Indian Contract Act 1872

INDIAN CONTRACT ACT 1872
1 santhi narayanan 10/11/2019

Introduction
 Law of contract – Foundation upon which the
superstructure of modern business is built
 It takes two to do Business – promise made between

parties –agreement - performance follows later
 Breaking of a promise – without incurring liability –

endless complications

Contd -
 Law upon which the entire relationship is built
 Relationship involves appropriate rights and duties of
the contracting parties
 Law of contract lays down legal rules relating to
promises, their formation, performance and
enforcement
 Applicable not only to business community but
others

CONTRACT
 Sec 2(h) – “ An agreement enforceable by law is a
contract”.
 Two elements -
 An Agreement
 Legal obligation ie, a duty enforceable by
law.

Agreement
 Section 2(e) – “Every promise and every set of
promises forming the consideration for each other, is an
agreement.”
 Promise – What is a promise?
 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

Example
 Ram offers to sell his car for Rs 1,00,000 to Shyam.
Shyam accepts this offer. This offer after acceptance
becomes promise and this promise is treated as an
agreement between Ram and Shyam
 Therefore, an agreement consists of an offer by one
party and its acceptance by the other.
 Agreement = Offer + Acceptance of offer

Enforceability of Agreement
 An agreement is said to be enforceable by law if it
creates a legal obligation.
 If an agreement is incapable of creating a duty
enforceable by law, it is not a contract.
 Thus, an agreement is a wider term than contract.

Agreement + Legal obligation
(Enforceability at law) = Contract

Contract Act
 “All contracts are agreement but all agreements are not
contracts”.
 Agreements of moral, religious or social nature
are not contracts
 they are not likely to create a duty enforceable by law
 parties never intend to create a legal obligation.

Contd -
 Ex;
 X invites his friend Y to a dinner and Y accepts the invitation. If
Y fails to turn up for the dinner. Can he take his friend to
Court????
 X cannot go to the court to claim his loss.
 A father promises to pay his son Rs 1000 as pocket

allowance. Later he refuses to pay. Can the son recover
the Amount???
 The son cannot recover as its is a domestic
agreement and there is no intention on the part
of the parties to create legal relations

Case
 Balfour vs Balfour [(1919) 2 K.B. 571]
 A promise by the husband to pay his wife 30 pounds

every month . Later Husband refuses to pay. Wife goes to
court.
 Held: unenforceable as parties never
intended it to be bound by legal obligations.

contd
 In commercial or business agreements an intention
to create legal relations is presumed.
 Thus, an agreement to buy and sell goods intends to
create legal relationship, hence is a contract,
provided other requisites of a valid contract are
present.
 But if the parties have expressly declared their
resolve is not to create a legal obligation, even a
business agreement does not amount to a contract.

Case
 Rose&Frank Co. vs Corruption Bros [1925 AC
445]
 There was an agreement between R company and C
company by means of which the former was
appointed as the agent of the latter. One clause in
the agreement was: ”This agreement is not entered
into….as a formal or legal agreement and shall not
be subject to legal jurisdiction in the law courts.”
 HELD - There was no binding contract as there was no
intention to create legal relationship

Distinction between an agreement and a contract
 Agreement  Contract
◦ Offer and its acceptance ◦ Agreement and its
constitute an agreement enforceability constitute a
◦ An agreement may or may contract
not create a legal ◦ A contract necessarily
obligation create a legal obligation
◦ Every agreement need not ◦ All contracts are
necessarily be a contract necessarily agreements.
◦ Agreement is not
concluded or binding ◦ Contract is concluded and
contract binding on the concerned
parties

Classification of Contract
Enforceability Method of Extent of Obligation to

Formation performance perform
Valid
Formal Executed Unilateral
Voidable Executory
Simple Bilateral
Void
unenforceable
Express Implied Quasi Standard Contingent
Illegal Form

Valid Contract
Essentials

Essential elements of a valid
contract
 Proper offer and its proper acceptance
 Intention to create legal relationship
 Free Consent
 Capacity to contract
 Lawful consideration
 Lawful object
 Agreement not expressly declared void
 Certainty of meaning
 Possibility of performance
 Legal formalities

Offer and acceptance
 OFFER
 An offer is the starting point in the making of an
agreement.
 An offer is also called ‘proposal’
 Sec 2(a) – “ A person is said to have made the
proposal when he signifies to another his willingness
to do or to abstain from doing anything with a view
to obtaining the assent of that offer to such act or
abstinence.”

