Formation of Contract

Pooja Agrawat
Assistant Professor
Lovely Professional University
• By Charter of 1661 and 1726 English Law had a deep
impact on the Indian Legal system.
• Whenever the Indian Law was deficient or wanting-
English Law was applied
• In 1774 the Mayor’s court at Calcutta was replaced
by Supreme Court.
• The regulating Act of 1773 and the Charter of 1774
were silent as to the law which the Supreme Court
was to apply to Indians
• It was directed that questions of inheritance and
succession and all matters of contract and dealing
between the parties should be determined
• In case of Mahomedans and Hindus by their
respective laws
• And where only one of the parties should be a
Mahomedan or Hindu by the laws and usages of the
defendant.
• This system continued upto the enactment of the
Indian Contract Act, 1872.
 Section 1
• This Act may be called the Indian Contract Act, 1872.
• Extent, commencement-
• It extends to the whole of India 1[except the State of
Jammu and Kashmir];
• and it shall come into force on the first day of September,
1872.
• Enactments repealed- 2[ * * *] Nothing herein contained
shall affect the provisions of any Statute, Act or Regulation
not hereby expressly repealed, nor any usage or custom or
trade, nor any incident of any contract, not inconsistent
with the provisions of this Act.
 Scope of the Act
• The Contract Act does not profess to be a
complete code dealing with the law relating to
Contracts.
• The Act purports to do no more than define and
amend certain parts of that law.
• Third clause of section 1 saves the provisions of
other statutes, regulations, customs of trade and
incidents of any contract, which are not
inconsistent with the provisions of this act.
• The Act deals with particular contracts in
separate chapters, but the legislature has not
dealt exhaustively with any particular chapter or
sub-division of the law relating to contracts.
• To the extent that this Act deals with a particular
subject, it is exhaustive and it is not permissible
to import the principles of English law
independent of the statutory provisions
contained in this Act.
• Contract Act is not retrospective in nature.
 2. Interpretation-clause

• (a) 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 either to such act or abstinence, he is said to make a proposal;
• (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;
• (c) The person making the proposal is called the "promisor", and
the person accepting the proposal is called "promisee",
• (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 to abstain from doing, something, such
act or abstinence or promise is called a consideration for the
promise;
• (e) Every promise and every set of promises, forming the
consideration for each other, is an agreement;
• (f) Promises which form the consideration or part of the
consideration for each other, are called reciprocal promises;
• (g) An agreement not enforceable by law is said to be void;
• (h) An agreement enforceable by law is a contract;
• (i) An agreement which is enforceable by law at the option of
one or more of the parties thereto, but not at the option of
the other or others, is a voidable contract;
• (j) A contract which ceases to be enforceable by law becomes
void when it ceases to be enforceable.
 Kinds of Contract
• From the point of view of enforceability
1. Valid Contract: 2(h) An agreement enforceable by law
is a contract.
2. Voidable Contract: 2(i) An agreement which is
enforceable by law at the option of one or more of
the parties thereto, but not at the option of the other
or others, is a voidable contract
3. Void Agreement: 2(g) An agreement not enforceable
by law is said to be void
2(j) A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable
4. Unenforceable Contract: It is one which is valid in
itself, but is not capable of being enforced in a court
of law because of some technical defect such as
absence of writing, registration, etc, or time barred
by the law of limitation.
5. Illegal or unlawful Agreement: An illegal agreement is
narrower in scope than a void agreement. All illegal
agreements are void but all void agreements are not
necessary illegal.
Eg. An agreement with a minor is void as against him
but not illegal.
 From the point of view of Mode of Creation

1. Express Contract: Where both the offer and acceptance

constituting an agreement are made in words spoken or
written, it is an express contract.
2. Implied/Inferred Contract: Where the offer and
acceptance are made otherwise than in words i.e. by acts
and conduct of the parties (e.g. eating at a restaurant), it
is an implied Contract.
Section 9: Promises, express and implied.—
In so far as the proposal or acceptance of any promise is
made in words, the promise is said to be express. In so far
as such proposal or acceptance is made otherwise than in
words, the promise is said to be implied.
3. Constructive or Quasi Contract- Such a
contract does not arise by virtue of any
agreement between the parties but the law
infers or recognizes a contract under certain
special circumstances.
Eg- Liability of a person to whom money is
paid under mistake to repay it back. (Sec 68-
72)
 From the point of view of Extent of Execution

