performed.

For examples –(a)

(c) A owes money to B under a contract. It is agreed between A, B and C, that B shall

thenceforth accept C as his debtor. Instead of A, the old debt of A to B is at an end, and a

new debt from C to B has been contracted.


28

Doctrine of Novation – The term novation has been thus defined by the house of lords –

That, there being a contract in existence. Some new contract is substituted for it either

between the same parties or between different parties, the consideration being mutually the

discharge of the old contract” In India, there is novatio when the parties are changed or the

nature of the obligation is changed.

Forms of novation – The parties to a contract may substitute new terms for the old ones, as

indicated by illustration (a) In the former case, there is a substitution of new terms for the old

ones while the parties remain the same . In the later case, a new party is substituted for old

one. In both the cases, the old debt is at an end, and a new one takes its place, the old

contract is replaced by a new contract.

or

(d) It may be agreed between the original promisor, the original promise and a third party that

the promise will look to the third party, instead of the original promisor, for the performance

of the contract as in illustration.

Effect of Novation – In cases where there is a novation, the old contract is completely,

extinguished, and a suit based on it is not maintainable. (Reference Book)

(5) Discharge by waiver of contract – Sec 63 a contract may also be discharged by way of

waiver, i.e. by the promisee dispensing with or remitting the performance of the promise made

to him. Sec 63 provides that every promisee may –

(1) Dispense with the performance of the promise made to him

(2) Remit wholly or in part.

(3) Extend the time for such performance.

(4) Accept, instead at it, any satisfaction which he thinks fit.

For examples – (a) A promises to paint a picture for B, B, after wards forbids him to do so, A

is no longer bound to perform the promise. .

Q.13 What is Contingent contract ?

Ans. Section 31, a contingent contract is a contract to do or not to do something, if some

event, collateral to such contract, does not happen. When the contract is dependent or

conditional upon the happening or non-happening of a certain future event, the contract is

contingent. For example, A contracts to pay B Rs.10,000 if B‟s house is burnt, this is a


29

contingent contract.1 The payment of the amount is contingent on the happening of a

collateral event i.e., the burning of the house. All contracts of insurance or indemnity aim at

payment of money only after a certain event happens, or the loss is caused, and therefore,

they are contingent contracts. A wagering agreement is also a contingent contract, but that

type of contingent contract has been specifically declared to be void by section 30.

A distinction is to be drawn between a contract under which a present obligation is

created but performance is postponed to a future date and a contract under which there is no

present obligation at all and the obligation is to arise by reason of some condition being

complied with or some contingency arising in future. In Harbaksh Singh Gill v. Ram Ratan,

AIR 1988 the vendor agreed to sell his half share in the property in dispute, but the sale deed

was to be executed after a month of the partition of the property and separation of his share.

The vendor undertook to get his share separated but failed to get that done. It was held that

the contract was not a contingent one and the same was, therefore, not frustrated by the

vendor‟s own wrong or failure to get his share separated. The vendee was held entitled to

obtain an injunction restraining the vendor from transferring the property to somebody else.

When the performance of the contract is not dependent on the happening of

some event collateral to the contract, it is an absolute contract and it must be performed

unconditionally. In Bashir Ahmed v. Govt. of Andhra Pradesh, AIR 1970 3, C.1089.

Enforcement of contingent contract

The following are the rules governing the enforcement of the various kinds of

contingent contracts :

1. Contracts contingent on an event happening

Contingent contracts to do or not to do anything if an uncertain future event

happens cannot be enforced by law unless and until that event has happened.

If the event becomes impossible, such contracts become void.7

(a) A makes a contract with B to buy B‟s house if A survives C. This contract cannot be

enforced by law unless and until C dies in A‟s life-time.


30

(b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse

has been offered refuses to buy him : The contract cannot be enforced by law unless and

until C refuses to buy the horse.

2. Contracts contingent on the event not happening

Contingent contracts to do or not to do anything if an uncertain future event does

not happen, can be enforced when the happening of that event becomes impossible, and

not before. Sec 33.

