Professional Documents
Culture Documents
Law Notes
Law Notes
(b) From the point of view of creation : From the point of view of creation, contracts may be
two types : (i) express contracts, and (ii) implied contracts.
Express Contract : Contracts entered into between the parties by words spoken or written, are
termed as express contracts. For example, if X tells Y on telephone that he offers to sell his
house for Rs.20,000 and Y in reply informs X that he accepts the offer, there is an express
contract.
Implied Contract : Where the offer or acceptance is made not by words, written or spoken,
but by acts and conduct of parties, it is termed as an implied contract. Thus, where X, a coolie,
in uniform takes up the luggage of Y to be carried out of a railway station without being asked
by Y, and Y allows the coolie to do so, the law implied here that Y agreed to pay for the services
of X, and there is an implied contract between X and Y. Similarly, when A takes a seat in a
bus, an implied contract comes into being—a contract according to which A will pay the
prescribed fare to the conductor (i.e., the agent of the bus company) for taking him to his
destination.
(c) From the point of view of extent of execution or classification according to
performance : On the basis of extent to which the contracts have been performed, we may
classify them as (i) executed contract, and (ii) executory contracts.
Executed Contract : An executed contract refers to that contract in which both the parties
have fulfilled their respective obligations. In other words, an executed contract is one where
nothing remains to be done by either party.
Example: X agrees to paint a picture for Y for Rs.20. When X paints the picture and Y pays
the price, it becomes an executed contract.
Sometimes though the contract may appear to be completed at once yet the effects of it may
continue, e.g., when a person buys a bun for a penny and subsequently breaks his tooth due to
a stone in it, he has a right to recover damages from the seller.
Executory Contract : An executory contract refers to that contract in which both the parties
to the contract have yet to perform their respective obligations. In the example
referred to above, the contract is executory, if X has not yet painted the picture and Y has not
paid the price. Similarly, if A agrees to engage M as his servant from the next month, the
contract is executory.
A contract may sometimes be partly executed and partly executory. Thus if Y has paid the price
to X and X has not yet painted the picture, the contract is executed as to Y &executory as to X.
On the basis of execution, the contracts may also be classified as (i) unilateral
contracts, and (ii) bilateral contracts.
Unilateral Contract : A contract is said to be unilateral where one party to a contract has
performed his share of obligation either before or at the time when the contract comes into
existence. It is only the obligation of the other party which remains outstanding at the time of
formation of the contract. Such contracts are also termed as contract with executed
consideration. Thus, a contract of loan, where money has been advanced by the creditor is an
example of unilateral contract, because the creditor has done what he was to do under the
contract, it remains for the debtor to repay the debt.
Bilateral Contract : In a bilateral contract obligations of both the parties are outstanding at
the time of the formation of the contract. They are, executory contracts or contracts with
executory consideration. In other words, in a bilateral contract, there is only a promise for a
promise. For example, where X promises to sell his car to Y after 15 days and Y promises to
pay the price on the delivery of the car, the contract is bilateral as obligations of both the parties
are outstanding at the time of formation on the contract.
It is to be remembered that a contract comes into being on the date on which it is entered into
between the parties. The date of its execution is immaterial for determining the validity of the
contract. In other words, a contract is a contract from the time it is made and not from the time
its performance is due.
(d) From the point of view of form or mode of the contract : There are four kinds of contracts
: formal contracts, contracts under seal or specialty contracts, simple contracts and quasi-
contracts.
Formal Contracts : These are in vogue in England. These have not received recognition by
the Indian Contract Act. Their validity depends upon their form alone. Consideration is not
essential in such contracts. They are required to satisfy certain legal formalities.
Contract under seal or speciality contracts : These contracts are those contracts, the terms
of which have been written down on a paper and are signed, sealed and delivered.
The following contracts must be made under seal, otherwise they will not be valid :
1. Contracts made without consideration.
2. Contracts of lease relating to land for more than three years.
3. Contracts entered into by corporations or companies.
4. Contracts relating to transfer of a British ship or any share therein.
Simple Contracts : Contracts which are not formal are known as simple contracts. They are
also known as ‘parole contracts’. They are made by words, spoken or written. They are to be
valid only when they are supported by consideration.
Quasi-Contracts : Contractual obligations are generally created voluntarily; but there are
some obligations which are not contractual, but which are treated as such by law, that is to say,
there is no contract in fact, but there is one in the contemplation of law. Such contracts are
called quasi-contracts. Thus, if X pays a sum of money to Y believing him to be his creditor,
while as a matter of fact he was not, he is bound to return the money to X on the assumption
that the above sum was given to him by way of loan. The Contract Act has rightly named such
contracts as “certain relations resembling those created by contract.”
Q.7 What do you mean by breach of contract and state various ways of breach of contract.
A breach of contract occurs if any party refuses or fails to perform his part of the contract or
by his act makes it impossible to perform his obligation under the contract. In case of breach,
the aggrieved party (i.e., the party not at fault) is relieved from performing his obligation and
gets a right to proceed against the party at fault.
A contract terminates by breach of contract. Breach of contract may arise in two ways (a)
Anticipatory Breach, and (b) Actual Breach.
Anticipatory Breach of Contract (Sec. 39)-- Anticipatory breach of contract occurs, when a
party repudiates it before the time fixed for performance has arrived or when a party by his
own act disables himself from performing the contract.
Examples
(1) A contracts to marry B. Before the agreed date of marriage he married C. B is entitled to
sue A for breach of promise.
Consequences of Anticipatory Breach
Where a party to a contract refuses to perform his part of the contract before the actual time
arrives the promisee may either: (a) rescind the contract and treat the contract as at an end, and
at once sue for damages, or (b) he may elect not to rescind but to treat the contract operative
and wait for the time of performance and then hold the other party liable for the consequences
of non-performance. In the latter case, the party who has repudiated may still perform if he can.
Thus, from the above discussion it follows that 'anticipatory breach' of contract does not by
itself discharge the contract. The contract is discharged only when the aggrieved party accepts
the repudiation of the contract, i.e., elects to rescind the contract.
Notice that if the repudiation is nor accepted and subsequently an event happens, discharging
the contract legally, the aggrieved party shall lose his right to sue for damages.
Example : A agreed 10 load a cargo of wheal on B' s ship at Odessa by a particular date but
when the ship arrived A refused to load the cargo. B did not accept the refusal and continued
to demand the cargo. Before the last date of loading had expired the Crimean War broke out,
rendering the performance of the contract illegal. Held, the contract was discharged and B
could not sue for damages.
Section 39 of the Contract Act deals with anticipatory breach of contract and provides as “when
a party to 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 works or
conduct, his acquiescence in its continuance”.
Actual Breach of Contract-The actual breach may take place (a) at the time when
performance is due, or (b) during the performance of the contract.
Actual breach of Contract, at the time when performance is due. If a person does not
perform his part of the contract at the stipulated time, he will be liable for its breach.
Example : A seller offers to execute a deed of sale only on payment by the buyer of a sum
higher than is payable under the contract for sale, the vendor shall be liable for the breach.
Time as Essence of Contract--But if the promisor offers to perform his promise subsequently,
the question arises whether it should be accepted, or whether the promisee can refuse such
acceptance and hold the promisor liable for the breach. The answer depends upon whether time
was considered by the parties to be of the essence of the contract or not. Section 55, in this
respect, lays down as follows: intentionally or without intention if the promisor could not
perform on time and when time is the essence of contract, contract becomes voidable at the
option of the promisee.
Breach during the Performance of the Contract. Actual breach of contract also occurs when
during the performance of the contract one party fails or refuses to perform his obligation under
the contract.
Example : A contracted with a Railway Company to supply it certain quantity of railway chairs
at a certain price. The delivery was to be made in installments. After a few instaments had been
supplied, the Railway Company asked A to deliver no more. Held, A could sue for breach of
contract.
Q.8 Define quasi contract and explain the causes deemed as quasi contracts.
A quasi-contract is a kind of contract by which one party is bound to pay money in
consideration of something done or suffered by the other party. Though no contractual relation
exists between the parties, law makes out a contract for them and such a contract is called a
quasi-contract. The basis of quasi-contract is to prevent unjust enrichment or unjust benefit,
i.e., no one should grow rich out of another person’s loss.
