Indian Contract

Act, 1872

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 Nature and Essential
of a Contract
Chapter - 1

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`The term “Contract” in ordinary sense means an
agreement between two persons.
The law of contract seeks to regulate the behavior of
persons who make contracts, so that any conflict arises
between these persons later may be resolved.
Meaning of Contract:
Sec. 2 (h) defines a contract: “ An agreement
enforceable by law is a contract.”
e.g. C makes an agreement with D to sell him some
goods for Rs. 25000.

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-B invites a friend S to dinner. He makes elaborate
preparations. S fails to turn up for dinner and all the
preparation made by B go waste. Since this was a
contract between the parties, B cannot take S to court
for legal action against him for breaking the
commitment to come for the dinner.

How could it be said that the above was not a contact

although it was clearly an agreement between the two
friends?

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 Essential of Valid Contract
1.An Agreement or offer and acceptance:
-Agreement = Proposal + their acceptance
-Agree. Must made by two person, one is making offer
and another is accepting this offer.
2.Intention to create legal relation
-Court would like to measure the degree of seriousness.
-Not every loose conversation, not any exchange of
pleasantries, not a casual social commitment, consider
as a contact.

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3.Competentnce of Parties
Everybody is able to make contract except Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.
4.Consideration
“Something in Return”
e.g. B promise to S that He will buy his bike for Rs.35000.
5.Free Consent
If the parties make the agree. without any kind of pressure
or misguidance, then the agree. would be the result of Free
Consent.
“Consensus ad idem” between parties, which means that
there must be complete understanding of each other’s mind
between them.

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 6.Lawful object and consideration
e.g. I will kill you Mr. if you will give mw 100 bottle wine.
7.Not expressly declared void (Cancelled) agreement
Always void i.e. without legal effect because of their nature.
e.g. Agree. made without consideration
Agree. to do impossible act.
Agree. on the meaning of which uncertain etc.
8.Certain Formalities
-Necessary fulfillment of certain formalities for making
certain specific types of contract
-Made in written or in presence of witness.

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 Case Law
A invite B to out for dinner together. B accepts the offer. A hires a taxi but B
does not turn up. A has to give the dinner some compensation. Can A recover
it from B?
V offer to donate Rs. 11000 to hospital. The hospital accept the offer. Can it
recover the amount ?

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 Chapter – 2

OFFER
AND
ACCEPTANCE

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 OFFER AND ACCEPTANCE
Formation of Agreement required two steps , making of
a proposal by one person and acceptance of this proposal
by other.
Agreement= Offer + their acceptance

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 The
The Proposal
Proposal or
or Offer
Offer
Sec.
Sec. 2
2 (a)
(a) define
define an
an offer
offer in
in these
these words:
words:
“When
“When one
one person signifies
signifies to
to another
another
his
his willingness
willingness to
to do
do or
or to
to abstain
abstain from doing anything,
anything,
with
with a view to obtaining the assent (acceptance) of that
other
other to
to such
such act
act or
or abstinence,
abstinence, he
he is
is said
said to
to make
make aa
proposal”
proposal”
e.g.
e.g. R
R tells
tells S
S :: ““ II am
am ready
ready to
to sell
sell my
my machine
machine for
for
Rs.9000,are
Rs.9000,are youyou ready
ready to
to buy”.
buy”.
This
This is
is clear
clear offer
offer from R to S.

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 Requirements for Valid Offer
1.Offer must be express or implied
-Must be made in a manner which leave no doubt about it.
-Proposal made in words, the promise is said to be express,
and proposal mad otherwise than in words, it is said to be
implied.
e.g. B tells S : “Can you repair my computer?” – Express
offer
A street seller of photo-albums quietly extends a piece
before a passer –by who takes it in his possession.-Implied
offer to sell.
2.Offer must intend to create legal relation
3.Offer must be certain and not vague in meaning
Offer must be definite and certain in meaning

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 4.Offer may be specific or General
There must be destination of offer.
-If offer is targeted for one specific person, it is called a specific
offer.
-If it is targeted for the whole world at large, it is called general
offer. e.g. Advertisement

5. Offer must be communicated

Lalman Shulka vs Gauri Dutt
6.Offer must be distinguished from invitation to offer
e.g. Availability of Books in Book Store being available for
letting out. Display of suit with price tag-All are example of
invitation to offer. Advertiser may or may not sell this.
e.g. Publishing of Time Table by railways are example of
expression of an intention.