For example, A agrees to pay B a sum of money if a certain ship does not return. This

ship is sunk. The contract can be enforced when the ship sinks.10

3. Contract contingent on the future conduct of a living person

If the future event on which a contract is contingent is the way in which a person will

act at an unspecified time, the event shall be considered to become impossible when such

person does anything which renders impossible that he should so act within any definite

time, or otherwise than under future contingencies. Sec 34

A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B

to C must now be considered impossible although it is possible that D may die, and that C

may afterwards marry B.12 Sec 34

4. Contracts contingent on happening of specified event within fixed time

Contingent contracts to do or not to do anything, if a specified uncertain event

happens within a fixed time, become void if, at the expiration of the time fixed, such event

has not happened, or if, before the time fixed, such event becomes impossible. Sec 35

A promises to pay B a sum of money if a certain ship returns within a year. The

contract may be enforced if the ship returns within the year, and becomes void if the ship is

burnt within the year. Sec 35

5. Contracts contingent on not happening of specified event within a fixed time

Contingent contracts to do or not to do anything, if a specified uncertain event does not

happens within a fixed time, may be enforced by law when the time fixed has expired and

such event has not happened or before the time fixed has expired, if it becomes certain that

such event will not happen.


31

For example, A promises to pay B a sum of money if a certain ship does not return

within a year. The contract may be enforced if the ship does not return within the year, or

is burnt within the year. Sec 35

6. Agreements contingent on impossible event

Contingent agreements to do or not to do anything, if an impossible event happens, 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. Sec 36

(a) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The

agreement is void.

(b) A agrees to pay B, 1000 rupees if B will marry A‟s daughter, C. C was dead at the time of

the agreement. The agreement is void.

Q.14 What is Quantum Meruit ?

Ans. Ordinarily, if a person, having agreed to do some work or render some services, has done

only a part of what he was required to do, he cannot claim anything for what he has done.

When a person agrees to complete some work for a lump sum, non-completion of the work

does not entitle him to any remuneration even for the part of the work done. But the law

recognizes an important exception to this rule by way of an action for ‘Quantum Meruit’.

Under this action, if A and B have entered into a contract, and A, who has already

performed a part of the contract is then prevented by B from performing the rest of his

obligation under the contract, A can recover from B reasonable remuneration for whatever

he has already done. Appleby v. Myers, 1867.

It may be noted that this action is not an action for compensation for the breach of

contract by the other side. It is an action which is alternative to an action for the breach of

contract. This action in essence is one of restitution, putting the party injured by the

breach of contract in a position in which he would have been, had the contract not been

entered into. It merely entitles the injured party to be compensated for whatever work he

may have already done, or whatever expense he may have incurred. In the words of

Alderson, De Birnardy v. Harding (1853) 3.

The nature of this remedy was explained by the Supreme Court in Puran Lal v.

State of U.P. AIR 1971 as under :


32

“In order to avail of the remedy under quantum meruit, the original contract must

have been discharged by the defendant in such a way as to entitle the plaintiff to regard

himself as discharged from any further performance and he must have elected to do so.

The remedy it may be noticed is, however, not available to the party who breaks the

contract even though he may have partially performed part of his obligation. This remedy

by way of quantum meruit is restitutory, that is, it is a recompense for the value of the work

done by the plaintiff in order to restore him to the position which he would have been in if

the contract had never been entered into. In this regard, it is different to a claim for

damages which is a compensatory remedy aimed at placing the injured party, as near as

may be, in the position which he would have been in, had the other party performed the

contract.”

The essentials of an action of quantum meruit are as follows :

1. One of the parties makes a breach of contract, or prevents the performance of it by the

other side.

2. The party injured by the breach of the contract, who has already performed a part of it,

elects to be discharged from further performance of the contract and brings an action for

recompense for the value of the work he has he has already done.

For instance, if A agrees to deliver B 500 bags of wheat and when A has already

delivered 100 bags B refuses to accept any further supply. A can recover from B the value

of wheat which he has already delivered.

In De Bernardy v. Harding, 80 the defendant, who was to erect and let seats to

view the funeral of the Duke of Wellington, appointed the plaintiff as his agent to advertise

and sell tickets for the seats. The plaintiff was to be paid a commission on the tickets sold

by him. The plaintiff incurred some expense in advertising for the tickets but before any

tickets were actually sold by him, authority to sell tickets was wrongfully revoked by the

defendant. It was held that the plaintiff was entitled to recover the expenses already

incurred by him, an action for quantum meruit.

