Unit 2

Free Consent – Unlawful

Agreements – Quasi Contracts -
Different Modes of Discharge of
Contract – Remedies of Breach –
Principles for awarding Damages.
Free
Consent
Free Consent
 Consent means acquiescence or act of
assenting to an offer. “Two or more persons
are said to consent when they agree upon the
same thing in the same sense”(Sec 13).
 Free consent, Consent is said to be free when
it is not caused by,
◦ Coercion
◦ Under the influence
◦ Fraud
◦ Misrepresentation
◦ Mistake
Coercion
 When a person is compelled to enter into a
contract by the use of force by the other
party or under a threat, coercion is employed.
Effect of Coercion
When consent is caused by coercion, fraud or
misrepresentation, the agreement is void.
Undue Influence

 A contract is said to be induced by ‘undue

influence’ where the relations subsisting
between the parties are such that one party is
in a position to exercise undue influence over
the other. Sec. 16(1).
 Holds authority over the other
eg..Relationship between a master and
servant, doctor and patient.
 Stands in a fiduciary relation to the other

eg.. Between father and son, solicitor and

client
 Contract with a person whose mental capacity

is temporarily or permanently affected by

age, illness or mental or bodily distress eg..
Medical attendant and his patient.
 Effect of undue influence
◦ When consent to an agreement is obtained by
undue influence, the agreement is a contract
voidable at the option of the party whose consent
was so obtained.
◦ Any such contract may be set aside, either
absolutely or if the party is entitled to avoid it has
received any benefit there under.
Contracts with pardanashin women
 A pardanashin women is presumed to have been
induced by undue influence.
 Any person who enters into a contract with a
pardanashin women has strictly to prove that no
undue influence was used and that she had free
and independent advice, understood the consents
of the contract and exercised her free will.
Misrepresentation and Fraud
 Misrepresentation
◦ It is a false statement which the person making it
honestly believes to be true or which he does not
known to be false.
◦ A representation when wrongly made, either
innocently or intentionally is a misrepresentation.
Misrepresentation may be-
◦ An innocent or unintentional misrepresentation
◦ An intentional, deliberate or wilful misrepresentation
with an intent to deceive or defraud the other party.
◦ The former is called ‘misrepresentation’ and the
latter ‘fraud’.
 Requirement for misrepresentation
◦ It must be a representation of material fact
◦ It must be made with the intention that it should be
acted upon the person to whom it is addressed.
◦ It must be actually have been acted upon and must
have induced.
◦ It must be made without any intention to deceive
the other party.
Fraud
 A false representation has been made
knowingly, or without belief in its truth, or
recklessly, not caring whether it is true or
false and that maker intended the other party
to act upon, it is fraud.
 There is a concealment of a material fact or

that there is partial statement of a fact in

such a manner that the withholding of what is
not stated makes that which is stated false.
Essential elements of fraud
 There must be a representation or assertion
and it must be false.
 The representation must relate to a material

fact which exists now or existed in the past.

 The representation must have been made

before the conclusion of the contract with the

intention of inducing the other party to act
upon it.
 The representation or statement must have
been made with a knowledge of its falsity or
without belief in its truth or recklessly, not
caring whether it is true or false.
 The other party must have been induced to

act upon the representation or assertion.

 The other party must have relied upon the

representation and must have been deceived.

Consequences of fraud
 A contract induced by fraud is voidable at the
option of the party defrauded.
 Until it is avoided, it is valid.
 The party defrauded has, however the

following remedies:
◦ He can rescind the contract.
◦ He can sue for damages.
◦ He can insist on performance of the contract on the
condition that he shall be put in the position if the
representation made had been true.
Exceptions – not voidable
 Where the consent of a party to a contract was
caused by misrepresentation or fraud and that
party could discover the truth by ordinary diligence.
 Where a party enters into a contract in ignorance
 Where, before the contract is avoided, the interest
of the third parties intervene.
 Where a party to a contract, whose consent was
caused by misrepresentation or fraud, cannot be
put in the position in which he would have been if
the representation made had been true.
Silence as to facts
 The general rule is that a person before entering
into a contract need not disclose to the other
party, the material fact which he knows but he
must refrain from making active concealment.
This means mere silence is not fraud.
Statutory exceptions:
 Where the circumstance of the case are such

that, regard being had to them is duty of the

person keeping silence to speak.
 When silence is, in itself, equivalent to speech.
Difference between Fraud and
Misrepresentation
Mistake

