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University Roll. No. - L02/LLB/191136

Registration No. - L02-1211-0055-19
Name of examination - 5-year B.A.L.L.B/1st
semester
Name of subject – General Principles Of
Contract
Paper Number – 4th
Date of examination – 05/10/2020
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Ans.2. Agreement is the meeting of minds or a mutual understanding between two or

more persons about their reciprocal rights and duties regarding past or future performances.
Often the term agreement is frequently used as a synonym for “contract, it lacks an essential
element of contract, such as consideration. The term agreement is much broader in meaning
than the term contract. Every contract would be an agreement but every agreement is not a
contract. For example, ‘A’ invites ‘B’ for dinner and ‘B’ accepts A’s invitation. This can be an
agreement, however, not a contract because it does not create a legal obligation between the
parties. An agreement covers executed sales, gifts, and other transfers of property. A binding
agreement makes an enforceable contract
An agreement becomes a contract when it is entered into between two or more persons with
each other's free consent. Two or more persons are said to consent
when they agree to the same thing in the same sense. Consent is said to be free when it is not
caused by coercion, undue influence, fraud, misrepresentation or mistake.
Factual Situation: State whether there is any contract in the following cases: (a) A and B agree
to go for hunting. (b) A and B agree to marry each other. (c) A agrees to sell some goods to B at
a price to be fixed by C. (d) A takes food in a restaurant. (e) A takes a seat in a local bus.
According to Salmond, “Contract is an agreement creating and defining obligation between
parties”.
For example, A promises to sell a mobile phone to B for Rs. 6,000, and B promises to buy a
mobile phone at that price.
From the above definitions, we find that a contract essentially consists of two elements:-
1. An agreement;
2. Enforceability of that agreement.
• Agreements
As per section 2(e) of the Act:
“Every promise and every set of promises, forming the consideration for each other, is an
agreement”. After observing the definition of the agreement it is clear that a ‘promise’ is an
agreement.
Promise
Section 2(b) of the Indian Contract Act, 1872, defines the term “promise”. It provides: “when
one 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”.
Thus, an ‘agreement’ is a bilateral transaction between two or more than two persons which
involves proposal or offer by one and acceptance of such proposal by the other. In other words,
it requires ‘plurality of persons’ because a single cannot enter into an agreement with himself.
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As stated above, an agreement to become a contract must give rise to a legal obligation. If an
agreement is not enforceable by law. It is not a contract.

• Enforceability of Agreements
Section 10 of the Act deals with the conditions of the enforceability of an agreement. It
provides: “All agreements are contracts if they are they 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”.
ESSENTIALS OF A VALID CONTRACT:-
1. Offer and Acceptance

When one person will signify to another person his willingness to do or not do something
(abstain) to obtain the assent of such person to such an act or abstinence, he is said to make a
proposal or an offer.”

In general, terms offer means when one party express his intention to another party to obtain
the consent of another party to do or not to do such act and abstinence. To create a lawful
contract it must be communicated, section 4 of the Act states that when the proposal comes in
see the knowledge of a person for whom it is made then such proposal is said to be
communicated.

The social invitation is not considered to be an offer as such an invitation doesn't create legal
relation Acceptance of an offer must result in a valid contract and such acceptance shall give
rise to legal relation. The offer should be clear and definite. Illustration: A offer B to buy his car,
this is an offer.

In Carlill v. Carbolic Smoke Balls Company[2] it was held that Mrs Carlill was entitled to get the
reward as the advertisement constitute a general offer of a unilateral contract by performing
the conditions stated in the offer she had accepted such offer. In Felthouse v. Bindley[3] offer
cannot states silence mode as a mode of acceptance.

In contract, after having offer acceptance should be there by the party to constitute
Agreement. Section 2(b) of the Act defines acceptance when the person to whom the proposal
is made gives his consent such offer, the offer is said to be accepted.

The offer should be accepted unconditionally by the offeree to whom the offer is made, it will
amount to acceptance. When the offer is accepted it becomes a promise and constitutes
agreement. There must be consensus-ad-idem (meeting of minds), i.e. the promisor and
promise must be thinking of the same thing in the same sense while offering and accepting the
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proposal.

Acceptance can be in the expressed form or implied form. If the parties are negotiating or
discussing the agreement then it is not said to be accepted. Acceptance must be in a reasonable
amount of time and must be communicated to offeror, mere silence will not amount to
acceptance.

Section 4 of the Act states that when the acceptance is said to be completed. Acceptance is said
to be complete when it came into the knowledge of the offeror. Before the communication of
acceptance is completed the promise can revoke the acceptance but not after the
communication of such acceptance is completed.

Illustration: A wants to sell his house to B for Rs 70 lakhs. B accepts the offer but put forward
his condition that he will buy the house for Rs 50 lakhs, it will not amount to acceptance of the
offer as this acceptance also have the condition. Acceptance must be free from any type of
condition.

In Lalman Shukla v Gauri Dutt, it was held that acceptance must be communicated to offeree
mere knowledge of such acceptance doesn't constitute acceptance. After offering the proposal
acceptance of such proposal constitutes agreement. It is essential for the contract that it must
be an agreement.

