ID NO: ADADR138_21

Name: Rupender  Swarna ( S. Rupender )

(DDE:  ADADR138_21)  admission batch: 2021 to 2022.

SUBJECT: – 1.2 .Law of Contracts 

PAPER: 2 
No of pages: 11

Answer 1)
One important and key  factor of a valid contract is free consent. Both the parties
involved in the contract must enter the contract willingly and under no pressure and
under sound and conscious mind . There are factors which impair the free consent of
either party.and for all parties involved with in the contract, Once such factor is
“mistake”, which includes a mistake of law and mistake of fact can be put as error of
law even  Let us take a more detailed look into it.

Free Consent

According to section 14 of the Indian Contract Act 1857, free consent is defined as

“consent is said to be free when it is not caused by coercion, under influence, fraud,
misrepresentation, and mistake.” and in other way accepting or giving ascent through
false information and misguided facts and malafide intension behind hiding the facts
wantedly and dedicatively . 

A mistake is an erroneous belief that is innocent in nature. It leads to a

misunderstanding between the two parties. Now when talking about a mistake, the
law identifies two types of mistakes, namely

i. A Mistake of Law
ii. A Mistake of Fact

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Mistake of Law

This mistake may relate to the mistake of the Indian laws, or it can be a mistake of
foreign laws. If the mistake is regarding Indian laws, the rule is that the ignorance of
the law is not a good enough excuse. This means either party cannot simply claim it
was unaware of the law. The maxim 'ignorantia juris non-excusat,' or 'ignorance of
the law is no excuse,' implies that the Court presumes that every party is aware of
law 

The Contract Act says that no party shall be allowed to claim any relief on the
grounds of ignorance of Indian law. This will also include a wrong interpretation of
any legal provisions and claiming ignorance and un awareness about can never be
awarded as it is respective and need responsibility to follow 

However, ignorance of a foreign law is not given a similar treatment. Ignorance of

the foreign law is given some leeway, the parties are not expected to know foreign
legal provisions and their meaning. So a mistake of foreign law is in fact treated as a
mistake of fact under the Indian Contract Act. As most of the citizen who enter
contracts outside India there is  a less possibility of knowing the law of that particular
land ,so he may not have upto the sources to know in and out of it completely as an
foreign citizen may not be faithfull always ,this is the intention behind.

Mistake of Fact

Then there is the other type of mistake, a mistake of fact. This is when both the
parties misunderstand each other leaving them at a crossroads. Such a mistake can be
because of an error in understanding, or ignorance or omission etc. But a mistake is
never intentional, it is an innocent overlooking. These mistakes can either be
unilateral or bilateral. , its accidental mistake not intentional whether from one side or
from both .

Bilateral Mistake

When both parties of a contract are under a mistake of fact essential to the

agreement, such a mistake is what we call a bilateral mistake. Here both the parties
have not consented to the same thing in the same sense, which is the definition of
consent. Since there is an absence of consent altogether the agreement is void.
Absence of content leads to cancellation of contract in other way expressed and null
and void .
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However, to render an agreement void the mistake of fact should be about some
essential fact that is of importance in a contract. So if the mistake is about the
existence of the subject matter or its title, quality, quantity price etc then it would be
a void contract. But if the mistake is of something inconsequential, then the
agreement is not void and the contract will remain in place.

For example, A agrees to sell to B his buffalo. But at the time of the agreement, the
buffalo had already died. Neither A nor B was aware of this. And so there is no
contract at all, i.e. the contract is void due to a mistake of fact.

Unilateral Mistake

A unilateral mistake is when only one party to the contract is under a mistake. In
such a case the contract will not be void. So the Section 22 of the Act states that just
because one party was under a mistake of fact the contract will not be void or
voidable. So if only one party has made a mistake of fact the contract remains a valid
contract.

However, there are some exceptions to this. In certain conditions, even a unilateral
mistake of fact can lead to a void or voidable agreement. Let’s see a few of these
exceptions via some examples and case studies.

1. When Unilateral Mistake is as to the Nature of the Contract: In such a case the
contract can be held as void. Let us see the example of Dularia Devi v. Janardan
Singh. Here an illiterate woman put her thumb impression on two documents
thinking they were the same. She thought the document was to gift some
property to her daughters. But the other document was a Sale deed to defraud
the women out of more of her property. This contract was held void by the
courts
2. When the Mistake is regarding the Quality of the Promise: There was an
auction being held by A to sell hemp and tow. B thinking the auction was only
for hemp, mistakenly bid for a tow. The amount bid was on par for hemp but
very high for a tow. Hence the contract was held as voidable.
3. Mistake of the Identity of the Person contracted with: For example, when A
wants to enter into a contract with B but mistakenly enters into a contract with
C believing him to be B.

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Solved Example on Mistake of Law and Mistake of Fact

Q: A mistake of law always leads to a valid contract. True or False?