1. Executed Contract: When a bookseller sells a

book on cash payment.
2. Executory Contract: A agrees to coach B, a
pre-medical student, from first day of the
next month and B promises to pay A Rs. 500
per month.
• Section 2(a) of Indian contract act defines
offer as
• when one person signifies to another his
willingness to do or to abstain from doing
something
• with a view to obtaining the assent of other
• such act or abstinence is said as proposal.
• Offer has been used in English Law and the
term proposal under the Indian Law.
 Essential Conditions of a Valid offer( Proposal)

1. Expression of willingness to do/Abstain from doing to

obtain other’s assent
Ingredients:
i. One person signifies to another
ii. His willingness to do or to abstain from doing anything
iii. With a view to obtaining the assent of that other.

• An offer must be made to obtain the assent of the other.

• Casual inquiry is not a proposal
• When a person says he may buy a particular thing for a
certain amount, it is not an offer.
2. Intention to contract
Courts generally presume intention to enter into legal
relation, unless the offer itself appears to be too trivial.
• No provision in Indian Contract Act regarding legal intention
• The intention of the parties is to be ascertained from the
terms of the agreement and the surrounding
circumstances.
• In social/family agreements- parties do not intend legal
consequences.
• In business agreements it is usual that the parties intend
legal consequences to follow.
 Balfour v. Balfour (1919)
• Balfour v Balfour [1919]
• Appellant- Mr. Balfour
• Respondent/Plaintiff -Mrs. Balfour
• Court- Court of Appeal of England and Wales
• Country - United Kingdom
• Area of law - Enforcement of promises, Family
arrangements
• Mr. Balfour was a civil engineer, and worked for the Government as
the Director of Irrigation in Ceylon (now Sri Lanka).
• Mrs. Balfour was living with him.
• In 1915, they both came back to England during Mr. Balfour's leave.
• But Mrs. Balfour had developed arthritis.
• Her doctor advised her to stay in England, because the climate
would be detrimental to her health.
• As Mr. Balfour's boat was about to set sail, he promised her £30 a
month until she came back to Ceylon.
• They drifted apart, and Mr Balfour wrote saying it was better that
they remain apart.
• In March 1918, Mrs. Balfour sued him to keep up with the monthly
£30 payments.
• Was Mr. Balfour's offer intended to be legally
binding?
• Does the fact that they were husband and
wife matter?
• The lower court entered judgment in favor of the
plaintiff and held that the defendant’s promise to send
money was enforceable.
• The court held that Mrs. Balfour’s consent was
sufficient consideration to render the contract
enforceable and the defendant appealed.
• In Appeal:
• The court said that: It is essential that both the parties
should intend that an agreement be legally binding so
at to become enforceable.
• The courts will not interfere between the spouses in
their day to day affairs.
• The husband was held not liable, as there was no
intention to create legal relationship.
• The court observed that arrangements between
husband and wife usually do not result in
contracts, even though there may be what would
constitute consideration for the agreement.
• The reason being the parties did not intend that
they should be attended by legal consequences.
 `

• Jones v. Padavatton(1969)
• The daughter acting on her mother’s promise left her
service and gone to another country for education.
• The mother undertook to foot the expenses.
• For five long years the daughter could not complete her
education.
• Differences arose between them and the mother stopped
the payments.
• Held: engagement was contract but only for a period
reasonable to complete education and the period of five
years was more than sufficient for the purpose.
3. Express or Implied Offer
4. Certainty of Offer
The terms of the offer must be certain and not
vague (Sec 29)
Eg. A agrees to sell to B “ my white horse for Rs
500 or Rs 1000”.
Not a valid offer
Eg: I will buy one of your houses if I can afford it.
Not a valid offer
• 5. Communication of Offer
• Signify means that the proposal must be communicated to the other
party.