CASES DEEMED AS QUASI-CONTRACTS
The Indian Contract Act recognises such types of contracts and section 68-72 deal with such
contracts. They are as follows :
1. Claims for necessaries supplied (Section 68)
If a person incapable of entering into a contract or any one whom he is legally bound to support,
is supplied by another person with necessaries suited to his condition in life, the supplier is
entitled to recover the price from the property of the incapable person.
Example : A supplies to B, a lunatic, with necessaries suitable to his condition in life. A is
entitled to be reimbursed from B’s property.
A contract by a minor is wholly void and unenforceable. He cannot even ratify it on attaining
majority. But section 68 of the Act provides an exception to this rule and makes the estate of
the minor liable for necessaries supplied to him. But supplier has to prove that goods supplied
were reasonable necessary for supporting a person in his position and infant had not already a
sufficient supply of these necessaries.
2. Payment by an interested person (Section 69)
This section provides that a person who is interested in the payment of money which another
is bound by law to pay and who, therefore, pays it, is entitled to be reimbursed by the other.
Example : B holds land in Bengal on a lease granted by A, the Zamindar. The revenue payable
by A to the Government being in arrear, his land is advertised for sale by the
Government. Under the revenue law, the consequence of such sale will be the annulment of
B’s lease. B to prevent the sale and the consequent annulment of his own lease pays to the
Government the sum due from A. A is bound to make good to B the amount so paid.
Examples : (a) A’s goods were wrongfully attached to realise the arrears of Government
revenue due by B. A pays the dues to save his property. He is entitled to recover the amount
from B.
3. Obligation of a person enjoying benefit of non-gratuitous act (Section 70)
Where a person lawfully does anything for another person or delivers, anything to him, not
intending to do so gratuitously, and such other person enjoys the benefit thereof the latter is
bound to make compensation to the former in respect of, or to restore the thing so done or
delivered.
Examples : (a) A, a tradesman leaves goods at B’s house by mistake. B treats the goods as his
own. He is bound to pay A for them.
(b) A saves B’s property from fire. A is not entitled to compensation from B, if the
circumstances show that he intended to act gratuitously.
4. Responsibility of finder of goods (Section 71)
A person who finds goods belonging to another and takes them into his custody, is subject to
the same responsibility as a bailee.
A finder of goods is bound to take as much care of the goods found as a man of ordinary
prudence would take of his own goods under similar circumstances. He cannot appropriate the
goods without taking proper steps to find out the owner and should keep them for a reasonable
time so that the owner may turn up and take them. The finder of the goods is entitled to retain
the goods against the owner until he receives compensation from him. He is also entitled to the
possession of the goods as against the whole world except the true owner.
Example : H picked up a diamond from the floor of F’s shop and handed over to F to keep it
till the owner is found. Inspite of best efforts the true owner could not be reached.
After some time H tendered to F the lawful expenses incurred by him for finding the true owner
and asked him (F) to hand over the diamond to him (H). F refused. It was held that F must
return the diamond to H as H was entitled to retain it against the whole world except the true
owner.
A person to whom money has been paid or anything delivered by mistake or under coercion,
must repay or return it.
Examples : (a) A and B jointly owe 100 rupees to C. A alone pays the amount to C and B not
knowing of this fact, pay 100 rupees over again to C. C is bound to repay the amount to B.
Q.9 Write note on Quantum Merit.
QUANTUM MERUIT
In addition to the above types of quasi-contracts a claim can also be made on the basis of
Quantum Meruit. Where one person has rendered service to another in circumstances which
indicate an understanding between them that it is to be paid for although no particular
remuneration has been fixed the law will infer a promise to pay Quantum Meruit i.e., as much
as the party doing the service has deserved. It covers a case where the party injured by the
breach had at time of breach done part but not all of the work which he is bound to do under
the contract and seeks to be compensated for the value of the work done. For the application
of this doctrine two conditions must be fulfilled :
(1) It is only available if the original contract has been discharged.
(2) The claim must be brought by a party not in default.
The object of allowing a claim on quantum meruit is to recompensate the party or person for
value of work which he has done. Damages are compensatory in nature while quantum meruit
is restitutory. It is but reasonable compensation awarded on implication of a contract to
remunerate. Where a person orders from a wine merchant 12 bottles of whisky and he sends
10 bottles of whiskey and 2 of brandy, and the purchaser accepts them, the purchaser must pay
a reasonable price for the brandy. The claim for quantum meruit arises in the following cases :
1. Where work has been done in pursuance of a contract, which has been discharged
by the default of the defendant.
