The Indian Contract Act, Act, 1872 •
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hide]] Page Contents [hide Preliminary 1. Shot title. 2. Interpretation -clause Chapter I – Of the Communication, cceptance and !e"ocation of Proposals #. Communication, acceptance and re"ocation of proposals. $. Communication %hen complete &. !e"ocation of Proposals and acceptance '. !e"ocation ho% made (. cceptance must )e a)solute *. cceptance )y performin+ conditions, conditi ons, or recei"in+ consideration consideratio n . . Promise, epress and implied i mplied Chapter II – Of contracts, "iola)le, contracts and "oid a+reements 1. /hat a+reements are contracts 11. /ho are competent to contract 12. /hat is a sound mind for the purposes of contractin+ 1#. 0Consent defined 1$. 0ree consent defined 1&. 0Coercion defined 1'. 03ndue influence defined 1(. 0fraud defined define d 0 1*. 04isrepresentation defined 1. 5oida)ility of a+reements %ithout free consent 1-. Po%er to set aside contract induced )y undue influence 2. +reement "oid %here )oth parties are under mista6e as to matter of fact 21. 7ffect of mista6e as to la% 22. Contract caused )y mista6e of one party as to matter of fact 2#. /hat consideration and o)8ects are la%ful, and %hat not 2$. +reements "oid, if consideration are o)8ects unla%ful in part 2&. +reement %ithout consideration, "oid, unless it is in %ritin+ and re+istered or is a promise to compensate for somethin+ done or is a promise to pay a de)t )arred )y limitation la% 2'. +reement in restraint of marria+e, "oid2(. +reement in restraint of trade, "oid 2*. +reements in restrain of le+al proceedin+s, "oid 2. +reements "oid for uncertainty #. +reements )y %ay of %a+er, "oid Chapter III – Of contin+ent contracts #1. 0Contin+ent contract defined #2. 7nforcement of Contracts contin+ent on an e"ent happenin+ ##. 7nforcement of contract contin+ent on an e"ent not happenin+#$. /hen e"ent on %hich contract is contin+ent to )e deemed impossi)le, if it is the future conduct of a li"in+ person#&. /hen contracts )ecome "oid, %hich are contin+ent on happenin+ of specified e"ent %ithin fied time #'. +reements contin+ent on impossi)le e"ent "oid Chapter I5 – Of the performance of contracts %hich must )e performed #(. O)li+ations of parties to contract #*. 7ffect of refusal to accept offer of performance #. 7ffect of refusal of party to perform promise %holly $. Person )y %hom promises is to )e performed $1. 7ffect of acceptin+ performance from this person $2. 9e"olution of 8oint lia)ilities $#. ny one of 8oint promisors may )e compelled to perform $$. 7ffect of release of one 8oint promisor $&. 9e"olution of 8oint ri+hts $'. :ime for performance of promise, %here no application is to )e made and no time is specified
$(. :ime and place for performance of promise, %here time is specified and no application
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$*. pplication for performance performanc e on certain day to )e at proper time and place $. Place for the performance of promise, %here no application to )e made and no place fied for performance &. Performance in manner or at time prescri)ed or sanctioned sanctio ned )y promise &1. Promisor not )ound to perform, unless reciprocal promisee ready and %illin+ to perform&2. Order of performance of reciprocal promises&#. ;ia)ility of party pre"entin+ e"ent on %hich contract is to ta6e effect&$. 7ffect of default as to the promise %hich should )e performed, in contract consistin+ or reciprocal promises&&. 7ffect of failure to perform a fied time, in contract in %hich time is essential &'. +reement to do impossi)le act&(. !eciprocal promise to do thin+s le+al, and also other thin+s ille+al &*. lternati"e promise, one )ranch )ein+ ille+al&. pplication of payment %here de)t to )e dischar+ed is indicated '. pplication of payment %here de)t to )e dischar+ed is not indicated'1. pplication of payment %here neither party appropriates '2. 7ffect of no"ation, rescission, and alteration of contract'#. Promise may dispense %ith or remit performan performance ce of promise '$. Conses lia)ility 12. Continuin+ +uarantee 1#. !e"ocation of continuin+ +uarantee 1#1. !e"ocation !e"ocatio n of continui continuin+ n+ +uarantee )y surety> death 1#2. ;ia)ility of t%o persons, primarily lia)le, not affected )y arran+ement )et%een them that one shall )e surety on other>s default 1##. 9ischar+e of surety )y "ariance in terms of contract1#$. 9ischar+e of surety )y release or dischar+e discha r+e of principal de)tor 1#&. 9ischar+e of surety %hen creditor compounds %ith, +i"es time to, or a+rees not to sue, principal de)tor 1#'. Surety not dischar+ed %hen a+reement made %ith third person to +i"e time to principal de)tor 1#(. Creditor>s for)earance for)earance to sue does not dischar+e surety 1#*. !elease of one co-surety does not dischar+e other 1#. 9ischar+e of surety )y creditor>s act or omissi omission on impairin+ surety>s e"entual remedy -
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$*. pplication for performance performanc e on certain day to )e at proper time and place $. Place for the performance of promise, %here no application to )e made and no place fied for performance &. Performance in manner or at time prescri)ed or sanctioned sanctio ned )y promise &1. Promisor not )ound to perform, unless reciprocal promisee ready and %illin+ to perform&2. Order of performance of reciprocal promises&#. ;ia)ility of party pre"entin+ e"ent on %hich contract is to ta6e effect&$. 7ffect of default as to the promise %hich should )e performed, in contract consistin+ or reciprocal promises&&. 7ffect of failure to perform a fied time, in contract in %hich time is essential &'. +reement to do impossi)le act&(. !eciprocal promise to do thin+s le+al, and also other thin+s ille+al &*. lternati"e promise, one )ranch )ein+ ille+al&. pplication of payment %here de)t to )e dischar+ed is indicated '. pplication of payment %here de)t to )e dischar+ed is not indicated'1. pplication of payment %here neither party appropriates '2. 7ffect of no"ation, rescission, and alteration of contract'#. Promise may dispense %ith or remit performan performance ce of promise '$. Conses lia)ility 12. Continuin+ +uarantee 1#. !e"ocation of continuin+ +uarantee 1#1. !e"ocation !e"ocatio n of continui continuin+ n+ +uarantee )y surety> death 1#2. ;ia)ility of t%o persons, primarily lia)le, not affected )y arran+ement )et%een them that one shall )e surety on other>s default 1##. 9ischar+e of surety )y "ariance in terms of contract1#$. 9ischar+e of surety )y release or dischar+e discha r+e of principal de)tor 1#&. 9ischar+e of surety %hen creditor compounds %ith, +i"es time to, or a+rees not to sue, principal de)tor 1#'. Surety not dischar+ed %hen a+reement made %ith third person to +i"e time to principal de)tor 1#(. Creditor>s for)earance for)earance to sue does not dischar+e surety 1#*. !elease of one co-surety does not dischar+e other 1#. 9ischar+e of surety )y creditor>s act or omissi omission on impairin+ surety>s e"entual remedy -
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1$. !i+hts of surety on payment or performance 1$1. Surety>s ri+ht to )enefit of creditor>s securities securiti es 1$2. =uarantee o)tained )y misrepresentation misrepresentation,, in"alid 1$#. =uarantee o)tained )y concealment, in"alid 1$$. =uarantee on contract that creditor credit or shall not act on it until co-surety 8oins 1$&. Implied promise to indemnify surety 1$'. Co-sureties lia)le to contri)ute e, @)ailor> and @)ailee> defined.B 1$. 9eli"ery to )ailee ho% made 1&. Aailor>s duty to disclose faults fault s in +oods )ailed 1&1. Care to )e ta6en )y )ailee 1&2. Aailee %hen not lia)le for loss, etc, of thin+ )ailed 1&#. :ermination of )ailment )y )ailee>s act inconsistent inconsiste nt %ith conditi conditions ons 1&$. ;ia)ility of )ailee ma6in+ unauthorised unauthorise d use of +oods )ailed 1&&. 7ffect of miture %ith )ailor>s consent, cons ent, of his +oods %ith )ailee>s 1&'. 7ffect of miture, %ithout )ailor>s )ailor >s consent, %hen the +oods can )e separated 1&(. 7ffect of miture, %ithout )ailor>s consent, %hen the +oods cannot )e separated 1&*. !epayment, )y )ailor, of necessary epenses 1&. !estoration of +oods lent +ratuitously 1'. !eturn of +oods )ailed, on epiration of time or a accomplishmen t of purpose 1'1. Aailee>s responsi)ility responsi )ility %hen +oods are not duly returned 1'2. :ermination of +ratuitous )ailment )ailmen t )y death 1'#. Aailer entitled to increas e or profit from +oods )ailed 1'$. Aailor>s responsi)ility responsi)il ity to )ailee 1'&. Aailment )y se"eral 8oint o%ners 1''. Aailee not responsi)le on redeli"ery to )ailor %ithout title 1'(. !i+ht of third person claimin+ claimin + +oods )ailed 1'*. !i+ht to finder of +oods may sue for specified re%ard offered 1'. /hen finder of thin+ commonly on sale may sell it 1(. Aailee>s particular lien 1(1. =eneral lien of )an6ers, factors, %harfin+er, attorneys and policy )ro6ers 1(2. 0Pled+e, 0Pa%nor, and 0Pa%nee defined 1(#. Pa%nee>s ri+ht of retainer 1($. Pa%nee not to retain for de)t or promise other than for %hich +oods pled+ed – presumption presumpti on in case of su)ses ri+ht as to etraordinary epenses incurred 1('. Pa%nee>s ri+ht %here pa%nor ma6es default 1((. 9efaultin+ pa%nor>s ri+ht to redeem 1(*. Pled+e )y mercantile a+ent 1(*. Pled+e )y person in possess possession ion under "oida)le contract 1(. Pled+e %here pa%nor has only a limited interest 1*. Suit )y )ailor or )ailee a+ainst %ron+-doer 1*1. ppointment of relief or compensation o)tained )y such suit – Chapter ? – +ency, ppointment and uthority of +ents 1*2. 0+ent and 0principal defined 1*#. /ho may employ a+ent 1*$. /ho may )e an a+ent 1*&. Consideration not necessary.B1*'. +ent>s authority may )e epressed or implied.B 1*(. 9efinitions of epress and implied 1**. 7tent of a+ent>s authority – 1*. +ent>s authority in an emer+ency 1. /hen a+ent cannot dele+ate 11. 0Su)-a+ent defined 12. !epresentation !epresentati on of principal )y su)-a+ent properly appointed appointe d 1#. +ent>s responsi)ility responsi)il ity for su)-a+ent appointed %ithout -
1$. !elation )et%een principal and person duly appointed )y a+ent to act in )usiness of
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a+ency 1&. +ent>s duty in namin+ such person 1'. !i+ht of person as to acts done forhim %ithout his authority, effect of ratification 1(. !atification may )e epressed or implied 1*. no%led+e res authority 2$. !e"ocation %here authority has )een partly eercised 2&. Compensation for re"ocation )y principal, or renunciation )y a+ent 2'. Eotice of re"ocation or renunciation 2(. !e"ocation and !enunciation may )e epressed or implied 2*. /hen termination of a+ent>s authority ta6es effect as to a+ent, and as to third
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2. +ent>s duty on termination o a+ency )y principal>s death or insanity 21. :ermination of Su)-a+ent>s authority 211. +ent>s duty in conductin+ principal>s )usiness 212. S6ill and 9ili+ence res accounts 21$. +ent>s duty of communicate %ith principal 21&. !i+ht to principal %hen a+ent deals, on his o%n account, in )usiness of a+ency %ithout principal>s consent 21'. Principal>s ri+ht to )enefit +ained )y a+ent dealin+ on his o%n account in )usiness of a+ency 21(. +ent>s ri+ht of retainer out of sums recei"ed on principal>s account 21* . +ent>s duty to pay sums recei"ed for principal 21. /hen a+ent>s remuneration )ecomes due 22. +ent not entitled to remuneration for )usiness misconducted 221. +ent>s lien on principal property 222. +ent to )e indemnified a+ainst conses ne+lect 22'. 7nforcement and Conses contracts 22(. Principal ho% far )ound, %hen a+ent eceeds authority 22*. Principal not )ound %hen ecess of a+ent>s authority is not separa)le 22. Conses unauthoriDed acts %ere authoriDed 2#*. 7ffect, on a+reement, of misrepresentation or fraud )y a+ent Chapter ?I – Of Partnership 2#-2'' of Partnership Sch. I .:F7 SCF793;7 7nactments repealed -
Preliminary 1. Shot title. :his ct may )e called the Indian Contract ct, 1*(2. 7tent, Commencement. -It etends to the %hole of India 1[ecept the State of Gammu and ashmir]H and it shall come into force on the first day of Septem)er 1*(2.