OFFER
 An offer involves the following essential elements;
 It must be made by one person to another person
 It must be an expression of readiness or willingness to do
(i.e., a positive act) or to abstain from doing something (i.e.,
a negative act)
 It must be made with a view to obtain the consent of that
other person to proposed Act or abstinence

Contd
 Offeror – The person making the proposal is called the
‘offeror’ or ‘proposer’.
 Offeree – The person to whom the proposal is made is
called the ‘offeree’ or the ‘proposee’.

Types of offer
General offer – When the offer is made to the world

at large
Specific offer – When the offer is made to a definite

person
Implied offer – An offer may be implied from the

conduct of the parties or the circumstances of the
case.

Cases
 General offer
 Carlil vs Carbolic Smoke ball Co (1893) 1 QB 258
 Harbhajan lal vs. Harcharan lal (AIR All 539)

Contd-
 Intention to create legal relationship
 An offer must be such that when it is accepted it will create a
legal relationship
 Certain and unambiguous terms

 If the terms of the offer are vague or indefinite, its acceptance
cannot create any contractual relationship.

Legal rules as to offer
Certain and Intention to
Different from an
unambiguous create legal
invitation to offer
terms relationship
No term of non-
Proper compliance of Communication
communication which amount to of special terms
acceptance
Different from a
mere declaration
of an intention

Contd -
 Different from a mere declaration of intention
 Mere declaration of intention indicates that
an offer will be made or invited in the future
 A declaration of intention by a person does

not give right of action to another.

Case
 Harrison vs Nickerson
 An auctioneer advertised in a newspaper that a sale of office
furniture would be held. A broker came from a distant place to
attend that auction, but all the furniture was withdrawn. The
broker thereupon sued the auctioneer for his loss of time and
expenses.
 Held - A declaration of intention to do a thing did not
create a binding contract with those who acted upon
it, so that the broker could not recover.

Contd -
 Different from an invitation to offer
 In an invitation to offer the person making an invitation invites
others to make an offer to him
 It is prelude to an offer inviting negotiations or
preliminary discussions
 Case –
 Pharmaceutical Society of Great Britian vs Boots cash
chemists Ltd (1953) 1 QB 401
 Harvey vs facey

Contd-
 Offer must be communicated
 An offer must be communicated to the person to whom
it is made.
 An offer is complete only when it is communicated to the
offeree
 Acceptance is not possible unless offer is brought to the
knowledge of the offeree. i.e., One can accept the offer
only when he knows about it.
 Acceptance in ignorance of offer confers no right. i.e., An
offer accepted without its knowledge does not
confer any legal rights on the acceptor.
 Case: Lalman Shukla vs. Gauri Dutt
Contd -
 No term of non-compliance of which amounts to
acceptance
 The offer must not contain a term, the non-compliance of
which amount to acceptance
 Ex: A offers by post to sell his horse to B for Rs 2000. He
writes, “ If you do not reply, I shall assume you have accepted
the offer.” There would be no contract even if B does not
reply

Contd
 While making the offer, the offeror cannot say that if the
offer is not accepted before a certain date, it will be
presumed to have been accepted
 Communication of special terms or standard terms
of contract
 Special terms of the offer must also be communicated along
with the offer.
 If the special terms of the offer are not communicated, the
offeree will not be bound by those terms.

Acceptance
 Acceptance means giving consent to the offer.
 It is an expression by the offeree of his willingness to
be bound by the terms of the offer.
 Sec 2(b) – “ A proposal is said to be accepted when
the person to whom the proposal is made signifies his
assent thereto. A proposal when accepted becomes a
promise.”
 Acceptance is the consent given to offer.

Contd-
 Who can accept
 In case of a specific offer –
 To be accepted by that definite person or that
particular group of persons to whom it has been
made and non else.
 In case of general offer –
 An offer made to the world at large or public in
general can be accepted by any person having the
knowledge of the offer by fulfilling the terms of
the offer.