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 What is difference between Invitation to Offer and General
Offer?
Invitation to Offer: Aims at taking the customer to the
advertiser to start negotiation.
General Offer: Aims at leading the offeree (to whom offer
made) to the performance of specified condition which
would amount to acceptance of offer.
7.An Offer should not contain a term forcing an action
on Offeree
e.g. B tells S that in case no reply is receiving from S
within days , it will treated as acceptance of his offer.
S are not bound by this offer.

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 The Acceptance

Sec. 2 (b) “When a person to whom the proposal is made ,

signifies his assent thereto, the proposal is said to be
acceptance.”
A proposal , when accepted become a promise.
Requirements for Valid Acceptance
1.By a proper person-
-The proper person to accept the offer is the one to whom
it is targeted.
-Offeror cannot be forced to be bound in a contract with a
person with whom he did not want to be involved.

2.Within proper time

Time specified by Offeror.
e.g. Advertisement of IPO

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 3.Must be absolute and unqualified(total and without
condition)
Offeree should neither add to nor reduce from the offer
anything from his side.
-B offer to sell his Car to S at Rs.20,000. S accept the offer
with the condition that payment shall take after a month.
This is counter offer from S to B. The offer from B
stand rejected.

4.Must be Communicated
Mental acceptance is no acceptance.

5.Must be given in a proper Mode.

-If Offeror prescribed ay mode of acceptance , it must be
adopted by offeree for acceptance. E.g. by fax, by mail, by
registered post etc

e.g. A makes an offer to B and says : “If you accept the

offer, replay by e-mail only.” B send the reply by post.
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 6.Accepatnce must succeed the offer
Two identical cross offers can not form an agreement.
e.g. A sends a letter to B containing an offer. Almost at
the same time, B also sends a latter to A containing an offer
on exactly same lines The two offer cross each other during
postal journey. So they called identical cross offer. Can
both of them together form an agreement between A and B
on the logic that they represent a common desire and
common understanding ?
Only two offer are made and there is no acceptance.

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 7. Offer once rejected can not be accepted.
B makes an offer to give job to H at Rs. 7000 pm salary. S says,
“No, I want Rs. 8000 pm month. B refuses. S says, “ Alright , I will
work for Rs.7000”. B says , “I am not interested in you.” There is
no contract between B and S because B’s initial offer came in to
end with its rejection by S through a counter offer. Now, it is S’s
offer to work for Rs. 7000 which B is rejecting. (Hyde vs Wrench)

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Communication of Offer, Acceptance and
Revocation
1.Communication of Offer
An offer is said to have been made when it comes
to knowledge of the other person for whom it was
intended.
2.Communication of Acceptance
For Acceptance two steps required: (i) Offeree
transmits his acceptance and (ii) Message reaches
the Offeror.
Brogden Vs Metropolitan railways Co.
i. Communication of acceptance from offeree is
binding upon the Offeror as soon as the latter of
acceptance is posted so as to be beyond the
Offeree’s control.
ii. Communication of acceptance from offeree is
binding upon the offeree himself only when it
comes to the knowledge of the Offeror.

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 e.g. Mr. X sends a latter of offer to Y on August 5 which
may reach Y on August 10. Y post his latter of acceptance
on August 15 which may comes to knowledge of X on
August 20.
Offer said to be made on = August 10
Offer said to be accepted for Y on = August 15
Offer said to be accepted for X on = August 20
Position of time gap between August 15 to August 20 =
This time is available for Y to withdraw his acceptance.

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 3.Communication for Revocation
Sec 5 provide rule about revocation of offer and
acceptance. It states:
“A proposal may be revoked at any time before the
communication of its acceptance is complete from
acceptor as against the proposer, but not afterward.”
“An acceptance may be revoked at any time before the
communication of the acceptance is complete as against
the acceptor ,but not afterward.”

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 X makes an offer to Y on 5th May, it reach to Y on 10th May.
Y posted of his acceptance to X on 15th May. It reaches to X
on 20th May.