◦ Mistake may be defined as an erroneous belief

about something.
◦ It may be a mistake of law or mistake of fact.
Mistake of Law
◦ Mistake of law of the country
 A party cant be allowed to get any relief
on the ground that it had done a
particular act in ignorance of law
◦ Mistake of law of foreign country
 Such a mistake is treated as mistake of
fact and the agreement in such case is
void
Mistake of fact
1. Bilateral mistake
◦ When both the parties to an agreement are under a
mistake as to a matter of fact essential to the
agreement, there is a bilateral mistake.
◦ In such a case, the agreement is void.
◦ The following two conditions have to be fulfilled for
application of Sec. 20
1. The mistake must be mutual
2. The mistake must relate to a matter of fact essential
to the agreement
The various cases falls under bilateral
mistakes are as follows:
1. Mistake as to the subject matter
 Mistake as to the existence of subject matter
 Mistake as to the identity of subject matter
 Mistake as to the quality of the subject matter
 Mistake as to the quantity of the subject matter
 Mistake as to the title of the subject matter
 Mistake as to the price of the subject matter
2. Mistake as to the possibility of
performing the contract
 Physical impossibility
 Legal impossibility
2. Unilateral mistake
When in a contract, only one of the parties is
mistaken regarding the subject-matter or in
expressing or understanding the terms or the
legal effect of the agreement, the mistake is a
unilateral mistake.
According to Sec, 22, a contract is not voidable
merely because it was caused by one of the
parties to it is being under a mistake as to a
matter of fact.
Exceptions for unilateral mistake
 A unilateral mistake is generally not allowed
as a defence in avoiding a contract. But in
certain cases, the consent is given by a party
under an error or mistake which is so
fundamental as goes to the root of the
agreement.
 In such cases, the agreement is void.
◦ Mistake as to the identity of the person contracted
with
◦ Mistake as to nature of contract
Unlawful Agreement
 A contract must not only be based upon
mutual assent of competent parties but also
have a lawful object
 If the object of an agreement is the

performance of an unlawful act, the

agreement is unenforceable.
 The word ‘object’ and ‘consideration’ of an

agreement is not lawful according to sec 23.

 In some cases, consideration of an agreement
may be lawful, but the purpose for which the
agreement is entered into maybe unlawful.
 In such cases, the agreement is void.
 As such both the object and the consideration

of an agreement must be lawful, otherwise

the agreement is void.
When consideration or object is
unlawful (Sec 23)
 If it is forbidden by law
 If it is of such a nature that, if permitted, it

would defeat the provisions of any law.

 If it is fraudulent
 If it involves or implies injury to the person or

property of another
 If the court regards it as immoral
 Where the court regards it as opposed to

public policy
 Forbidden by law
◦ If the object of the agreement or the
consideration of the agreement is the doing of an
act which is forbidden by law, the agreement is
void.

 If it is of such a nature that, if permitted, it

would defeat the provisions of any law: 
◦ If the object of the agreement or the
consideration of the agreement is indirectly lead to
a violation of the law.
If it is fraudulent: 
◦Any agreement which is made for fraudulent purpose is void is void.

If
it involves or implies injury to the person or property of
another
◦Injury means ‘wrong’, ‘harm’, or ‘damage’. ‘Person’ means one’s body. ‘ Property’ means
movable and immovable property

If the Court regards it as immoral.

◦An agreement, the consideration or object of which is immoral i.e unethical, the agreement
is void.
 