Examples
(a) P agreed to write a volume on ancient armour to be published in a magazine owned by C.
For this he was to receive $ 100 on completion. When he had completed part, but not the whole,
of his volume, C abandoned the magazine.
P was held entitled to get damages for breach of contract and payment quantum meruit for the
part already completed
SALE OF GOODS ACT 1932
Q.16 Define negotiable instrument (NI) and discuss the characteristics of negotiable
instruments.
According to Section 13 (a) of the Act, "NI means a promissory note, bill of exchange or cheque
payable either to order or to bearer, whether the word "order" or " bearer" appear on the
instrument or not."
In the words of Justice, Willis, "A NI is one, the property in which is acquired by anyone who
takes it bonafide and for value notwithstanding any defects of the title in the person from
whom he took it".
Thus, the term, NI means a written document which creates a right in favour of some person
and which is freely transferable. Although the Act mentions only these three instruments (such
as a promissory note, a bill of exchange and cheque), it does not exclude the possibility of
adding any other instrument which satisfies the following two conditions of negotiability :
(1) the instrument should be freely transferable (by delivery or by endorsement. and delivery)
by the custom of the trade; and
(2) the person who obtains it in good faith and for value should get it free from all defects, and
be entitled to recover the money of the instrument in his own name.
Characteristics of a NI Act
A NI has the following characteristics :
1. Property--The possessor of the NI is presumed to be the owner of the property contained
therein. A NI does not merely give possession of the instrument but right to property also. The
property in a NI can be transferred without any formality. In the case of bearer instrument, the
property passes by mere delivery to the transferee. In the case of an order instrument,
endorsement and delivery are required for the transfer of property.
2. Title--The transferee of a NI is known as 'holder in due course.' A bona fide transferee for
value is not affected by any defect of title on the part of the transferor or of any of the previous
holders of the instrument.
3. Rights--The transferee of the NI can sue in his own name, in case of dishonour
A NI can be transferred any number of times till it is at maturity. The holder of the instrument
need not give notice of transfer to the party liable on the instrument to pay.
4. Presumptions--Certain presumptions apply to all negotiable instruments e.g., a presumption
that consideration has been paid under it. It is not necessary to write in a promissory note the
words ‘for value received’ or similar expressions because the payment of consideration is
presumed. The words are usually included to create additional evidence of consideration.
5. Prompt payment- A NI enables the holder to expect prompt payment because a dishonour
means the ruin of the credit of all persons who are parties to the instrument.
Q.28 What are general obligations for enforcement of Intellectual property rights?
Explain.
General obligations
1. Members shall ensure that enforcement procedures as specified in this Part are available
under their law so as to permit effective action against any act of infringement of intellectual
property rights covered by this Agreement; including expeditious remedies to prevent
infringements and remedies which constitute a deterrent to further infringements. These
procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate
trade and to provide for safeguards against their abuse.
2. Procedures concerning the enforcement of intellectual property rights shall be fair and
equitable. They shall not be unnecessarily complicated or costly, or entail unreasonable
timelimits or unwarranted delays.
3. Decisions on the merits of a case shall preferably be in writing and reasoned. They shall be
made available at least to the parties to the proceeding without undue delay. Decisions on the
merits of a case shall be based only on evidence in respect of which parties were offered the
opportunity to be heard.
4. Parties to a proceeding shall have an opportunity for review by a judicial authority of final
administrative decisions and, subject to jurisdictional provisions in a Member’s law concerning
the importance of a case, of at least the legal aspects of initial judicial decisions on the merits
of a case. However, there shall be no obligation to provide an opportunity for review of
acquittals in criminal cases.
5. It is understood that this Part does not create any obligation to put in place a judicial system
for the enforcement of intellectual property rights distinct from that for the enforcement of law
in general, nor does it affect the capacity of Members to enforce their law in general.
Nothing in this Part creates any obligation with respect to the distribution of resources as
between enforcement of intellectual property rights and the enforcement of law in general.