Sa"in+.- 2[ ] Eothin+ herein contained shall affect the pro"isions of any Statute, ct or !e+ulation not here)y epressly repealed, nor any usa+e or custom of trade, nor any incident of any contract, not inconsistent %ith the pro"isions of this ct. 1. Subs. by Act 3 of 1951, sec. 3 and Sch., for “excet Part ! States". 2. #he $ords “#he enact%ents %entioned in the Schedule hereto are reealed to the extent secified in the third colu%n thereof, but" re. by Act 1& of 191', sec. 3 and Sch. 11.
2. (nterretation )clause In this ct the follo%in+ %ords and epressions are used in the follo%in+ senses, unless contrary intention appears from the contetJ KaL /hen one person si+nifies to another his %illin+ness to do or to a)stain from doin+ anythin+, %ith a "ie% to o)tainin+ the assent of that other to such act or a)stinence, he is said to ma6e a proposalH K)L /hen a person to %hom the proposal is made, si+nifies his assent thereto, the proposal is said to )e accepted. proposal, %hen a accepted, )ecomes a promiseH KcL :he person ma6in+ the proposal is called the 0promisor, and the person acceptin+ the proposal is called 0promisee, KdL /hen, at the desire of the promisor, the promisee or any other person has done or a)stained from doin+, or does or a)stains from doin+, or promises to do or to a)stain from doin+, somethin+, such act or a)stinence or promise is called a consideration for the promiseH KeL 7"ery promise and e"ery set of promises, formin+ the consideration for each other, is an a+reementH KfL Promises %hich form the consideration or part of the consideration for each other, are called reciprocal promisesH K+L n a+reement not enforcea)le )y la% is said to )e "oidH KhL n a+reement enforcea)le )y la% is a contractH KiL n a+reement %hich is enforcea)le )y la% at the option of one or more of the parties thereto, )ut not at the option of the other or others, is a "oida)le contractH K8L contract %hich ceases to )e enforcea)le )y la% )ecomes "oid %hen it ceases to )e enforcea)le. C*++-#S t the desire of the promisor Suit %ould lie for the reco"ery of a promised su)scription %here on the faith of the promisee, the promiser entered into a contract %ith a contractorH edarnath Ahattachar8i ". =orie 4ohomed, K1**'L I;! 1$ Cal '$. Consideration and moti"e promise founded on moti"e of +enerosity, prudence and natural duty is a promise %ithout considerationH )dul DiD ". 4asum li, K11$L ;G! #' ll 2'*. Contract contract comes into eistence only %hen all the terms and conditions ha"e )een finalised. If the facts of a particular case sho% that eecution of a %ritten contract %as a condition precedent for comin+ into force of the contract )et%een the parties, then it cannot )e said that any concluded contract in a)sence of a %ritten contract )ein+ eecuted has come into force )et%een the partiesH G.. Industries ;td. ". 4ohan In"estments and Properties P"t. ;td., I! 12 9el #&. ProposalJ Offer and statement of intention :he proposal %hen accepted +i"es rise to an a+reement. It is at this sta+e that the a+reement is reduced into %ritin+ and a formal document is eecuted on %hich parties affi their si+nature or thum) impression so as to )e )ound )y the terms of the a+reement set out in that document. Such an a+reement has to )e la%fulH :arsem Sin+h ". Su6hmider Sin+h, I! 1* SC 1$. 5alid consideration :he consideration should )e somethin+ %hich not only the parties re+ard )ut the la% can also re+ard as ha"in+ some "alue. It must )e real and not illusory, %hether ade
Creatin+ le+al relations If there )ein+ no a+reement, there %as no )reach of contract committed )y the respondent and also that since there %as no )reach of contract, the petitioner cannot retain or forfeit the earnest money deposited )y the respondent )y %ay of penaltyH State of :ripura ". Aho%mi6 M Co., I! 2$ =au 21.
Chapter I – Of the Communication, Acceptance and Revocation of Propoal 3. Co%%unication, accetance and reocation of roosals. :he communication of proposals, the acceptance of proposals, and the re"ocation of proposals and acceptance, respecti"ely, are deemed to )e made )y any act or omission of the party proposin+, acceptin+ or re"o6in+, )y %hich he intends to communicated such proposal, acceptance or re"ocation, or %hich has the effect of communicatin+ it. Co%%ents Communication of acceptance n offer is accepted %hen the acceptance is communicated. :he communication must )e made to the offeror and a communication of acceptance made to a third person creates no contractH elthouse ". Aindely, K1*'2L ' ;: 1&(. 7posure of +oodsJ offer or not :he 7posure of +oods )y a shop6eeper does not amount to an offer to sell. On pic6in+ the +oods, it is an offer )y the customer to )uy, and sale is not effected until the )uyer>s offer price is accepted )y the shop6eeperH Pharmaceutical Society of =reat Aritain ". Aoots Cash Chemists KSouthernL ;td., K1&2L 2 NA (&. Offer to the %hole %orld :hou+h an offer may )e made to the %hole %orld, a contract can arise only )y acceptance of the offer. Fence 6no%led+e of the terms of the offer is essential for acceptance. :hus %here a person sent his ser"ant in search of his missin+ )oy and su)se
'. Co%%unication $hen co%lete :he communication of a proposal is complete %hen it comes to the 6no%led+e of the person to %hom it is made. :he communication of an acceptance is complete,B as a+ainst the proposer, %hen it is put in a course of transmission to him so as to )e out of the po%er of the acceptorH as a+ainst the acceptor, %hen it comes to the 6no%led+e of the proposer. :he communication of a re"ocation is complete,B as a+ainst the person %ho ma6es it, %hen it is put into a course of transmission to the person to %hom it is made, so as to )e out of the po%er of the person %ho ma6es itH as a+ainst the person to %hom it is made, %hen it comes to his 6no%led+e. (llustrations KaL proposes, )y letter, to sell a house to A at a certain price. :he communication of the proposal is complete %hen A recei"es the letter. K)L A accepts >s proposal )y a letter sent )y post. :he communication of the acceptance is complete, as a+ainst %hen the letter is postedH as a+ainst A, %hen the letter is recei"ed )y .
KcL re"o6es his proposal )y tele+ram. :he re"ocation is complete as a+ainst %hen the tele+ram is despatched. It is complete as a+ainst A %hen A recei"es it. A re"o6es his acceptance )y tele+ram. A>s re"ocation is complete as a+ainst A %hen the tele+ram is despatched, and as a+ainst %hen it reaches him. C*++-#S Communication of proposal and acceptance :he ad"ertisement of the Corporation for tenders %as an @in"itation to ma6e an offer>. :he tenders %hen su)mitted to the Corporation %ere @offers> or @proposals> in terms of section $ of the ct and the @communication> of @proposal> or @offers> %as complete %hen recei"ed )y the Corporation. In terms of section $ of the ct, the @acceptance> %as not complete as it %as ne"er made, and ne"er put into transmission. :he re"ocation %ithin the meanin+ of section $ %as complete as it %as recei"ed and %ithin the 6no%led+e of the Corporation. :he offers on tenders %ere re"o6ed )efore it %as accepted. :he contract ne"er sa% the li+ht of the dayH Shyam Airi /or6s P"t. ;td. ". 3.P. orest Corporation, I! 1 ll 2&. /here an offer is made )y a method of instantaneous communication li6e tele, the contract is only complete %hen the acceptance is recei"ed )y the offerer, and the contract is made at the place %here the acceptance is recei"edH 7ntores ;td. ". 4iles ar 7ast Corporation, K1&&L 2 ll 7! $#J K1&&L 2 NA #2(J K1&&L # /;! $*. Contract )y correspondenceJ ntecedents and su)se
5. /eocation of Proosals and accetance proposal may )e re"o6ed at any time )efore the communication of its acceptance is complete as a+ainst the proposer, )ut not after%ards. n acceptance may )e re"o6ed at any time )efore the communication of the acceptance is complete as a+ainst the acceptor, )ut no after%ards. (llustrations proposes, )y a letter sent )y post, to sell his house to A. A accepts the proposal )y a letter sent )y post. may re"o6e his proposal at any time )efore or at the moment %hen A posts his letter of acceptance, )ut not after%ards. A may re"o6e his acceptance at any time )efore or at the moment %hen the letter communicatin+ it reaches , )ut not after%ards. C*++-#S !e"ocation /here an offer +i"es the offerer an option to accept %ithin a fied period, it may )e %ithdra%n e"en )efore the epiry of that period unless there is some consideration for 6eepin+ it openH irfred Schonlan6 ". 4uthurayna Chetty, K1*2L 2 4ad ;G &(.