Ans: The statement is False. A mistake of India law if is regarded as a valid contract

since ignorance of the law is not a good enough excuse. But a mistake of foreign law
is considered as a mistake of fact, and if such a mistake is bilateral it will lead to a
void contract.

Answer 2) Explanation on clauses :

A)1 A)  If "A" restricted to work for 4 continuous years is  rule against the public
policy of the country , which covers the Right to work and under Article 21 Right to
dignity and opportunity of life , but in case if the employeer and employee enters an
agreement about clarity ,brewity and specificity understanding the in and out of the
outcomes of the contract where the employee donot loose the right decided and
awarded  by the constitution ,where he do not fall under the ambit of exploitation ,so
that in later he dont need to agitate for his rights in the court of law ,it is permissible.

1B) its is no restricted to his movement of work to the employee by

employeer ,hence no issue can be raised by the employee as he is set free to work .

2 A) its an opportunity to  the employee or individual to move from one job to the
other and choice employeer ,office and employement of eligibility and growth ,hence
when he is paid same salary in the notice serving period ,then it shall not be an
objectionable problem to the individual .

2 B) this is an reasonable restriction as if he wants to join the company of same

nature she shall serve notice continued for  further more period of 3 months which he
is entitled to receive salary from the previous employeer ,he is drawing enumeration
on the company ground ,even after he cease to exist an employee to the company ,
here an issues raises when it is a good opportunity and hence the new company laid
deadline to join in the same 3 months ,but hence if not it is an accepted ground of no
loss to the working individual .

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SECTION 3:

Answer: It is a fact when the rule of law and rule of land always prevails over
anything under the defined jurisdiction , where constitution of the country is the
major law and hence it guides and fills the lawfullness of the country . The the
consitution law ,international law are parent laws of the country so the subsequent
laws on par and  other side to it only supportive in functioning as they are guidelines
for others to follow and excercise and function .

Apex courts like Supreme court and High Courts of India, have 3 jurisdictions:

a) Original jurisdiction ,
b) Appellate jurisdiction ,
c) Advisory jurisdiction, 
all the names are self explanatory according to its functionalities and
exercising nature with abilities and capabilities to levels of its capacities and one
more inherent jurisdiction it has SUPERVISORY and being the custodian of law in
the boundaries of the country , so the apex courts are always vigilant in the outcomes
of judgments and judicial decision ,including having a watch on the legislations and
acts the parliamentarians  and members of assembly and council make for
functioning of administration in the country ,

There are many and many numerous examples to quote where court has stuck down
the legislation under the prevoyance of effect  of acts  and effecting the basic
structure of the constitution ,in case when courts finds where the real theme and spirit
of constitution is going to be effected out the legislations made . 

Any contracts in India whether between :

1) private to private parties 

2) private to government parties 
3) private to semi governments
4) or between state governments to state governments ,because we have states ,
5) between central government to the state government ,
courts wants laws and legislations or acts to work along with under the frame and
guidance of constitution not the contrary to it , the main heads the judiciary

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watches ,untill these below are not effected or going to be infected , they
donot apply  such doctrine or even doctrine of unruly horse ,

 Hence  source of authority of the Constitution lies with the people of India.

Preamble declares India to be a sovereign, socialist, secular and democratic republic.
The objectives stated by the Preamble are to secure justice, liberty, equality to all
citizens and promote fraternity to maintain unity and integrity of the nation. these can
be treated heads guideliness in framing   the public policy .

SECTION 4

Answer:

This sort of situation arises when international trade or commerce is involved, for
example if it is export and import industry we shall provide an example describing its
procedures ,

Export is one of the major components of international trade. Exports facilitate

international trade and stimulate domestic economic activity by creating
employment, production, and revenues. Businesses export goods and services
where they have a competitive advantage.

Introduction

India is amongst the world’s top 20 nations with respect to the export of
merchandise. With the increased liberalisation of trade by the Indian Government,
there’s an abundant opportunity for establishing a profitable export business. For
undertaking an export business, an entrepreneur should have a clear understanding

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of the rules and regulations along with the documentation pertaining to these
export transactions.

Governing Authorities

Exports are governed by Foreign Trade (Development & Regulation) Act, 1992
and Export-Import (EXIM) Policy. Directorate General of Foreign Trade
(DGFT) is the primary governing body responsible for the export and import
policies in the country.
Since an export trade has to follow a specific set of procedures from receiving
inquiries to completion of the transaction, exporters need to get themselves
registered with these authorities for ensuring all the legal formalities as required by
them are met and also for receiving incentives which are allowed under the export
promotion schemes.
The Reserve Bank of India (RBI) guidelines have to be met by the exporter. An
exporter also requires an Import-Export Code Number from the concerned regional
licensing authority.

