COURSE MANUAL

LAW OF CONTRACT I

Course Instructors

Shilpi Bhattacharya
Ashrita Prasad Kotha
Ajey Sangai
Rohini Sen
Sandeep Suresh
Shivprasad Swaminathan

B.A. LL.B./ B. B.A. LL.B. 2017

(Semester B-- 2018)

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 Course Manual for Law of Contract - I

The following information contains the official record of the details of the course.

PartI

Course Title: Law of Contract I

Course Code:
Course Duration: One
Semester
No. of Credit Units: 4 credits
Level: B.A. LL.B/ B.B.A. LL.B
Medium of Instruction: English
Pre-requisites: Nil
Pre-cursors: Nil
Equivalent Courses: Nil
Exclusive Courses: Nil

The above information shall form part of the University database and may be uploaded
to Dspace into the KOHA Library system and catalogued and may be distributed
amongst students.

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PART II

A. Course Description 1

Welcome to Law of Contract I! In your first introduction to the world of contracts, you
will study the elements of a standard contract, how it is formed, its terms, the manner of
performance, and the various legal challenges to the enforcement or performance of any
agreement. This subject-matter will hold you in good stead throughout your law career
and beyond, as contracts permeate our personal, professional and commercial lives.

B. Course Aims

This course will:

 Provide students with the basic principles of the Indian Contract Act, 1872, such as
offer, acceptance, agreement, void contracts, voidable contracts, competency to
contract, breach of contract, frustration of contract, remedies and damages.
 Demonstrate the interpretation and application of said principles by Indian courts,
and the courts in other common law countries.
 Explore the policy underpinnings of the core doctrines of Indian contract law, and
how these policies have evolved, including through reference to contract law in
common-wealth countries such as the United Kingdom.
 Illustrate the relationship between contract law and actual commercial practice by
businessmen, consumers, and others in contemporary society.

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This course manual is the result of the collaborative effort of faculty members who have taught
this course over the semesters. The course instructors would like to thank, Rohan Alva, Indranath
Gupta, Nemika Jha, Manasi Kumar, Natasha Nayak and Subramanya Sirish Tamvada for their
contributions to earlier versions of this course manual.

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 C. Intended Learning Outcomes
Intended Learning
Outcomes and Weightage
By the end of the course, students should be able to:
(i) Demonstrate knowledge
and understanding of the
relevant aspects of contract
law; state relevant rules and
sources of law and be able to
discuss their effect
(ii) Demonstrate an interest in
the operation of day- to-day
commercial transactions.
Students will be able to
distinguish between the
operation of various types of
commercial contracts such as
indemnity contracts,
guarantee, pledge, bailment,
etc.
Teaching and Learning
Activities
(i) Reading of relevant cases,
statutes, and other legal
40% materials:
Students are expected to read
the wide range of materials
included in the Course Manual
or in handouts.
(ii) Lectures:
30%
Students will acquire basic
knowledge on how to read
cases, statutes, scholarly
writings and other legal
material, and formulate
arguments for or against a
legal proposition.
Students will learn how to
comprehend a legal issue and
Assessment
Tasks/Activities
Students’ ability to grasp
and critically evaluate
the topics/issues
discussed in the syllabus
will be tested in the
following ways:
(i) End-semester
examination (50%).
(ii) Internal assessment
(50%). Each Course
Instructor will advise the
students separately as to
the methods by which
the students will be
internally assessed.
4

(iii) Apply the legal principles
30%
to understand and appreciate
legal problems in the field of
commercial contracts
to find and apply legal rules to
a given situation/case through
background readings and case-
law analysis.
(iii) Tutorials:
Each Course Instructor will
advise the students separately
as to the specific tutorials that
will be conducted in class.

D. Grading of Student
Achievement

Students will be assessed based on a common final examination, as well internal

assessment modes, determined by each instructor individually. The common final
examination will constitute 50% of your overall grade. The remaining 50% will be based
upon the internal assessment, as determined by your course instructor.

Please note the grades and their values below:

Letter Percentage Grade Definitions

Grade Of marks
O 80% and above Outstanding Outstanding
work with strong
evidence of
knowledge of the
subject matter,
excellent
organizational
capacity, ability
to synthesize and
critically analyse

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 and originality in
thinking and
presentation.
A+ 75 to 79.75% Excellent Sound
knowledge of the
subject matter,
thorough
understanding of
issues; ability to
synthesize
critically and
analyse.
A 70 to 74.75% Good Good
understanding of
the subject
matter, ability to
identify issues
and provide
balanced
solutions to
problems and
good critical and
analytical skills.
A- 65 to 69.75% Adequate Adequate
knowledge of the
subject matter to
go to the next
level of study and
reasonable
critical and
analytical skills.
B+ 60 to 64.75% Marginal Limited
knowledge of the
subject matter,
irrelevant use of
materials and
poor critical and
analytical skills.
B 55 to 59.75% Poor Poor
comprehension
of the subject
matter; poor
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 critical and
analytical skills
and marginal use
of the relevant
materials.
B- 50 to 54.75% Pass “Pass” in a pass-
fail course. “P”
indicative of at
least the basic
understanding of
the subject
matter.
F Below 50% Fail Fails in the
subject

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E. A Word of Caution on Online Readings

Students are encouraged to access online resources for research and preparation for
next class. However, online sources can be classified into reliable, unreliable and
outright bogus, and students are cautioned from depending on unreliable and bogus
materials. Internet is an open domain in which all can create web pages and indulge in
propaganda, falsification or misrepresentation of events. The few sources that can help
you with basic information and which are fairly unbiased are: websites of
established newspapers, magazines and journals.

Student should always consult with the instructor about the veracity and authenticity of
a particular website and its suitability for researching topics covered in this syllabus.

F. P lagiarism

Any idea, sentence or paragraph you cull from a web source must be credited with the
original source. If you paraphrase or directly quote from a web source in the exam,
presentation or essays, the source must be explicitly mentioned. You should not feel free
to plagiarize content, be it from scholarly sources (i.e. books and journal articles) or from
the internet. This is an issue of academic integrity on which no compromise
will be made, especially as students have already been trained in the perils of lifting
sentences or paragraphs from others and claiming authorship of them.

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Part III

A. Readings:

Faculty members may assign readings from any of the following secondary sources:

1. AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF (EBC)

2. AKHILESHWAR PATHAK, CONTRACT LAW, 1ST ED. (OXFORD UNIVERSITY

PRESS, 2011)

3. EWAN MCKENDRICK, CONTRACT LAW: TEXT, CASES & MATERIALS ( 5TH EDN,
OXFORD UNIVERSITY PRESS, 2012)[ENGLISH CASE DECISIONS]

4. DUTT ON CONTRATS REVISED BY H.K.SAHARAY EDITION: 10TH EDITION,

2006
5. G. TREITEL/E.PEEL, THE LAW OF CONTRACT (SWEET & MAXWELL, 13TH EDN,
2011)

6. R.G.PADIA, POLLOCK & MULLA INDIAN CONTRACT AND SPECIFIC RELIEF

ACTS, (LEXIS NEXIS, 2010)

7. JACK BEATSON AND OTHERS, ANSON’S LAW OF CONTRACT (29TH EDN,

OXFORD UNIVERSITY PRESS, 2010)

8. POLLOCK AND MULLA LAW OF CONTRACT (2ND ED. 1909) Note: this is the
second edition of 1909. Pdf file will be provided.

The students should familiarize with the following legislations during the progress of this
Course.

1. THE INDIAN CONTRACT ACT, 1872

2. SPECIFIC RELIEF ACT, 1963

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B. Class Format

The class will cover between one and two topics each week as per the lecture
program. The instructor will tell students at least a week before how far ahead to
read in the required readings for the next week, and if there are any changes in the
readings. Students are expected to attend all classes and to complete all the required
readings and case laws. If you are unable to attend a class you should contact the
course instructor in advance.

The class format will combine lecture and discussion along with on the spot Q&A
sessions. Students are expected to prepare for and participate in class discussion on a
regular basis.

PART IV

Syllabus and Required Readings:

The following information is subject to modifications as per the progress of the course.

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 Teaching Plan

Week Topic

1-2 Introduction & Offer

3 Acceptance

4-6 Consideration, Intention to Create Legal

Relations and Privity

7-8 Capacity & Consent

9 Illegality

10 Contingent Contract

11 Discharge

12-13 Remedies- Damages and Specific Relief

14-15 Quasi Contracts

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 OFFER

An offer, or proposal, is an objective manifestation of an intent to be bound, and which

is made with a view to obtaining the acceptance of another. The person making the offer,
or proposal, is the offeror. The person to whom the offer is made, is the offeree.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What is an offer?

(2) How is the offer communicated?
(3) What is the difference between a general offer and a specific offer?
(4) What is the difference between offer and an invitation to make offer (also known
as invitation to treat)?
(5) How does an offer lapse?

Statutory Provisions:

Contract Act, 1872: Sections 2-4, 8-10

Cases:

Invitation to Make Offer/Invitation to Treat

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd., [1952]
2 QB 795

McPherson v. Appana, AIR 1951 SC 184

Revocation of Offer

Dickinson v. Dodds [1876] 2ChD 463

Sandhoo Lal Motilal v. State of Madhya Pradesh, AIR 1972 All 137

Advertisements as Offers

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Carlill v. Carbolic Smoke Ball Co., [1893] 1 QB 256
Leonard v. Pepsico, 88 F. Supp. 2d (1999)

ACCEPTANCE

After an offeror communicates her offer to the offeree, the offeree may accept the offer,
reject the offer, or propose a counteroffer. Once an offeree accepts the offer, a contract is
born.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) Who may accept an offer?

(2) How must the offeree accept an offer?
(3) What is a counteroffer, and when do courts deem acceptance to actually constitute a
counteroffer?
(4) How must an offeree communicate his acceptance?
(5) How may an acceptance be revoked?

Statutory Provisions:

Contract Act, 1872: Sections 2-7

Cases:

Acceptance

Harvey v. Facey, [1893] 3 App. Cas. 459

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How to accept

Badrilal v. Indore Municipality, AIR 1973 SC 508

Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corpn (England) Ltd., (1979) 1 WLR 401 CA
[consider: do you agree with the application of the mirror image rule in commercial
transactions where stock contractual language is used? What are the pros and cons of
such application?]

How to accept: Acceptance by Conduct

Brodgen v Metropolitan Railway [1877] 2 App Cas 666

Pro CD v Zeidenberg, 86 F. 3d 1447 (7th Cir. 1996)

Acceptance in Ignorance of offer

R V Clarke (1927) 40 CLR 227 (Australia)

Communication of Acceptance:
Entores v. Miles Far East Corporation, [1955] 2 QB
Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., AIR 1966 SC
543 [consider: contrast the position of the majority judges with that of the minority, and
with which position of law do you agree?]

Is it justified to apply the English legal position to India?

S. Swaminathan ‘The Will Theorist’s Mail Box: Misunderstanding the Moment of
Contract Creation in the Indian Contract Act’ has been accepted for publication
in (2017) 38 Statute Law Review (forthcoming)

Suggested Additional Reading

Hyde v Wrench, (1840) 3 Beav. 334 [Mirror Image Rule]

Adams v Lindsell, (1818) 1 B & Ald. 681 [Communication of Acceptance]
Felthouse v Bindley, (1862) 11 CBNS 869 [Mode of Acceptance]

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Errington v Errington, [1952] 1 KB 290 [How to Accept: Acceptance by Performance]
Felthouse V Bindley (1862) 11 CB (NS) 869 [Silence not acceptance]
Perala Krishnayyam Chettiar v. G. Paimanathan Chettiar, AIR 1917 Mad 63
Haridwar Singh v. Bagum Sambrui, AIR 1972 SC 1242
Frederick Lipman, ‘On Winning the Battle of the Forms: An Analysis of Section 2-207 of
the Uniform Commercial Code’, Vol. 24 The Business Lawyer (1969)

CONSIDERATION

One of the fundamentals of contract law is that a contract must represent a bargained-
for exchange of promises. This bargained-for exchange is broadly referred to as
consideration. The promisee (person receiving the promise) is the one who gives
consideration in return for the promise, however, both parties to a contract are
promisors and promisees. In other words, consideration is a two-way street.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What is consideration?

(2) What is privity of contract? What is privity of consideration?
(3) Does consideration have to be adequate? If so, how is such adequacy measured?
(4) What is promissory estoppel?
(5) Is past consideration valid consideration?

Statutory Provisions:

Contract Act, 1872: Sections 2(d) and 25

Cases:

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Definitional problem?

The standard definition of consideration in English Law uses the language of benefit and
detriment. The Indian Contract Act doesn’t use those words. How far from the English
position does this really take the Indian law? Is there tension between the discussion of
consideration in Ss.2, 10 , 23, 24 and 25?

See Pollock v. Stokes Debate in Pollock and Mulla Law of Contract (2nd ed. 1909) Pp.25.

Courts and academics alike have held that the Indian Contract Act reproduces the
consideration requirement of English law. But is there any warrant for this assumption?
Could it be argued instead that although the Indian Contract Act uses the term
consideration, it means something completely different from the English law?

S. Swaminathan, ‘Eclipsed by Orthodoxy: The Vanishing Point of Consideration and the

Forgotten Ingenuity of the Indian Contract Act’ (2017) 12 Asian Journal of
Comparative Law 141-165.

Need not be adequate

Chappel & Co V Nestle [1960 AC] 87

Devji Shivji v. Karsandas Ramji, AIR 1954 Pat 280

Illusory consideration

Ramchandra Chintaman v. Kalu Raju, (1877) 2 Bom 362

Past consideration and its limits

Pao On V Lau Yiu Long [1980] AC 614

Mill v. Wyman, 3 Pick. 207 (Mass. 1825)

Webb v. McGowin, 27 Ala. App. 82 (1935)

Pre Existing Duty

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Stilk v Myrick (1809)2 Camp 317
Lalman Shukla v. Gauri Dutt, (1913) 11 ALJ 489 (is there any basis for the pre-existing
duty rule in Indian law?)

General

Williams V Roffey Brothers [1991] 1 QB 1

D & C Builders V Rees [1966] 2 QB 617

Ramchandra Chintaman v. Kalu Raju (1878) ILR 2 Bom 362

Kedarnath Bhattacharji v. Gorie Mahomed. (1866) ILR 14 Calcutta 64

Consideration and Promissory Estoppel

General Proposition
Central London Property Trust V High Trees House Ltd [1957] 1 KB 130
M.P. Sugar Mills v. State of U.P., AIR 1979 SC 621[Promissory Estoppel]

Shield or Sword?
Crabb V Arun DC [1976] Ch. 179
Does estoppel extinguish or suspend rights?
Total Metal Manufacturing V Tungstein Electric [1955] 1 WLR 761

Intention to Create Legal Relations

The test of intention to create legal relations is a test the law uses to mark out
agreements which it thinks are serious enough to be enforced from those which are not
so. Given this role, its function overlaps partly with that of the doctrine of consideration.
It would also be useful to study how exactly the idea of ‘intention to create legal
relations’ is related to Consideration. While reading the materials pertaining to
intention to create legal relations, students should persistently keep in the forefront the
question of whether this doctrine is merely a reincarnation of consideration without the
language of value/ benefit/ detriment or whether it is a free-standing principle. The

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contract law of Europe does quite happily without consideration and all agreements
which are made with the intention of creating legal relations are treated as binding
contracts. The theme here has a relevant connection with the rules relating to ‘offer’. So,
it is useful to revisit some cases relating to offer here while discussing intention to create
legal relations.
Cases:

Balfour V Balfour [1919] 2 KB 571

Coward V Motor Insurers’ Bureau [1963] 1 QB 259

Kleinwort Benson V Malaysia Mining Corporation [1989] 1 All ER 785 (involving the
legal status of comfort letters)

Lucy v. Zehmer, 84 S.E.2d 516

Is ‘intention to create legal relations’ a requirement under Indian Contract Law?

Singh 16-17

Banwari Lal V Sukhdarshan Dayal (1973) 1 SCC 294

CWT Vs Abdul Hussain (1988) 3 SCC 562

Privity of Contract and Consideration

The doctrine of privity of contract states that a contract is a private affair between two
parties consequent upon which third parties neither have rights nor duties. However,
the destiny of the privity rule is tied closely to the doctrine of consideration (See Dunlop
Pnuematic and Tweddle v Atkinson ) . Now, given that the definition of consideration
under the Indian law is much wider than English law does it still make sense to stick to
the English rules of privity? (See M.C.Chako case)
Generally see: Singh 108-123
S. Swaminathan, ‘The Great Indian Privity Trick: Hundred Years of Misunderstanding
Nineteenth Century English Law’ 2016 (16) Oxford University Commonwealth Law
Journal 160-182

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Cases:

Dunlop Pnuematic Tyre Company V Selfridge Co [1915] AC 79

Chinnaya v. Venkataramaya (1881) ILR 4 Madras 137

M.C.Chacko v. The State Bank of Travancore (1969) 2 SCC 343

Orthodox contract scholarship says that consideration, offer and acceptance are the part
of an inviolable trinity. This has been questioned off late. We will no doubt touch upon
some of these criticisms. But given that this is a core course on contract we will go along
with the orthodox idea of this trinity being at the heart of contract.

“At the desire of the promisor”

Raja of Venkatagiri v. Krishanayya, AIR 1948 PC 150

Kedarnath v. Gorie Mohamed, 1886 ILR 14 Cal 64
Doraswami Iyer v. Arunachala Ayyar, AIR 1936 Mad 135 [consider: compare and
contrast the Kedarnath and Doraswami cases. Why did the courts reach two different
opinions on such similar facts?]

Suggested Additional Reading

Currie v Misa, (1875) LR 10 Ex. 153 [Consideration]

Tweddle v Atkinson, [1861] 1 B & S 393 [Privity of Consideration]
Hughes v. Metropolitan Railway Co., (1877) 2 App. Cas. 439 [Promissory Estoppel]

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 CAPACITY

Generally speaking, the capacity to contract requires an analysis of whether a person is

eligible to enter into a contract. Related to this inquiry, is an analysis of the
consequences which follow if persons ineligible to enter into a contract do so and the
legal principles that must be considered.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) Who is competent to contract?

(2) What is a sound mind for the purposes of contracting?

Statutory Provisions:

Contract Act, 1872: Sections 10, 11, 12, 65, 68

Cases:

General Rule

Mohri Bibi v. Dhuromdas Ghose, 1903 30 IA 114

Raj Rani v. Prem Adib AIR 1949 Bom 215
Mathai v. Joseph Mary (2015) 5 SCC 622

Circumventing the General Rule

A.T. Raghava Chariar v. O.A Srinivasa (1916 ) 31MLJ 575

Fernandez v. Gonsalves AIR 1925 Bom 97
B. Sitarama Rao v. Venkatarama Reddiar, AIR 1956 Mad 261 [pay special attention to
the discussion of Subramanyam v. Subba Rao]

Suggested Additional Reading

Nash v. Inman, [1908] 2 KB 1 [Supply of Necessities to Minor]

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Gadigappa Bhimappa v. Balangowda, AIR 1931 Bom. 561 (FB) [Application of rule of
estoppel to minors contracts]
Ajudhia Prasad v. Chandan Lal, AIR 1937 All. 610

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 CONSENT

For a contract to come into existence, the contracting parties must consent to the
contract. But, there might be occasions in which the consent of a party to the
contract has been obtained in a questionable manner.
In this unit, we will discuss the ways in which the Contract Act seeks to intervene
when the fact of consent to a contract might have been influenced by (i) coercion, (ii)
undue influence, (iii) fraud, (iv) misrepresentation, and (v) mistake.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What is consent? And under what circumstances is such content vitiated?
(2) How are coercion, undue influence, misrepresentation, fraud and mistake
defined, and what is their effect on a contract?
(3) What is the difference between coercion and undue influence?
(4) What is the difference between misrepresentation and fraud?
(5) What is the effect of a mistake of fact and a mistake of law?

Statutory Provisions:

Contract Act, 1872: Sections 13-23, 64, 65, 66

Cases:

Threat of self-harm and coercion

Chikham Amiraju v. Chikham Sesamma, 1917 41 Mad. 33

Threat of criminal prosecution and coercion

Askari Mirza v. Bibi Jai Kishori, 1912 16 IC 344

Kishen Lal Kalra v. NDMC, AIR 2001 Del 402

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 Economic Duress

Universe Tankships Inc of Monrovia v International Transport Workers’

Federation [1982] 2 All ER 67
Daiichi Karkaria v ONGC AIR 1992 Bom 309
Atlas Express Ltd. v Kafco [1989] 1 QB 833

Undue Influence

Raghunath Prasad v. Sarju Prasad, 1923 51 I.A. 101

Subhash Chandra Mushib v. Ganda Prasad Mushib, AIR 1967 SC 878

Unconscionability
Central Inland Water Transportation Ltd. v. Brojo Nath Ganguly, AIR 1986 SC
1571

‘Inequality of bargaining power doctrine’

Lloyds Bank v. Bundy, [1975] 1 QB 326 (close analysis of the judgment of Lord
Denning)

Hugh Beale, ‘Unconscionability and Undue Influence’ in Andrew Dyson, James

Goudkamp and Fred Wilmot Smith eds. Defences in Contract (Hart 2016) 87-110.

Fraud

Derry v. Peek, 1899 14 App Cas 337

Ramesh Kumar v. Furu Ram, 2011 8 SCC 613
Vokes v. Arthur Murray, 212 So. 2d 1906 (1968)

Misrepresentation

Union of India v. Benode Kumar, AIR 1926 Cal 48

K.R. Raghavan v. Union of India, Delhi High Court, May 4, 1979
Bhagwani Bai v. LIC, Jabalpur, AIR 1984 MP 126
Esso Petroleum v Mardon, [1976] QB 801

Mistake

Tarsem Singh v. Sukhminder Singh, 1998 3 SCC 471

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Suggested Additional Readings

Bisset v Wilkinson, [1927] AC 177 [Misrepresentation]

Esso Petroleum v Mardon, [1976] QB 801 [Misrepresentation]
Cundy v Lindsay, (1878) 3 App. Cas. 459 [Mistake]
Bell v Lever Brothers, [1932] AC 161 [Mistake]
Smith v Hughes, (1871) LR 6 QB [Mistake]
Couturier v Hastie, (1856) 5 HLC 673 [Mistake]
King’s Norton Metal Co. Ltd v Edridge, Merrett & Co Ltd, (1897) 14 TLR 98
[Mistake]
Philips v Brooks Ltd., [1919] 2 KB 243 [Mistake]
Redgrave v. Hurd, (1881) 20 Ch D 1

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 LEGALITY

A contract must be based not only upon the mutual assent of competent parties, but
must also have a lawful object and lawful consideration. If the object of an agreement,
or the consideration of an agreement, is not lawful, the agreement is unenforceable.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) When is the consideration or the object unlawful?

(2) What is an agreement in restraint of trade, and an agreement in restraint of legal
proceedings?
(3) What are agreements by way of wager?
(4) What is the difference between an unlawful agreement and an illegal agreement?
(5) What is the difference between an absolute restraint and a partial restraint?

Statutory Provisions:

Contract Act, 1872: Sections 23-30

Cases:
Patel v Mirza [2016] UKSC 42[restatement of the principle of ex turpi causa]
BOI Finance Ltd. v. Custodian and Ors., AIR 1997 SC 1952
Niranjan Shankar Golikari v. Century Spinning & Manufacturing Co. Ltd., AIR 1967
SC 1098

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 CONTINGENT CONTRACTS

Contingent means that which is dependent upon something else. A contingent

contract is a contract to do or not to do something, if some event does or does not
happen.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What are contingent contracts?

(2) How are contingent contracts enforced?

Statutory Provisions:

Contract Act, 1872: Sections 31-36

Cases:

Ramzan v. Hussaini, AIR 1990 SC 529

Ganga Saran v. Firm Ram Charan Ram Gopal, AIR 1952 SC 9

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 DISCHARGE OF CONTRACT

Discharge of a contract refers to termination of a contract where it ceases to operate

and the rights and obligations of the parties created by the contract, come to an end.

A contract may be discharged in mainly in one of the following manners:

1. By performance
2. By agreement or consent
3. By impossibility of performance
4. By breach of contract

Contractual obligations may also be discharged by lapse of time and/or operation of

law.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What is the difference between actual performance and attempted performance?
(2) What are the various ways in which contracts are discharged by way of agreement?
(3) What is the doctrine of frustration?
(4) What are the different grounds for impossibility of performance?
(5) What is the difference between actual breach and anticipatory breach?

Statutory Provisions: Sections 37-67, 73

Attempted performance

Cutter v Powell, (1795) 101 ER 573

Impossibility of performance

Taylor v. Caldwell, QB (1863) 3 B & S: 122 ER 309

Frustration of the object

Energy Watchdog v. CERC, 2017 SCC Online SC 378

Satyabrata Ghose v. Mugneeram Bangur, 1954 SCR 310
Krishna and Co. v. The Government of A.P. & Ors., AIR 1993 AP 1

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Discharge by agreement: novation

Ram Khilona & Ors. v. Sardar & Ors., AIR 2002 SC 2548

Discharge by agreement: alteration

Kalianna Gounder v. Palani Gounder, (1970) 2 SCR 455

M. Sham Singh v. State of Mysore, AIR 1972 SC 2440

Discharge by agreement: accord and satisfaction

Kapur Chand Godha vs. Mir Nawab Himayatali Khan, (1963 AIR 250/ 1963 SCR (2)
168)