0. /eocation ho$ %ade proposal is re"o6ed K1L )y the communication of notice of re"ocation )y the proposer to the other partyH
K2L )y the lapse of the time prescri)ed in such proposal for its acceptance, or, if no time is so prescri)ed, )y the lapse of a reasona)le time, %ithout communication of the acceptanceH K#L )y the failure of the acceptor to fulfil a condition precedent to acceptanceH or K$L )y the death or insanity of the proposer, if the fact of the death or insanity comes to the 6no%led+e of theacceptor )efore acceptance.
. Accetance %ust be absolute In order to con"ert a proposal into a promise the acceptance must K1L )e a)solute and un
. Accetance by erfor%ing conditions, or receiing consideration . Performance of the conditions of proposal, for the acceptance of any consideration for a reciprocal promise %hich may )e offered %ith a proposal, is an acceptance of the proposal. Co%%ents Performance )y actJ Interference of acceptance :he defendant company ad"ertised that they %ould pay pound 1, to any person %ho used their car)olic smo6e )all for a certain time any yet contracted influenDa. :he plaintiff purchased the medicine, used it for the stated time )ut contracted the disease. It %as held that the contract %as accepted )y )ein+ acted upon, that the defendant had not stipulated for any communication of acceptance and therefore the plaintiff %as entitled to reco"er the amountH Carlill ". Car)olic Smo6e Aall Co., K1*#L 1 NA9 2&'.
9. Pro%ise, exress and i%lied In so far as the proposal or acceptance of any promise is made in %ords, the promise is said to )e epress. In so far as such proposal or acceptance is made other%ise than in %ords, the promise is said to )e implied. C*++-#S Implied terms contract can )e implied and it is "ery clear from section of the Contract ct, )ut it is a fundamental principle of la% that the court should not ma6e a contract for the parties. contract implied in fact re
Chapter II – Of contract, viola!le, contract and void a"reement
1&. hat agree%ents are contracts ll a+reements are contracts if they are made )y the free consent of parties competent to contract, for a la%ful consideration and %ith a la%ful o)8ect, and are not here)y epressly declared to )e "oid. Eothin+ herein contained shall affect any la% in force in 1India, and not here)y epressly repealed, )y %hich any contract is re
11. ho are co%etent to contract 7"ery person is competent to contract %ho is of the a+e of ma8ority accordin+ to the la% to %hich he is su)8ect, and %ho is sound mind and is not diss contract of ser"ice contract of marria+e, entered into )y a father for the )enefit of his minor child is not "oid for %ant of consideration, unli6e a contract of ser"ice )y a minor %hich is a contract of ser"ice entered into )y a father on )ehalf of the minor %hich is not enforcea)le as it is "oid for %ant of considerationH !a8 !ani ". Prem di), I! 1$ Aom 21&. 4inor>s contract "oid /here a mort+a+e %as made )y a minor and the money lender %ho had ad"anced money to the minor on the security of the mort+a+e sued the minor on the stren+th of the contract. It is held, ha"in+ re+ard to sections 2, 1 and 11 of the Contract ct, that the ct ma6es it essential that the contractin+ parties should )e competent to contract and that a minor>s contract is "oidH 4ohori)i)ee ". 9harmodas =hose, K1#L I;! # Cal &# KPCL. BBBBBBBBBBB 1. See the (ndian +a7ority Act, 15 49 of 15.
12. hat is a sound %ind for the uroses of contracting person is said to )e of sound mind for the propose of ma6in+ a contract, if, at the time %hen he ma6es it, he is capa)le of understandin+ it and of formin+ a rational 8ud+ement as to its effect upon his interest. person %ho is usually of unsound mind, )ut occasionally of sound mind, may ma6e a contract %hen he is of sound mind. person %ho is usually of sound mind, )ut occasionally of unsound mind, may not ma6e a contract %hen he is of unsound mind. (llustrations KaL patient in a lunatic asylum, %ho is, at inter"als, of sound mind, may contract durin+ those inter"als. K)L sane man, %ho is delirious from fe"er, or %ho is so drun6 that he cannot understand the terms of a contract, or form a rational 8ud+ment as to its effect on his interests, cannot contract %hilst such delirium or drun6enness lasts.
13. “Consent" defined ) :%o or more person are said to consent %hen they a+ree upon the same thin+ in the same sense.
1'. “8ree consent" defined ) Consent is said to )e free %hen it is not caused )y K1L coercion, as defined in section 1&, or K2L undue influence, as defined in section 1', or K#L fraud, as defined in section 1(, or K$L misrepresentation, as defined in section 1*, or K&L mista6e, su)8ect to the pro"isions of section 2,21, and 22. Consent is said to )e so caused %hen it %ould not ha"e )een +i"en )ut for the eistence of such coercion, undue influence, fraud, misrepresentation, or mista6e.
15. “Coercion" defined 0Coercion is the committin+, or threatin+ to commit, any act for)idden )y the Indian Penal Code K$& of 1*'L or the unla%ful detainin+, or threatenin+ to detain, any property, to the pre8udice of any person %hate"er, %ith the intention of causin+ any person to enter into an a+reement. (llustrations , on )oard an 7n+lish ship on the hi+h seas, causes A to enter into an a+reement )y an act amountin+ to criminal intimidation under the Indian Penal Code K$& of 1*'L. after%ards sues A for )reach of contract at Calcutta. has employed coercion, althou+h his act is not an offence )y the la% of 7n+land, and althou+h section &' of the Indian Penal Code K$& of 1*'L %as not in force at the time %hen or place %here the act %as done. C*++-#S n act for)idden )y the Penal Code :he threat of suicide amounts to coercion %ithin section 1&H Chi6am mira8u ". Chic6am Seshamma, K112L 1' IC #$$.
10. “ndue influence" defined 1
[10.:ndue influence; defined.BK1L contract is said to )e induced )y 0under influence %here the relations su)sistin+ )et%een the parties are such that one of the parties is in a position to dominate the %ill of the other and uses that position to o)tain an unfair ad"anta+e o"er the other. K2L In particular and %ithout pre8udice to the +enerally of the fore+oin+ principle, a person is deemed to )e in a position to dominate the %ill of another KaL %here he hold a real or apparent authority o"er the other, or %here he stands in a fiduciary relation to the otherH or K)L %here he ma6es a contract %ith a person %hose mental capacity is temporarily or permanently affected )y reason of a+e, illness, or mental or )odily distress. K#L /here a person %ho is in a position to dominate the %ill of another, enters into a contract %ith him, and the transaction appears, on the face of it or on the e"idence adduced, to )e unconsciona)le, the )urden of pro"in+ that such contract %as not induced )y undue influence shall )e upon the person in a position to dominate the %ill of the other.
Eothin+ in the su)-section shall affect the pro"isions of section 111 of the Indian 7"idence ct, 1*(2 K1 of 1*(2L (llustrations KaL ha"in+ ad"anced money to his son, A, durin+ his minority, upon A>s comin+ of a+e o)tains, )y misuse of parental influence, a )ond from A for a +reater amount than the sum due in respect of the ad"ance. employs undue influence. K)L , a man enfee)led )y disease or a+e, is induced, )y A>s influence o"er him as his medical attendant, to a+ree to pay A an unreasona)le sum for his professional ser"ices, A employes undue influence. KcL , )ein+ in de)t to A, the money-lender of his "illa+e, contracts a fresh loan on terms %hich appear to )e unconsciona)le. It lies on A to pro"e that the contract %as not induced )y undue influence. KdL applies to a )an6er for a loan at a time %hen there is strin+ency in the money mar6et. :he )an6er declines to ma6e the loan ecept at an unusually hi+h rate of interest. accepts the loan on these terms. :his is a transaction in the ordinary course of )usiness, and the contract is not induced )y undue influence.] C*++-#S 3nconsidera)le transaction :he circumstance that a +randfather made a +ift of a portion of his properties to his only +randson a fe% years )efore his death is not on the face of it an unconsciona)le transactionH Su)has Chandra 9as 4ushi) ". =an+a Prasad 9as 4ushi), I! 1'( SC *(*. 3ndue influence 4erely )ecause the parties %ere nearly related to each other no presumption of undue influence can ariseH Su)has Chandra 9as 4ushi) ". =an+a Prasad 9as 4ushi), I! 1'( SC *(*. 3ndue influence and fraud KiL 3ndue influence is said to )e a su)tle species of fraud %here)y mastery is o)tained o"er the mind of the "ictim, )y insidious approaches and seducti"e artificesH 4ah)oo) han ". Fa6im )dul !ahim, I! 1'$ !a8 2&. KiiL /here pardanashin and illiterate %oman actin+ under full confidence of the defendant %ho pro8ected a false impression of the contents of a documents, put this thum) impression on such documents, their comment is a "itiated oneH har)u8a uer ". Gan+)ahadur !ai, I! 1'# SC 12#. /hat to pro"eBAurden of proof If the transaction appears to )e unconsciona)le then the )urden of pro"in+ that the contract %as not induced )y undue influence is to lie upon the person %ho %as in a position to dominate the %ill of the otherH Shrimati ". Sudha6ar !. Ahat6ar, ir 1* Aom 122. BBBBBBBBBBB 1. Subs. by Act 0 of 199, sec. 2, for section 10.
1. “fraud defined “ 0raud means and includes any of the follo%in+ acts committed )y a party to a contract, or %ith his conni"ance, or )y his a+ents, 1 %ith intent to decei"e another party thereto his a+ent, or to induce him to enter into the contractH K1L the su++estion as a fact, of that %hich is not true, )y one %ho does not )elie"e it to )e trueH K2L the acti"e concealment of a fact )y one ha"in+ 6no%led+e or )elief of the factH K#L a promise made %ithout any intention of performin+ itH K$L any other act fitted to decei"eH K&L any such act or omission as the la% specially declares to )e fraudulent. xlanation.B4ere silence as to facts li6ely to affect the %illin+ness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, re+ard )ein+ had to them, it is the duty of the person 6eepin+ silence to spea6 2, or unless his silence, is, in itself, es unsoundness. :his is not fraud in . K)L A is >s dau+hter and has 8ust come of a+e. Fere the relation )et%een the parties %ould ma6e it >s duty to tell A if the horse is unsound.
