Nirma University

Institute of Law

2BL231 – Contract I
CE Examination

Submitted By: -
Himanshu Shah (19BBL024)
Section: - C
ANSWER 1 A
No, the contract entered into by Manisha and Tanisha is void.

As per Section 10 of the Act, “all agreements are contracts if they are made by the free
consent of the parties competent to contract, for a lawful consideration and with a lawful
object and are not expressly declared to be void”. In the instant case the Consideration is
not valid which makes the agreement void.

Yes, the consideration in this transaction is invalid and makes an agreement void.

As per Section 23 of The Indian Contract Act,1872, ‘consideration’ or object is unlawful

if it is forbidden by law; or it would if permitted, defeat the provisions of any law or is
fraudulent or involves injury to the person or property of another or is immoral or
opposed to public policy. Every agreement where the object or consideration is unlawful
is void. Thus section 23 has set out the limits to contractual freedom. In the instant case,
Manisha entered into an agreement where the object was unlawful with the intention of
defeating law, therefore, under section 23 the consideration becomes void.

Case laws

Jaffar Ali Meher Vs Budge-Budge Jute Mills Co

where a person, while in insolvent circumstances, transferred his property to one of his
creditors with the object of defrauding his other creditors, it was held that the agreement
was void and the transfer was inoperative. The court observed that although the
consideration of the contract was lawful but the object was unlawful because the purpose
of the parties was to defeat the provisions of the Insolvency Law.

Alexander Vs. Rayson

A leased flat to R at rent of £1200 a year two separate agreements entered into, one for
lease at £450 and other for services connected with flat at £750 A sued R for recovery of
instalment of £750 Held, agreement void as object was to deceive the municipal
authorities A could not recover R entitled to remain in possession of flat for remainder of
term of lease.

Pranballav Saha v. Sm. Tulsibala Dassi,

A lease of a house for running a brothel is not only an act forbidden by statute but also an
immoral act under Section 6(h)(2) of the Transfer of Property Act read with Section 23 of
the Contract Act. It has been held that knowingly letting a house to a prostitute with the
object of her carrying on therein prostitution is immoral and contrary to public policy.

Nandlal Vs. Thomas

A licensed under Excise Act to run liquor shop – Act forbade sale, transfer or sub-lease of
licence or creation of partnership in running of shop – A took B into partnership - Held,
agreement void as it would defeat the policy of the law if unapproved persons could find
their way into working liquor shops.

ANSWER 1 B

No, the deal is not valid. Under section 10 of the Indian Contract Act, it should be legally
considered and legally aimed for a contract to be valid. Section 23 of the Indian Contract
Act now stipulates that a consideration or object of an agreement is legally applicable
unless it is of a type which would defeat any law if allowed. In this event, A & B formed
an unlawful agreement in which A in the court was to act as a security for B in order that
he could be issued on bail, thereby defeating the legislation, so it is unlawful to take
account of this agreement.

ANSWER 2
a. Yes, Shahsaab would succeed in setting aside the contract. Section 11 of the
Indian Contract Act, 1872 states,” 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 sound mind and is
not disqualified from contracting by any law to which he is subject.” In the instant case,
Shahsaab shall not be competent to contract as he is perpetually drunk and can be
regarded as a person of unsound mind.

As per Section 12 of the act states,” 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 of understanding it
and of forming a rational judgement as to its effect upon his interest. A person who is
usually of unsound mind, but occasionally of sound mind, may make a contract when he
is of sound mind. A person who is usually of sound mind, but occasionally of unsound
mind, may not make a contract when he is of unsound mind.”
In the instant case, Shahsaab clearly has the burden of proof, since at the time he is in the
contract he has to prove his failure to understand and make a rational judgment on his
interests, and Mr. X must know his intoxication from the other party.

Also, in the case of Bromley v. Ryan, the court held that, “The mental capacity required
by the law is relative to the particular transaction and may be described as the capacity to
understand the transaction when it is explained.” Therefore, this contract being voidable
at the option of Shahsaab must fulfil the abovementioned criteria.

b. Section 11 also states that a minor does not have the capacity to contract and any
agreement made with a minor is void ab-initio. The same was also observed in the case of
Mohori Bibee v. Dharmodas Ghose. In the instant case, Shahsaab being a minor, is
disqualified from being a party to this contract. Thus, making the contract void.

c. Even if a minor is a major false and contractual, he can argue in favor of a

minority. The contract remains null. He may defend his minority, but in this case the
other party can not demand special performance and also the other party is a minor
Section 33(2)(b) of Specific Relief Act, 1963 states that any agreement void under
section 11 of the Indian Contract Act, the defendant in such case must restore the benefits
received by such contract. The present case obligates the minor party of the same.

ANSWER 3
Amara can institute the suit against Shyama under Section 17 and 18 which specifically
defines about fraud and misrepresentation respectively. And after applying this she could
claim her money back under section 19 when consent to a contract takes place due to
fraud, misrepresentation, undue influence or coercion, the contract is voidable at the
option of the party whose consent was so caused by any of the above.

Amara may sue Shyama in accordance with Sections 17 i.e. Fraud and Section 18 i.e.
Misrepresentation

As per Section 17 Fraud means and includes any of the following act committed by a
party to a contract or with his connivance or by his agent with intent to deceive another
party thereto or his agent or to induce him to enter into the contract.

(i) the suggestion, as to a fact, of that which is not true by one who does not
believe it be true.

(ii) the active concealment of a fact by one, having knowledge or belief of the fact;
 (iii) a promise made without any intention of performing it;

(iv) any other act fitted to deceive; and

(v) any such act or omission as to law specially declared to be fraudulent

In the instant case it was known to Shyama, and Amara still did not realize it. Amara
came to know about the same when the scooter was brought to the mechanic after an
accident, and then she realized that the scooter was made of two scooters that were scarp
and thus unsuitable for driving and could not be repaired.

As per Section 18(1) “Misrepresentation’ does not involve deception but is only an
assertion of something by a person which is not true, though he believes it to be true.
misrepresentation could arise because of innocence of the person making it or because he
lacks sufficient or reasonable ground to make it. A contract which is hit by
misrepresentation can be avoided by the person who has been misled.

In the instant case All the essential elements are met in this case. Shyama depicted her
scoot 2-year-old and was not used, but she discovered that the scoot was 5 years old when
Amara visited the mechanic teo weeks later. Although there is no evidence that Shyama
knew this, she did believe it was true. And so Amara was led to conclude the contract
with this representation.

And after applying this she could claim her money back under section 19 when consent to
a contract takes place due to fraud, misrepresentation, undue influence or coercion, the
contract is voidable at the option of the party whose consent was so caused by any of the
above.

Case Law

Derry v. Peek

The court found this to be an action of deceit, under which the establishment of
misrepresentation alone is not enough to prove liability. In this case, Plaintiff relied on
the prospectus, which may have been misrepresentation, but Defendants reasonably
believed they could glean approval of the board of trade and should not be held liable for
their later failure to do so.

Candler v. Crane, Christmas & Co

it was observed that if there is no contract therefore no duty. Lord Denning dissented,
saying there could be a duty if the accountants knew of the transaction (investing) which
would result from their statement; in this case they were as they were present at the time
the defendant decided to invest. The present case fulfils these requirements.