If the Court regards it as opposed to public policy: 
The following agreements have been held to be against public
policy:
 
 a. Trading with Enemy:-Contact Before war and after war
 b. Agreement to commit crime:

 
 c. Agreements which interfere with administration of justice:

◦ Interference with the course of justice. Eg: favour with judge

◦ Stifling prosecution. Eg suppressing criminal charges is illegal and
void. 
◦ Champerty and Maintenance:pg 84
 d. Agreements in restraint of legal proceedings: An agreement
entered into with the object of exercising improper influence
on judges or officers of justice is bad in law as opposed to
public policy.
  
 
 e. Agreement to vary the period of limitation: An agreement
that reduces or increases the period of limitation as laid
down by the law of limitation is opposed to public policy.

 f.  Traffic in Public Offices and title: An agreement whereby

an appointment to a public office is procured for monetary
consideration is against public policy because it would
cause corruption in administration of the State.
 
 g. Agreement creating an interest opposed to duty
 
 h. Agreements restraining personal freedom
 i. Agreements opposed to parental rights and duties
◦ Father is supposed to be the guardian of his children and in the
absence of the father their mother acquires this right as well as
responsibility and this right cannot be bartered away.
 
 j.  Marriage Brokerage Agreements: Agreement to pay
reward to a person for negotiating marriage is opposed to
public policy.
 
 The following agreements are also opposed to public

policy.
 i.  Agreements in restraint of marriage.
 ii. Agreements in restraint of trade.
 iii. Agreements in restraint of legal proceedings.
Unlawful and illegal agreements
 An unlawful agreement is one which, like a
void agreement, is not enforceable by law.
 It affects only the immediate parties and has

no further consequences.
 An illegal agreement is not only void as

between immediate parties but has this

further effect that collateral transactions to it
also become tainted with illegality.
 Every illegal agreement is unlawful, but every

unlawful agreement is not necessarily illegal.

Effects of illegality
 The collateral transactions to an illegal
agreement become tainted with illegality and
are treated as illegal even though they would
have been lawful by themselves.
 No action can be taken
◦ (a) for the recovery of money paid or property
transferred under an illegal agreement, and
◦ (b) for the breach of an illegal agreement.
 In case of equal guild in an illegal agreement,
the position of the defendant is better than
that of the plaintiff.
 Quasi Contract
 Quasi-contracts is the agreement imposed by the law,
which outlines the obligation of one party towards
another party in case the former possesses the
property of the latter party, i.e., something is acquired
by one party at the expense of another party. 
 The court creates these to avoid unjust enrichment of
any party overpayment against good or service. Since
the court creates these, so neither party can disagree
with the same, and they are obliged to follow it.
 Law of quasi contract is also known as law of
restitution.
Kinds of Quasi-Contract
 Supply of necessaries (Sec.
68)
 Payment by an interested

person (Sec. 69)

 Obligation to pay for non-

gratuitous acts (Sec. 70)

 Responsibility of finder of

goods (Sec. 71)

 Mistake or coercion (Sec. 72)
Section 68 – Supply of necessaries

It states that in case there is a person who is

not capable for entering into any contract,
and the supplies are provided to him or to
anyone to whom the incapable person is
bound legally to support by the third party,
then the supplier third party is entitled to
recovering the price of such supplier from the
incapable person’s property.
 John is a lunatic. Peter supplies John with
certain necessaries suited to his condition in
life. However, John does not have the money
 or sanity and fails to pay Peter. This is
termed as a Quasi contract and Peter is
entitled to reimbursement from John’s
property.
Section 69 – Payment by an
interested person
 It states that in case there is a person who
has an interest in payment of money and
pays on behalf of another person who is
bound to pay by the law, then the person who
made the payment is entitled to get
reimbursement by another party (on behalf of
whom he has paid).
 Peter is a zamindar. He has leased his land to John,
a farmer. However, Peter fails to pay the revenue
due to the government. After sending notices and
not receiving the payment, the government releases
an advertisement for sale of the land (which is
leased to John). According to the Revenue law, once
the land is sold, John’s lease agreement is annulled.
 John does not want to let go of the land since he
has worked hard on the land and it has started
yielding good produce. In order to prevent the sale,
John pays the government the amount due from
Peter. In this scenario, Peter is obligated to repay
the said amount to John.
Section 70 - Obligation to pay for
non-gratuitous acts
 It states that in case a person does anything
for the other person lawfully or gives the
delivery of something without intending to do
the same gratuitously where the receiving
party has enjoyed the benefits of the same.
Then such a receiving party is bound to give
compensation to the former party.
 Imagine a person lawfully doing something or
delivering something to someone without the
intention of doing so gratuitously and the
other person enjoying the benefits of the act
done or goods delivered. In such a case, the
other person is liable to pay compensation to
the former for the act, or goods received.
This compensation can be in money or the
other person can, if possible, restore the
thing done or delivered.
Section 71- Responsibility of finder
of goods