KcL A says to B@@If you do not deny it, I shall assume that the horse is sound. says nothin+. Fere, >s silence is es %illin+ness to proceed %ith the contract. is not )ound to inform A. C*++-#S Cases %here there is duty to spea6 It is the duty of the assured to put the insurer in possession of all material facts affectin+ the ris6 co"eredH 4ithoo ;al Eaya6 ". ;.I.C. of India, I! 1'2 SC *1$. Pleadin+ and proof of fraud :he transaction desi+ned to defeat the plaintiff creditors %as fraudulent. raud %as fully carried into effect in letter and spirit. In as much as the plaintiff himself %as the preparator of fraud, he should not )e +ranted any discretionary relief. Once it is found that the parties are in pari delicto the court %ill not assist the party %ho enters into ille+al transaction and ma6es that transaction the )asis of his claimH Sultan hmad ". !ashid hmad, I! 1 ll $(. BBBBBBBBBB1. Cf. section 23, infra. 2. See section 1'3, infra.
1. “+isreresentation" defined 04isrepresentation means and includes K1L the positi"e assertion, in a manner not %arranted )y the information of the person ma6in+ it, of that %hichis not true, thou+h he )elie"es it to )e trueH K2L any )reach of duty %hich, %ithout an intent to decei"e, +ains an ad"anta+e to the person committin+ it, or anyone claimin+ under himH )y misleadin+ another to his pre8udice, or to the pre8udice of any one claimin+ under himH K#L causin+, ho%e"er innocently, a party to an a+reement, to ma6e a mista6e as to the su)stance of the thin+ %hich is su)8ect of the a+reement. C*++-#S statement is said to )e %arranted )y the information of the person ma6in+ it %hen he recei"es the information from a trust%orthy source. It should not )e a mere hearsayH 4ohanlal ". Sri =un+a8i Cotton 4ills Co., K1L $ C/E #'.
19. s factory, and there)y induces A to )uy the factory. :he contract is "oida)le at the option of A. K)L , )y a misrepresentation, leads A erroneously to )elie"e that fi"e hundred maunds of indi+o are made annually at >s factory. A eamines the accounts of the factory, %hich sho% that only four hundred maunds of indi+o ha"e )een made. fter this A )uys the factory. :he contract is not "oida)le on account of >s misrepresentation. KcL fraudulently informs A that >s estate is free from incum)rance. A thereupon )uys the estate. :he estate is su)8ect to a mort+a+e. A may either a"oid the contract, or may insist on its )ein+ carried out and mort+a+e-de)t redeemed.
KdL A, ha"in+ disco"ered a "ein of ore on the estate of , adopts means to conceal, and does conceal the eistence of the ore from . :hrou+h >s i+norance A is ena)led to )uy the estate at an under-"alue. :he contract is "oida)le at the option of . KeL is entitled to succeed to an estate at the death of AH A diesJ C, ha"in+ recei"ed intelli+ence of A>s death, pre"ents the intelli+ence reachin+ , and thus induces to sell him his interest in the estate. :he sale is "oida)le at the option of . C*++-#S Scope :he defendant represented himself to )e a partner of the firm )y his conduct and throu+h documents and +ot a loan of !s. ', from the plaintiff )an6. :he plaintiff )an6 +a"e loan to all the defendants )elie"in+ them to )e partners of the defendant. It %as held that the defendant had represented himself to )e a partner and therefore lia)le %ith other defendantsH Oriental Aan6 of Commerce ". S.!. ishore M Co., I! 12 9el 1($. BBBBBBBBBB1. #he $ords “undue influence" re. by Act 0 of 199, sec. 3.
19)A. Po$er to set aside contract induced by undue influence ) /hen consent to an a+reement is caused )y undue influence, the a+reement is a contract "oida)le at the option of the party %hose consent %as s o caused. ny such contract may )e set aside either a)solutely or, if the party %ho %as entitled to a"oid it has recei"ed any )enefit thereunder, upon such terms and conditions as to the Court may seem 8ust. (llustrations KaL >s son has for+ed A>s name to a promissory note. A under threat of prosecutin+ >s son, o)tains a )ond from for the amount of the for+ed note. If A sues on this )ond, the Court may set the )ond aside. K)L , a money-lender, ad"ances !s. 1 to A, an a+riculturist, and, )y undue influence, induces A to eecute a )ond for !s. 2 %ith interest at ' per cent. per month. :he Court may set the )ond aside, orderin+ A to repay the !s. 1 %ith such interest as may seem 8ust.] BBBBBBBBBB1. (ns. by Act 0 of 199, sec. 3.
2&. Agree%ent oid $here both arties are under %ista=e as to %atter of fact /here )oth the parties to an a+reement are under a mista6e as to a matter of fact essential to the a+reement the a+reement is "oid. 7planation.Bn erroneous opinion as to the "alue of the thin+ %hich forms the su)8ect-matter of the a+reement, is not to )e deemed a mista6e as to a matter of fact. (llustrations KaL a+rees to sell to A a specific car+o of +oods supposed to )e on its %ay from 7n+land to Aom)ay. It turns out that, )efore the day of the )ar+ain the ship con"eyin+ the car+o had )een cast a%ay and the +oods lost. Eeither party %as a%are of these facts. :he a+reement is "oid. K)L a+rees to )uy from A a certain horse. It turns out that the horse %as dead at the time of the )ar+ain, thou+h neither party %as a%are of the fact. :he a+reement is "oid. KcL , )ein+ entitled to an estate for the life of A, a+rees to sell it to C, A %as dead at the time of a+reement, )ut )oth parties %ere i+norant of the fact. :he a+reement is "oid. C*++-#S 4ista6e :here can )e a mista6e of identity only %hen a person )earin+ a particular identity eists %ithin the 6no%led+e of the plaintiff and the plaintiff intends to deal %ith him onlyH in+>s Eortan 4etal Co. ". 7drid+e, 4errett M Co., K1*(L 1$ :;! * KCL.
21. ffect of %ista=e as to la$ contract is not "oida)le )ecause it %as caused )y a mista6e as to any la% in force in 1IndiaH )ut mista6e as to a la% not in force in India has the same effect as a mista6e of fact. 2 [] (llustration
and A ma6e a contract +rounded on the erroneous )elief that a particular de)t is )arred )y the Indian ;a% of ;imitationH the contract is not "oida)le. 3
[] BBBBBBBBB– 1. #he original $ords “!ritish (ndia" hae successiely been a%ended by the A.*. 19' and the A.*. 195& to read as aboe. 2. Paragrah 2 o%itted by the A.*. 195&. arlier aragrah 2 $as inserted by the A.*. 193. 3. #he second (llustration re. by Act 2' of 191, sec. 3 and Sch. ((
22. Contract caused by %ista=e of one arty as to %atter of fact contract is not "oida)le merely )ecause it %as caused )y one of the parties to it )ein+ under a mista6e as to a matter of fact.
23. hat consideration and ob7ects are la$ful, and $hat not :he consideration or o)8ect of an a+reement is la%ful, unless -It is for)idden )y la%H oris of such nature that, if permitted it %ould defeat the pro"isions of any la% or is fraudulentH ofin"ol"es or implies, in8ury to the person or property of anotherH orthe Court re+ards it as immoral, or opposed to pu)lic policy. In each of these cases, the consideration or o)8ect of an a+reement is said to )e unla%ful. 7"ery a+reement of %hich the o)8ect or consideration is unla%ful is "oid. (llustrations KaL a+rees to sell his house to A for 1, rupees. Fere, A>s promise to pay the sum of 1, rupees is the consideration for >s promise to sell the house and >s promise to sell the house is the consideration for A>s promise to pay the 1, rupees. :hese are la%ful considerations. K)L promises to pay A 1, rupees at the end of si months, if C, %ho o%es that sum to A, fails to pay it. A promises to +rant time to C accordin+ly. Fere, the promise of each party is the consideration for the promise of the other party, and they are la%ful considerations. KcL promises, for a certain sum paid to him )y A, to ma6e +ood to A the "alue of his ship if it is %rec6ed on a certain "oya+e. Fere, >s promise is the consideration for A>s payment, and A>s payment is the consideration for >s promise, and these are la%ful considerations. KdL promises to maintain A>s child, and A promises to pay 1, rupees yearly for the purpose. Fere, the promise of each party is the consideration for the promise of the other party. :hey are la%ful considerations. KeL , A and C enter into an a+reement for the di"ision amon+ them of +ains acs estate is sold for arrears of re"enue under the pro"isions of an ct of the ;e+islature, )y %hich the defaulter is prohi)ited from purchasin+ the estate. A, upon an understandin+ %ith , )ecomes the purchaser, and a+rees to con"ey the estate to upon recei"in+ from him the price %hich A has paid. :he a+reement is "oid, as it renders the transaction, in effect, a purchase )y the defaulter and %ould so defeat the o)8ect of the la%. K8L , %ho is A>s mu6htar, promises to eercise his influence, as such, %ith A in fa"our of C, and C promises to pay 1, rupees to . :he a+reement is "oid, )ecuase it is immoral. K6L a+rees to let her dau+hter to hire to A for concu)ina+e. :he a+reement is "oid, )ecause it is immoral, thou+h the lettin+ may not )e punisha)le under the Indian Penal Code K$& of 1*'L. C*++-#S pplica)ility :he notification permittin+ refund of sales ta %as contrary to the statute. :he ta paid is not an amount spent )y the appellant )ut realised on sale )y it. :he constitutional re
%as in contra"ention of pu)lic purpose thus "iolati"e of pu)lic policy and "oid under section 2# of the Contract ctH mrit Aansapati Co ;td. ". State of Pun8a), I! 12 SC 1('. Ille+al and "oid a+reements :he distinction )et%een ille+al and "oid contracts is "ery thin )ut it is there. :he la% may either for)id an a+reement to )e made, or it may merely say that if it is made the courts %ill not enforce it. In the former case, it is ille+al in the latter only "oidH Eutan umar ". IInd dditional 9istrict Gud+e, Aanda, I! 1$ ll 2*. O)8ect of a+reement is "alid thereof :he eemption clause containin+ that the carrier shall )e under no lia)ility for any dama+es to passen+ers, is "alid and it le+ally ecludes all lia)ility for ne+li+ence and such clause cannot )e held )ad under section 2# of ctH Indian irlines ". 4adhuri Cho%dhuri, I! 1'& Cal 2&2. Scope If an a+reement is merely collateral to another or constitutes an aid facilitatin+ the carryin+ out of the o)8ect of the other a+reement %hich thou+h "oid, is not prohi)ited )y la% it may )e enforced as a collateral a+reement. /here a person enterin+ into an ille+al contract promises epressly or )y implication that the contract is )lameless such a promise amount to collateral a+reement upon %hich the other party if in fact innocent of turpitude may sue for dama+esH !a8at umar !ath ". =o"ernment of India, I! 2 Ori #2. :he appellation @"oid> in relation to a 8uristic act, means %ithout le+al force, effect or conse unli6e the term @consideration> has not )een defined in section 2 of the ct, )ut has )een held to mean as @purpose> or @desi+n> of the contract. If the o)8ect is opposed to pu)lic policy or tends to defeat any pro"ision of la%, it )ecomes unla%ful and there)y it is "oid under section 2# of the ctH Eutan umar ". IInd dditional 9istrict Gud+e, Aanda, I! 1$ ll 2*. :he term @la%> in section 2# of the ct must )e understood in the sense of the term eplained in the rticle 1#K#L of the ConstitutionH Eutan umar ". IInd dditional 9istrict Gud+e, Aanda, I! 1$ ll 2*. BBBBBBBBBB 1. See sections 20, 2, 2 and 3&, infra.