Export Procedure

In general, an export procedure flows as stated below: 

Step 1. Receipt of an Order The exporter of goods is required to register with

various authorities such as the income tax department and Reserve Bank of India
(RBI). In addition to this, the exporter has to appoint agents who can collect orders

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from foreign customers (importer). The Indian exporter receives orders either
directly from the importer or through indent houses. 

Step 2. Obtaining License and Quota After getting the order from the importer, the
Indian exporter is required to secure an export license from the Government of
India, for which the exporter has to apply to the Export Trade Control Authority
and get a valid license. You can get a license from here too. The quota is referred
to as the permitted total quantity of goods that can be exported.

Step 3. Letter of Credit The exporter of the goods generally ask the importer for
the letter of credit, or sometimes the importer himself sends the letter of credit
along with the order. 

Step 4. Fixing the Exchange Rate Foreign exchange rate signifies the rate at which
the home currency can be exchanged with the foreign currency i.e. the rate of the
Indian rupee against the American Dollar. The foreign exchange rate fluctuates
from time to time. Thus, the importer and exporter fix the exchange rate mutually. 

Step 5. Foreign Exchange Formalities An Indian exporter has to comply with

certain foreign exchange formalities under exchange control regulations. As per the
Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is
required to furnish a declaration in the form prescribed in a manner. The
declaration states:- 
I.The foreign exchange earned by the exporter on exports is required to be
disposed of in the manner specified by RBI and within the specified period. 
II.Shipping documents and negotiations are required to be done through authorised
dealers in foreign exchange. 

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III.The payment against the goods exported will be collected through only
approved methods. 

Step 6. Preparation for Executing the Order The exporter should make required
arrangements for executing the order: 
I.Marking and packing of the goods to be exported as per the importer’s
specifications. 
II.Getting the inspection certificate from the Export Inspection Agency by
arranging the pre-shipment inspection. 
III.Obtaining insurance policy from the Export Credit Guarantee Corporation
(ECGC) to get protection against the credit risks. 
IV.Obtaining a marine insurance policy as required. 
V.Appointing a forwarding agent (also known as custom house agent) for handling
the customs and other related matters. 

Step 7. Formalities by a Forwarding Agent The formalities to be performed by the

agent include – 
I.For exporting the goods, the forwarding agent first obtains a permit from the
customs department. 
II.He must disclose all the required details of the goods to be exported such as
nature, quantity, and weight to the shipping company. 
III.The forwarding agent has to prepare a shipping bill/order. 
IV.The forwarding agent is required to make two copies of the port challans and
pays the dues. 
V.The master of the ship is responsible for the loading of the goods on the ship.
The loading is to be done on the basis of the shipping order in the presence of
customs officers. 

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VI.Once the goods are loaded on the ship, the master of the ship issues a receipt for
the same. 

Step 8. Bill of Lading The Indian exporter of the goods approaches the shipping
company and presents the receipt copy issued by the master of the ship and in
return gets the Bill of Lading. Bill of lading is an official receipt which provides
the full description of the goods loaded on the ship and the name of the port of
destination. 

Step 9. Shipment Advise to the Importer The Indian exporter sends shipment

advice to the importer of the goods so that the importer gets informed about the
dispatch of the goods. The exporter sends a copy of the packing list, a non-
negotiable copy of the Bill of Lading, and commercial invoice along with the
advice note. 

Step 10. Presentation of Documents to the Bank The Indian exporter confirms that
he possesses all necessary shipping documents namely; Marine Insurance Policy
The Consular Invoice Certificate of Origin The Commercial Invoice The Bill of
Lading Then the exporter draws a Bill of Exchange on the basis of the commercial
invoice. The Bill of Exchange along with these documents is called Documentary
Bill of Exchange. The exporter then hands over the same to his bank. 

Step 11. The Realisation of Export Proceeds In order to realise the proceeds of the
export, the exporter of the goods has to undergo specific banking formalities. On
submission of the bill of exchange, these formalities are initiated. Generally, the
exporter receives payment in foreign exchange.

where bank play a key and crucial role ,

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Courts always keep restraints and injunction when there is violation of contract , or
function of excercise of cheat and fraud with the individuals or between
individuals ,or betweens individuals and organisations or between organisations and
organisations . When violations effect the innocent sufferers due the strength of other
party ,due to denial of performing the responsibility they have fulfill ,the promises
and contracts they have to deliver ,or its going to create an bad idea and opinion or
remain as unhealthy practice for the future to understand over , 

Its is very nature of bank to check with the guarantees because as it is an institution
and organisation it should possess the vigilance ,prevoyance ,well versed with
legalities and contract law including anticipating the outcome if any worst and
unhealthy thing happens, always should be alert in functionality and deciding on, but
there are certain situations whether banks are being cheated by individuals and
organisations ,where every bank involves into activities and transactions in
enumerous so there can be certain mistakes in functioning ,when court finds the point
beyond doubt ,it restrains the illegal action to halt and compels parties to act
according to its commitment and contracts whether they are irrevocable or others.

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