X send withdrawal of his offer on 9th May, it reaches to Y

on 14th May.
-It will come to effect on 14th May only, even though X
send on 9th May. It is called revocation of offer.

Y send withdrawal of his acceptance on 17th May , it reaches

to X on 19th May.
-It will come to effect on 19th May only, not on 17th May. It
is called revocation of Acceptance.

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1. X makes an offer to Y on 1th May, it reach to Y on 5th
June. When Offer is completed?
-It is competed only on 5th June.

2. Y posted of his acceptance to X on 10th June. It reaches

to X on 30th June. When acceptance is completed?
- It is completed only on 30th June.

3. X want to withdraw his offer, which is the last date?

-It must be before 10th June, not thereafter.

4. Y want to cancel his acceptance, which is the last date

for cancellation?
-It must be before 30th June, not thereafter.

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Loss of letter of Acceptance in the Postal transit
�Acceptance is complete as against Offeror as soon as the latter of
acceptance is posted. The contract is completed even if the latter
of acceptance lost in the post.
�But it is important that the latter of acceptance is correctly
addressed, sufficiently stamped and posted.
Contract over telephone or telex or oral communication
�The offeree must make sure that his acceptance is properly
received i.e. heard and understood by the Offeror.

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 When does an offer come to an end?

An offer come to end by Two - Revocation or lapse and

Rejection of Offer.

A. Revocation or lapse or Withdrawal of Offer (Sec.6)

1.By communication of notice of revocation by Offeror
before its acceptance is completed against him

2. By laps of time
- X offer Y to sell some goods on 1st May and
agreed to give him three days time to accept. Y
accepted offer on 5th May.

3. By non-fulfillment of condition by offeree

- X offer to sell some goods to Y, if Y give full amount
before certain date.

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 4.By death of Offeror
- If offeree accept the offer in ignorance of the death
of Offeror, the acceptance is valid.

5. If counter offer is made

6.If Offer is not accepted according to prescribed mode

7.If law is change

B. Rejection of Offer by Offeree

1. Express Rejection i.e. by words written or spoken
2.Implied rejection
-when offeree make counter offer
-When offeree make conditional acceptance
-Not following prescribed time

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CASE LAW
1. A garment store gave the following
advertisement in a newspaper: “Special sale for
tomorrow only. Men’s Suits reduced from Rs. 200
to Rs. 100.” Is it offer?
2. P says to Q, “I will sell you a camera.” Is it offer?
3. A advertises in ToI that he would pay Rs. Rs.200
to anyone who finds and return his knowledge. Is
it offer?
4. A offer by a latter to sell his car to B for Rs.
15000. B, at the same time, offer by latter to buy
A’s car for Rs.15000. The two letters cross each
other in the post. Is there a contract between A
and B?

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 Consideration
-“Something in Return”
Sec. 2 (d) defines consideration as follow : “When at the
desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing,
something, such act or abstinences or promise is called a
consideration for promise.”

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 Legal Rules as to Consideration

1.Consideration at the desire of the promisor

e.g. A saves B’s goods from fire without being asked to do so. A
can not demand payment for his service.
2. Consi. from promisee or any other person.
It is immaterial who provides the consideration for a person’s
promise so long as consideration is there.
3. Con. may be past, present or future.
Past Con. : A finds B’s Son and B promises to pay
A 10000.
Present Con. : At the time of making promise
Future Con. : A promises to deliver goods to B when the ship
arrives and b promises to pay A Rs 1000 against the receipts of
goods. Its future, as both the parties will perform after the arrival
of ship.

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4. Con. need not be adequate
e.g. X sell his house worth Rs 1 lac for Rs. 100 to Y.
5. Con. must be real and not illusory.
i. Physically Impossibility
e.g. X promises to put life into Y’s dead wife should Y pay
him Rs. 500.
ii. Legal Impossibility
iii. Uncertain Consideration
6.Con. must be something which promisor not already bound
to due.
e.g. There was a promise to pay to the Vakil an additional sum
if the case was successful.
7.It must not be illegal, immoral or opposed to public policy.

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EXCEPTIONS (SEC. 25)
1.Love and Affection
e.g. A father promises to pay his son 1000 out of affection and love and
registers it. It’s a contract
2.Compensation for voluntary services
e.g. X finds Y’s purse and give it to him. Y promises to give X Rs. 50.
This is contract.
3. Promise to pay a time-barred debt.

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 Capacity to Contract

‘Capacity’ means Competency of the parties to enter into a valid contract.

Sec.11 declares the following persons to be incompetent to contact:

i. Minor
ii. Persons of Unsounded Mind
iii. Persons disqualified from any other law.

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MINOR
According to Indian Minority Act, 1875., a person who has
completed his 18th year of age is considered too be minor.

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Law Relating to minor’s Agreements:
“NO LEGAL ACTION TAKEN AGAINST MINOR”

1.Absolutly Void
Agree. of minor is absolutely void and nullify.
e.g. A minor take loan of Rs. 20000 from moneylender and put
mortgage of his house in favor of moneylender. Later, minor
started an action to get the mortgage cancelled.

2. Agree. may be enforced for minor’s benefits.

e.g. A minor may give loan to a person and the borrower may
refuse to return money on the ground that agreement is void.
-Fundamental rule, aim to protect the minor.

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3. “Rule of Estoppel” does not apply against minor
-If minor mislead the other party to believe that he is of the
majority age, and then some benefits get under an agreement , he
will be permitted to deny latter the fact that he was of minority
age. Thereby , he will have no liability towards the other party.

4. Normally , no restitution would be permitted

-No recovery from Minor
Law regarding restitution is according to Sec.33 of Specific Relief
Act 1963

5.Apprenticeship agreements are enforceable

Such Agreement are made for minor’s benefit to enable him to
acquire skill under trained person for future.
-Agreement must be made under Apprentice Act 1961.

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6. Service argee. for minor is not enforceable
e.g. Film Producer agreed with the guardian of minor girl to give
to the girl the role in his film. Later, he gave role to other girl.
Can girl make case on Film producer?

7. Normally , specific performance of promises shall not be

ordered.
Agree. By minor may be ordered for specific performance if some
condition are satisfied.
i. It is made by guardian on behalf
ii. The Guardian is competent to make that agreement
iii. The agreement for minor’s benefit

8. No ratification on attaining majority age.

e.g. K (minor) take loan from B of Rs.10000 and give promissory
note in favor of B .K will not be liable under this P/Note even
after attaining majority age by K.

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9. Minor’s liability for necessaries
If person provide any support or necessities to minor who are not
enable to make contract, this person who had provide necessity
have right to reimburse from the property of the minor, because
it is benefit of the minor.
10.Minor as a member of partnership firm
-Minor can not be partner.
11.Minor as shareholder
A minor can become a shareholder in a company through his
guardian who will act as his trustee.
Minor directly can not entered into contract with the
company.
12.Minor as an agent
A minor can be appointed as a agent because agent do not incur
personal Liability

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13.Position of Minor’s Parents
-Parents are not liable for Minor’s act
14. Position of a joint contract of major and minor
-Minor will not be liable major (adult) are liable.
15. Insolvency of Minor
- Court can not be declared insolvency by court.

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Indian Contract Act,
1872

CONTINUED
Contracts by person of unsound mind
�Contracts by lunatics
�Contracts by drunkards

Contracts with Parda-Nishin women.

Contracts by married women
Contracts by corporation
Contracts by insolvents

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 Free Consent

According to Sec. 13 ‘Two or more person are said to consent when

they agree upon the same things in the same sense.’
This mean that there should be perfect identity of mind
(consensus ad idem) regarding the subject-matter of contract.
According to Sec. 14 consent is said to be free when it is not caused
by any of the following :
1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

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i. A has two cars, one blue and other red. He wants to
sell his blue car. B who knows of only A’s red car, offer
to purchase A’s car for Rs. 20000. A accept the offer
thinking that it is for his blue car. This is no consent
because both the parties are not understanding the
same things in the same sense.

ii. If B goes to A and on the point of pistol asks A to

sell his red car for sum of Rs. 20000 to him, there is
consent because both are understanding that red car is
the subject matter of the consent, but the consent is
not free because it has been obtained by Coercion.

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UNDUE INFLUENCE
Undue influence is the improper use of any power possessed
over the mind of the contracting party.
According to Sec. 16 a contract is said to be affected by
undue influence when:
-(a) the relation subsisting between the parties are such
that one of the parties is in a position to dominate the will
of the other, and
(b) Use that position to obtain an unfair advantages over
other.

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The person deemed to be in position to dominate the will of
the other.
- Where he holds a real or apparent authority over the
other like master and Servant , child and parents.

-Where he stand in a fiduciary relationship (Mutual trust

and confidence) like religious guru and follower, doctor
and patients, lawyer and clients.

- Where he makes a contract with a person whose mental

capacity is temporarily or permanently affected by reason
of age, illness or mental or body distress.

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BURDEN OF PROOF
The person who claim undue influence has to prove
that it was the cause of contract. He has to prove that
pre-existing relationship, the position of domination,
and the misuse of the position.

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DIFFERENCE BETWEEN COERCION AND UNDUE INFLUENCE
1.Mode of Obtaining Consent
- In Coercion ,Consent obtained by threatening to act.
- In U.I. , Consent obtained by using dominating power.
2. Type of Force
-In Coercion, physical force is exercised.
- In U.I. , Moral forced is used.
3. Existence of Relationship
-relationship between the promisor and the promisee is not necessary.
-Some sort of relationship MUST exist between the two parties to the
contract.

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FRAUD
Fraud means method of misleading a person deliberately to
cause in him a wrong understanding of so as to obtaining
that’s person’s consent for a contact.

E.g. M falsely tells R that the car that he was offering to sell
was once owned by Sachin Tendulkar. This is a fraud against
R committed to obtain his consent to purchase the car.

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MISREPRESENTATION
Misrepresentation is a false representation made innocently
without any intention of deceiving the other party. It may
include two things:
(a) Wrong statement of a material facts not known to be
false
(b) Non-disclosure of the facts where there is a large
duty to disclose without any intention to deceive.

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DIFF. BETWEEN FRAUD AND MISREPRESENTATION
1. Intention:
- In fraud, there is intention to deceive (mislead to
somebody).
-In Mis. , there is no intention to deceive.

2. Consequence:
-In Fraud, damage can be available to the affected
party for the loss suffered .
-In Mis. , no such damage are available.

3. Defense:
-In Fraud, the guilty party does not have any defense
in its favor.
In Mis. , the guilty party have defense in its favor.

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MISTAKE
A mistake means an error in understanding the
fact relevant for formation of a contract.

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CASE LAW
- X , a poor widow, borrowed Rs. 3000 from a money-lender at
100% per annum rate of interest for the purpose of enabling her to
establish her right of maintenance. Is she liable to replay the loan
on these terms?
⭶No, this is an unconscionable transaction and thus amount to a
contract caused by undue influence.
A woman went to a jeweller, falsely represented herself to be a wife
of Sachin Tendulkar and took with her a ring on the pretext of
getting the approval of her husband . She deposit the ring with Mr.
Kambli. Can the jeweller recover the ring from Mr. Kambli?
- Yes, because , there was a mistake of identity on the part of
the jeweller, Thus the agreement was void.

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VOID AGREEMENT
1. Agreement made by incompetent parties (Sec. 11)
Everybody is able to make contract except
Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.

2. Agree. the consideration or object of which is unlawful in

part. (Sec. 24)
I will kill you Mr. if you will give mw 100 bottle wine.

3. Agree. Made without consideration. (Sec. 25)

4. Agree. in restraint of marriage. (Sec.26)

Freedom of choice in marriage has been guaranteed to
every person who is major in age.

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5. Agree. in restraint of trade. (Sec. 27)
X and Y were competitor shopkeeper in a locality in Surat. Y agreed to
pay X , a sum of money if he would close his business in that
locality.. X did so but Y refuse to pay money.