2'. Agree%ents oid, if consideration are ob7ects unla$ful in art If any part of a sin+le consideration for one or more o)8ects, or any one or any part of any one of se"eral consideration of a sin+le o)8ect, is unla%ful, the a+reement is "oid. (llustration promises to superintend, on )ehalf of A, a le+al manufacturer of indi+o, and an ille+al traffic in other articles. A promises to pay to a salary of 1, rupees a year. :he a+reement is "oid, the o)8ect of >s promise, and the consideration for A>s promise, )ein+ in part unla%ful. CO447E:S =eneral !ule Eon-compounda)le offences, %hich are a matter of pu)lic concern, cannot )e su)8ect matter of pri"ate )ar+ains and administration of criminal 8ustice should not )e allo%ed to pass from the hands of 8ud+es to pri"ate indi"iduals. /here the offence is of pu)lic nature, no a+reement can )e "alid that is founded on the consideration of stiflin+ of a prosecution for it. :he payment of $( million 3S dollars )y the 3nion Car)ide Corporation to 3nion of India %as held not to )e stiflin+ of prosecution and the payment not unla%fulH 3nion Car)ide Corporation ". 3nion of India, I! 12 SC 2$*.
25. Agree%ent $ithout consideration, oid, unless it is in $riting and registered or is a ro%ise to co%ensate for so%ething done or is a ro%ise to ay a debt barred by li%itation la$ ) n a+reement made %ithout consideration is "oid, unless -
K1L it is epressed in %ritin+ and re+istered under the la% for the time )ein+ in force for the re+istration of 1documents, and is made on account of natural lo"e and affection )et%een parties standin+ in a near relation to each otherH or unless. K2L it is a promise to compensate, %holly or in part, a person %ho has already "oluntarily done somethin+ for the promisor, or somethin+ %hich the promisor %as le+ally compella)le to doH or unless. K#L it is a promise, made in %ritin+ and si+ned )y the person to )e char+ed there%ith or )y his a+ent +enerally or specially authorised in that )ehalf, to pay %holly or in part de)t of %hich the creditor mi+ht ha"e enforced payment )ut for the la% for the limitation of suits. In any of these cases, such an a+reement is a contract. 7planation 1 J Eothin+ in this section shall affect the "alidity, as )et%een the donor and donee, of any +ift actually made. 7planation 2 J n a+reement to %hich the consent of the promisor is freely +i"en is not "oid merely )ecause the consideration is inades purse and +i"es it to him. A promises to +i"e !s. &. :his is a contract. KdL supports A>s infant son. A promises to pay >s epenses in so doin+. :his is a contract. KeL o%es A !s. 1,, )ut the de)t is )arred )y the ;imitation ct. si+ns a %ritten promise to pay A !s. & on account of the de)t. :his is a contract. KfL a+rees to sell a horse %orth !s. 1, for !s. 1. >s consent to the a+reement %as freely +i"en. :he a+reement is a contract not%ithstandin+ the inades consent %as freely +i"en. Comments Eatural lo"e and affection as a consideration In order to rely upon clause K1L of section 2&, the eistence of the factum of natural lo"e and affection )et%een parties standin+ in a near relation to each other is a condition precedentH !a8lu6hy 9a)ee ". Ahootnath 4oo6her8ee, K1L $ C/E $**. 5oluntary ser"ices If the ser"ices are rendered "oluntarily, %ithout the desire of the promisor or other%ise than at his re
20. Agree%ent in restraint of %arriage, oid) 7"ery a+reement in restraint of the marria+e of any person, other than a minor, is "oid. C*++-#S +reement in restraint of marria+e n a+reement )et%een t%o co-%ido%s that if any of them remarried, she should forfeit her ri+ht to her share in the deceased hus)and>s property is not in restraint of marria+eH . Suryanarayan 4urthi ". P. rishna 4urthy, I! 1&( Ori 12&.
2. Agree%ent in restraint of trade, oid 7"ery a+reement )y %hich anyone is restrained from eercisin+ a la%ful profession, trade or )usiness of any 6ind, is to that etent "oid.
7ception 1 J Sa"in+ of a+reement not to carry on )usiness of %hich +ood %ill is sold – One %ho sells the +ood%ill of a )usiness may a+ree %ith the )uyer to refrain from carryin+ on a similar )usiness, %ithin specified local limits, so lon+ as the )uyer, or any person deri"in+ title to the +ood%ill from him, carries on a li6e )usiness therein, pro"ided that such limits appear to the court reasona)le, re+ard )ein+ had to the nature of the )usiness. 1
[] C*++-#S +reement in restraint of trade :he %ords 0restrained from eercisin+ a la%ful profession, trade or )usiness, do not mean an a)solute restriction, and are intended to apply to a partial restriction, a restriction limited to same particular placeH Mahbub Chander ". Raj Coomar, K1*($L ?I5 Aen+al ;a% !eports ('. BBBBBBBBBB 1.xcetions 2 and 3 re. by Act 9 of 1932, sec. 3 and Sch. ((.
2. Agree%ents in restrain of legal roceedings, oid ) 1
[]7"ery a+reement, )y %hich any party thereto is restricted a)solutely from enforcin+ his ri+hts under or in respect of any contract, )y the usual le+al proceedin+s in the ordinary tri)unals, or %hich limits the time %ithin %hich he may thus enforce his ri+hts, is "oid to the etent. xcetion 1 J Sa"in+ of contract to refer to ar)itration dispute that may arise.:his section shall not render ille+al contract, )y %hich t%o or more persons a+ree that any dispute %hich may arise )et%een them in respect of any su)8ect or class of su)8ect shall )e referred to ar)itration, and that only and amount a%arded in such ar)itration shall )e reco"era)le in respect of the dispute so referred. 2 [] xcetion 2J Sa"in+ of contract to refer
29. Agree%ents oid for uncertainty ) +reements, the meanin+ of %hich is not certain, or capa)le of )ein+ made certain, are "oid. (llustrations KaL a+rees to sell A 0a hundred tons of oil. :here is nothin+ %hate"er to sho% %hat 6ind of oil %as intended. :he a+reement is "oid for uncertainty. K)L a+rees to sell A one hundred tons of oil of a specified description, 6no%n as an article of commerce. :here is no uncertainty here to ma6e the a+reement "oid. KcL , %ho is a dealer in coconut-oil only, a+rees to sell to A 0one hundred tons of oil. :he nature of >s trade affords an indication of the meanin+ of the %ords, and has entered into a contract for the sale of one hundred tons of coconut-oil. KdL a+rees to sell A 0all the +rain in my +ranary at !amna+ar. :here is no uncertainty here to ma6e the a+reement "oid. KeL a+rees to sell to A 0one thousand maunds of rice at a price to )e fied )y C. s the price is capa)le of )ein+ made certain, there is no uncertainty here to ma6e the a+reement "oid.
KfL a+rees to sell to A 0my %hite horse for rupees fi"e hundred or rupees one thousand. :here is nothin+ to sho% %hich of the t%o prices %as to )e +i"en. :he a+reement is "oid.
3&. Agree%ents by $ay of $ager, oid +reements )y %ay of %a+er are "oidH and no suit shall )e )rou+ht for reco"erin+ anythin+ alle+ed to )e %on on any %a+er, or entrusted to any person to a)ide the result of any +ame or other uncertain e"ent on %hich may %a+er is made. 7ception on fa"our of certain priDes for horse-racin+J :his section shall not )e deemed to render unla%ful a su)scription or contri)ution, or a+reement to su)scri)e or contri)ute, made or entered into for or to%ard any plate, priDe or sum of money, of the "alue or amount of fi"e hundred rupees or up%ards, to )e re%arded to the %inner or %inners of any horse-race. Section 2$ of the Indian Penal Code not affected J Eothin+ in this section shall )e deemed to le+aliDe any transaction connected %ith horse-racin+, to %hich the pro"isions of section 2$ of theK$& of 1*'L apply. C*++-#S Scope :o treat an a+reement )y %ay of %a+er as "oid is that the la% discoura+es people to enter into +ames of chance and ma6e earnin+ )y tryin+ their luc6 instead of spendin+ their time, ener+y and la)our for more fruitful and useful %or6 for themsel"es, their family and the societyH Su)hash umar 4an%ani ". State of 4adhya Pradesh, I! 2 4P 1. /a+erin+ Contract chit-fund does not come %ithin the scope of %a+erH Earayana yyan+ar ". .5. m)alam, K12(L I;! & 4ad '' KAL.
Chapter III – Of contin"ent contract 31. “Contingent contract" defined 0contin+ent contract is a contract to do or not to do somethin+, if some e"ent, collateral to such contract, does or does not happen. (llustration A contracts to pay to B !s.1, if B’s house is )urnt. :his is a contin+ent contract.
32. nforce%ent of Contracts contingent on an eent haening Contin+ent contracts to do or not to do anythin+ in an uncertain future e"ent happens, cannot )e enforced )y la% unless and until that e"ent has happened. If the e"ent )ecomes impossi)le, such contracts )ecome "oid. (llustrations KaL ma6es a contract %ith A to )uy A>s horse if sur"i"es C. :his contract cannot )e enforced )y la% unless and until C dies in >s lifetime. K)L ma6es a contract %ith A to sell a horse to A at a specified price, if C, to %hom the horse has )een offered, refuses to )uy him. :he contract cannot )e enforced )y la% unless and until C refuses to )uy the horse. KcL contracts to pay A a sum of money %hen A marries C. C dies %ithout )ein+ married to A. :he contract )ecomes "oid. C*++-#S pplica)ility :he essential idea upon %hich doctrine of frustration is )ased is that of impossi)ility of performance of contractH Satya)rata =hose ". 4u+neeram Aan+ur, I! 1&$ SC $$.