The remedy by way of quantum meruit is not a contractual remedy although in some

cases the remedy is available on the breach of contract by a party to it. The real nature of

the remedy is quasi-contractual. The remedy has, therefore, been held to be available

when the work has been done by the plaintiff under a void agreement. In Cravan-Ellis v.


33

Cannon Ltd.(1936) 2 the plaintiff was appointed managing director of a company and he

was to be paid certain remuneration for his services. The agreement of his appointment

was void because contrary to the requirement of the Articles of Association, he and the

other directors, who had appointed him had failed to take the qualification shares within the

prescribed time limit. The plaintiff, however, continued to render the services to the

company. It was held that though the contract was void and the plaintiff could not claim

anything on that basis, he was still entitled to recover for the services rendered by him on

his claim on the quantum meruit. Greer, L.J. observed83 :

“The obligation to pay reasonable remuneration for the work done when there is no

binding contract between the parties is imposed by the rule of law, and not by an inference

of fact arising from the acceptance of services or goods. It is one of the cases referred to in

books on contracts as obligations arising quasi ex contractu.”

In Associated Cement Co. Ltd. v. Union of India AIR 1998 M.P241 the railway

authority charged excess freight from the appellant on the supposition that cement from

one of the appellant‟s factories is to be carried by a longer route. The goods were, in fact,

carried by a shorter route. The excess fare charged was because of mistake and therefore,

the contract was void ab initio.

It was held that the appellants could claim the excess amount paid by them and the

respondent, i.e. the Railway authorities could retain the freight for carrying the goods to

actual distance on the basis of the application of the doctrine of Quantum Meruit.

Q.15 What is Declaratory Decrees ?

Ans. A person entitled to any legal character or any right as to any property1 may seek a

declaration from a court to that effect so that there are no adverse attack which could

weaken that legal character or title.2 The declaration could be sought under Section 34,

which reads as under –

“ 34. Discretion of court as to declaration of status or right. – Any person

entitled to any legal character; or to any right as to any property, may institute a suit

against any person denying, or interested to deny, his title to such character or right,

and the court may in its discretion make therein a declaration that he is so entitled,

and the plaintiff need not in such suit ask for any further relief :


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Provided that no court shall make any such declaration where the plaintiff, being

able to seek further relief than a mere declaration of title, omits to do so.

Explanation – A trustee of property is a “person interested to deny” a title adverse

to the title of some one who is not in existence, and for whom, if in existence, he

would be a trustee.”

Requisites of a declaratory suit (Section 34)

In order to get relief by way of a decree the following essentials are to be proved by

the plaintiff3 :

(1) That at the time of the suit the plaintiff was entitled to –

(i) Any legal character ;

(ii) To any right as to any property

What has to be proved is that the plaintiff was entitled to either the legal character, or to

any right as to any property and either of them exclusively can be the basis of the suit.4

A declaration under Section 34 can not be sought for a declaration regarding the

subsistence of a contract between the parties as the same neither relates to any legal

character, nor any right to property.5

(2) The suit can be instituted against any person denying or interested in denying the

plaintiffs right to any legal character, or to any right as to any property.

A trustee of property is a “person interested to deny” a title adverse to the title of

some one who is not in existence, and for whom, if in existence, he would be a trustee.6

The above mentioned provision may be explained through the following

illustrations7 :

(a) A is lawfully in possession of certain land. The inhabitants of a neighbouring village claim a

right of way across the land. A may sue for a declaration that they are not entitled to the

right so claimed.

Plaintiff to prove his title to property for declaration and consequential relief

In S. Madasamy v. A.M. Arjuna Raja, AIR 2000 Mad 465 It has been held that in a suit for

declaration of title and consequential injunction, the burden is on the plaintiff to prove his right

and possession over property. If the plaintiff fails to prove his clear title to property he is not

entitled to such declaration and the consequential injunction.


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If oral and documentary evidence indicates that the defendant had actual possession of

property and had constructed building over property in dispute, the plaintiff can not obtain

declaration etc. unless he proves his right to the possession over property.