• Section 3: Communication, acceptance and revocation of proposals.—

• The communication of proposals,
• the acceptance of proposals, and
• the revocation of proposals and acceptances, respectively,
• are deemed to be made by any act or omission of the party proposing,
• accepting or revoking,
• by which he intends to communicate such proposal, acceptance or
revocation,
• or which has the effect of communicating it.
• If an offer has not yet been communicated, even
if somebody acts according to the terms of the
offer, he cannot be deemed to be acceptor of
that offer.
• Acting in ignorance of an offer does not amount
to the acceptance of that offer.
• Knowledge of an offer is must before the offer
can be accepted.
• Communication is necessary whether the offer is
specific or general.
 Section 4: Communication when complete

• The communication of a proposal is complete when it comes to the

knowledge of the person to whom it is made.
• The communication of an acceptance is complete,— 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.
• The communication of a revocation is complete,— as against the
person who makes it, when it is put into a course of transmission to
the person to whom it is made, so as to be out of the power of the
person who makes it;
• as against the person to whom it is made, when it comes to his
knowledge.
Lalman Shukla v. Gauri Dutt (1913)
• Facts: Defendant’s nephew absconded from home.
• The plaintiff, who was defendant’s servant, was sent to
search the missing boy.
• After the plaintiff had left in search of the boy, the
defendant issued handbills announcing a reward of Rs.
501 to anyone who might find out the boy.
• The plaintiff came to know of this offer only when he
had already traced and informed defendant about the
boy.
• The plaintiff brought an action to claim his reward.
• The court observed that a suit can only be founded on a
contract.
• In order to constitute a contract there must be an
acceptance of an offer and there can be no acceptance
unless there is knowledge of the offer.
• Contention of Plaintiff: neither Motive nor Knowledge
essential
• Court: Motive is not essential but knowledge and intention
are.
• In the present case, the plaintiff was already under an
obligation to do what he did( acting under the servant’s
duty) and therefore the performance of act cannot be
regarded as a consideration for the defendant’s promise.
• 6. General offers
• Two kinds of offer: General and Specific
• In case of general offers, the contract is made
only with that person who comes forward and
performs the conditions of the proposal as
such performance amounts to acceptance of
performance
• In such cases communication of acceptance is
not necessary.
 Carlill vs. Carbolic Smoke Ball Co. (1893)

Facts: the patent-medicine company advertised that it would

give a reward of £100 to anyone who contracted influenza
after using the smoke balls of the company for a certain
period according to the printed directions. Mrs. Carlill
purchased the advertised smoke ball and contracted
influenza in spite of using the smoke ball according to the
printed instructions. She claimed the reward of £100. The
claim was resisted by the company on the ground that offer
was not made to her and that in any case she had not
communicated her acceptance of the offer. She filed a suit
for the recovery of the reward.
Held: She could recover the reward as she had accepted the
offer by complying with the terms of the offer.)
• Contentions by the defendants:
• Terms of offer vague
• No time limit fixed for catching of influenza
• No intention to enter into legal relations
• Puffing advertisement
• Offer not made to anyone in particular
• Plaintiff did not communicate her intention to
accept
• No consideration for the promise
Contentions rejected:

• The offer was definite.

• It was added in the advertisement “ amount is deposited with the
Alliance Bank showing our sincerity in the matter.” Hence not a puff
• Offer is made to the world, the contract is made with that limited
portion of the public who come forward and performs the condition
on the faith of the advertisement.
• Communication of acceptance is not necessary in cases like these.
• Performance of the conditions is a sufficient acceptance without
notification in advertisement cases.
• In present case the general offer is in continuing nature hence it will
be open for acceptance to any number of persons until it is
retracted.
• Transaction was advantageous to the company ( for increasing
sales), enough to constitute consideration for the promise.
• 7. Cross Offers: When two parties make
identical offers to each other, in ignorance of
each other’s offer
• No completed agreement
• A wrote to B offering to sell him certain goods.
On the same day, B wrote to A offering to buy
the same goods. The letters crossed in the
post. There is no concluded contract between
A and B.
• 8. Offer and Invitation to Treat
• Where a party, without expressing his final
willingness, proposes certain terms on which
he is willing to negotiate, he does not make an
offer but merely invites the other party to
make an offer on these terms.
 Harvey v Facey (1893)

• Facts: The plaintiffs telegraphed to the defendants, writing: “Will

you sell us Bumper Hall Pen? Telegraph lowest cash Price”. The
defendants replied- “ Lowest price for Pen £ 900”.
• The plaintiffs immediately sent their last telegram stating: “We
agree to buy Pen for £ 900 asked by you”. The defendants, however
refused to sell the plot of land at that price.