Contd -
 How to make acceptance –
 Express acceptance –
 An express acceptance is one in which is made by words
spoken or written
 Implied acceptance –
 An implied acceptance is one which is made otherwise
than in words.
 It is inferred from the conduct of the parties or the
circumstances of a particular case

Legal rules of valid acceptance
 Absolute and unqualified

 Manner
 Communication
 By whom
 To whom
 Before the lapse of the offer

Communication of offer and
acceptance
 Must be complete so as to bind the concerned parties
because as soon as the communication is complete the
parties loose the right of withdrawal or revocation.
 (a) Communication of offer – It is complete when it comes of
the knowledge of the person to whom it is made.

Contd -
 Communication of acceptance –
 As against the proposer –
When it is put in a course of transmission
to him, so as to be out of the power of the
acceptor.
 As against the acceptor
When it comes to the knowledge of the
proposer.

Revocation of offer and acceptance
 Taking back, withdrawal (sec 5)
 Time for revocation of proposal – A proposal may be
revoked at any time before the communication of its
acceptance is complete as against the proposer, but not
afterwards.

Contd -
 Time for revocation of acceptance – An acceptance may
be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but not
afterwards.

Communication of Offer, Acceptance and
Revocation
1.Communication of Offer
An offer is said to have been made when it
comes to knowledge of the other person for
whom it was intended.
2.Communication of Acceptance
For Acceptance two steps required: (i) Offeree
transmits his acceptance and (ii) Message
reaches the Offeror.
Brogden Vs Metropolitan railways Co.
i. Communication of acceptance from offeree is
binding upon the Offeror as soon as the latter of
acceptance is posted so as to be beyond the
Offeree’s control.
ii. Communication of acceptance from offeree is
binding upon the offeree himself only when it
comes to the knowledge of the Offeror.
39
e.g. Mr. X sends a latter of offer to Y on August 5 which
may reach Y on August 10. Y post his latter of
acceptance on August 15 which may comes to
knowledge of X on August 20.
Offer said to be made on = August 10
Offer said to be accepted for Y on = August 15
Offer said to be accepted for X on = August 20
Position of time gap between August 15 to August 20 =
This time is available for Y to withdraw his acceptance.
40
3.Communication for Revocation
Sec 5 provide rule about revocation of offer and
acceptance. It states:
“A proposal may be revoked at any time before the
communication of its acceptance is complete from
acceptor as against the proposer, but not afterward.”
“An acceptance may be revoked at any time before the
communication of the acceptance is complete as against
the acceptor ,but not afterward.”
41
X makes an offer to Y on 5th May, it reach to Y on 10th May.
Y posted of his acceptance to X on 15th May. It reaches to
X on 20th May.
X send withdrawal of his offer on 9th May, it reaches to Y

on 14th May.
-It will come to effect on 14th May only, even though X
send on 9th May. It is called revocation of offer.
Y send withdrawal of his acceptance on 17th May , it

reaches to X on 19th May.
-It will come to effect on 19th May only, not on 17th May.
It is called revocation of Acceptance.
42
1. X makes an offer to Y on 1th May, it reach to Y on 5th
June. When Offer is completed?
-It is competed only on 5th June.
2. Y posted of his acceptance to X on 10th June. It reaches

to X on 30th June. When acceptance is completed?
- It is completed only on 30th June.
3. X want to withdraw his offer, which is the last date?

-It must be before 10th June, not thereafter.
4. Y want to cancel his acceptance, which is the last date

for cancellation?
-It must be before 30th June, not thereafter.
43
 Loss of letter of Acceptance in the Postal transit
 Acceptance is complete as against Offeror as soon as
the latter of acceptance is posted. The contract is
completed even if the latter of acceptance lost in the
post.
 But it is important that the latter of acceptance is
correctly addressed, sufficiently stamped and posted.
 Contract over telephone or telex or oral
communication
 The offeree must make sure that his acceptance is
properly received i.e. heard and understood by the
Offeror.
44
When does an offer come to an end?
An offer come to end by Two Revocation or laps and

Rejection of Offer.
A. Revocation or laps or Withdrawal of Offer (Sec.6)

1.By communication of notice of revocation by Offeror
before its acceptance is completed against him
2. By laps of time
- X offer Y to sell some goods on 1st May and agreed
to give him three days time to accept. Y accepted
offer on 5th May.
3. By non-fulfillment of condition by offeree