33. nforce%ent of contract contingent on an eent not haening) Contin+ent contracts to do or not to do anythin+ if an uncertain future e"ent does not happen, can )e enforced %hen the happenin+ of that e"ent )ecomes impossi)le, and not )efore. (llustration A a+rees to pay B a sum of money if a certain ship does not return. :he ship is sun6. :he contract can )e enforced %hen the ship sin6s.
3'. hen eent on $hich contract is contingent to be dee%ed i%ossible, if it is the future conduct of a liing erson) If the future e"ent on %hich a contract is contin+ent is the %ay in %hich a person %ill act at an unspecified time, the e"ent shall )e considered to )ecome impossi)le %hen such person does anythin+ %hich renders it impossi)le that the should so act %ithin any definite time, or other%ise than under further contin+encies.
(llustration a+rees to pay A a sum of money if A marries C, C marries 9. :he marria+e of A to C must no% )e considered impossi)le, althou+h it is possi)le that 9 may die and that C may after%ards marry A.
35. hen contracts beco%e oid, $hich are contingent on haening of secified eent $ithin fixed ti%e Contin+ent contracts to do or not to do anythin+, if a specified uncertain e"ent happens %ithin a fied time, )ecome "oid, if, at the epiration of the time fied, such e"ent has not happened, or if, )efore the time fied, such e"ent )ecomes impossi)le. /hen contracts may )e enforced, %hich are contin+ent on specified e"ent not happenin+ %ithin fied time J Contin+ent contract tutu or not to do anythin+, if a specified uncertain e"ent does not happen %ithin a fied time, may )e enforced )y la% %hen the time fied has epired and such e"ent has not happened, or )efore the time fied has epired, if it )ecome certain that such e"ent %ill not happen. (llustrations KaL A promises to pay B a sum of money if a certain ship returns %ithin a year. :he contract may )e enforced if the ship returns %ithin the yearH and )ecomes "oid if the ship is )urnt %ithin the year. K)L A promises to pay B a sum of money if a certain ship does not return %ithin a year. :he contract may )e enforced if the ship does not return %ithin the year, or is )urnt %ithin the year.
30. Agree%ents contingent on i%ossible eent oid Contin+ent a+reements to do or not to do anythin+, if an impossi)le e"ent happens, are "oid, %hether the impossi)ility of the e"ent is 6no%n or not to the parties to a+reement at the time %hen it is made. (llustrations KaL A a+rees to pay B 1, rupees if t%o strai+ht lines should enclose a space. :he a+reement is "oid. K)L A a+rees to pay B 1, rupees if B %ill marry A’s dau+hter C. C %as dead at the time of the a+reement. :he a+reement is "oid.
Chapter I# – Of the performance of contract $hich mut !e performed 3. *bligations of arties to contract ) :he parties to a contract must either perform, or offer to perform, their respecti"e promises, unless such performance in dispensed %ith or ecused under the pro"ision of this ct, or of any other la%. Promises )ind the representati"e of the promisor in case of the death of such promisors )efore performance, unless a contrary intention appears from the contract. (llustrations KaL promises to deli"er +oods to A on a certain day on payment of !s.1,. dies )efore that day. >s representati"es are )ound to deli"er the +oods to A, and A is )ound to pay the !s. 1, to >s representati"es. K)L promises to paint a picture for A )y a certain day, at a certain price. dies )efore the day. :he contract cannot )e enforced either )y >s representati"es or )y A C*++-#S ssi+nment of Contract person cannot )e su)8ect to the o)li+ation of a contract to %hich he is not a party and the lo+ical conse
3. ffect of refusal to accet offer of erfor%ance /here a promisor has made an offer of performance to the promisee, and the offer has not )een accepted, the promisor is not responsi)le for non-performance, nor does he there)y lose his ri+hts under the contract. 7"ery such offer must fulfil the follo%in+ conditions K1L it must )e unconditionalH
K2L it must )e made at a proper time and place, and under such circumstances that the person to %hom it is made may ha"e a reasona)le opportunity of ascertainin+ that the person )y %hom it is )een made is a)le and %illin+ there and then to do the %hole of %hat he is )ound )y his promise to doH K#L if the offer is an offer to deli"er anythin+ to the promisee, the promisee must ha"e a reasona)le opportunity of seein+ that the thin+ offered is the thin+ %hich the promisor is )ound )y his promise to deli"er. n offer to one of se"eral 8oint promisees has the same le+al conses %arehouse, on the appointed day, under such circumstances that A may ha"e a reasona)le opportunity of satisfyin+ himself that the thin+ offered is cotton of the
39. ffect of refusal of arty to erfor% ro%ise $holly /hen a party to a contract has refused to perform, or disa)led himself from performin+, his promise in its entirety, the promisee may put an end to the contract,unless he has si+nified, )y %ords or conduct, his acs performance. On the sith ni+ht %ilfully a)sents herself from the theatre. A is at li)erty to put an end to the contract. K)L , a sin+er, enters into a contract %ith A, the mana+er of a theatre, to sin+ at his theatre t%o ni+hts in e"ery %ee6 durin+ net t%o months, and A en+a+es to pay her at the rate of 1 rupees for each ni+ht. On the sith ni+ht %ilfully a)sents herself. /ith the assent of A, sin+s on the se"enth ni+ht. A has si+nified his acs failure to sin+ on the sith ni+ht.
'&. Person by $ho% ro%ises is to be erfor%ed ) If it appears from the nature of the case that it %as the intention of the parties to any contract that any promise contain in it should )e performed )y the promisor himself, such promise must )e performed )y the promisor. In other cases, the promisor or his representati"e may employ a competent person to perform it. (llustrations KaL A promises to pay B a sum of money. A may perform this promise, either )y personally payin+ the money to B or )y causin+ it to )e paid to B )y anotherH and, if A dies )efore the time appointed for payment, his representati"es must perform the promise, or employ some proper person to do so. K)L A promises to paint a picture for B. A must perform this promise personally.
'1. ffect of acceting erfor%ance fro% this erson /hen a promisee accepts performance of the promise from a third person, he cannot after%ards enforce it a+ainst the promisor.
'2. >eolution of 7oint liabilities /hen t%o or more person ha"e made a 8oint promise, then, unless a contrary intention appears )y the contract, all such persons, durin+ their 8oint li"es, and, after the death of any of them, his representati"e 8ointly %ith the sur"i"or or sur"i"ors, and, after the death of the last sur"i"or the representati"es of all 8ointly, must fulfil the promise.
'3. Any one of 7oint ro%isors %ay be co%elled to erfor% /hen t%o or more persons ma6e a 8oint promise, the promise may, in the a)sence of epress a+reements to the contrary, compel any 1one or more of such 8oint promisors to perform the %hole promise. 7ach promisor may compel contri)ution J 7ach of t%o or more 8oint promisors may compel e"ery other 8oint promisor to contri)ute e
Sharin+ of loss )y default in contri)ution J If any one of t%o or more 8oint promisors ma6e default in such contri)ution, the remainin+ 8oint promisors mus )ear the loss arisin+ from such default in es estate, and 1,2& rupees from A. KcL , A and C are under a 8oint promise to pay 9 #, rupees. C is una)le to pay anythin+, and is compelled to pay the %hole. is entitled to recei"e 1,& rupees from A. KdL , A and C are under a 8oint promise to pay 9 #, rupees. and A )ein+ only sureties for C. C fails to pay. and A are compelled to pay the %hole sum. :hey are entitled to reco"er it from C. BBBBBBBBBBB– 1. Subs. by Act 12 of 191, sec. 2 and Sch. (( Pt. (, for “one".
''. ffect of release of one 7oint ro%isor /here t%o or more persons ha"e made a 8oint promise, a release of one of such 8oint promisors )y the promisee does not dischar+e the other 8oint promisor,neither does it free the 8oint promisor so released from responsi)ility to the other 8oint promisor or 8oint promisors.1 BBBBBBBBB 1. See section 13. infra.
'5. >eolution of 7oint rights /hen a person has made a promise to t%o or more persons 8ointly, then unless contrary intention appears from the contract, the ri+ht to claim performance rests, as )et%een him and them, %ith them durin+ their 8oint li"es, and, after the death of any one of them, %ith the representati"e of such deceased person 8ointly %ith the sur"i"or or sur"i"ors, and, after the death of the last sur"i"or, %ith the representati"es of all 8ointly.1 (llustration , in consideration of &, rupees lent to him )y A and C, promises A and C 8ointly to repay them that sum %ith interest on a day specified. A dies. :he ri+ht to claim performance rests %ith A>s representati"e 8ointly %ith C durin+ C>s life, and after the death of C, %ith the representati"es of A and C 8ointly. BBBBBBBBBBB– 1. 8or an excetion to section '5 in case of ?oern%ent securities, see the Public >ebt Act, 19'' 41 of 19'', section .
'0. #i%e for erfor%ance of ro%ise, $here no alication is to be %ade and no ti%e is secified /here, )y the contract, a promisor is to perform his promise %ithout application )y the promisee, and no time for performance is specified, the en+a+ement must )e performed %ithin a reasona)le time. 7planation J :he
'. #i%e and lace for erfor%ance of ro%ise, $here ti%e is secified and no alication to be %ade ) /hen a promise is to )e performed on a certain day, and the promisor has underta6en to perform it %ithout the application )y the promisee, the promisor may perform it at any time durin+ the usual hours of )usiness on such day and at the place at %hich the promise ou+ht to )e performed. (llustration A promises to deli"er +oods at B’s %arehouse on the first Ganuary. On the day A )rin+s the +oods to B’s %arehouse, )ut after the usual hour closin+ it, and they are not recei"ed. A has not performed his promise.
'. Alication for erfor%ance on certain day to be at roer ti%e and lace )
/hen a promise is to )e performed on a certain day, and the promisor has not underta6en to perform it %ithout application )y the promisee, it is the duty of the promisee to apply for the performance at a proper place %ithin the usual hours of )usiness. 7planation J :he
'9. Place for the erfor%ance of ro%ise, $here no alication to be %ade and no lace fixed for erfor%ance ) /hen a promise is to )e performed %ithout application )y the promisee, and not place is fied for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasona)le place for the performance of the promise, and to perform it at s uch a place. (llustration A underta6es to deli"er a thousand maunds of 8ute to B on a fied day. A must apply to B to appoint a reasona)le place for the purpose of recei"in+ it, and must deli"er it to him at such place.