2. Legal relationship
Both the parties must have intention on their part to create a legal relationship. Although
Indian Contract Act does not have any specific provision related to intention to create legal
relationship while offering and accepting the proposal, however, the English law has a principle
that to constitute a contract both the parties must have the intention to create a legal
relationship. When a legal relationship is created it gives rise to legal obligations and legal
consequences in the agreement. Agreements which are of social and domestic nature do not
entertain any legal relationship, hence they do not constitute a contract.

Illustration: A agrees to meet his friend B at 9:00 p.m. It is the moral and social duty of A to
meet this agreement and it does not create any legal obligation on B neither there is any legal
relationship between A and B.
3. Lawful consideration

There must be a consideration from both the side of the agreement has to be enforceable by
law. Section 2(d) of the Act states that When the promisee upon the desire of the promisor, do,
does or promise to do something or abstained from doing, such act or abstinence or promise is
called a consideration for the promise. Consideration must be moved according to the desire of
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promisor and it can be moved from the end of promisor or any other person i.e. stranger to
consideration but such stranger may maintain a suit.

The consideration does not need to be adequate to the promise, it should be real and
substantial. One of the main element in consideration is that it should be lawful nature. General
rule of law says that agreement is void if it is made without consideration. But there is the
certain exception to this rule stated in section 25 of the Act.

If the agreement is expressed in writing and registered under the law, made on account of
natural love and affection between the parties who are in near relation to each other then
consideration is not essential. Consideration is not required in case of bailment, agency or gift.
Section 63 of the Act also states that consideration is not required or the promisor wholly or in
part may remit the consideration or performance.

4. Competent parties
Parties to the agreement must be competent to enter into contact. According to section 10 of
the Act parties to the agreement must be competent, it is one of the essential elements
contracts. Section 11 of the Act defines who are competent to the contract and states every
person who is not minor according to the law to which he subject, who is not disqualified from
contracting, and who is of sound mind can enter into a contract. Section 3 of the Indian
majority Act defines minority as the person who is below eighteen years of age.

Therefore, a person who has not completed eighteen years of age cannot enter into a contract.
Section 12 of the Indian Contract Act provides a definition of sound mind who all are eligible to
enter into a contract. The soundness of mind can be determined by two factors. First, is the
ability of a person to understand the terms and condition of contract and second is the ability
of a person to make a rational judgement to act upon it. Idiot, lunatic etc. are those who have
an unsound mind and are not competent to enter into a contract.

In Mohori Bibee v. Damodar Ghose[7], In this case, Damodar Ghose the defendant was a minor
and the sole owner of his property. His legally appointed guardian was his mother. a
moneylender Mr Brahmo Dutt, through his agent Kedar Nath, lent the defendant at 12%
interest per year a sum of Rs 20,000. By way of mortgaging the property, the loan was taken by
the defendant. On the day on which the deal was made, Damodar Ghose's mother notified the
appellant that Damodar was a minor, and anyone who enters an agreement with him would do
so at his own risk. Kedar Nath claimed that Damodar Ghose had lied about minority on the date
of the execution of the deed.

Therefore, Brahmo Dutt's appeal was dismissed and his request for the return of Rs 10,500
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advanced towards him was also rejected as Damodar Ghose's mother notified the appellant
about his minority. It was held that an agreement entered by a minor is void ab initio.
5. Free consent
For the creation of a contract, both parties must agree to the same thing in the same manner.
Both the party must give their consent in the same thing in the same sense to constitute a valid
contract. It is essential for the contract that parties must consent to the contract and they must
give consent freely.

Section 14 of the Act defines free consent as a consent which is free from coercion, undue
influence, misrepresentation fraud and mistake. Section 15 of the Act define coercion as
commit or threat to commit any act forbidden by the Indian Penal Code, unlawful detaining, of
any property or threat to commit such act, to the force any person with the intention that such
person agrees. undue influence is defined under Section 16 of the Act which says that when
one person uses his position and misuse his power to dominate the other person.

Chickam Amiraju v. Chickam Sheshamma[8] In case, the Husband gives a threat that he will
commit suicide if they did not execute a release deed in favors of his brother to his wife and
son. The wife and son executed the release deed under the threat given by the husband. It was
held that threat to commit suicide amounts to coercion under section 16 of the Act. Section 17
of the Act lays down the list of Act which amounts to fraud. There is the slightest difference
between fraud and misrepresentation, in the first case the person making the statement does
not believe that such statement is true and in later one, the person making such statement
believes that such statement is true.
6. Lawful object
The object of the agreement must be lawful and must not violate the law. If an object or the
consideration of an agreement is unlawful then such agreement will not be enforceable.
Section 23 of the Act states that what consideration and object amount to lawful. The
consideration or object of an agreement is considered as lawful unless it is forbidden by any
law, is of such a nature that if permitted it would violate the provisions of any law, is
fraudulent, involves or implies injury to another person or property or the Court considered it
as immoral, or opposed to public policy.
7. Not expressly declared void
An agreement must not be one of those agreements, which have been expressly declared to be
void. Indian Contract Act specifically declares certain agreements void.

Some of those:
Agreement void, where both there is a mistake of fact essential to the agreement (S. 20). Every
agreement which has an object or consideration unlawful is void (S. 23). Agreements void, if
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any part of considerations or objects unlawful (S.24). Agreements without consideration are
void (S. 25)

Ans.5. Contracts are of different types. Since people can get into various kinds of agreement
for performance or non-performance of certain acts. One way of understanding contracts is by
dividing them into two types: Absolute and Contingent. Let us take a detailed look at contingent
contracts.
Enforcement of Contingent Contracts
Sections 32 – 36 of the Indian Contract Act, 1872, list certain rules for the enforcement of a
contingent contract.
Rule # 1 – Contracts Contingent on the happening of an Event
A contingent contract might be based on the happening of an uncertain future event. In such
cases, the promisor is liable to do or not do something if the event happens. However, the
contract cannot be enforced by law unless the event takes place. If the happening of the event
becomes impossible, then the contingent contract is void. This rule is specified in Section 32 of
the Indian Contract Act, 1872.
Peter promises to pay John Rs 50,000 if he can marry Julia, the prettiest girl in the
neighborhood. This is a contingent contract. Unfortunately, Julia dies in a car accident. Since
the happening of the event is no longer possible, the contract is void.
Rule # 2 – Contracts Contingent on an Event not happening
A contingent contract might be based on the non-happening of an uncertain future event. In
such cases, the promisor is liable to do or not do something if the event does not happen.
However, the contract cannot be enforced by law unless happening of the event becomes
impossible. If the event takes place, then the contingent contract is void. This rule is specified in
Section 33 of the Indian Contract Act, 1872.
Peter promises to pay John Rs 50,000 if the ship named Titanic which leaves on a dangerous
mission does not return. This is a contingent contract. This contract is enforceable by law if the
ship sinks making its return impossible. On the other hand, if the ship returns, then the contract
is void.
Rule # 3 – Contracts contingent on the conduct of a living person who does something to make
the event or conduct as impossible of happening
Section 34 of the Indian Contract Act, 1872 states that if a contract is a contingent upon how a
person will act at a future time, then the event is considered impossible when the person does
anything which makes it impossible for the event to happen.
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Peter promises to pay John Rs 5,000 if he marries Julia. However, Julia marries Oliver. Julia’s act
thus renders the event of John marrying her impossible. (A divorce is still possible though but
the happening of the event is considered impossible.)
Rule # 4 – Contracts Contingent on an Event happening within a Specific Time
There can be a contingent contract wherein a party promises to do or not do something if a
future uncertain event happens within a fixed time. Such a contract is void if the event does not
happen and the time lapses. It is also void if before the time fixed, the happening of the event
becomes impossible. This rule is specified in Section 35 of the Indian Contract Act, 1872.
Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous
mission returns before June 01, 2019. This contract is enforceable by law if the ship returns
within the fixed time. On the other hand, if the ship sinks, then the contract is void.
Rule # 5 – Contracts Contingent on an Event not happening within a Specific Time
Contingent contracts might be based on the non-happening of an uncertain future event within
a fixed time. In such cases, the promisor is liable to do or not do something if the event does
not happen within the said time. The contract can be enforced by law if the fixed time has
expired and the event has not happened before the expiry of the time. Also, if it becomes
certain that the event will not happen before the time has expired, then it can be enforced by
law. This rule is specified in Section 35 of the Indian Contract Act, 1872.
Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous
mission does not return before June 01, 2019. This contract is enforceable by law if the ship
does not return within the fixed time. Also, if the ship sinks or is burnt, the contract is enforced
by law since the return is not possible.
Rule # 6 – Contracts Contingent on an Impossible Event
If a contingent contract is based on the happening or non-happening of an impossible event,
then such a contract is void. This is regardless of the fact if the parties to the contract are aware
of the impossibility or not. This rule is specified in Section 36 of the Indian Contract Act, 1872.
Peter promises to pay John Rs 50,000 if the sun rises in the west the next morning. This
contract is void since the happening of the event is impossible.
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VOID CONTRACT
In a void contract no obligation or right
arises or accrues to parties to the
contract from a void contract. Such
contracts are not covered by law.
A void contract can give rise to no legal
liability since transaction is nullity.
A void contract cannot confer any right.
The contract becomes void when it
ceases to be enforceable.
A void contract cannot be made valid by
parties to the contract by their consent.
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VOIDABLE CONTRACT
A voidable contract continues at the
option of one party; it is the desire of
one party either to rescind it or continue;
it is enforceable at the option of one
party and is covered by law.
A voidable contract remains valid until
rescinded.
A voidable contract confers enforceable
right till is not essential.
A contract becomes voidable only when
consent to agreement is obtained by
coercion, undue influence fraud or
misrepresentation.
A voidable contract can be made valid
by the party who has a right to rescind it
by giving up his right of rescinding it.
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