- X offer to sell some goods to Y, if Y give full amount
before certain date.
45
4.By death of Offeror
- If offeree accept the offer in ignorance of the
death of Offeror, the acceptance is valid.
5. If counter offer is made
6.If Offer is not accepted according to prescribed

mode
7.If law is change
B. Rejection of Offer by Offeree

1. Express Rejection i.e. by words written or spoken
2.Implied rejection
-when offeree make counter offer
-When offeree make conditional acceptance
-Not following prescribed time
46
CAPACITY TO CONTRACT

Minor
 Person domiciled in India, who is under 18 years of age.
 Law protects minor’s rights because they are not mature
and may not possess the capacity to judge what is good
or what is bad

Position of minor’s agreement
 Validity – An agreement with a minor is void-ab-intio

 Case – Mohiri Bibee vs Dharmdas Ghosh

Position of persons of unsound
mind
 Who is a person of unsound mind
 Sec 12 - A person is said to be of sound mind for the purpose
of making a contract, if at the time when he makes it, he is
capable –
 (a) to understand the terms of the contract.
 (b) to form a rational judgment as to its effect upon his interests
 Ex ; idiots, lunatic, drunken person

Position of agreements with
persons of unsound mind
 Persons of unsound mind  Capacity to contract
 1. Lunatic
 He cannot enter into any
 (a) while he is of unsound contract. Any agreement
mind entered into by him during
this period is altogether void
and he cannot be held liable
thereon.

Contd-
 b) While he is of sound mind  He can enter into a valid
contract and he is liable for
such contract.
 He cannot enter into any

 (II) Idiots
contract. Any agreement
entered by him is void and
he is liable thereon.

Contd
 Drunken person  He cannot contract while
such delirium or
drunkness lasts

Persons disqualified by law
 Alien enemies – cannot enter into any contracts
 Foreign sovereigns and ambassadors – can enter
into contracts
 enforce those contracts in our courts
 but cannot be sued in our courts without the sanction of the central
government
 Convicts – Cannot enter into any contract during
the period of the sentence

Contd -
 Company –
 Contractual capacity is determined by the ‘object clause’ of
the memorandum of association.
 Any act done in excess of the power given is ultra vires [(i.e)
beyond the power] and hence void.
 Insolvent –
 Cannot sue and be sued.
 Cannot enter into contracts relating to his property.
 When the insolvent is discharged the disqualification is
removed.

Consideration
 Without which no single promise is enforceable
 A technical term used in the sense of quid pro quo
(i.e., something in return).
 When a party promises to do something he must get
‘something in return’. This something is defined as
consideration.

Section 2(d)
 “When at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does
or abstains from doing, or promises to do or abstain from
doing something, such act or abstinence or promise is
called a consideration for the promise”.

Contd -
 Ex – X promises to deliver the goods to Y and Y promises

to pay Rs 1000 on delivery. In this case, the consideration
for each of these promises is as under:
 For X’s promise - Y’s promise to pay Rs 1000 on delivery
 For Y’s promise – X’s promise to deliver the goods

Essential elements
 Move at the desire of the promisor – An act constituting
consideration must have been done at the desire or
request of the promisor.
 Case – Durga Prasad vs. Baldeo
 May move from any person – immaterial as to who
furnishes the consideration
 Case – Chinnayya vs. Ramayya

Contd -
 It may be past present or future
 It must be of some value.
 It must be real and not illusory
 Something other than the promisor’s existing obligation
 Case – Ramachandra Chintamana vs. Kala Raju

Stranger to contract
 A stranger to consideration – can sue because the
consideration can be furnished or supplied by any
person whether he is a promisee or not
 A stranger to the contract - cannot sue because of
the absence of the privity of the contract
 Case – Dunlop P tyre Co ltd vs Selfridge&Co Ltd

Contracts without consideration(Exceptions to
general rule, no consideration, no contract )
 Agreements made on account of natural love and

affection
 Promise to compensate for past voluntary service
 Promise to pay a time barred debt
 Completed gift
 Agency

Elements of valid consideration
Move at the desire Move from any Past/present or

of the promisor person future
Something other
Real and not than the
Of some value illusory promisor’s existing
obligation
Lawful

Free consent
 It is essential to the creation of the contract that the
parties are ad idem,ie, they agree upon the same thing in
the same sense at the same time and their consent is free
and real.
 Consent means an act of assenting to an offer.

Sec 13
 “Two or more persons are said to consent when they
agree upon the same thing in the same sense.”
 Effect of absence of consent – When there is no consent
at all, the agreement is void ab-intio, ie, it is not enforceable
at the option of either party.

Free consent
 Sec 14
 Consent is said to be free when it is not caused by (a)
coercion (b)undue influence (c)fraud (d)misrepresentation or
(e) mistake
 No free consent – contract is usually voidable

Contd-
Free
Consent
Undue Misrepres
Coercion Fraud Mistake
influence entation

Coercion
 Sec 15
 A contract is said to be caused by coercion if it is obtained by
 (a) committing any act which is forbidden by the Indian Penal Code
 (b) threatening to commit any act which is forbidden by the Indian
Penal Code
 (c) Unlawful detaining of any property
 (d) threatening to detain any property

 i. A has two cars, one blue and other red. He wants
to sell his blue car. B who knows of only A’s red car,
offer to purchase A’s car for Rs. 20000. A accept the
offer thinking that it is for his blue car. This is no
consent because both the parties are not
understanding the same things in the same sense.
 ii. If B goes to A and on the point of pistol asks A to

sell his red car for sum of Rs. 20000 to him, there is
consent because both are understanding that red car
is the subject matter of the consent, but the consent
is not free because it has been obtained by Coercion.

Case
 Case 1
 Ranganayakam vs Alwar Shetty, (1889) 13 Mad 214
 The relatives of a young widow threatened her that they
would not allow her to cremate the dead body of her
husband unless she consented to the adoption of a boy as
her son.
 Held: The adoption is not binding on her on account of
coercion

Case
 Muttiah Chettiar vs. Koruppen Chetty
 (1927) 50 Mad 786
 A person secured a release from liabilities from his
principal by refusing to hand over the books of account.
The release deed was held to be voidable of the option of
the principal.
 Effect of coercion: Contract is voidable at the option of

the party whose consent has been caused by coercion.

Undue influence
 Dominating the will of the other person to obtain an unfair
advantage over the other
 Sometimes the parties to the agreement are related in such a
way that one of them is able to dominate the will of the other.
 It creates a mental or moral fear created by coercion.
Consequently the party on whom undue influence is exercised
is indirectly compelled to enter into the contract

 Ex: A, having money advanced money to his son B during
his minority, upon B’s coming of age, obtains by parental
influence, a bond from B for a greater amount than the
sum due in respect of the advance. A employs undue
influence

Burden of Proof
 The person who claim undue influence has to prove
that it was the cause of contract. He has to prove
that pre-existing relationship, the position of
domination, and the misuse of the position.
74
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 his agent, with intent to
deceive another party thereto of his agent, or to induce him to enter
into the contract:-
 (1) the suggestion, as a fact, of that which is not true, by one who does
not believe it to be true;
 (2) the active concealment of a fact by one having knowledge or belief of
the fact;
 (3) a promise made without any intention of performing it
 (4) any other act fitted to deceive;
 (5) any such act or omission as the law specially declares to be
fraudulent.

Contd-
 Explanation.- Mere silence as to facts likely to
affect the willingness of a person to enter into
a contract is not fraud, unless 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 unless his silence
is, in itself, equivalent to speech.

Illustrations
 a) A sells, by auction, to B, a horse which A knows to be

unsound. A says nothing to B about the horse's
unsoundness. This is not fraud in A.
 (b) B is A's daughter and has just come of age. Here, the
relation between the parties would make it A's duty to
tell B if the horse, is unsound.

Contd-
 (c) B says to A - "If you do not deny it, I shall assume that
the horse is sound." A says nothing. Here, A's silence is
equivalent to speech.
 (d) A and B, being traders, enter upon a contract. A has
private information of a change in prices which would
affect B's willingness to proceed with the contract. A is
not bound to inform B.

Effect
 Suit for recession
 Suit for damages for fraud
 Right of recession lost if—

 Affirmation of the contract even after becoming aware of
the fraud

Misrepresentation
 A false representation of fact made innocently or non-
disclosure of a material fact without the intention to
deceive the other party
 Aggrieved party can avoid or rescind the contract

Contd-
 Ex: A tells B, without checking records, that in his factory
1000 tons of indigo is manufactured every month. A
believes his assessment to be true. The actual production
is found to be only 830 tons. A is guilty of
misrepresentation.
 Effect: Right to rescind the contract

MISTAKE
 Erroneous belief about something
 Mistake of law
 Mistake of fact


Mistake
Mistake Mistake
of law of fact
Mistake of
the law of Unilateral
the country mistake
Mistake of Bilateral
foreign law mistake
Mistake of Law
 Since ignorance of law is not persumed technically there
is no question of such a mistake except if such a law is
not in force in India, in such a case,it would be a mistake
of fact.

Mistake of of fact
 As to identity: A person who is supposed to be party to a
contract but is actually a mistaken identity, resulting in
void contract.
 As to subject matter: The subject matter ceases to exist
before the contract is made.
 Or what the seller purports to sell,he does not have the
right to
 Parties to contract do not have the same subject matter
in mind
 Parties to the contract are mistaken as to the substance,
nature or quality of subject matter

 Mistake about the nature and content of the promise –
There is confusion about the character of the deed, eg,
one party may think it is a gift deed while the others
think it is a sale of money. If both parties are mistaken, it
is void.

Sec21. Effect of mistakes as to law
 A contract is not voidable because it was caused by a
mistake as to any law in force in India; but a mistake as to
a law not in force in [India] has the same effect as a
mistake of fact.
 Illustration
 A and B make a contract grounded on the erroneous
belief that a particular debt is barred by the Indian Law of
Limitation: the contract is not voidable.

Legality of the object and consideration
 Object and consideration of contract must be lawful,
otherwise the agreement is void
 Consideration or object of contract is unlawful in the
following cases:
 (a) If it is forbidden by law
 (b) If it defeats the provision of any law
 (c) If it is fraudulent
 (d) If the court regards it as immoral or opposed to public
policy

Agreements opposed to the public
policy
 Agreements of trading with the enemy
 Agreement of stifling prosecution
 Agreement in restraint of paternal rights
 Agreement in restraint of personal liberty
 Agreements in restraint of trade

Other essentials
 Certainty of meaning – terms of contract must be
unambiguous
 Possibility of performance – An agreement to do an
impossible act is void
 Legal formalities - Must comply with necessary
formalities like writing, registration and stamping

Quasi contracts

Meaning
 Not a contract at all

 One or the other essentials of a contract are
absent
 An obligation imposed by law upon a person for
the benefit of the other even in the absence of a
contract.
 Based on the principle of equity

Features
 Imposed by law and does not arise from any agreement
 Duty of a party and not the promise of any party is the
basis of such contract
 Right under it is always a right to money
 Right under it is available against specific persons and not
against the whole world

Types of quasi contracts
 Right to recover the price of necessaries supplied
 Right to recover money paid for another person
 Right to recover for non-gratuitous Act
 Responsibility of finder of goods
 Right to recover from a person to whom money is paid
or thing is delivered, by mistake or under coercion

Quantum meruit
 “as much as earned’

 Payment in proportion to the amount of work
done.
 When a person has begun the work and before
he could complete it, the other party terminates
the contract or does something which make it
impossible for the other party to complete the
contract, he can claim for work done under the
contract.

Contd-
 He may also recover the value of the work done where
the further performance of contract becomes impossible.
 The party claiming relief has to establish the following:
 He has been ready and willing to perform the contract.
 He has made a part performance of the contract for which the
remuneration is due.

Cases in which the claim of quantum
meruit can arise
 In case of void agreement or contract that becomes void
 In case of non gratuitous act
 In case of preventing the completion of the contract
 In case of divisible contract
 In case of indivisible contract performed completely but
badly.

Performance of contract

Meaning
 A contract is said to have performed when the parties to
the contract either perform or offer to perform their
respective promises.
 Sec 37 : “The parties to the contract must either perform
or offer to perform their respective promises, unless such
performance is dispensed with or excused under the
provision of the Act, or any other law.”

Contd -
 Types of performance:
 Actual performance
 Attempted performance

Contd -
 Persons who can demand performance
 Promisee
 Legal representatives
 Third party
 Joint promisee
 Persons who must perform
 Promisor
 Promisor’s agent
 Legal representative
 Third party
 Joint promisors

Time and place of performance
 The contract must be performed within a reasonable
period of time.
 The promise must be performed in the manner and at

the time prescribed by the promisee.

Contd-
 Time as essence of contract – It is essential for

the parties to a contract to perform their
respective promises within the specified time.

Discharge of contract

Discharge of a contract
 Discharge of a contract means the termination of
contractual relations between the parties to a contract. A
contract is said to be discharged when the rights and
obligations of the parties under the contract come to an
end.

Modes of discharge of contract
 Discharge by performance
 (a) By actual performance
 (b) By attempted performance
 Discharge by mutual agreement:
 (a) Novation – Substitution of a new contract
 (b) Rescission – Cancellation of contract
 (c) Alteration – Change in terms of contract with mutual consent of
parties.
 (d) Remission – Acceptance by promisee of a lesser fulfillment of the
promise made

Contd -
 (e) Waiver – Intentional relinquishment of a right under the
contract.
 Discharge by operation of law –

 (a) By death of promisor
 (b) By insolvency
 (c) By unauthorized material alteration
 (d) By the identity of the promisor and promisee

Contd -
 Discharge by impossibility of performance
 Effect of initial impossibility
 Effect of supervening impossibility
 Discharge by Lapse of time

Breach of contract

Contd-
 Breaking of contract means a breaking of the obligation
which a contract imposes
 Breach of contract is of two types:
 Actual breach of contract
 Anticipatory breach of contract

Actual breach of contract
 At the time when the performance is due
 During the performance of the contract

Anticipatory breach of contract
 Ex; A undertakes to supply certain goods to B on 1st
January. Before this date, he informs B that he is not going
to supply goods. This is an anticipatory breach of contract
 Anticipatory breach does not necessarily discharge the
contract, unless the promisee (the aggrieved party) so
chooses.

Remedies for breach of Contract
 When a contract is broken the injured party has one or

more of the following remedies.
 Rescission of the contract
 Suit for damages
 Suit for quantum meruit
 Suit for specific performance of the contract
 Suit for injunction

Rescission
 A right not to perform obligation
 The aggrieved party is discharged from all the obligations
under the contract.
 He is entitled to claim compensation for damage which
he has sustained for the non performance of the contract

Suit for damages
 Monetary compensation allowed for the loss suffered by
the aggrieved party due to the breach of the contract.
 Case; Hadley vs Baxendale

Contd -
 Rule ; Where two parties have made a contract
which one of them has broken, the damages which
the other party ought to receive in respect of such
breach of contract should be as such as may fairly
and reasonably be considered either arising
naturally i.e., according to usual course of things,
from such breach of contract itself, or such as may
reasonably be supposed to have been in
contemplation of both the parties, at the time they
made the contract, as the probable result of the
breach of it.

Section 73
 Deals with compensation for loss
 Ordinary damages
 Special damages
 Exemplary damages
 Nominal damages
 Damages for inconvenience and discomfort
 Liquidated damages and penalty
 Stipulation for interest
 Forfeiture of security deposit

Suit for specific performance
 Demanding the court’s direction to the

defaulting party to carry out the promise
according to the terms of the contract

Suit for injunction
 Demanding court’s stay order

 Injunction means an order of the court which
prohibits a person to do a particular act.

Suit for quantum meruit
 Right to claim compensation for the work already done.
 Ex: C an owner of a magazine engaged P to write a book
to be published by installments in his magazine. After a
few installments were published, the publication of the
magazine was stopped. It was held that P could claim
payment for the part already published.

Indemnity and Guarantee
Definition
 It is entered into with the object of protecting the

promisee against anticipated loss.
 A contract by which one party promises to save
the other from loss caused to him by the promisor
himself or by the conduct of any other person, is
called a contract of indemnity. (Sec 124)
Contd -
 A lost his share certificate. He applied to the company for
the issue of a duplicate certificate. The company asked A
to furnish an ‘indemnity bond’ in its favor to protect it
against any claim that may be made by any person on the
original certificate. A, accordingly executed the indemnity
bond. It is a contract of indemnity between A and the
Company. A is the indemnifier and the Company is the
indemnified or indemnity holder.
Contracts of guarantee
 A contract of guarantee is a contract to perform the
promise, or discharge the liability of a third person in
case of his defeat. (Sec 126)
 Features
 Three parties
 Consent of surety
 Obligation arises in case of default
 Types of contract
 Primary liability
 Consideration is necessary for contract of guarantee
Bailment
 It involves change of possession of goods from one