5&. Perfor%ance in %anner or at ti%e rescribed or sanctioned by ro%ise ) :he performance of any promise may )e made in any manner, or at any time %hich the promisee prescri)es or sanctions (llustrations KaL A o%es 2, rupees. desires A to pay the amount to >s account %ith C, a )an6er. A, %ho also )an6s %ith C, orders the amount to )e transferred from his account to >s credit, and this is done )y C. fter%ards, and )efore 6no%s of the transfer, C fails. :here has )een a +ood payment )y A. K)L and A are mutually inde)ted. and A settle an account )y settin+ off one item a+ainst another, and A pays the )alance found to )e due from him upon such settlement. :his amounts to a payment )y and A, respecti"ely, of the sums %hich they o%ed to each other. KcL o%es A 2, rupees. A accepts some of >s +oods in reduction of the de)t. :he deli"ery of the +oods operates as a part payment. KdL desires A, %ho o%es him !s.1, to send him a note for !s.1 )y post. :he de)t is dischar+ed as soon as A puts into the post a letter containin+ the note duly addressed to . C*++-#S 4anner and time of performance If any a+reement states that a particular act relatin+ to the furtherance of a contract is to )e done in a particular manner, it should )e done in that manner and it is not open to the parties to chal6 out his o%n manner of performin+ his part of contractH Aisham)er Eath +ar%al ". ishan Chand, I! 1 ll (.
51. Pro%isor not bound to erfor%, unless recirocal ro%isee ready and $illing to erfor%) /hen a contract consists of reciprocal promises to )e simultaneously performed, no promisor need perform his promise unless the promisee is ready and %illin+ to perform his reciprocal promise. (llustrations KaL A and B contract that A shall deli"er +oods to B to )e paid for )y B on deli"ery. A need not deli"er the +oods, unless B is ready and %illin+ to pay for the +oods on deli"ery. B need not pay for the +oods, unless A is ready and %illin+ to deli"er them on payment. K)L A and B contract that A shall deli"er +oods to B at a price to )e paid )y instalments, the first instalment to )e paid on deli"ery. A need not deli"er, unless B is ready and %illin+ to pay the first instalment on deli"ery. B need not pay the first instalment, unless A is ready and %illin+ to deli"er the +oods on payment of the first instalment.
52. *rder of erfor%ance of recirocal ro%ises) /here the order in %hich reciprocal promises are to )e performed is epressly fied )y the contract, they shall )e performed in that order, and %here the orders is not epressly fied )y the contract, they shall )e performed in that order %hich the nature of transaction re
53. @iability of arty reenting eent on $hich contract is to ta=e effect) /hen a contract contains reciprocal promises and one party to the contract pre"ents the other from performin+ his promise, the contract )ecomes "oida)le at the option of the party so pre"entedH and he is entitled to compensation 1from the other party for any loss %hich he may sustain in conse
5'. ffect of default as to the ro%ise $hich should be erfor%ed, in contract consisting or recirocal ro%ises) /hen a contract consists of reciprocal promises, such that one of them cannot )e performed, or that its performance cannot )e claimed till the other has )een performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must ma6e compensation to the other party to the contract for any loss %hich such other party may sustain )y the non-performance of the contract. (llustrations KaL hires A>s ship to ta6e in and con"ey, from Calcutta to the 4auritius, a car+o to )e pro"ided )y , A recei"in+ a certain frei+ht for its con"eyance. does not pro"ide any car+o for the ship. cannot claim the performance of A>s promise, and must ta6e compensation to A for the loss %hich A sustains )y the nonperformance of the contract. K)L contracts %ith A to eecute certain )uilder>s %or6 for a fied price, A supplyin+ the scaffoldin+ and tim)er necessary for the %or6. A refuses to furnish any scaffoldin+ or tim)er, and the %or6 cannot )e eecuted. need not eecute the %or6, and A is )ound to ma6e compensation to for any loss caused to him )y the non-performance of the contract. KcL contracts %ith A to deli"er to him, at a specified price, certain merchandise on )oard a ship %hich cannot arri"e for a month, and A en+a+es to pay for the merchandise %ithin a %ee6 from the date of the contract. A does not pay %ithin the %ee6. >s promise to deli"er need not )e performed, and A must ma6e compensation. KdL promises A to sell him one hundred )ales of merchandise, to )e deli"ered net day, and A promises to pay for them %ithin a month. does not deli"er accordin+ to his promise. A>s promise to pay need not )e performed, and must ma6e compensation.
55. ffect of failure to erfor% a fixed ti%e, in contract in $hich ti%e is essential /hen a party to a contract promises to do a certain thin+ at or )efore a specified time, or certain thins at or )efore a specified time and fails to do such thin+ at or )efore a specified time, and fails to do such thin+ at or )efore a specified time, the contract or so much of it as has not )een performed, )ecomes "oida)le at the option of the promisee, if the intention of the parties %as that time should )e of essence of the contract. 7ffect of such failure %hen time is not essentialJ If it %as not the intention of the parties that time should )e of the essence of the contract, the contract does not )ecome "oida)le )y the failure to do such thin+ at or )efore the specified timeH )ut the promisee is entitled to compensation from the promisor for any loss occasioned to him )y such failure. 7ffect of acceptance of performance at time other than a+reed uponJ If, in case of a contract "oida)le on account of the promisor>s failure to perform his promise at the time a+reed, the promisee accepts performance of such promise at any time other than a+ree, the promisee cannot claim compensation of any loss occasioned )y the non-performance of the promise at the time a+reed, unless, at the time of acceptance, he +i"e notice to the promisor of his intention to do so.1 C*++-#S :ime – %hether essence of Contract :he parties, may ma6e time of the essence either epressly in terms %hich unmista6a)ly pro"ide that they intended to do so. lternately, ma6in+ of time as the essence of a contract may )e inferred from the nature of the contract, the property or the surroundin+ circumstancesH S%arnam !amchandran ". ra"acode Cha6un+al Gayapalan, I! 2 Aom $1.
/hen the contract itself pro"ides for etension of time, the same cannot )e termed to )e the essence of the contract and default, ho%e"er, in such a case it does not ma6e the contract "oida)leH rosan 7nterprises ;td. ". 3nion of India, I! 1 SC #*$. :he deferred clause indicated that time %as not the essence of the contract. Aut in the present case the defendants had 6ept
50. Agree%ent to do i%ossible act) n a+reement to do an act impossi)le in itself is "oid. Contract to do act after%ards )ecomin+ impossi)le or unla%fulJ contract to do an act %hich, after the contract is made, )ecomes impossi)le or, )y reason of some e"ent %hich the promisor could not pre"ent, unla%ful, )ecomes "oid %hen the act )ecomes impossi)le or unla%ful.1 Compensation for loss throu+h non-performance of act 6no%n to )e impossi)le or unla%fulJ /here one person has promised to )e somethin+ %hich he 6ne% or, %ith reasona)le dili+ence, mi+ht ha"e 6no%n, and %hich the promisee did not 6no% to )e impossi)le or unla%ful, such promisor must ma6e compensation to such promise for any loss %hich such promisee sustains throu+h the non-performance of the promise. (llustrations KaL a+rees %ith A to disco"er treasure )y ma+ic. :he a+reement is "oid. K)L and A contract to marry each other. Aefore the time fied for the marria+e, +oes mad. :he contract )ecomes "oid. KcL contracts to marry A, )ein+ already married to C, and )ein+ for)idden )y the la% to %hich he is su)8ect to practise poly+amy. must ma6e compensation to A for the loss caused to her )y the non-performance of his promise. KdL contracts to ta6e in car+o for A at a forei+n port. >s =o"ernment after%ards declares %ar a+ainst the country in %hich the port is situated. :he contract )ecomes "oid %hen %ar is declared. KeL contracts to act at a theatre for si months in consideration of a sum paid in ad"ance )y A. On s e"eral occasions is too ill to act. :he contract to act on those occasions )ecomes "oid. C*++-#S Contractin+ party must not )e in default In contracts in %hich the performance depends on the continued eistence of a +i"en person or thin+, a condition is implied that the impossi)ility arisin+ from the perishin+ of the person or thin+ shall ecuse performanceH :aylor ". Cald%el, 122 7! #. It is not permissi)le for the courts to tra"el outside the pro"isions of the section and import the principles of 7n+lish la% de hors the statutory pro"isionsH Satya)rata =hose ". 4u+neeram Aan+ur M Co., I! 1&$ SC $$. Impossi)ility may )e in la% or in fact :he doctrine of frustration is really an aspect or part of the la% of dischar+e of contract )y reason of super"enin+ impossi)ility or ille+ality of the act a+reed to )e done and hence comes %ithin the pur"ie% of section &'H Satya)rata =hose ". 4u+neeram Aan+ur, I! 1&$ SC $$. Scope and applica)ility Section &' lays a positi"e rule relatin+ to frustration and does not lea"e the matter of frustration to the court to )e determined. :here can )e no a+reement on altered circumstances and it has also )een held that if a consideration of the terms of the contract in the li+ht of the circumstances %hen it %as made sho%s that the parties ne"er a+reed to )e )ound in a fundamentally different situation %hich unepectedly arises the contract ceases to )ind at that point, not )ecause the court in its discretion considers it 8ust )ut on true construction it does not apply in that situationH Shyam Airi /or6s P"t. ;td. ". 3.P. orest Corporation, I! 1 SC 2&. BBBBBBBBBB
1. See section 05, infra.
5. /ecirocal ro%ise to do things legal, and also other things illegal /here persons reciprocally promise, firstly to do certain thin+s %hich are le+al, and, secondly under specified circumstances, to do certain other thin+s %hich are ille+al, the first set of promise is a contract, )ut the second is a "oid a+reement. (llustration A and B a+ree that A shall sell B a house for 1, rupees, )ut that, if B uses it as a +am)lin+ house, he shall pay A &, rupees for it. :he first set of reciprocal promises, namely, to sell the house and to pay 1, rupees for it, is a contract. :he second set is for an unla%ful o)8ect, namely, that B may use the house as a +am)lin+ house, and is a "oid a+reement.
5. Alternatie ro%ise, one branch being illegal) In the case of an alternati"e promise, one )ranch of %hich is le+al and other other ille+al, the le+al )ranch alone can )e enforced. (llustration A and B a+ree that A shall pay B 1, rupees, for %hich B shall after%ards deli"er to A either rice or smu++led opium. :his is a "alid contract to deli"er rice, and a "oid a+reement as to the opium.