 It states that in case there is a person who

finds goods that belongs to another party
and takes such goods into his custody, then
the former has responsibility the same as that
of a bailees.
 Peter owns a flower shop. Olivia visits him to buy a
bouquet but forgets her purse in the shop.
Unfortunately, there are no documents in the purse to
help ascertain her identity. Peter leaves the purse on the
checkout counter assuming that she would return to
take it.
 John, an assistant at Peter’s shop finds the purse lying
on the counter and puts it in a drawer without informing
Peter. He finished his shift and goes home. When Olivia
returns looking for her purse, Peter can’t find it. He is
liable for compensation since he did not take care of the
purse which any prudent man would have done.
Section 72 – Mistake or coercion
 It states that in case there is a person who
has been paid or delivered mistakenly or
under the coercion, then he must repay or
must return the same back.
 Peter misunderstands the terms of the lease
and pays municipal tax erroneously. After he
realizes his mistake, he approached the
municipal authorities for reimbursement. He
is entitled to be reimbursed since he had paid
the money by mistake.
Quantum meruit
 Quantum meruit means "the amount he deserves" or "as much as he
has earned". In most cases it denotes a claim for a reasonable sum in
respect of services or goods supplied to the defendant.
 An action in quantum meruit is available to recover money for
services or goods supplied to a defendant in circumstances where
the claimant is not recompensed by performing his obligations or
supplying the goods.
 The claimant must usually show that the defendant expressly or
impliedly requested or freely accepted the services or goods in
question. Depending on the facts, the claimant might find it difficult
to prove how much the claimant is entitled to receive under the
principle of quantum meruit.
 A claim for quantum meruit cannot arise if the parties have a
contract to pay an agreed sum. In such circumstances, the parties'
relationship is governed by the law of contract.
Quantum meruit
 When an agreement is discovered to be void
 When something is done without any intention to do so
gratuitously
 When there is an express or implied contract to render
services but there is no agreement as to remuneration.
 When a completion of contract has been prevented by
the act of the other party of the contract.
 When a contract is divisible
 When a indivisible contract is completely performed but
badly
 https://thelawexpress.com/cutter-vs-powell-case-
summary
Discharge of Contract

 It is a termination of a contractual
relationship between the parties.
A contract may be discharged
◦ By performance
◦ By agreement or consent
◦ By impossibility of performance
◦ By lapse of time
◦ By operation of law
◦ By breach of contract
1. Discharge by Performance
 Performance means the doing of that which
is required by a contract.
 Discharge by performance takes place when
the parties to the contract fulfill their
obligations arising under the contract within
the time and in the manner prescribed.
Actual performance :
 When both the parties perform their

promises, the contract is discharged.

Attempted performance or tender :
 Tender is not actual performance but is only

an offer to perform the obligation under the

contract.
 Where the promisor offers to perform his

obligation, but the promisee refuses to

accept the performance, tender is equivalent
to actual performance.
2. Discharge by agreement or consent

 Typesof discharge by agreement or

consent:
(a)Novation-new, before expiry of time
(b)Rescission-cancelled
(c)Alteration-mutual consent
(d)Remission-lesser fulfillment
(e)Waiver-mutual abandonment
(f) Merger-inferior right by a superior right
3. Discharge by impossibility of
performance
1. Impossibility existing at the time of
agreement.
2. Impossibility arising subsequent to the
formation of contract.
Discharge by supervening
impossibility
 Destruction of subject-matter of contract.
 Non-existence or non-occurrence of a

particular state of things.