Discretion of the Court

The Court has a discretion to make declaration of status or right, claimed under Section 34.

The Court is not bound to grant a declaratory decree in favour of the plaintiff in all cases where

such a suit is validly brought. The court may, in its discretion make a declaration that the

plaintiff is entitled to the same.

In Smt. Suman Mahajan v. Kusum Sandhu, AIR 1999 Delhi 314 In Life Insurance

Corporation of India v. Tufan Mondal,10

In Life Insurance Corporation of India v. Tufan Mondal AIR 1999

Dismissal of the suit without consideration on merit is erroneous

In M/s. Anant Associates v. Nagpur Improvement Trust, AIR 2000 S.C. 3350 dismissal of

the suit without considering the same on merit is bad in law and should be considered again.

In the above mentioned case there was suit for declaration regarding certain property. The

appellant also filed an application for temporary injunction. The trail court not only dismissed

the application for temporary injunction but also dismissed the suit itself. On the date of

dismissal of the suit neither any issues had been framed nor any evidence had been led.

The dismissal of the suit was held to be erroneous and the matter was remitted back to the trial

court for deciding the suit in accordance with law.

Executing court cannot grant consequential relief

If the plaintiff did not claim consequential relief and the suit is decreed accordingly, the

executing court cannot grant the relief which the plaintiff had not claimed at suit level. In State

of M.P. v. Mangilal Sharma,16 the plaintiff claimed a declaration that he was in the service of

the State Government as he had not been informed that the resignation submitted by him had

been granted. The Court granted him a declaration that he continued to be in service. In the

suit for declaration the plaintiff had not claimed either arrears of salary or interest on the

arrears. It was held that the executing court could not add or alter the decree and, therefore,

could not grant arrears of salary and interest thereon to the plaintiff.


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Effect of declaration (Section 35)

According to Section 35, a declaration made under this Chapter is binding only on the parties

to the suit, persons claiming through them respectively, and where any of the parties are

trustees, on the persons for whom, if in existence at the date of the declaration, such parties

would be trustees.

The declaration operates as a bar only between the parties to the suit and their privies. It is

not binding on her persons. The provision may be explained through the following illustration17

:

A a Hindu in a suit to which B, his alleged wife, and her mother, are defendants, seeks a

declaration that his marriage was duly solemnized and an order for the restitution of his

conjugal rights. The Court makes the declaration and order. C, claiming that B is his wife, then

sues A for the recovery of B. The declaration made in the former suit is not binding upon C.

IN SNP Shipping Services Pvt. Ltd. v. World Tanker Carrier Corp.,AIR 2000 Bom.34 it has

been held that by virtue of Section 35 of the Specific Relief Act, declaration given under

Section 34 is binding only between the parties. It is a declaration in personam, and

notinrem.


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Important Questions

Q.1 Discuss in detail, the essentials of a valid contract.

Q.2 Define proposal and acceptance. Explain its legal rules with the help of

decided cases.

Q.3 Define consideration & state the exceptions of the rule “Agreement without

consideration is void”.

Q.4 “Minors are incapable of entering into a valid contract”. Explain the position of

minors in Indian Contract Act with suitable case laws.

Q.5 What do you understand by free consent? Discuss effect of fraud in an

agreement.

Q.6 What do you mean by legality of object and consideration ? Explain public

policy.

Q.7 Explain Quasi – contract. Describe briefly the cases where this theory has

been recognised under the provisions of Indian contract Act 1872.

Q.8 What is doctrine of “frustration of contracts”? Discuss with the help of decided

cases.


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Q.9 What are the various modes of discharge of a contract?

Q.10 What are the rules of measure the damage in case of breach of contract?

Discuss.

Q.11 Discuss various contracts which may be specifically enforced.

Q.12 What are the contracts which cannot be specifically enforced? Explain with illustrations.

Q.13 Mention the various remedies provided in specific Relief Act,1963 ?

Q.14 Write short note on :

a) Contingent contract -

b) Wagering agreement -

c) Doctrine of Quantum Merit -

d) Void agreement -

e) Declaratory decree – -

f) Types of injunctions -

g) Doctrine of privities of contract -

LL.B./IST YEAR

Contract I

Documents

Transcript of Contract I