On the Basis of Performance

• Executed contract
In an executed contract both the parties have
performed their promises under a contract.
Example: A contracts to buy a car from B by paying
cash, B instantly delivers his car.
• Executory contract
In a Executory contract both the parties are yet to
perform their promises.
Example: A sells his car to B for Rs. 2 lakh. If A is still to
deliver the car and B is yet to pay the price, it is an
executory contract.

Adv.Benny Pappachen
On the Basis of Performance (contd…..)

• Partly Executed and partly executory contract

In a partly executed and partly executory contract, one
party has already performed his promised and the other
party has yet to execute his promise.

Example: Anuj sells his bike to Bibek. Though Anuj has

delivered the bike, Bibek has yet to pay the price. For Anuj,
it is an executed contract, whereas it is an executory
contract on the part of Bibek since the price has yet to be
paid.

Adv.Benny Pappachen
On the Basis of Performance (contd…..)

• Unilateral Contract
A unilateral contract is also known as a one-sided
contract. It is a type of contract where only one party
has to perform his promise.

Example: Anuj promises to pay Rs. 1000 to anyone who

finds his lost cellphone. B finds and returns it to Anuj.
From the time B found the cellphone, the contract came
into existence. Now Anuj has to perform his promise, i.e.
the payment of Rs. 1,000.

Adv.Benny Pappachen
On the Basis of Performance (contd…..)

• Bilateral contract
A Bilateral contract is one where the obligation or
promise is outstanding on the part of both the parties. It
is also known as a two-sided contract.

Example: A promises to sell his car to B for Rs. 1 lakh

and agrees to deliver the car on the receipt of the
payment by the end of the week. The contract is bilateral
as both the parties have exchanged a promise to be
performed within a stipulated time.

Adv.Benny Pappachen
 On the Basis of validity or Enforceability

•Valid contract
If the contract entered into by the parties and satisfies all the elements
of a valid contract as per the act, it is said to be a valid contract.

•Void contract
Section 2 (j) states as follows: “A contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable”.
Thus a void contract is one which cannot be enforced by a court of law.
Example: Mr A agrees to write a book with a publisher. After few days,
A dies in an accident. Here the contract becomes void due to the
impossibility of performance of the contract.
It may be added by way of clarification here that when a contract is
void, it is not a contract at all but for the purpose of identifying it, it has
to be called a void contract.
Adv.Benny Pappachen
On the Basis of validity or
Enforceability(contd…)
• Voidable contract
Section 2(i) defines that an agreement which is enforceable
by law at the option of one or more parties but not at the
option of the other or others is a voidable contract.
This in fact means where one of the parties to the
agreement is in a position or is legally entitled or authorized
to avoid performing his part, then the agreement is treated
and becomes voidable.
Such a right might arise from the fact that the contract may
have been brought about by one of the parties
by coercion, undue
influence, fraud or misrepresentation and hence the other
party has a right to treat it as a voidable contract.
Ex: ‘A’ agrees to sell his car for Rs. 80000 to ‘B’ The
consent of ‘A’ is obtained using force. Now this contract is
avoidable (cancelable) only at the option of ‘A’, as only ‘A’
can cancel contract or avoid the contract
Adv.Benny Pappachen
On the Basis of validity or
Enforceability(contd..)
• Illegal contract
Illegal contract are those that are forbidden by law. All illegal
contracts are hence void also. Because of the illegality of their
nature they cannot be enforced by any court of law.
In fact, even associated contracts cannot be enforced.
Contracts which are opposed to public policy or immoral are
illegal. Similarly contracts to commit a crime like supari
contracts are illegal contracts.

• Unenforceable contract
A type of contract which satisfies all the requirements of the
contract but has technical defects is called an unenforceable
contract. A contract is said to have a technical defect when it
does not fulfil the legal formalities required by some other act.
When such legal formalities are compiled are complied with,
later on, the act becomes enforceable.

Adv.Benny Pappachen
DIFF B/w VOID AND VOIDABLE CONTRACT

Adv.Benny Pappachen
Adv.Benny Pappachen
Answer with Reasons

Adv.Benny Pappachen
M mows L’s lawn without being asked by L to do so. L watches M
do the work but does not attempt to stop him. Is L bound to pay
any charges to M?
Hint: Yes, L is bound to pay M a reasonable remuneration
C orally offered to pay A, an auto mechanic, ` 50 for testing a
used car which C was about to purchase from D. A agreed and
tested the car. C paid A ` 50 in cash for his services. Is the
agreement between C and A (a) express or implied, (b) executed
or executory, (c) valid, void, voidable or unenforceable?
[Hint: The agreement is (a) express, (b) executed,Adv.Benny
and (e) valid.]
Pappachen
Offer and Acceptance

Adv.Benny Pappachen
 Proposal (or Offer) [S.2 (a)]

Offer is not only one of the essential elements of a contract but it is

the basic building block also.
An offer is synonymous with proposal. The offeror or proposer
expresses his willingness “to do” or “not to do” (i.e., abstain from
doing) something with a view to obtain acceptance of the other
party to such act or abstinence. Thus, there may be ‘positive’ or
‘negative’ acts which the offeror is willing to do.
Example: (i) Anna offers to sell her a book to Begum. Anna is
making an offer to do something, i.e., to sell her a book. It is a
positive act on the part of the offerer.
(ii) Amin offers not to fi le a suit against Bedi, if the latter pays Amin
the amount of ` 10,000 outstanding. Here the act of Amin is a
negative one i.e. he is offering to abstain from filing a suit

Adv.Benny Pappachen
Modes of making an Offer

Express offer.
It means an offer made by words (whether written or
oral). The written offer can be made by letters,
telegrams, telex messages, advertisements, etc. The
oral offer can be made either in person or over
telephone.
Examples:
A real estate company proposes, by a letter, to sell a flat
to Rajiv at a certain price. This is an offer by an act by
written words (i.e., letter). This is also known as an
express offer.
If the company proposes, over telephone, to sell the flat
to Rajiv at a certain price then this is an offer by an act
(by oral words). This is an express offer.

Adv.Benny Pappachen
Modes of making an Offer (contd…)

Implied offer.
It is an offer made by conduct. It is made by positive acts
or signs so that the person acting or making signs
means to say or convey something. However, silence of
a party can, in no case, amounts to offer by conduct.
Example:
A company owns a fleet of motor boats for taking people
from Mumbai to Goa. The boats are in the waters at the
Gateway of India. This is an offer by conduct to take
passengers from Mumbai to Goa. Even if the in-charge
of the boat does not speak or call the passengers, the
very fact that the motor boat is in the waters near
Gateway of India signifies company’s willingness to do
an act with a view to obtaining the assent

Adv.Benny Pappachen
Modes of making an Offer (contd…)

Offer by abstinence
An offer can also be made by a party by omission to do
something. This includes such conduct or forbearance
on one’s part that the other person takes it as his
willingness or assent.
Example:
Akbar, a creditor, offers not to file a suit against Begum,
a debtor, if the latter pays him the amount of ` 2000
outstanding. This is an offer by abstinence or omission to
do something

Adv.Benny Pappachen
 Modes of making an Offer (contd…)
Specific and general offers.
An offer can be made either to
(i) A definite person or a group of persons, or to
(ii) the public at large.
An offer made either to a definite person or a group of
persons is a specific offer. The specific offer can be
accepted by that person to whom it has been made. Thus,
if a real estate company offers to sell a flat to Amar at a
certain price, then it is only Amar who can accept it.
The offer made to the public at large is a general offer. A
general offer may be accepted by any one by complying
with the terms of the offer. The celebrated case of Carlill
vs. Carbolic Smoke Ball Co. (1813) is an excellent
example of a general offer.

Adv.Benny Pappachen
 Case Law

Carlill vs Carbolic Smoke Ball (1893)

Business Laws-Prof.Benny Pappachen

Adv.Benny Pappachen
 Facts of the Case
 The Carbolic Smoke Ball Co. made a product called
the "smoke ball".

 Itclaimed to be a cure for influenza and a number of

other diseases.

 The smoke ball was a rubber ball with a tube attached.

It was filled with carbolic acid (or phenol).

 The tube would be inserted into a user's nose and

squeezed at the bottom to release the vapours. The
nose would run, ostensibly flushing out viral
infections.
 The Company published advertisements in the Pall
Mall Gazette and other newspapers on November 13,
1891, claiming that it would pay £100 to anyone who
got sick with influenza after using its product
according to the instructions provided with it.

Fig 1: Carbolic Smoke Ball

 £100 REWARD
WILL BE PAID BY THE

CARBOLIC SMOKE BALL CO.

to any Person who contracts the Increasing Epidemic,

INFLUENZA,
Cold, or any Diseases caused by taking Cold, after having used the
CARBOLIC SMOKE BALL according to the printed directions
supplied with each Ball.

£1000 IS DEPOSITED
with the ALLIANCE BANK, Regent Street, showing our sincerity
in the matter.
 Mrs Louisa Elizabeth Carlill saw the advertisement,
bought one of the balls and used it three times daily
for nearly two months until she contracted the flu on
17 January 1892.

 She
claimed £100 from the Carbolic Smoke Ball
Company.

Fig 2: Ms Lousia Elizabeth Carlill

 Continued…..
 The defendant raised the following arguments to
demonstrate the advertisement was a mere invitation
to treat rather than an offer:
 The advert was a sales puff and lacked intent to be an
offer.
 It is not possible to make an offer to the world.
 There was no notification of acceptance.
 The wording was too vague to constitute an offer since
there was no stated time limit as to catching the flu.
 There was no consideration provided since the 'offer'
did not specify that the user of the balls must have
purchased them.
 Issues/problems of the case
 Was the advertisement an offer?

 To whom had the offer been made?

 IfMs. Carlill had accepted the offer, what

had been the consideration?

Let’s have discussion on the given

problems......
The Court of Appeal held that Mrs Carlill was entitled
to the reward as the advert constituted an offer of a
unilateral contract which she had accepted by performing
the conditions stated in the offer. The court rejected all the
arguments put forward by the defendants for the following
reasons:
The statement referring to the deposit of £1,000 demonstrated
intent to demonstrate the company’s sincerity in paying the
reward.and therefore it was not a mere sales puff. (Intention to
create legal relation)
It is quite possible to make an offer to the world.

In unilateral contracts there is no requirement that the offeree

communicates an intention to accept, since acceptance is through
full performance.
 There was consideration in this case for two reasons:
 Carbolic received a benefit i.e. In the sales directly beneficial
to them by advertising the Carbolic Smoke Ball.
 The direct inconvenience to the person who uses the smoke
ball 3 times a day x 2 weeks according to the directions at the
request of Carbolic.
 In other words, performance of the specified conditions
constitutes consideration for the promise.

Fig 3: Lord
Justice Lindly

Fig 4: Lord Justice

A.L. Smith
 Yes, the advertisement was an offer, more
specifically General Offer
 General offer - When offer is given to entire world at a
large.

 The offer had been made to the whole world – and

will ripen into a contract with anybody who comes
forward and performs the condition mentioned in the
advertisement.
 The nature of Mrs Carlill's consideration (what she
gave in return for the offer) was good, because there
is both an advantage in additional sales in reaction to
the advertisement and a "distinct inconvenience" that
people go to when using a smoke ball.
ESSENTIALS CHARACTERISTICS OF A VALID
OFFER

1. The offer must be capable of creating legal relations

2. The offer must be certain, definite and not vague
3. The offer must be communicated to the other party
4. The offer must be made with a view to obtaining the consent of
the offeree
5. The offer must be distinguished from an answer to a question
6. Invitation to an offer is not an offer:
7. The offer must be distinguished from mere statement of intention
8. Special conditions attached to an offer must also be
communicated

Adv.Benny Pappachen
ESSENTIALS CHARACTERISTICS OF A VALID OFFER(contd…)

9. The offer may be positive or negative

10.The offer may be express or implied
11. The offer may be specific or general
12. The offer should not contain a term the non-
compliance of which would amount to acceptance

Adv.Benny Pappachen
Lalman Shukla Vs. Gauri Dutt
(1913)
Lalman Shukla V. Gauri Dutt is touted as a landmark judgment for
the validity of the contract under the Indian Contract Act, 1872. The
case was filed in the Allahabad high court in the year 1913 and was
presided over by Justice Banerji at the Allahabad High Court.
The case between the plaintiff Lalman Shukla and the defendant
Gauri Dutt examined the validity of the contract in the absence of
prior acceptance.
According to the judgement given by the Allahabad high court, a
contract without acceptance is void. Therefore, despite his services,
the plaintiff Lalman Shukla was not entitled to get the reward as the
mere performance of the act does not mean an assertion to the
contract. Additionally, to turn an agreement into a proposal, it has to
be enforceable by law. And lastly, the communication of the proposals
means that the person to whom the offer or the proposal is made
must come to the knowledge of the acceptor before accepting the
proposal.

Adv.Benny Pappachen
Lalman Shukla V. Gauri Dutt is touted as a landmark judgment
for the validity of the contract under the Indian Contract Act,
1872. The case was filed in the Allahabad high court in the
year 1913 and was presided over by Justice Banerji at the
Allahabad High Court.
The case between the plaintiff Lalman Shukla and the
defendant Gauri Dutt examined the validity of the contract in
the absence of prior acceptance.
According to the judgement given by the Allahabad high court,
a contract without acceptance is void. Therefore, despite his
services, the plaintiff Lalman Shukla was not entitled to get the
reward as the mere performance of the act does not mean an
assertion to the contract. Additionally, to turn an agreement
into a proposal, it has to be enforceable by law. And lastly, the
communication of the proposals means that the person to
whom the offer or the proposal is made must come to the
knowledge of the acceptor before accepting the proposal.
Adv.Benny Pappachen
Facts Of The Case:
• In this case, the defendant Gauri Dutt’s Nephew had absconded and was
nowhere to be found. After the defendant became aware of the same, Dutt
had sent all the servants in search of the missing nephew. The plaintiff Lalman
Shukla was one of the servants who had gone out in search of the nephew. The
plaintiff eventually found him and brought him back.
• When Lalman Shukla had left the house to leave for Haridwar from Kanpur he
was handed some money for his railway fare and other expenses. As soon as
Lalman Shukla had left the house, the defendant announced a reward of Rs.
501 for whosoever found Dutt’s nephew. Shukla had no idea that such an
announcement was made. The plaintiff found the missing nephew and brought
him back to his home in Kanpur. Six months after the said incident occurred,
Dutt sacked the plaintiff.
• After being removed from the job, the plaintiff claimed the money from the
defendant and the latter denied to pay the said remuneration. As a result the
plaintiff Lalman Shukla filed a case against Gauri Dutt, his master, for not
rewarding him as he was entitled to.

Adv.Benny Pappachen
Issues Raised In This Case:

The main issues which were raised in this case were as

follows:
• Whether Lalman Shukla was entitled to get the reward
from Gauri Dutt for tracing the missing boy.
• Whether there was a valid acceptance of the offer made
by the plaintiff.
• Whether there exists a contract or whether the situation
amounts to a contract between the two.

Adv.Benny Pappachen
Arguments On Behalf Of The Plaintiff (Lalman Shukla)

• The plaintiff Lalman Shukla strongly affirmed that the very

performance of him finding the missing boy was sufficient enough
for him to be entitled to the reward. Since according to Gauri
Dutt’s condition whoever found the lost boy and brought him back
would get the reward. Therefore, as per the condition of the
defendant, the plaintiff had traced the boy and brought him back.
• He stated that it is not important to have prior knowledge about the
reward, especially under this circumstance. He also emphasized
the fact that section 8 of the ICA 1872, states that ‘the
performance of the act or the acceptance of any consideration of a
proposal is an acceptance of the proposal’.And in this present
case, the condition as stated by the defendant Gauri Dutt was to
find the missing child to be rewarded Rs 501. He stated that it was
immaterial that the person who has performed the act must have
the knowledge of the condition to claim the reward.

Adv.Benny Pappachen
Arguments On Behalf Of The Gauri Dutt
• The defendant asserted and strongly argued that the plaintiff
Lalman Shukla was not aware of the offer and had no knowledge
about it before finding the defendant’s nephew. So an offer without
the knowledge of the offeree or the promise cannot be accepted
and also there was no such possibility for the plaintiff to accept the
offer without even knowing about it. Gauri Dutt argued that
according to section 2(a) of the Indian Contract Act, 1872, “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
other to such act or abstinence, he is said to make a
proposal”. Further under section 2(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”Therefore, the defendant contended that assent was
essential to create a contract between both parties. This means
that before accepting the offer the offeree must have complete
knowledge about the facts to give assent or approval. But in this
particular case, the plaintiff was completely unaware of the reward
which was associated with it and the plaintiff was merely doing his
duty.
• Therefore, according to section 2(h) of the ICA, since there was no
acceptance there was no agreement that can be enforceable by
law.So according to the defendant Gauri Dutt, Lalman Shukla was
not entitled to get the reward and hence he couldn’t claim it.
Adv.Benny Pappachen
The Judgement
• In the said case, the petitioners’ appeal against the
respondent Gauri Dutt was dismissed by the court.
• After analyzing all the facts of the case, the honorable high
court held that for creating or entering into a valid contract
there has to be knowledge and assent to the offeree made by
the proposer. Here, the plaintiff did not know the reward
before performing his act. He only came to know about it
later, in which case there was no possibility of accepting the
offer.
• Hence, there was no contract. Therefore, Lalman Shukla was
not entitled to get or claim the reward. The judge reiterated
that the plaintiff was fulfilling his obligations as a servant of
tracing the missing boy which was a part of his duty.
Therefore, the plaintiff’s suit against the defendant was
completely dismissed by the court.

Adv.Benny Pappachen
 Revocation of Offer
There are many reasons due to which the offer lapses or is revoked such as:
(i) An offer is revoked 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. Therefore, if the acceptance is made in ignorance of the
death, or insanity of the offeror, there would be a valid contract
(ii) An offer lapses by the death or insanity of the offeree before acceptance,
(iii) An offer terminates when rejected by the offeror,
(iv) An offer terminates when revoked by the offeror before acceptance by the
offeree,
(v) An offer terminates by not being accepted in the mode prescribed, or if no
mode is prescribed, in some usual and reasonable mode (or manner),
(vi) A conditional offer terminates when the condition is not accepted by the
offeree,
(vii) An offer terminates by counter-offer by the offeree.
Adv.Benny Pappachen
OFFER and INVITATION TO OFFER

An invitation to offer will turn into a contract only when an offer

is made by the seller to the buyer. The difference, therefore, lies
in the word “invitation”. It is an invitation to any potential
buyer to make an offer on the goods to be sold. There are several
examples of an invitation to offer: auctioneering, display of
goods in a shop, an invitation to tender, display of the menu of a
restaurant, advertisements in a newspaper, an invitation to see
an apartment for sale/rent, recruitment offers, request for
proposals, etc

Business Laws-Prof.Benny Pappachen

Adv.Benny Pappachen
Business Laws-Prof.Benny Pappachen
Adv.Benny Pappachen
CASE LAW

Harvey vs Facey -1893

Adv.Benny Pappachen
Harvey vs Facey case is one of the important case law in contract
law as it defines the difference between an invitation to offer and
offer and it also throws a light explaining completion of the
offer as it plays a very important role in the agreement formation.

Adv.Benny Pappachen
RELEVANT ACT AND SECTION:

Section 2(a), Indian Contract Act, 1872–“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 other to such act or
abstinence, he is said to make a proposal.”
Section 2(b), Indian Contract Act, 1872–“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”
Once the acceptance is communicated, it can’t be
revoked or withdrawn.
An invitation to treat (offer)–It’s a concept of
Contract Law which refers to an invitation for a
party to make an offer to enter into contractual
negotiation.
Adv.Benny Pappachen
FACTS OF THE CASE:
Mr. Harvey, who was running a partnership company in Jamaica,
wanted to purchase a property owned by Mr. Facey,
On October 6th, 1893 Mr. Harvey sent a telegram regarding the
purchase of property to Mr. Facey who was traveling on the train on
that day .
Telegram said “Will you sell us Bumper Hall Pen? Telegraph
lowest cash price.” Replying to the question Mr. Facey said “Lowest
price for Bumper Hall Pen-£900.” Furthermore, Mr. Harvey replied
“We agree to buy Bumper Hall Pen for the sum of nine hundred
pounds asked by you. Please send us your title deed in order that
we may get early possession.”
Mr. Facey refuses to sell the property resulting in Mr. Harvey sued
him, claiming that the contract existed between him and stated that the
telegram was an offer and that he has accepted it.
The Petition was dismissed on the first trial by Justice Curran on the
ground that “The agreement as alleged by the Mr. Harvey did not
denote a concluded contract” but won the claim in the appellate
court which quashed the trial court judgement declaring that the
binding agreement had been proved. Upon taking leave from the
appellate court, he appeals to the Queen of Council (i.e. The Privy
Council).

Adv.Benny Pappachen
ISSUES FRAMED:
1.Was there an explicit offer from Mr. Facey to Mr. Harvey for the sale
of the said property for the consideration of £900 and is it capable of
acceptance?
2.Was there a valid contract or not?
JUDGEMENT:
• The Privy Council held that no agreement has ever existed between
the parties. The first conversation is only a request for information, not
an offer that could be accepted. Therefore, the telegram sent by Mr.
Facey was not credible. It was concluded that the telegram sent by Mr.
Facey is only a piece of information(invitation to offer). At no point in
time, Mr. Facey made an offer that could be accepted.
CONCLUSION:
• A valid contract requires a proposal and an acceptance to it and to
make contract binding acceptance of the proposal must be notified to
the proposer because a legally enforceable agreement required
sureness to hold. This case clearly explains the differentiation between
invitation to offer and offer and it also throws a light explaining the
nature of the offer as it plays a very important role.
Adv.Benny Pappachen
 Acceptance

According to Sec 2(b) of Indian contract act 1872, defines the term acce
ptance “as a proposal or offer is said to have been accepted when the p
erson to whom the proposal is made signifies his assent to the proposa
l”.
The acceptance of an offer may be
Express or Implied.
It is express when the acceptance has been signified either in writing or
by words of mouth or by performance of some required act of the
offeree. The acceptance by performing the required act may be
exemplified with reference to Carlill v. Carbolic Smoke Ball Co. case

Adv.Benny Pappachen
Implied acceptance
Acceptance is implied when it is said to be gathered from
the surrounding circumstances or the conduct of the
parties.
Who can accept the an offer
An offer can be accepted only by the person or persons for
whom the offer is intended. An offer made to a particular
person can only be accepted by him because he is the
only person intended to accept. But, an offer made to the
world at large can be accepted by any person whatsoever.
To constitute a valid acceptance the assent must be
communicated to the offeror.

Adv.Benny Pappachen
RULES RELATING TO ACCEPTANCE

1. Acceptance must be given only by the person to whom the offer

is made.
2. It must be communicated to the offeror.
3. Acceptance must be absolute and unqualified [Sec. 7 (1)].
4. Acceptance must be expressed in some usual and reasonable
manner, unless the proposal prescribes the manner in which it is
to be accepted [Sec. 7 (2)].
5. Acceptance must be given within a reasonable time and before
the offer lapses and or is revoked.
6. Acceptance must succeed the offer.
7. Rejected offers can be accepted only, if renewed.
8. It cannot be implied from silence.

Adv.Benny Pappachen
 REVOCATION OF AN ACCEPTANCE
An acceptance may be revoked at any time before the
communication of its acceptance is complete as against the
accepter, but not afterwards.
According to section 5 “An acceptance may be revoked at any
time before the communication of the acceptance is complete as
against the acceptor but not afterwards”.
In fact, revocation of acceptance amounts to withdrawal of the
acceptance to a proposal by the offeree himself.
According to English law, an acceptance once complete, cannot
be revoked. Acceptance is necessarily irrevocable for it is
acceptance that binds both the parties. Anson has said,
"Acceptance is to offer what a lighted match is to a train of
gunpower. It produces something which cannot be recalled or
undone". Therefore, when the acceptance is effected properly
the offer ceases to be an offer and it becomes an enforceable
contract.
Adv.Benny Pappachen
Capacity to Contract (Ss. 10-12)

Adv.Benny Pappachen
Capacity to Contract (Ss. 10-12)

Any one cannot enter into a contract; he must be competent to

contract according to the law. Every person is competent to contract if
he
(i) is of the age of majority,
(ii) is of sound mind, and
(iii) is not disqualified from contracting by any law to which he is
subject (s.11).

Adv.Benny Pappachen
 Capacity of a minor to enter into a Contract
The position of minors contract may be summed up as follows:
1. A contract with a minor is void, and a minor, therefore cannot bind himself
by a contract
2. A minor can be a promisee or a beneficiary
3. A minor’s agreement cannot he ratified by the minor on his attaining
majority as the agreement is void ab initio
4. If a minor has received any benefit under a void contract, he cannot be
asked to refund the same
5. A minor is always allowed to plead minority, and is not estopped to do so
even where he had procured a loan or entered into some other contract
by falsely representing that he was of full age.
6. A minor cannot be a partner in a partnership firm. However, a minor may,
with the consent of all the partners for the time being, he admitted to the
benefits of partnership (Section 36 of the Indian Partnership Act, 1932).
7. A minor’s estate is liable to a person who supplies necessaries of life to a
minor, or to one whom the minor is legally bound to support, according to
his station in life. This liability of the minor is not on the basis of any
contract, but on the basis of an obligation resembling a contract

Adv.Benny Pappachen
CASE LAW

Adv.Benny Pappachen
 Mohoribibi vs Dharmodas Ghose case

Mohoribibi vs Dharmodas Ghose case gave the well-defined

principle that any contract entered by a minor is void ab initio
and doctrine of restitution turns out to be unenforceable in such
circumstances.
Competency is a significant element in contract law, it is the
foundation of every valid contract. Section 11 of the Indian
Contract Act 1872 asserts that every individual of the age of
majority is competent to contract but initially there was an
ambiguity in relation to the status of contracts entered by a
minor
and whether section 65 of the act which states the principle of
restitution is applicable.

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 FACTS
• Dharmodas Ghose (minor) mortgaged some of his properties in
favor of Brahmo Dutt (money-lender) and received a certain sum of
money.
• The whole process was carried out through Kedar Nath(advocate)
with no direct involvement of Brahmo Dutt.
• During the execution of the mortgage deed, Dharmodas Ghose
was an infant/minor and the fact of his infancy was known to Kedar
Nath as the mother of Dharmodas Ghose send a letter informing
about the same which was fully acknowledged by Kedar Nath, and
yet he continued with the execution of the deed.
• Thereafter the mother of Dharmodas Ghose filed a legal suit for
declaring the deed void, as Dharmodas Ghose was a minor.
• A second appeal was made in the High Court.

Adv.Benny Pappachen
ISSUE/PROBLEMS OT THE CASE

• Whether the contract by a minor be considered void or

voidable?
• Whether Dharmodas Ghose is liable for the repayment of
the amount received by him?

Adv.Benny Pappachen
 Judgements

• Any sought of contract with a minor or infant is void/void ab-

initio (void from beginning).

• Since minor was incompetent to make such mortgage hence

the contact such made or commenced shall also being void
and not valid in the eyes of law.

• The minor i.e. Dharmodas Gosh cannot be forced to give

back the amount of money that was advanced to him,
because he was not bound by the promise that was
executed in a contract.

Adv.Benny Pappachen
Mental Incompetence Prohibits a Valid
Contract
A person who is not of sound mind may not enter into a
contract; he must be of sound mind so as to be competent
to contract.
A test of soundness of mind has been laid down by law. A
person is said to be of unsound mind for the purpose of
making a contract if at the time he makes it he is incapable
of understanding it and of forming a rational judgement as
to its effect upon his interests.
A person who is usually of unsound mind but occasionally
of sound mind may make a contract when he is of sound
mind (S.12).

Adv.Benny Pappachen
 PERSONS DISQUALIFIED BY LAW
Alien Enemy (Political Status)

An alien is a person who is a citizen of a foreign country.

Thus, in the Indian context, an alien is a person who is
not a citizen of India.
An alien may be
(i) an alien friend or (ii) an alien enemy.
An alien friend whose country is at peace with the
Republic of India, has usually the full contractual
capacity of a natural born subject.
In case of contracts with an alien enemy (i.e., an alien
whose country is at war with India) the position may be
studied under two heads; (a) contracts during the war;
and (b) contracts made before the war.

Adv.Benny Pappachen
Foreign Sovereigns and Ambassadors (Political Status)
Foreign sovereigns and accredited representatives of a foreign
state or Ambassadors can enter into contracts and enforce those
contracts in our courts
A company incorporated under the Companies Act, 1956, or a
statutory corporation brought into existence by passing a
Special Act of Parliament (corporate status). A company cannot
go beyond its objects mentioned in its memorandum of
association. The company’s activities are confined strictly to the
objects mentioned in its memorandum, and if they go beyond
these objects, then such activities are ultra vires and void, and
cannot be ratified even by the assent of the whole body of
shareholders.
Municipal Corporations (local bodies) are disqualified from
entering into contracts which are not within their statutory powers.
Insolvent persons (legal status). A person adjudicated as
insolvent is incompetent to contract until he obtains a certificate of
discharge from the court
Adv.Benny Pappachen