person to another for some specific purpose.
 Bailment is concerned only with goods
 Ex:A delivers a piece of cloth to B a tailor, to be stitched
into a suit. There is a contract of bailment between A and
B.
 Sec 148: Delivery of goods by one person to another

for some purpose upon a contract, that they shall,
when the purpose is accomplished , be returned or
otherwise disposed of according to the directions of
the person delivering them.
Pledge
 Bailment of goods as security for payment of a debt or
performance of a promise is called ‘pledge’.
 A pledge is bailment for security..
 Ex: If A borrows Rs 200 from B and keeps his watch as
security for payment of debt, the bailment of watch is a
pledge.
Agency
 Sec 182: An agent is a person employed to do any act for
another, or to represent another in dealings with a third
person.
 Person for whom such Act is done –Principal
 Agent – connecting link between the principal and third
parties.
Agency
 Two essentials
 Agreement between the principal and agent –
 agency depends on agreement but not necessarily on contract.
 No consideration is necessary to create an agency.
 Intention of the agent to act on behalf of the principal.
Test of agency
 Has that person the capacity to bind the principal
 Can he be made answerable to a third person by bringing him
(the principal) into legal relations with the third person
 can a privity of contract be established between that person
and the principal?
 If yes, he is an agent, otherwise not.

Indian Contract Act 1872

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Indian Contract Act 1872

Încărcat de

Drepturi de autor:

Formate disponibile

INDIAN CONTRACT ACT 1872

1 santhi narayanan 10/11/2019

 It takes two to do Business – promise made between

 Breaking of a promise – without incurring liability –

2 santhi narayanan 10/11/2019

3 santhi narayanan 10/11/2019

4 santhi narayanan 10/11/2019

 Sec 2(b) - When the person to whom the proposal is

5 santhi narayanan 10/11/2019

6 santhi narayanan 10/11/2019

7 santhi narayanan 10/11/2019

8 santhi narayanan 10/11/2019

9 santhi narayanan 10/11/2019

 A father promises to pay his son Rs 1000 as pocket

10 santhi narayanan 10/11/2019

 A promise by the husband to pay his wife 30 pounds

11 santhi narayanan 10/11/2019

12 santhi narayanan 10/11/2019

13 santhi narayanan 10/11/2019

14 santhi narayanan 10/11/2019

Enforceability Method of Extent of Obligation to

15 santhi narayanan 10/11/2019

16 santhi narayanan 10/11/2019

17 santhi narayanan 10/11/2019

18 santhi narayanan 10/11/2019

19 santhi narayanan 10/11/2019

20 santhi narayanan 10/11/2019

General offer – When the offer is made to the world

Specific offer – When the offer is made to a definite

Implied offer – An offer may be implied from the

21 santhi narayanan 10/11/2019

22 santhi narayanan 10/11/2019

 Certain and unambiguous terms

23 santhi narayanan 10/11/2019

24 santhi narayanan 10/11/2019

 A declaration of intention by a person does

25 santhi narayanan 10/11/2019

26 santhi narayanan 10/11/2019

27 santhi narayanan 10/11/2019

29 santhi narayanan 10/11/2019

30 santhi narayanan 10/11/2019

31 santhi narayanan 10/11/2019

32 santhi narayanan 10/11/2019

33 santhi narayanan 10/11/2019

 Absolute and unqualified

34 santhi narayanan 10/11/2019

35 santhi narayanan 10/11/2019

36 santhi narayanan 10/11/2019

37 santhi narayanan 10/11/2019

38 santhi narayanan 10/11/2019

X send withdrawal of his offer on 9th May, it reaches to Y

Y send withdrawal of his acceptance on 17th May , it

2. Y posted of his acceptance to X on 10th June. It reaches

3. X want to withdraw his offer, which is the last date?

4. Y want to cancel his acceptance, which is the last date

An offer come to end by Two Revocation or laps and

A. Revocation or laps or Withdrawal of Offer (Sec.6)

3. By non-fulfillment of condition by offeree

5. If counter offer is made

6.If Offer is not accepted according to prescribed

7.If law is change

B. Rejection of Offer by Offeree

47 santhi narayanan 10/11/2019