59. Alication of ay%ent $here debt to be discharged is indicated /here a de)tor, o%in+ se"eral distinct de)ts to one person, ma6es a payment to him, either %ith epress intimation, or under circumstances implyin+, that the payment is to )e applied to the dischar+e of some particular de)t, the payment if accepted, must )e applied accordin+ly. (llustrations KaL o%es A, amon+ other de)ts, 1, rupees upon a promissory note, %hich falls due on the first Gune. Fe o%es A no other de)t of that amount. On the first Gune, pays to A 1, rupees. :he payment is to )e applied to the dischar+e of the promissory note. K)L o%es to A, amon+ other de)ts, the sum of &'( rupees. A %rites to and demands payment of this s um. sends to A &'( rupees. :his payment is to )e applied to the dischar+e of the de)t of %hich A had demanded payment. C*++-#S Scope of applica)ility :o se"eral distinct de)ts paya)le )y a person and not to the "arious heads of one de)t. :he principal and interest due on a sin+le de)t or decree passed on such de)t carryin+ su)se
0&. Alication of ay%ent $here debt to be discharged is not indicated) /here the de)tor has ommitted to intimate, and there are no other circumstances indicatin+ to %hich de)t the payment is to )e applied, the creditor may apply it at his discretion to any la%ful de)t actually due and paya)le to him from the de)tor, %hether its reco"ery is or is not )arred )y the la% in force for the time )ein+ as to the limitations of suits.
01. Alication of ay%ent $here neither arty aroriates /here neither party ma6es any appropriation, the payment shall )e applied in dischar+e of the de)ts in order of time, %hether they are or are not )arred )y the la% in force for the time )ein+ as to the limitation of suits. If the de)ts are of e
02. ffect of noation, rescission, and alteration of contract) If the parties to a contract a+ree to su)stitute a ne% contract for it, or to rescind or alter it, the ori+inal contract need not )e performed. (llustrations KaL o%es money to A under a contract. It is a+reed )et%een , A and C, that A shall thenceforth accept C as his de)tor, instead of . :he old de)t of to A is at an end, and a ne% de)t from C to A has )een contracted.
K)L o%es A 1, rupees. enters into an a+reement %ith A, and +i"es A a mort+a+e of his K>sL, estate for &, rupees in place of the de)t of 1, rupees. :his is a ne% contract and etin+uishes the old. KcL o%es A 1, rupees under a contract, A o%es C 1, rupees, A orders to credit C %ith 1, rupees in his )oo6s, )ut C does not assent to the a+reement. A still o%es C 1, rupees, and no ne% contract has )een entered into. C*++-#S lteration of Contracts Person enterin+ into a+reement under section *K1LKaL of !e
03. Pro%ise %ay disense $ith or re%it erfor%ance of ro%ise 7"ery promise may dispense %ith or remit, %holly or in part, the performance of the promise made to him, or may etend the time for such performance, 1or may accept instead of it any satisfaction %hich he thin6s fit. (llustrations KaL promises to paint a picture for A. A after%ards for)ids him to do so. is no lon+er )ound to perform the promise. K)L o%es A &, rupees. pays to A, and A accepts, in satisfaction of the %hole de)t, 2, rupees paid at the time and place at %hich the &, rupees %ere paya)le. :he %hole de)t is dischar+ed. KcL o%es A &, rupees. C pays to A 1, rupees, and A accepts them, in satisfaction of his claim on . :his payment is a dischar+e of the %hole claim.2 KdL o%es A, under a contract, a sum of money, the amount of %hich has not )een ascertained. , %ithout ascertainin+ the amount, +i"es to A, and A, in satisfaction thereof, accepts, the sum of 2, rupees. :his is a dischar+e of the %hole de)t, %hate"er may )e i ts amount. KeL o%es A 2, rupees, and is also inde)ted to another creditors. ma6es an arran+ement %ith his creditors, includin+ A, to pay them a 3[composition] of ei+ht annas in the rupee upon their respecti"e demands. Payment to A of 1, rupees is a dischar+e of A>s demand. C*++-#S Aecomes "oid – disco"ered to )e "oid Section '& starts from the )asis of there )ein+ an a+reement or contract )et%een competent parties and has no application to a case in %hich there ne"er %as, and ne"er could ha"e )een any contract, e.+. %here one of the parties %as a minorH 4ohori Ai)ee ". 9harmodas =hose, K1#L I;! # Cal &# KPCL. Eecessity for consideration :he plaintiff )an6 accepted the sum of !s. 1,, from the defendants to%ards the full dischar+e of the suit claim accordin+ to second a+reement. It %as held that ha"in+ recei"ed the said compromise amount, it is not open for the plaintiff to claim the o"erdue interest to the etent of !s. ',&(1.2 for %hich there has
)een no a+reement and that under the circumstances the claim, if any made )y the plaintiff has )een directly hit )y section '# of Contract ctH Central Aan6 of India ". 5. =. Eaidu M Sons K;eatherL P"t. ;td., I! 12 4ad 1#. /ai"er %ai"er is nothin+ unless it amounts to a release. It si+nifies nothin+ more than an intention not to insist upon the ri+htH Ga+ad Aandhu Chatter8ee ". Eilima !ani, K1'L # SCC $&&J K1(L 2 SC! 2&J K1(1L 1 SCG #*. BBBBBBBBBB 1. !ut See section 135, infra. 2. See section '1, sura. 3. Subs. by Act 12 of 191, sec. 2 and Sch. ((, Pt. (, for “co%ensation".
0'. Conseuence of rescission of oidable contract /hen a person at %hose option a contract is "oida)le rescinds it, the other party thereto need to perform any promise therein contained in %hich he is the promisor. :he party rescindin+ a "oida)le contract shall, if he ha"e recei"ed any )enefit thereunder from another party to such contract restore such )enefit, so far as may )e, to the person from %hom it %as recei"ed. 1 BBBBBBBBB 1.See section 5, infra.
05. *bligation of erson $ho has receied adantage under oid agree%ent, or contract that beco%es oid ) /hen an a+reement is disco"ered to )e "oid, or %hen a contract )ecomes "oid, any person %ho has recei"ed any ad"anta+e under such a+reement or contract is )ound to restore, it, or to ma6e compensation for it, to the person from %hom he recei"ed it. (llustrations KaL pays A 1, rupees, in consideration of A>s promisin+ to marry C, >s dau+hter. C is dead at the time of the promise. :he a+reement is "oid, )ut A must repay the 1, rupees. K)L contracts %ith A to deli"er to him 2& maunds of rice )efore the first of 4ay. deli"ers 1# maunds only )efore that day, and none after. A retains the 1# maunds after the first of 4ay. Fe is )ound to pay for them. KcL , a sin+er, contracts %ith A, the mana+er of a theatre, to sin+ at his theatre for t%o ni+hts in e"ery %ee6 durin+ the net t%o months, and A en+a+es to pay her a hundred rupees for each ni+ht>s performance. On the sith ni+ht, %ilfully a)sents herself from the theatre, and A, in conse
00. +ode of co%%unicating or reo=ing rescission of oidable contract) :he rescission of a "oida)le contract may )e communicated or re"o6ed in the same manner, and su)8ect to some rules, as apply to the communication or re"ocation of the proposal. proposal. 1 BBBBBBBBB– 1.see sections 3 and 5, sura.
0. ffect of neglect or ro%ise to afford ro%isor reasonable facilities for erfor%ance) If any promisee ne+lects or refuses to afford the promisee reasona)le facilities for the performance of his promise, the promisor is ecused )y such ne+lect or refusal as to non-performance caused there)y. (llustration
A contracts %ith B to repair B’s house. B ne+lects or refuses to point out to A the places in %hich his house re
Chapter # – Of certain relation reem!lin" thoe created !y contract 0. Clai% for necessaries sulied to erson incaable of contracting, or on his account ) If a person, incapa)le of enterin+ into a contract, or anyone %hom he is le+ally )ound to support, is supplied )y another person %ith necessaries suited to his condition in life, the person %ho has furnished such supplies is entitled to )e reim)ursed from the property of such incapa)le person. (llustrations KaL A supplies B, a lunatic, %ith necessaries suita)le to his condition in life. A is entitled to )e reim)ursed from B’s property. K)L A suplies the %ife and children of B, a lunatic, %ith necessaries suita)le to their condition in life. A is entitled to )e reim)ursed from B’s property. BBBBBBBBB– 1. #he roerty of a ?oern%ent $ard in +adhya Pradesh is not liable under this section6 see the C.P. Court of ards Act, 199 4C.P. Act 2' of 199, section 314(.
09. /ei%burse%ent of erson aying %oney due by another, in ay%ent of $hich he is interested person %ho is interested in the payment of money %hich another is )ound )y la% to pay, and %ho therefore pays it, is entitled to )e reim)ursed )y the other. (llustration B holds land in Aen+al, on a lease +ranted )y A, the Damindar. :he re"enue paya)le )y A to the =o"ernment )ein+ in arrear, his land is ad"ertised for sale )y the =o"ernment. 3nder the re"enue la%, the conses share %ould not +i"e him a ri+ht of reco"ery under this s ectionH Jagpatiraju ". Sadnusannama, I! 11' 4ad *.
&. *bligation of erson en7oying benefit of non)gratuitous act /here a person la%fully does anythin+ for another person, or deli"ers anythin+ to him, not intendin+ to do so +ratuitously, and such another person en8oys the )enefit thereof, the letter is )ound to ma6e compensation to the former in respect of, or to restore, the thin+ so done or deli"ered.
1. /esonsibility of finder of goods person %ho finds +oods )elon+in+ to another, and ta6es them into his custody, is su)8ect to the same responsi)ility as a )ailee. 1 BBBBBBB– 1.See sections 151 and 152,infra.
2. @iability of erson to $ho% %oney is aid, or thing deliered, by %ista=e or under coercion) person to %hom money has )een paid, or anythin+ deli"ered, )y mista6e or under coercion, must repay or return it. (llustrations KaL and A 8ointly o%e 1 rupees to C, alone pays the amount to C, and A, not 6no%in+ this fact, pays 1 rupees o"er a+ain to C. C is )ound to repay the amount to A. K)L rail%ay company refuses to deli"er up certain +oods to the consi+nee ecept upon the payment of an ille+al char+e for carria+e. :he consi+nee pays the sum char+ed in order to o)tain the +oods. Fe is entitled to reco"er so much of the char+e as %as ille+al and ecessi"e. C*++-#S In+redients of un8ust enrichment 3nder this Section the principle of un8ust enrichment cannot )e etended to +i"e a ri+ht to the State to reco"er or realise "end fee after the concerned statute for realisation or reco"ery of "end fee has )een struc6 do%nH 4s. Somaiya Or+anics KIndiaL ;td. 5. State of 3ttar Pradesh, I! 21 SC 1(2&.
Chapter #I – Of the cone%uence of !reach of contract
3. Co%ensation of loss or da%age caused by breach of contract /hen a contract has )een )ro6en, the party %ho suffers )y such )reach is entitled to recei"e, form the party %ho has )ro6en the contract, compensation for any loss or dama+e caused to him there)y, %hich naturally arose in the usual course of thin+s from such )reach, or %hich the parties 6ne%, %hen they made the contract, to )e li6ely to result from the )reach of it. