CONTRACT - According to sec.2(h), a contract is

defined as an agreement enforceable by law.

AGREEMENT - According to sec.2(e), every

promise and every set of promises forming

consideration for each other.

Consideration is the return benefit the parties to

the contract get.

Agreement = Offer + Acceptance

PROMISE - According to sec.2(b), a

proposal when accepted becomes a promise.

CONSENSUS - AD – IDEM-According to Sec.13, meeting of minds or identity

of minds or receiving the same thing in same sense at same time.

AGREEMENT Contract

Offer + Acceptance Agreement + its legal enforceability

May create social or legal obligation

Creates only legal obligations between the parties.

All agreement do not become contracts

All contracts are based on agreements

1. A Valid Offer & acceptance.2.Intention to create legal relationship.3.Consensus - ad - idem.4. Lawful Consideration.5.Capacity to contract.6.Free consent.7.Legality of object.8.Possibility of performance.9.Writing & registration.

Valid contract - If all the condition are fulfilled it iscalled as a valid contract.

Invalid contract - In a contact if any one conditionis not fulfilled.

Is void (Void-ab-initio) - An agreement which isnot valid from the beginning.

Becomes void - An agreement which is valid inthe beginning but due to some superveningimpossibility the contract becomes void.

Voidable contract - A contract which is validunless until avoided by either the party.

Illegal contract - An agreement forbidden by

law. It involves the commission of crime or

violate public policy, or immoral in nature.

Unenforceable contract - It is valid but due

to some technical defect the contract becomes

void. In case defects are removed the contract

is enforceable.(lack of registration, lack of

signature etc.,)

Express contract - When contractsare either in writing or in oral.

Implied contract - When contractsare neither in writing nor in oral butinferred from the acts or circumstancesof a particular case.

Quasi Contract: It is not actually enteredinto by the parties but is somethingimposed on a party by law.

Executed contract - In a contract where both theparties have performed their obligation, thereremains nothing to perform.

Executory contract - In a contract where both theparties are yet to perform their obligation.

Unilateral contract - In a contract one party hasperformed his obligation and other person isyet to perform his obligation.

Bilateral contract - In a contract where both theparties have performed their obligation.Bilateral & Executory are same and inter -changeable.

According to Sec.2(a), when a person

signifies to another his willingness to do

or to abstain from doing something with a

view to obtaining the assent of that other

to such an act or abstinence, he is said to

make a proposal.

TYPES OF OFFER:

Express offer Implied offer Specific offer General offer Cross offer Counter offer Standing offer

Express offer - When offer is given to another person either in

writing or in oral.

Implied offer - When offer is given to another person neither in

writing nor in oral.

Specific offer - When offer is given to a specific person.

General offer - When offer is given to entire world at a

large.(Carlill Vs. Carbolic smoke ball Co.,)

Cross offer - When both the persons are making identical offers

to each other in ignorance of other’s offer.

Counter offer – When a person to whom the offer is made,

instead of accepting the terms of the offeror desires

modification of the same.

Standing offer - An offer which remains continuously

enforceable for a certain period of time.

(1) that the advertisement was not a unilateral offer to all

the world but an offer restricted to those who acted upon

the terms contained in the advertisement

(2) that satisfying conditions for using the smoke ball

constituted acceptance of the offer

(3) that purchasing or merely using the smoke ball

constituted good consideration and more people buying

smoke balls by relying on the advertisement was a clear

benefit to Carbolic

(4) that the company's claim that £1000 was deposited at

the Alliance Bank showed the serious intention to be

legally bound.

Offer must be given with an intention to create alegal relationship.(Balfour Vs. Balfour)

Offer must be definite.(Taylor Vs. Portington)

There is a difference between offer, invitation tooffer, invitation to sale. (Harris Vs. Nickerson)

Offer must be communicated. (Lalman Vs. GauriDutt). Communication of offer is complete only when it reaches the person to whom it is made.