 Death or incapacity for personal service.
 Change of law or stepping in of a person with

statutory authority.
 Outbreak of war.
Impossibility of performance
– not an excuse
 In the following cases, a contract is not
discharged on the ground of supervening
impossibility.
◦ Difficulty of performance.
◦ Commercial impossibility- high profit not realised.
◦ Impossibilitydue to failure of a third person.
◦ Strikes, lock-outs and civil disturbance.
◦ Failure of one of the objects.
Effects of supervening impossibility
 Contact becomes impossible or unlawful-
subsequently-void
 If the promisor knew that it could not be

performed – compensation to promise

 An agreement discovered to be void- benefit

received-make compensation.
DOCTRINE OF FRUSTRATION
 In England, the doctrine of frustration is the concept
that is analogous to ‘supervening impossibility.
 It comes into play when the common object of a

contract can no longer be achieved or when the

contract, after it is made, becomes impossible of
performance due to circumstances beyond the
control or contemplation of the parties. Void.
 The frustration of the contract makes the contract

void and it also discharges the parties from any

liability. This doctrine is an exception to the general
principles of contract under when compensation is
usually given for breach of contract. 
4. Discharge by lapse of time
 The Limitation Act, 1963 lays down that a
contract should be performed within a specified
period, called period of limitation.
 If it is not performed, and if no action is taken
by the promisee within the period of limitation.
He is deprived of his remedy at law.
 Eg: the price of goods sold without any
stipulation as to the credit, must be paid within
3 years. If the price is not paid and the creditor
does not file suit than the debt becomes time
barred after 3 years.
5. DISCHARGE BY OPERATION OF LAW
 A contract may be discharged independently of the
wishes of the parties, i.e., by operation of law. This
includes discharge –
◦ By death (in the case of contracts for personal service)
◦ Merger:
◦ By insolvency: liabilities prior to adjudication.
◦ By unauthorised alteration of the terms of a written agreement.
◦ By rights and liabilities becoming vested in the same person.
 A bill of exchange which was accepted by X reaches X’s 
hands after being negotiated and endorsed through 4 
other parties. The contract is discharged.
6. Discharge by breach of contract
 Breach of contract means a breaking of the
obligation which a contract imposes. It occurs
when a party to the contract without lawful
excuse does not fulfill his contractual
obligation or by his own act makes it
impossible that he should perform his
obligation under it.
Breach of contract may be

◦ 1. Actual breach of contract,

 At the time when the performance of the contract
 During the performance of the contract
 Express repudiation
 Implied repudiation

◦ 2. Anticipatory or constructive breach of contract

Anticipatory breach of contract
 1. By expressly renouncing his obligation
under the contract
 By doing some act so that the performance of

his promise becomes impossible

◦ The rights of the aggrieved party in case of
anticipatory breach
 Can treat the contract as discharged
 Take immediate legal action for breach of contract or
wait till the time the act was to be done.
Remedies for Breach of
Contract
Remedies for Breach of Contract
 Where there is a right, there is a remedy
 A contract gives rise to correlative rights and

obligations.
 A right accruing to a party under a contract

would be of no value if there were no remedy

to enforce that right in a law court in the
event of its infringement or breach of
contract.
 A remedy is the means given by given by law

for the enforcement of a right.

 When a contract is broken, the injured party
has one or more of the following remedies.
 The remedies are:
◦ Rescission of the contract
◦ Suit for damages,
◦ Suit for quantum meruit,
◦ Suit for specific performance of the contract
◦ Suit for injunction.
Rescission

 When a contract is broken by one party, the

other party may sue to treat the contract as
rescinded and refuse further performance.
 In such a case, he is absolved of all his

obligations under the contract.

Suit for Damages
 The word ‘damages’ means monetary compensation
for loss suffered. Whenever a breach of contract takes
place, the remedy of ‘damages’ is the one that comes
to mind immediately as the consequence of breach.
 A breach of contract may put the aggrieved party to

some disadvantage or inconvenience or may cause a

loss to him.
 The court would desire the guilty part to accept

responsibility for any such loss of the aggrieved party

and compensate him adequately.
 The quantum of damages is determined by the

magnitude of loss caused by breach

Principles for awarding Damages
 Damages are a financial remedy which aims
to compensate the injured party for the
consequences of a breach in the contract they
were in.
 In general, the principle of awarding damages

to a party is to put them back into the

position, as far as possible, that they would
have been in, had the breach not have
occurred
points
1. Liable for the losses that were foreseeable. Therefore
the loss is remote should not be recoverable. 
2. If parties knew when they made the contract that a
particular loss is likely to result from such breach,
they can agree for payment of such compensation.
3. The person aggrieved by the breach is not required
to prove actual loss or damage suffered by him
before he can claim a decree.
4. Where Court concludes that the term contemplating
damages is by way of penalty, the Court may grant
reasonable compensation not exceeding the amount
mentioned in the contract on proof of damages.
Types of damages
 General & Special Damages: General damages are such as
the law implies, and presumes to have occurred, in the usual
course of things, naturally from the wrong complained of.
Special damages result from the commission of the wrong,
not necessarily implied by law, it must be specifically
pleaded and proved, unlike general damages.
 ‘Y’ has to supply 10 bags to mangoes to ‘Z’ for Rs. 10 per
bag now, ‘Y’ cancel the contract and said ‘Y’ don’t have bags
to deliver but ‘Y’ has contracted with someone else to deliver
the bags of mangoes and he purchased the bags from the
market but the price has reached peak now ‘Y’ will get
purchase at a high price and he suffered the loss of Rs. 5 on
every bag of mango. This amount of loss is called Damages.
 
Damages arising naturally- ordinary
damages
 Such losses would be called the general or
ordinary losses which can be seen as arising
naturally and directly out of the breach in the
usual course of the things.
 They would be the unavoidable and logical
consequence of the breach.
 The damages for such losses are called general
or ordinary damages. An aggrieved party’s right
to damages applies most naturally for the direct
or general losses. There can be no damages for
indirect and remote losses.
Special damages
 Special damages would be the compensation for the
special losses caused to the aggrieved party by the special
circumstances attached to the contract.
 At the time of making the contract, a part may place
before the other party some information about the special
circumstances affecting him and tell him that if the
contract is not performed properly, he would suffer some
particular types of losses because of those special
circumstances. If the other party still proceeds to make
the contract, it would imply that he has agreed to be
responsible for the special losses that may be caused by
an improper performance of his obligation. Compensation
for such special losses is called special damages.
Difference between general and special damages are:
General Damages  Special Damages
General damages refer to
those damages which arose
naturally during the normal
course of the events.
In relation to the pleadings,
the complained of is
presumed to be a natural
and probable consequence
with the result that the 
Special damages are those
that do not, of course,
arise from the breach of
the defendant and can only
be recovered if they were in
the reasonable
consideration of the parties
at the time they made the
contract.
It refers to those losses
that must be specifically
pleaded and proven.
 Nominal Damages: If the breach of contract
causes no loss to the aggrieved party, no
damages need be awarded to him.
 However, in order to record the fact of breach

by guilty party, the courts may award nominal

or token damages, e.g. a compensation of
Rs.10. They would be called nominal
damages.
Exemplary or vindictive damages
 Sometimes, the courts award damages for mental or
emotional suffering also caused by the breach. Such
damages are called exemplary or vindictive damages.
 These may be taken as an exception to the general

principle that damages are awarded only for the

financial loss caused by breach of contract.
 In a case Addies vs Gramophone Co. Ltd.², the court

stated that in three cases mental suffering and pain

of the aggrieved party can also be taken into account:
◦ Unjustified dishonour of a cheque by banker,
◦ Breach of promise to marry
 Substantial Damages: In contrast to nominal
damages, substantial damages is a
considerable sum awarded for compensating
considerable loss or injury.
 Aggravated Damages: Damages that are
awarded when the conduct of the defendant
or the surrounding circumstances increase
the injury to the claimant by subjecting him
to humiliation, distress, or embarrassment,
particularly in such torts as assault, false
imprisonment, and defamation
 Liquidated & Unliquidated Damages: Section
74 of the Act applies to measure of damages,
which the parties to the contract have
thereby, ascertained, agreed and fixed as
payable by defaulting party, this is liquidated
damages. On the contrary, damages/ loss
assessed or ascertained by court of law are
unliquidated.
 Compensatory Damages: This is equivalent to
the actual loss in respect to which they are
allowed, e.g. payments to reimburse damages
such as medical expenses, lost income, and
pain and suffering. It is the amount of money
determined adequate to compensate for any
actual loss or damage caused to the plaintiff.