6. Agree. in restraints of legal proceeding. (Sec. 28)

7. Agree. the meaning of which is uncertain. (Sec. 29)
8. Agree by way of wager. (Sec. 30)
A agrees with B that if there is a rain on a certain
day, A will pay B Rs. 50. If there is no rain B will pay Rs.
50.
A bet on horse race.
A bet on winning or loosing of cricket match.
9. Agree to do impossible act. (Sec. 56)
10. Agreement made under a mutual mistake of the fact.
(Sec. 20)

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Indian Contract Act,
1872

Agreement void where both parties are under mistake as to matter of fact.
Where both the parties to an agreement are under a mistake as to a matter of
fact essential to the agreement, the agreement is void.
Explanation.-An erroneous opinion as to the value of the thing which forms
the subject-matter of the agreement is not to be deemed a mistake as to a
matter of fact.

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Indian Contract Act,
1872

Illustrations (a) A agrees to sell to B a specific

cargo of goods supposed to be on its way from
England to Bombay. It turns out that, before the
day of the bargain, the ship conveying the cargo
had been cast away and the goods lost. Neither
party was aware of the facts. The agreement is
void.
(b) A agrees to buy from B a certain horse. It
turns out that the horse was dead at the time of
the bargain, though neither party was aware of
the fact. The agreement is void.

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Indian Contract Act,
1872

EFFECT OF MISTAKES AS
TO LAW
.-A contract is not voidable because it was caused by a mistake as to
any law in force in [India];
Contract caused by mistake of one party as to matter of fact.- A
contract is not voidable merely because it was caused by one of the
parties to it being under a mistake as to a matter of fact.

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Indian Contract Act,
1872

CONSIDERATION VALID
OR NOT ??
What considerations and objects are lawful and what are not.-The
consideration or object of an agreement is lawful, unless- it is
forbidden by law ; or is of such a nature that, if permitted, it would
defeat the provisions of any law; or is fraudulent ; or involves or
implies injury to the person or property of another or ; the Court
regards it as immoral, or opposed to public policy.

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Indian Contract Act,
1872

. Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here B's
promise to pay the sum of 10,000 rupees is the
consideration for A's promise to sell the house, and A's
promise to sell the house is the consideration for B's
promise to pay the 10,000 rupees.
(b) A promises to pay B 1,000 rupees at the end of six months,
if C, who owes that sum to B, fails to pay it. B promises to
grant time to C accordingly. Here the promise-of each party
is the consideration for the promise of the other party and
they are lawful considerations.

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Indian Contract Act,
1872

(c) A promises, for a certain sum paid to him by B, to

make good to B the value of his ship if it is wrecked
on a certain voyage. Here A's promise is the
consideration for B's payment and B's payment is the
consideration for A's promise and these are ________
considerations.
(d ) A promises to obtain for B an employment in the
public service, and B promises to pay 1,000 rupees to
A. The agreement is void, as the consideration for it
is unlawful
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Indian Contract Act,
1872

AGREEMENT IN RESTRAINT
OF TRADE VOID.-
Every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any kind, is
to that extent void. Saving of agreement not to carry on
business of which good-will is sold.-
Exception 1.-One who sells the good-will of a business may
agree with the buyer to refrain from carrying on a similar
business, within specified local limits, so long as the buyer, or
any person deriving title to the good-will from him, carries on
a like business therein, provided that such limits appear to the
Court reasonable, regard being had to the nature of the
business.

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Indian Contract Act,
1872

AGREEMENTS IN RESTRAINT
OF LEGAL PROCEEDINGS
VOID.-
Every agreement,- (a) by which any party thereto is
restricted absolutely from enforcing his rights under or in
respect of any contract, by the usual legal proceedings in
the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or (b) which
extinguishes the rights of any party thereto, or discharges
any party thereto from any liability, under or in respect of
any contract on the expiry of a specified period so as to
restrict any party from enforcing his rights, is void to that
extent. Saving of contract of refer to arbitration dispute
that may arise.-

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Indian Contract Act,
1872

AGREEMENTS VOID FOR

UNCERTAINTY.-
Agreements, the meaning of which is not certain, or
capable of being made certain, are void.
Illustrations (a) A agrees to sell to B " a hundred tons
of oil ". There is nothing whatever to show what kind
of oil was intended. The agreement is void for
uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a
specified' description, known as an article of
commerce. There is no uncertainty here to make the
agreement void.
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Indian Contract Act,
1872

(c) A, who is a dealer in coconut-oil only, agrees to

sell to B "one hundred. tons of oil". The nature of A's
trade affords an indication of the meaning of the
words, and A has entered into a contract for the sale
of one hundred tons of coconut-oil.

(d) A agrees to sell to B " my white horse for rupees

five hundred or rupees one thousand". 'There I is
nothing to show which of the two prices was to be
given. The agreement is void,

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Indian Contract Act,
1872

AGREEMENTS BY WAY OF
WAGER VOID.-
A wager agreement between two parties to the effect
that if a given uncertain event happens, one party
shall pay a certain sum to the other and on the
contrary event happening. For eg. If the event turns
out one way, one party shall lose and the other shall
gain.
Agreements by way of wager are void ; and no suit
shall be brought for recovering anything alleged to
be won on any wager, or entrusted to any person to
abide the result of any game or other uncertain event
on which any wager is made.

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Indian Contract Act,
1872

CONTINGENT CONTRACTS
"Contingent contract" defined.-A " contingent contract " is a contract
to do or not to do something, if some event, collateral to such
contract, does or does not happen. Illustration A contracts to pay B
Rs. 10,000 if B's house is burnt. This is a contingent contract.

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Indian Contract Act,
1872

ENFORCEMENT OF CONTRACTS
CONTINGENT ON AN EVENT
HAPPENING
Contingent contracts to do or not to do anything if an uncertain
future event happens cannot be enforced by law unless and
until that event has happened. If the event becomes impossible,
such contracts become void. Illustrations
(a) A contracts to pay B a sum of money when B marries C. C
dies without being married to B. The contract becomes void.
(b) A makes a contract with B to sell a horse to B at a specified
price, if C, to whom the horse has been offered, refuses to buy
him. The contract cannot be enforced by law unless and until C
refuses to buy the horse.

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Indian Contract Act,
1872

ENFORCEMENT OF CONTRACTS
CONTINGENT ON AN EVENT
NOT HAPPENING.-
Contingent contracts to do or not to do anything if an uncertain
future event does not happen can be enforced when the happening of
that event becomes impossible, and not before.
Illustration A agrees to pay B a sum of money if a certain ship does
not return. The ship is sunk. The contract can be enforced when the
ship sinks.

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Indian Contract Act,
1872

EXPIRY OF TIME

Illustrations
(a) A promises to pay B a sum of money if a certain
ship returns within a year. The contract may be
enforced if the ship returns within the year, 'and
becomes void if the ship is burnt within the year.
(b) A promises to pay B a sum of money if a certain
ship does not return within a year. The contract may
be enforced if the ship does not return within the
year, or is burnt within the year.

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Indian Contract Act,
1872

AGREEMENT CONTINGENT ON
IMPOSSIBLE EVENTS VOID.-
Contingent agreements to do or not to do anything, if
an impossible event happens, are void, whether the
impossibility of the event is known or not to the
parties to the agreement at the time when it is made.
Illustrations
(a) A agrees to pay B 1,000 rupees if two parallel
lines should meet. The agreement is void.
(b) A agrees to pay B 1,000 rupees if B will marry
A's daughter C. C was dead at the time of the
agreement

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Indian Contract Act,
1872

CASES
In carew Co. Ltd v North Bengal, where two sugar
manufactures had entered into an agreement allocating zones to
procure sugar for meeting the needs of their respective
factories and each undertook not to draw any cane from the
zones alloted to the other factory, it was held that the
agreement was in restraint of trade and therefore void.
Similarly where four ginning factories entered into an
agreement fixing uniform rate for ginning cotton and pooling
their earnings to be divided between them in certain
proportions, it was held that such an agreement was valid and
enforceable.
A combination which tends to create monopoly and which is
against the public interest is void.

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Indian Contract Act,
1872

IN Attwood v. Lamount where the contract of service is

provided that on termination of employment the tailor would
not carry on similar business within 10 miles of his employer,
the agreement was void.
But if same restriction is made while the term is on, it is not
restraint from trade.
A, in bombay, enters into a contract with B in madras with a
condition that all disputes will be subject to bombay
jurisdiction. This limits the right of B to sue only in Bombay
court in case of dispute. Such an agreement is valid.
A agrees to sell B hundred tons of oil. The agreement is void
for uncertainty as there is nothing whatever to show what kind
of oil was intended.

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Indian Contract Act,
1872

An agreement to pay certain sum when able to pay is void or

not ?
A agrees to sell B “ all the grains in my grainary at Ramnagar.
Is there any uncertainty ?
A contracts to pay B a sum of money when B marries to C. C
dies without being married to B. The contract becomes void.
A agrees to pay Re 1000 if two parallel lines meet. The
agreement is void.
A agrees with B to put life into a dead man. The agreement is
void.
Money lent for the purpose of gambling can be recovered even
though lent with the knowledge of the parties.

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Indian Contract Act,
1872

A having advanced money to his son, B, during his minority, upon

B's coming of age obtains, by misuse of parental influence, a bond
from B for a greater amount than the sum due in respect of the
advance.

72
QUASI CONTRACT

There is no offer, no acceptance, no consensus ad

idem and in fact neither agreement nor promise.

These contact constituted by the Law, and therefore

termed as Quasi Contact.

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 KINDS OF QUASI CONTRACTS (SEC. 68 TO
72)

1. Supply of necessaries
2. Payment by an interested person
3. Obligation to pay for non-gratuitous acts
e.g. Mr. X , a trader, leaves goods at Y’s house by
mistake. Y treats the goods as his own. He is bound to
pay for them to X.
4. Responsibility of Finder of Goods
Mr. X picks up a diamond on the floor of Y’s shop. He
hands it over to Y to keep it till true owner is found out.
No one appears to claim it for quite some weeks inspite
of the wide advertisement in the newspapers. X claims
the diamond from Y who refuse to return. Y is bound to
return the diamond to X who is entitled to retain the
diamond against the whole world except true owner.

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The finder can sell the goods in the following cases:

1.When the things found is in danger of perishing

2.When the owner cannot be found out
3. When the owner is found out, but he refuse to pay the
lawful charges of the finder

5. Mistake or coercion
e.g. A and B jointly owe Rs. 100 to C. A alone pays the
amount to C. and B not knowing this fact, and pays Rs. 100
to C again. C is bound to pay the amount to B.

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QUANTUM MERUIT
Quantum Meruit means “as much as earned”.

When a person has done some work under a contact, and

some event happens which makes the further performance
of the contact impossible, then the party who has
performed the work can claim remuneration for the work he
has already done.

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THE CLAIM FOR QUANTUM MERUIT ARISES
IN THE FOLLOWING CASES
1. When an agreement is discovered to be void.
e.g. GE was employed as a managing director in a
company. After he rendered service for three months. It
was found that the director were not qualified to appoint
him.
2. When something is done without any intention to do so
gratuitously.
3. When there is an express or implied contract to render
service, but there is no agreement as to remuneration.
In such cases, reasonable remuneration is payable.
e.g. There was an implied agreement between P and a fire
brigade for the services of the brigade.
4. When an indivisible contract is completely performed but
badly.

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 Kinds of Contracts (Sec. 68 to 72)

Classification of Contract

Enforceability Extent of
Mode of Creation
Execution

Express Contr. Implied Cont.

Valid Illegal Void Unenforceable

Executed Executory

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1. Classification of Contract on the basis of Enforceability:
a. Valid Contract:
Contract which satisfy all the essential elements of a valid
contract as laid down be Section 10.
b. Void Contract:
An agreement may be enforceable at the time when it was
made but later on, due to certain reason, it become void and
unenforceable.
c. Illegal Contract:
All illegal agreement are void but all void agreement are not
necessarily illegal.
e.g. An agreement with minor is void but not illegal.
d. Unenforceable Contract:
Certain contract become void because the law court will not
enforce them due to not fulfillment of certain formalities.

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2. Classification of Contract on the basis of Mode of Creation
a. Expressed Contract:
Contract is made by words spoken or written.
b. Implied Contract:
Contract which come into being on account of the act of the
parties and not by their express words, written or spoken.
3. Classification of Contract on the basis of Extent of
Execution
a. Executed Contract
Where both the parties to the contract have fulfilled their
respective obligation, the contact said to executed.
b. Executory Contract
Where one or both the parties to the contact still to perform
certain things in future or under the terms of the contract
something remains to be done, the contract is termed as an
executory contract.

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Thank You

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