Mere statement of price is not an offer.(Harvey Vs. Facey)

First telegram from Harvey to Facey-"Will you sell us Bumper Hall Pen? Telegraph lowest cash price".

Facey replied on the same day: "Lowest price for Bumper Hall Pen £900.

" Harvey then replied in the following words. "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."

According to sec.2(b), when a person made a proposal toanother to whom proposal is made, if proposal is assentedthere to, it is called acceptance.

LEGAL RULES FOR ACCEPTANCE

• Acceptance must be absolute and unconditional. (Neale VsMerret)

• Acceptance must be given as per the mode prescribed by theofferer.

• Acceptance must be given before the lapse of time or withinreasonable time.

• Acceptance may be given by any person in case of generaloffer

• Acceptance must be given by the person to

whom the offer is made or by an authorised

person. ( Powell Vs Lee)

• Acceptance must be communicated.

(Bordgon Vs. Metropolitan Rly. Co.)

• Mental acceptance is no acceptance or

acceptance must not be derived from

silence.

• Acceptance must not be precedent to offer.

According to Section 4,

The communication of offer is complete when it comes to the knowledge of the person to whom it is made.

The communication of acceptance is complete-

As against the proposer- when it is put in to a course of transmission to him so as to be out of the power of the acceptor.

As against the acceptor – when it comes to the knowledge of the proposer.

A proposal may be revoked at any time before the communication of acceptance is complete as against the proposer but not afterwards.

An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor but not afterwards.

M, by a letter posted on 1st June, offers to sell his car to N for 5 lakhs. The letter reaches N on 3rd of June. N accepts the offers by a letter posted on 5th. The letter reaches M on 7th.

Communication of offer -3rd June.

Communication of acceptance-

as against the proposer- 5th June

As against the acceptor- 7th June

Proposal can be revoked – before 5th June

Acceptance can be revoked – before 7th June

Lapse of offer:

Revocation

Lapse of time

Death or Insanity of offerer

Counter Offer

Acceptance not as per the prescribed mode

Destruction of subject matter of contract

Rejection of offer by offeree.

B offered to sell his house to A forRs.50,000. A accepted the offer by post. On the next day, A sent a telegram revoking the acceptance which reached B before the letter. Is the revocation of acceptance valid? What would be the effect if both the letter of acceptance and the telegram of revocation of acceptance reach B at the same time?

Yes. The revocation of acceptance is valid because the acceptor may revoke his acceptance at any time before the letter of acceptance reaches the offeror.

If both letter and telegram reach B at the same time, the formation of contract will depend on the fact – which of the two is opened first by B. If B reads the telegram first, revocation is valid, but if the letter is read first, revocation is not possible.

According to sec 2(d) consideration is defined as

“when at the desire of the promisor , or

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 an act or absinence or

promise is called a consideration for the promise

A party to an agreement who promises to do

something must gain something in return. This something in return is called consideration.

1) Consideration must always be provided at the desire of the promisor.[Durga Prasad v. Baldeo ]

2)It may be pro vided by the promisee or any other person.[Chinnaya v. Ramayya ]

3)It may be past ,present or future .

4)It need not be adequate . It must be of some value in the eyes of law.

5)It must be real , certain and possible. (Harvey Vs Gibbons)(Stilk Vs Myrick).

6)It must not be illegal , immoral or opposed to public policy .

Love & affection ( Venkataswamy Vs Rangaswamy)

Compensation for voluntary service

Promise to pay a time – barred debt

Completed gift

No consideration is necessary to create an Agency

Charity (Kedarnath v. Gauri Mohamed ) (Abdul Aziz Vs Masum Ali)

Guarantee by surety

It is general rule of contract that only parties to contract can sue & be sued on that contract . This rule is known as ‘Doctrine of privity’ i.erelationship between the parties to contract .

(Dunlop Pneumatic Tyre Co. Vs Selfridge and Co Ltd)

Exceptions

1)A trust or a charge

2)Marriage settlement , partition or other family arrangements .(Shubbu ammal Vs Subramaniyam)

3) Estoppel (Acknowledgement)

4)Assignment of contract .

5)Contract with agent .

6) Convenants running with land .

Following are the condition for a person to enter into contract

He must be major

He must be sound mind

He must not be disqualified by any other law.

a) Minor

b) unsound person

c) others

i.e alien enemy,

insolvent,

convict,

company/corporationagainst MOA / AOA .

According to Indian majority act sec(3) minor is

defined as any person under the age of 18

years . In the following cases a person is said to

be minor if he does not complete the age of 21

years

a) any person under the guardian & wards act,1890

b)any person who comes under superintendence of law/legal representative.

Rule 1 : judges are counsellors ,

jury is the servant ,

law is the guardian .

Rule 2:in case minor entered into a

contract which is unlawful , illegal ,

immoral he is also prosecutable &

punishable under the relevant law.

An agreement with minor is void ab initio and he is not liable to return the benefits received under a void agreement. [Mohiri Bibi v. Dharmadas Ghase]

Minor can be a beneficiary[Abdul Gaffar Vs Prem piar lal] Minor cannot ratify his agreement on attaining

the age of majority(Smith Vs King)

He can enter into contract for his necessary [Robert v. Gray ]

Minor can be a shareholder Minor cannot act as a partner Minor can act as an agent A Minor is liable for punishment for criminal

offences.

According to sec(12) a person generally

sound , occasionally unsound can enter into

a contract when he of sound mind

A person generally unsound occasionally

sound can enter onto contract when he is

sound mind .

Persons of unsound mind:

1)Lunatic ,

2)Idiots ,

3)Drunken or intoxicated persons .

A person is said to be of a sound mind for the purpose of making a contract, if ,at the time when he makes, he is capable of understanding it and forming a rational judgment as to its effect upon his interests.

Lunatic: A lunatic suffers from intermittent conditions of sanity and insanity.

Idiot: An idiot does not possess understanding power at all. It is a permanent condition and the contract is void.

Drunken Person: When a person is drunk he losses his capacity to form a rational judgment during that time.

Alien Enemies- One whose country is at war with India.

Foreign Ambassadors- They are representatives of foreign countries. They can enter into a contract but legal action can be taken only with permission of CG.

Convicts- Convict is a person in jail. Insolvents- A person whose debts are more

than his assets. His property will come in to the possession of the official receiver.

Sec 13 defines “consent” as “Two or more persons are said to consent when they agree upon the same thing in the same sense”. According to Sec 14, consent is said to be free when it is not caused by:

1.Coercion

2.Undue influence

3.Fraud

4.Misrepresentation

5.Mistake

According to Sec 15 coercion means “Committing or threaten to commit any act forbidden by Indian Penal Code 1860 or unlawful detaining or threatingto detaining any other persons property with a view to enter into an agreement. It is immaterial whether the IPC is or is not in force where the coercion is employed”

The threat amounting to coercion need not necessarily be from a party to contract , it may also proceed from a stranger to the contract.

Consent is said to be caused by coercion when obtained by:1.The committing or threatening to commit any act forbidden by the Indian Penal Code2.The unlawful detaining or threatening to detain any property.

Chikkim Ammiraju vs. Seshamma:

In this case a person threatened his wife and son that he would suicide if she doesn’t transfer her property in his brother’s favour. The wife and son executed the release of the deed under the threat . Held the threat of suicide amounted to coercion within Sec 15 and the release deed was therefore voidable.

This also is a very important case to prove that threat to commit suicide amounts to coercion.

Ranganayakamma vs. Alwar Setty:

3.Muthia vs. Muthu Karuppa:An agent refused to hand over the accountbooks of a business to the new agentunless the principal released him from allliabilities. The principal had to give arelease deed. held the deed was givenunder coercion and was voidable at theoption of the principal.

Sometimes a party is compelled to enter into a contract against his will as a result of unfair persuasion by the other party.

Section 16 defines undue influence as followsA contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other

1. There are two persons2. The relations are satisfying between them3. One must dominate the other4. There must be unfair advantage5. It involves the moral pressureThere is an undue influence between the following

persons:-Principal and agent-Superior and and subordinate- Doctor and patient- Father and son- Teacher and student- Promoter and company- Master and servant - Spiritual advisor and devotee

Among the following relations there is no undue influence1.wife and husband2.landlord and tenant3.debtor and creditor

CASE: Raniannapurna vs. SwaminathanA poor Hindu widow was persuaded by a money lender to agree to pay 100% rate of interest on money lent by him. She needed the money to establish her right to maintenance. It was a clear case of undue influence and the court reduced the rate of interest to 24%.

Mannu Singh Vs Umadat Pandey

Shersingh Vs Prithi Singh

Coercion Undue Influence

Law does not presume coercion under any circumstances.

Law presumes coercion under some circumstances.

It may be exercised by a stranger to a contract.

It is exercised only by a party to the contract.

It involves threat to one’s life or property.

It involves the use of one’s position to advantage

It amounts to commission of crime punishable under IPC.

It does not amount to commissionof crime punishable under IPC

According to Sec 17 fraud means and includesany of those acts committed by a party tocontract or with his connivance or by his agentwith an intent to deceive or induce a person toenter a contract.

1. The suggestion that a fact is true when it isnot true and the person making it does notbelieve in it to be true2. The active concealment of a fact by a personhaving knowledge or belief of the fact.3. A promise made without any intention ofperforming it4. Any other act fitted to deceive5. Any such act or omission as the lawspecially declares to be fraudulent

The essentials of fraud are:

1. There must be a representation or assertionand it must be false.

2.The representation must relate to a fact.

3.The representation must have been madewith the intention of inducing the other partyto act upon it.

4.The representation must have been madewith a knowledge of its falsity.

5.The other party must have subsequentlysuffered some loss

He can rescind the contract and he has to exercise the right of recession within a reasonable time.

He can insist on the performance of the contract upon the condition that he is put in the position in which he would have been had the representation be true.

He can claim damages.

where the affected party had the means of discovering the truth by ordinary diligence.

Where the party after becoming aware of fraud takes benefit under the contract. (Long Vs Lloyd).

Where before the contract is rescinded by affected party, a third party acquires interest in the subject matter.

Where the parties cannot be restored to their original position.

According to Sec 18 there is misrepresentation: When a person positively asserts a fact is true

when his information does not warrant it to beso, though he believes it to be true.

When there is any Breach of duty by a personwhich brings an advantage to the personcommitting it by misleading another to hisprejudice

When a party causes however innocently the otherparty to the agreement to make a mistake as tothe substance of the thing which is the subject ofthe agreement

Misrepresentation is a false representation of fact made by a party to an agreement with out any intention to deceive the other party.

Derry vs PeekEssentials of Misrepresentation:

1. There must be a representation or assertion and it must be false and his intention is not to deceive the other party.

2.The representation must relate to a fact.

3.The representation must have been made with theintention of inducing the other party to act upon it.

4.The person making it should honestly believe it to betrue.

5.The other party must have subsequently sufferedsome loss

He can rescind the contract.

He can insist on the performance of the contract upon the condition that he is put in the position in which he would have been had the representation be true.

where the affected party had the means of discovering the truth by ordinary diligence.

Where the party after becoming aware of misrepresentation takes benefit under the contract.

Where before the contract is rescinded by affected party, a third party acquires interest in the subject matter

. Where the parties cannot be restored to their

original position.

Mistake can be defined as “ an incorrect idea or opinion about something.

Types of Mistake:

1) Mistake of Law

a) Indian Law – Ignorance of law is no excuse.

b) Foreign Law- Void

2) Mistake of Fact

a) Bilateral Mistake

b) Unilateral Mistake

Bilateral Mistake:

According to section 20, where both the parties toan agreement are under a mistake as to a matterof fact essential to the agreement, the agreementis void.