• The court observed that the defendants gave only the lowest price
and did not express their willingness to sell.
• No offer was made.
• The plaintiffs last telegram was an offer to buy, but that was never
accepted by the defendants.
 Pharmaceutical Society of Great Britain v. Boots Cash
Chemists( Southern) Ltd. (1953)
Facts
• The defendant ran a self-service shop in which non-
prescription drugs and medicines, many of which were
listed in the Poisons List provided in the Pharmacy and
Poisons Act 1933, were sold.
• These items were displayed in open shelves from which
they could be selected by the customer, placed in a
shopping basket, and taken to the till where they would be
paid for.
• The till was operated by a registered pharmacist.
• The plaintiff picked up a bottle of medicine from the
shelves of the defendant’s shop with the intention of
buying it, but the defendant refused to sell it.
• Observations: A shopkeeper’s catalogue of prices is not an offer, it is
only an invitation to the intending customers to offer to buy at the
indicated prices.
• Similarly the display of goods in a shop with price chits attached is
not an offer.
• In present case, the mere fact that the customer picks up a bottle of
medicine from the shelves does not amount to an acceptance of an
offer to sell.
• It is an offer by the customers to buy, and there is no sale effected
until the buyer’s offer to buy is accepted by the acceptance of the
price.
• Reason: limited stock
• Leaves the customer with no other option as he would never be
able to change his mind.
• Section 5: Revocation of Proposals and
acceptance.—
• A proposal may be revoked at any time before
the communication of its acceptance is complete
as against the proposer, but not afterwards.
• An acceptance may be revoked at any time
before the communication of the acceptance is
complete as against the acceptor, but not
afterwards.
 Section 6: Revocation how made
A proposal is revoked—"(1) by the communication of
notice of revocation by the proposer to the other
party;
• (2)by the lapse of the time prescribed in such proposal
for its acceptance, or, if no time is so prescribed, by the
lapse of a reasonable time, without communication of
the acceptance;
• (3) by the failure of the acceptor to fulfill a condition
precedent to acceptance; or
• (4) by the death or insanity of the proposer, if the fact
of his death or insanity comes to the knowledge of the
acceptor before acceptance.
 Acceptance
• Essential Requirements of a Valid acceptance
I. Communication of Acceptance
1. Acceptance express or implied
2. When communication not necessary
Section 8: Acceptance by performing conditions,
or receiving consideration.—Performance of the
conditions of a proposal, or the acceptance of
any consideration for a reciprocal promise which
may be offered with a proposal, is an
acceptance of the proposal.
• 3. Communication to offeror himself:
• Acceptance must be communicated to the offeror
himself.
• Felthouse v. Bindley (1863)
• The court laid down the following two propositions:
i. Acceptance of offer should be communicated to the
offeror himself or his authorized agent. A
communication to a stranger, like the auctioneer in
this case will not do
ii. An offeror can’t impose upon the offeree the burden
of refusal or duty to reply.
4. Communication by acceptor himself
Powell v. Lee (1908)
• The plaintiff was an applicant for the headmastership of a
school.
• The managers passed a resolution appointing him, but
the decision was not communicated to him.
• One of the members in his individual capacity informed
the plaintiff about his appointment.
• The managers cancelled their resolution and the plaintiff
sued for breach of contract.
• Held: no contract had come into existence as, information
from a unauthorized person is as insufficient as over-
hearing from behind the door.
• 5. Mode of Communication: Acceptance has to be made in the
manner prescribed or indicated by the offeror.
• Section 7: Acceptance must be absolute.—In order to convert a
proposal into a promise the acceptance must
• (1) be absolute and unqualified;
• (2) 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;
• but, if he fails to do so, he accepts the acceptance.
• 6. When Contract Concluded: When the
parties are in the presence of each other the
contract is concluded when acceptance is
communicated to the proposer.
 Modes of communication of Acceptance

1. Acceptance by Post etc.

• Section 4:
• The communication of an acceptance is complete,— 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.
• This rule is based on commercial expediency.
• The proposer or offeror becomes bound immediately on
the posting of the letter to him and it makes no difference
that the letter is delayed in transit or it is even lost in the
post and offeror never receives it.
• Adams v. Lindsell (1818)
• On sept 2, the defendants sent a letter offering to sell
goods to the plaintiff.
• The letter added “receiving your answer in course of post”
• The letter reached the plaintiffs on 5th sept.
• On the same day, the plaintiffs posted their letter of
acceptance which reached defendants on 9th sept.
• The defendants had sold the goods on 8th sept.
• Held: that a complete contract arises on the date when the
letter of acceptance is posted in due course (i.e. on sept 5th)
• Thus there is a binding contract between the parties.
• In England, when a letter of acceptance is posted, both
the offeror and acceptor become irrevocably bound.
• In India, the offeror becomes bound but the acceptor
does not become bound by merely posting his
acceptance.
• He becomes bound only when his acceptance comes to
the knowledge of the proposer.
• Under both English and Indian Laws, a contract is made
at a place where the letter of acceptance is posted.
• If the proposal and acceptance thereof are made in
different places, the place of acceptance will be the
place where the contract is made.
 Acceptance by Telephone/Telex

• Bhagwan Das G. Kedia v. Girdharilal & Co. (1966)

• Facts: The plaintiffs made an offer (on phone) from Ahmedabad to the
defendants at khamgaon to purchase certain goods and the defendants
accepted the offer.
• The question was whether the conversation resulted in a contract at
Khamgaon or at Ahmedabad.
• The issue then is whether the ordinary rule, which regards a contract as
complete only when the acceptance is intimated to the proposer, should
apply or whether the execution engrafted upon the rule in case of offers
and acceptance by post and telegrams, is to be accepted.
• Held: Contract was made at Ahmedabad where the acceptance was
communicated.
• The contract, in case of acceptance by phone is deemed to be complete
when the offeror hears the acceptance at his end rather than when the
acceptor speaks the words of acceptance
• This is unlike acceptance by letter where the contract is
concluded when the letter of acceptance is posted.
• SC endorsed the principle of Entores Case.
• Entores Ltd. V. Miles Far East Corpn. (1955)
• An offer was made from London by Telex to a party in
Holland and it was duly accepted through the Telex, the
only question being as to whether the contract was made
in Holland or in England.
• Held that Telex is a method of instantaneous
communication (it enables a message to be despatched by
the teleprinter operated like a typewriter in one country
and almost instantaneously received and typed in another)
• Acceptance by Internet:
• Chwee King Keong v. Digilandmall.com Pvt. Ltd. (2004)
• Email is like post, the postal rule applies to it.
• Once an offer is sent over the Internet, the sender
loses control over the route and delivery time of the
message.
• The acceptance is made the instant the offer is sent.
• The acceptance would be effective the moment the
offer enters that mode of the network outside the
control of the originator.
 II. Absolute and Unqualified Acceptance

• Section 7 provides that in order to convert a proposal into a

promise, the acceptance must be absolute and unqualified i.e.
without any qualification or condition.
• For a valid acceptance, there must be an ad idem “concurrence of
mind” i.e. agreeing on the same thing in the same course/sense and
at the same time.
• Acceptance through post is an exception to this because in such
cases acceptance becomes complete when posted, whether it is
known to the offeror or not.
• Offer and acceptance must be based on three components:
Certainty, Commitment and Communication.
• There can be series of contracts between the parties. At each stage,
there is a distinct offer and a distinct acceptance.
• Counter Proposals:
• An acceptance with a variation(eg. Introduction
of new terms) is no acceptance: it is simply a
counter proposal, which must be accepted by the
original promisor before a contract is made.
• A counter offer puts an end to the original offer
and it cannot be revived by subsequent
acceptance by the acceptor unless it is renewed.
• Hyde v Wrench (1840)
• An offer to sell a farm for £1000 was rejected by the
plaintiff, who offered £950 for it.
• This was turned down by the offeror and then the
plaintiff agreed to pay £1000. But the defendant again
refused to sell.
• Held: The plaintiff’s offer was a counter proposal and it
put an end to the offer previously made by the
defendant, thus there was no contract.
• It was not competent for the plaintiff to revive the
defendant’s offer, by giving an acceptance of it.
• If after rejecting the counter offer, the offeror
repeats his original offer which then is
accepted by the offeree a contract is deemed
to have arisen.
• When a counter offer is accepted, a contract
arises in terms of the counter offer, and not in
terms of original offer.
• A partial acceptance is another kind of
counter proposal.
• Provisional Acceptance
• An acceptance made subject to final approval is called provisional
acceptance. It does not ordinarily bind either party until the final
approval is given.
• The offeror is at liberty to cancel his offer unless there is a contrary
condition supported by consideration
• Union of India v. S. Narain Singh (1953)
• Facts: The conditions of auction sale of liquor shop expressly
provided that the acceptance of the bid shall be subject to the
confirmation of the chief commissioner and the person whose bid
has been provisionally accepted is entitled to withdraw his bid.
• When a provisional acceptance is subsequently confirmed, the fact
should be notified to the offeror, for it is only then he becomes
finally bound.
• Tender:
• It is not an offer but an invitation to offer.
When a tender is approved it is converted into
a standing offer (an offer which is allowed to
remain open for acceptance over a period of
time is known as standing, open or continuing
offer).
• A contract arises only when an order is placed
on the basis of tender.
 Essentials of a valid Contract
• An agreement becomes a contract when the
following conditions mentioned in sec. 2(h),
sec 10 and other sections of the Contract Act
are satisfied.
• 1. Offer and acceptance
• 2. Intention to create legal obligations
• 3. There is some consideration for it- the price for which the
promise of the other is bought
• 4. The parties are competent to contract ( a minor or persons
disqualified by law e.g. alien enemy or convicts are incompetent to
contract.
• 5. Free Consent
• 6. Lawful Object
• 7. The agreement must not be expressly declared to be void e.g. an
agreement in restraint of trade/marriage, agreement by way of
wager, etc.
• 8. The terms of the agreement must not be vague or uncertain (sec
29)
• 9. The agreement must be capable of performance(sec 56)- An
agreement to do an impossible act is void.
• 10. Legal Formalities
• All legal obligations are not contracts.
• Only those legal obligations that arise out of
agreements constitute contracts.
• Civil liability for torts, breach of trust
• Judgements of courts
• Status obligations
 10. What agreements are contracts

• All agreements are contracts

• if they are made by the free consent of parties
• competent to contract,
• for a lawful consideration and
• with a lawful object, and
• are not hereby expressly declared to be void.
• 11. Who are competent to contract.—
• 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.
• The age of majority is 18, but where a
guardian is appointed it is 21.
• No estoppel against Minor.
• 115 Estoppel. —When one person has, by his declaration, act or
omission,
• intentionally caused or permitted another person to believe a thing
to be true and to act upon such belief,
• neither he nor his representative shall be allowed, in any suit or
proceeding between himself and such person or his representative,
to deny the truth of that thing.
• Illustration:
• A intentionally and falsely leads B to believe that certain land
belongs to A, and thereby induces B to buy and pay for it. The land
afterwards becomes the property of A, and A seeks to set aside the
sale on the ground that, at the time of the sale, he had no title. He
must not be allowed to prove his want of title.
• No liability in contract or in tort arising out of contract
• Doctrine of Restitution:
• English Law: If the minor has unjustly enriched himself, equity demands
that such property or goods be restored.
• Three rules laid down in Leslie R Ltd. V Sheill (1914)
• 1. If an infant obtains property or goods by misrepresenting his age, he can
be compelled to restore it, but only so long as the same is traceable in his
possession.
• 2. Where the infant has sold goods or converted them, he cannot be made
to repay the value of goods, because that would amount to enforcing a
void contract.
• 3. The doctrine of restitution is not applied where the infant has obtained
cash instead of goods for restitution stopped where repayment began.
• It is difficult to identify money and to prove whether it is the same money
or different one, the doctrine does not apply to money.
• 12. What is a sound mind for the purposes of contracting
• A person is said to be of sound mind for the propose 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