Discharge by breach
Murlidhar Chatterjee v. International Film Co., AIR 1943 PC 34

Anticipatory breach

Hochster v De La Tour, (1853) 2 E & B 678

Discharge of joint liabilities

Devilal v. Himat Ram, AIR 1973 Raj. 39

Suggested Additional Readings:

Re Moore & Co. Ltd v. Landauer & Co., [1921] 2 KB 519 (Actual Performance)
Shipton, Anderson & Co v Weil Bros & Co., [1912] I KB 574 (Actual Performance)
Ralli Bros. v. Compania Nautera, (1920) 2 K.B. 287 (Impossibility of Performance)
Rash Behary Shaha v. Nrittya Gopal Nundy, (1906) ILR 33 Cal 477 (Anticipatory
Breach)
V.L. Narasu v. Iyer, ILR [1953] Mad. 831 (Self-induced Frustration)
Wasoo Enterprises v. J.J. Oil Mills, AIR 1968 Guj. 57 (Time of Performance)

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 REMEDIES

A contract when breached gives rise to damages that could be claimed by the injured
party, and in certain instances a right to demand specific performance of the contract.
“Damages”, means compensation in terms of money for the loss suffered by the injured
party. Every action for damages raises two problems. The first is the problem of
“remoteness of damage” and the second that of “measure of damages”.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What are the various remedies available to the aggrieved party?
(2) What are direct versus indirect damages? And what are the several ways that courts
measure the amount of damages owed?
(3) What is the difference between a liquidated damages provision and one that imposes
an impermissible penalty?
(4) When can a party require specific performance of a contract?

Statutory Provisions:

Contract Act, 1872: Sections 73-74

The Specific Relief Act: Sections 9-19

Cases:

Remoteness of damage and Measure of damages

Hadley v. Baxendale (1854), 9 Ex 341

Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
Murlidhar Chiranjilal v. Dwarkadas, [1962] 1 SCR 653
C Czarnikow Ltd v Koufos  [1967] UKHL 4
Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48

Niranjan Venkatesan, ‘The Contract Remoteness Rule: Exclusion, Not Assumption of

Responsibility’ in Andrew Dyson, James Goudkamp and Fred Wilmot Smith eds.
Defences in Contract (Hart 2016) 186-213

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Liquidated Damages

Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd, (1915) AC 79 (Lord
Dunedin’s opinion)
Cavendish Square Holdings v Talal El Makdessi [2015] UKSC 67 (a landmark decision
which restates the basis of penalties and practically does away with the old idea of
liquidated damages as a genuine pre-estimate of damage ).
Fatehchand v Balkishan Das [1964] 1 SCR 515
Maula Bux v Union of India [1969] 2 SCC 554
Kailash Nath Associates v Delhi Development Authority [2015] 4 SCC 136

S. Swaminathan, ‘A Centennial Refurbishment of Dunlop’s Contractual Concepts’ (2016)

45 Common Law World Review 248-256.

Duty to Mitigate
Jamaal v. Moola Dawood, (1916) ILR 43 Cal 493

Suggested additional reading:

Anglia Television Ltd. v. Reed, [1971] 3 All E.R. 690
Sylvia Shipping Co Limited v Progress Bulk Carriers Limited [2010] EWHC 542 

Specific Relief

‘Specific and Agreed Remedies for Breach of Contract in Indian Law: A Code of English Law?’
in Mindy Chen-Wishart, Alexander Loke, & Burton Ong eds. Studies in the Contract Laws of
Asia: Remedies for Breach of Contract (Oxford: Oxford University Press 2016) 59-83

Adequacy of Damages (The general limitation)

Beswick V Beswick [1968] AC 58.

QUASI-CONTRACTS

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 There are also many situations in which law and justice require that a certain person
be required to conform to an obligation, although he has neither broken any contract
nor committed any tort. Such obligations are generally described as quasi-contractual
obligations. In this chapter we will under the theory of “Un-just Enrichment” and
theory of “Implied-in-fact” Contract.

Please keep the following questions in the back of your mind as you go through your
reading. This will help you glean the most pertinent information from your reading
materials:

(1) What is a quasi-contract?

(2) What are the elements of unjust enrichment?

Statutory Provisions:

Contract Act, 1872: Sections 68-72

Cases:

State of W.B. v. B.K. Mondal, AIR 1962 SC 779

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