Bilateral Mistake as to the subject matter:

1. Mistake as to the very existence of the subjectmatter.

2. Mistake as to the identity of the subject matter.

3. Mistake as to the quality of the subject matter.

4. Mistake as to the quantity of the subjectmatter.

5. Mistake as to the title of the subject matter (Cooper Vs Phibbs)

6. Mistake as to the price of the subject matter (Webster Vs Cecil)

Bilateral mistake as to the possibility of performing the contract:

1.Physical Impossibility2. Legal Impossibility

Unilateral Mistake: When one of the parties to the contract is

under a mistake as to the matter of fact, itis known as unilateral mistake.

A contract is not voidable merely because itwas caused by one of the parties to it beingunder a mistake.

When there is a mistake as to the identity of the person contracted with. ( Sowler Vs Potter)

When there is a mistake as to the nature of the contract. (Foster Vs Mackinnon)

According to section 23, The object of theagreement is lawful unless “it is forbidden bylaw or is of such a nature that, if permitted, itwould defeat the provisions of any law or isfraudulent or it involves or implies injury tothe person or property of another or thecourt regards it as immoral or opposed topublic policy.

Every agreement of which the object orconsideration is unlawful is void.

Forbidden by law- Giving bribe to get a job, selling pirated movie cds.

Defeats the provision of any law-Ramamurthy Vs Goppayya

If it is fraudulent – Swindling the public money

If it involves or implies harm to the person or property – Ramsaroop vs Bansi Mandar

If the court regards it as immoral- Baivijli Vs Nansa Nagar

If the court regards it as opposed to public policy- black marketing, adulteration, agreement with alien enemy.

An agreement in restraint of marriage.

An agreement in restraint of trade.

An agreement in restraint of legal proceeding.

A wager contract is a contract in which one person promises to another to pay money or money’s worth by the happening of an uncertain future event in consideration for other person’s promise to pay if the event does not happen.

There are two persons.

There must be an uncertain future event.

No control over the event by both the parties.

There must be a reciprocal promise.

Others are not interested in the contract.

In a wrestling bout, A tells B that wrestler no.1 willwin. B challenges the statement of A. They bet witheach other over the result of the bout. This is awagering agreement.

A contingent contract is a contract to do or not todo something, if some event, collateral to suchcontract, does or does not happen. It is alsocalled a conditional contract.

Essential Elements of a Contingent Contract: There are two persons. There must be an uncertain future event. Some control over the event but not absolute

control. There is no reciprocal promise between the

persons. Others may be interested in the contract. It is a valid contract.

Contingent contracts dependent on happening ofan uncertain future event cannot be enforced untilthe event has happened.( Sec 32 )

Where a contingent contracts is to be performed ifa particular event does not happen, itsperformance can be enforced when the happeningof that event becomes impossible.( Sec 33 )

If a contract is contingent upon how a person willact at an unspecified time, the event shall beconsidered to become impossible when suchperson does anything which renders it impossiblethat he should so act within any definite time, orotherwise than under further contingencies.( Sec34)

Contingent contracts to do or not to do anything, if a specified uncertain event does not happen within a fixed time, may be enforced if the event does not happen or its happening becomes impossible before the expiry of that time.( Sec 35 )

Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether or not the fact is known to the parties. (Sec 36)

Wager agreement There is a reciprocal promise. It is a void contract. Others are not interested in the contract. It is contingent in nature.Contingent agreement There is no reciprocal promise. It is a valid contract. Others are interested in the contract. It may not be wagering in nature.

DISCHARGE BY PERFORMANCE

DISCHARGE BY AGREEMENT OR CONSENT

DISCHARGE BY IMPOSSIBILITY OF

PERFORMANCE

DISCHARGE BY LAPSE OF TIME

DISCHARGE BY OPERATION OF LAW

DISHARGE BY BREACH OF CONTRACT

ACTUAL PERFORMANCE

When both parties perform their promises & there isnothing remaining to perform.

ATTEMPTED PERFORMANCE :

When the promisor offers to perform his obligation butpromisee refuses to accept the performance. It is alsoknown as tender.

Conditions of Performance:

Unconditional: It is made as per the terms of contract.

Proper Time: It is performed within the stipulated timeor during business hours.

Proper Place: Stipulated place or promisee’s place ofbusiness

Opportunity to examine:

For the whole obligation:

Promisor Himself

A person authorized by promisor

Legal Representative

Third Person

Joint Promisors

Devolution means transfer or passing over fromone person to another.

According to section 42, when a joint promisordies his legal representatives must fulfill thepromise jointly with the surviving promisor.

According to section 43, When two or morepersons make a joint promise, the promisee mayin the absence of express agreement to thecontrary, compel any one or more of such jointpromisors to perform the whole of the promise.

When one of the joint promisors aloneperforms the whole of the promise, he mayclaim an equal contribution from the otherjoint promisors.

If any one of the joint promisors makesdefault in paying contribution, the remainingjoint promisors must bear the loss arisingfrom such default in equal shares.

When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, all such joint promisees can claim performance. If any of the joint promisees die, his legal representatives along with surviving joint promisees can claim performance.

A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B's representative jointly with C during C's life, and after the death of C with the representatives of B and C jointly.

1. where by the contract, a promisor is to perform

his promise without the application by thepromisee and no time for performance isspecified, the promise must be performed withina reasonable time.

2. where a promise is to be performed on a certainday and the promisor has undertaken to performwith out the application by the promisee, thepromisor may perform any time during usualhours of business and at the place at whichpromise ought to be performed.

where a promise is to be performed on acertain day and the promisor has notundertaken to perform without the applicationby the promisee, it is the duty of the promiseeto apply for performance at a proper place andwithin the usual hours of business.

When a promise is to be performed withoutapplication by the promisee and no place isfixed for the performance of it, it is the duty ofthe promisor to apply to the promisee to fix areasonable place of the promise.

The performance of any promise may be madein any manner or at any time which thepromisee prescribes or sanctions.

According to section 2(f), “ promises whichform the consideration or part of theconsideration for each other are calledreciprocal promises.

Rules regarding performance of reciprocal promises:

when a contract consists of reciprocalpromises to be simultaneously performed,the promisor need not perform his promiseunless the promisee is ready and willing toperform his reciprocal promise.

Where the order in which the reciprocal promisesare to be performed is expressly fixed by thecontract, they shall be performed in that order.

When a contract contains reciprocal promises andone party to the contract prevents the other fromperforming, the contract becomes voidable.

where the nature of the reciprocal promises aresuch that one of them cannot be performed tillthe other party performs and if the other partyfails to perform, he cannot claim from the firstparty and he has to compensate the first partyfor any loss sustained.

when time is an important part of thecontract, failure to perform makes thecontract voidable.

when time is not an important part of thecontract, failure to perform does not makethe contract voidable but the promisee isentitled for compensation for any loss.

Where a debtor, owing several distinct debts to one person,makes a payment to him, either with express intimation, orunder circumstances implying that the payment is to be appliedto the discharge of some particular debt, the payment ifaccepted, must be applied accordingly.

Where the debtor has omitted to intimate and there are no othercircumstances indicating to which debt the payment is to beapplied, the creditor may apply it at his discretion to any lawfuldebt actually due and payable to him by the debtor whether itsrecovery is or is not barred by the law in force for the time beingas to the limitation of suits.

Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionately.

It refers to transferring one’s contractual rightsand liabilities under a contract to a thirdparty.

It may take place due to-

By the act of parties.

- Assignment of contractual obligations

- Assignment of contractual rights

By operation of law.

Contractual obligation involving personal skillor ability cannot be assigned.

The promisor cannot compel the promisee toaccept any other as being liable on the promise.

Assignment of contractual rights:

The rights and benefits under a contract notinvolving personal skill can be assigned subjectto all equities between the parties.

Assignment by operation of law:

Death of a party- pass on to the legal heirs.

Insolvency of a party- pass on to the officialassignee or receiver.

NOVATION (Sec 62): New contract substituted for old contract with the same or different parties.

RESCISSION (Sec 62) : Cancellation of contract by mutual consent or by the failure of one of the parties to perform.

ALTERATION (Sec 62):When one or more terms of

a contract is/are altered by the mutual consent of the parties to the contract

REMISSION (Sec 63) : Acceptance of a lesser fulfilment of the promise made.

WAIVER : Not to insist on certain obligations of a person arising out of the contract

MERGER :When an inferior right accruing to a party to contract merges into a superior right accruing to the same party

KNOWN TO PARTIES- Void ab initio UNKNOWN TO PARTIES- Void on the ground of

mutual mistake. When the promisor alone knows the

impossibilty- compensate the loss suffered bythe promisee.

SUPERVENNING IMPOSSIBILITY (Sec 56)-Impossibility subsequent to the formation of thecontract.

Destruction of subject matterNon-existance of state of thingsDeath or incapacity of personal servicesChange of lawOutbreak of war

DEATH

MERGER

INSOLVENCY

UNAUTHORISED ALTERATION OF THE TERMS OF A WRITTEN AGREEMENT

RIGHTS & LIABILITIES VESTING IN THE SAME PERSON

ACTUAL BREACH : At the time of performance During the performance

ANTICIPATORY BREACH – party to the contact declares his intention not perform before the performance is due.

By the act of promisor(implied repudiation)

By renunciation of obligation (express repudiation)

THE LIMITATION ACT 1963, CLEARLY STATESTHAT A CONTRACT SHOULD BE PERFORMEDWITHIN A SPECIFIED TIME CALLED PERIODOF LIMITATION.

IF IT IS NOT PERFORMED AND IF THEPROMISEE TAKES NO ACTION WITHIN THELIMITATION TIME, THEN HE IS DEPRIVED OFHIS REMEDY AT LAW

A remedy is a means given by law for th enforcement of a right

Following are the remedies

1. Rescission

2. Damages

3. Suit upon quantum meruit.

4. Suit for specific performance.

5. Suit for injunction.

When a contract is broken by one party, the otherparty may sue to treat the contract as rescindedand refuse further performance. In such case, the isabsolved of all his obligations under the contract.

The court may give rescission due to

1)contract is voidable.2)contract is unlawful

The court may refuse to rescind if

1)Plaintiff has ratified the contract.

2)Parties cannot be restored to the original position.

3)The third party has acquired for value.

4)When only a part is sought to be rescinded.

Damages are a monetary compensation allowed tothe injured party by the court for the loss or injurysuffered by him by the breech of the contract.

The objective of awarding damages for the breechof contract is to put the injured party in the sameposition as if he had not been injured.

This is called the doctrine of restitution. Thefundamental basis is awarding damages for thepecuniary loss.

Ordinary Damages: The damages that arise naturally inthe usual course of business.

Special Damages: The damages that the parties to thecontract know, when they enter in to a contract andthe loss are the result of the breach. (Simpsons VsLondon and N.W. Rail co.)

Vindictive Damages:

- Breach of promise to marry

- Wrongful dishonour of cheque by bank (I.V.RajagopalVs Canara Bank)

Nominal Damages: Damages awarded to the affectedparty who has not actually suffered any loss due to thebreach. (Brace Vs Calder)

Damages for inconvenience and Discomfort

Damages for loss of reputation

The phrase quantum meruit literally means ‘as much as earned’. It means payment in proportion to the amount of work done.

When a contract becomes void

When a person does something without any intention to do so gratuitously.

When there is no specific agreement as to remuneration

When one party is prevented from completing the task. (Planchet Vs Colburn)

When the contract is divisible

When an indivisible contract is fully but badly performed.

In certain cases of breach of contract damages arenot an adequate remedy. The court may, in suchcases, direct the party in breach to carry out hispromise according to terms of the contract. This isa direction by the court for specific performance ofthe contract at the suit of the party not in breach

Cases for specific performance to be enforced

1)when the act agreed to be done is such thatcompensation is not adequate relief.

2)when there is no standard for ascertaining theactual damage

3)when it is probable that compensation cannot beagreed to be done.

Injunction is an order of the court preventing aperson from doing a particular act. It is also calleda stay order.

(Warner Bros Vs Nelson)

Quasi Contract:

A quasi contract is not a contract entered intointentionally by the parties. It is an obligationcreated by law on a person in the absence of anyagreement.

◦ Supply of necessaries (Sec 68)

◦ Payment by a interested person (Sec 69)

◦Obligation to pay for non gratuitous acts (Sec 70 )

◦ Responsibility of finder of goods (Sec 71 )

According to sec 68 a minor is liable to pay out ofhis property for ‘necessaries’ supplied to him or toanyone whom he is legally bound to support.

The significance of this is that it does not arise outof a contract as much so as it arises out of acontract.

The minor is not personally liable and ‘necessaries’include food clothing as well as education, Theyalso include watch bicycle etc.

According to Sec 70 when a person lawfully does or delivers anything for the other ,not intending to do so gratuitously, and the person derives any benefit from it, he is liable to compensate, or restore the thing so done or delivered.

Here three conditions must satisfy

[1] The thing must have been done lawfully

[2] The person intending to do it must not have done it gratuitously

[3] The person must have derived benefit from the act

According to Sec 69 a person who is interested in the payment of money which another is bound by law to pay,and who therefore pays it, is entitled to be

reimbursed by the other.

The essential elements center around

[1] The payment made should be bona fide of ones

interest

[2] The payment should not be a voluntary one

[3] The payment must be such that the other is

bound by law to pay

According to Sec 71 a person who finds goodsbelonging to another and takes them into hiscustody is subject to the same responsibility asthe bailee is bound to take as much care of thegoods as a man of ordinary prudence would, Inaddition to that he must make efforts to tracethe owner. If he does not ,he will be guilty ofwrong conversation, and till the owner is foundout the property will vest with the finder. Hecan sell in case of

[1] goods are perishable in nature[2] owner cannot be found out[3] when owner refuses to pay for the lawful

charges[4] when the lawful charges amount to two thirds

of thing.

A CONTRACT BY WHICH ONE PARTY PROMISES TO ANOTHER TO SAVE HIM FROM LOSS CAUSED TO HIM BY THE CONDUCT OF THE PROMISOR HIMSELF , OR BY THE CONDUCT OF ANY OTHER PERSON IS CALLED A CONTRACT OF INDEMNITY

There are two persons , the indemnifier the indemnified or the indemnity holder

There must be loss either by the promisor’s conduct or by any other person’s conduct

It is a contingent contract by nature It may be express or implied

Sec125 deals with the commencement of the indemnifier’s liability. His liability commences when the event causing the loss occurs or when the event saving the indemnified from the loss becomes impossible

A CONTRACT OF GUARANTEE IS A CONTRACTTO PERFORM THE PROMISE, OR DISCHARGETHE LIABILITY,OF A THIRD PERSON IN CASEOF HIS DEFAULT. THE PERSON WHO GIVESTHE GUARANTEE IS KNOWN AS THE‘SURETY’, THE PERSON IN RESPECT OFWHOM THE GUARANTEE IS GIVEN IS KNOWNAS THE ‘PRINCIPAL DEBTOR’, AND THEPERSON TO WHOM THE GUARANTEE ISGIVEN IS CALLED THE ‘CREDITOR’. AGUARANTEE MAY BE EITHER ORAL ORWRITTEN.

Concurrence of three contracts

Primary liability is that of the principal debtor

In case the debtor is a minor , the surety’s liability becomes primary

All the essentials of a valid contract

It may be in writing or oral

There need not be full disclosure of facts to the surety before he gives the guarantee

SPECIFIC GUARANTEE :

When a guarantee extends to a single transaction or debt it is known as a specific or simple guarantee

CONTINUING GUARANTEE :

When a guarantee extends to a series of transactions

It is called continuing guarantee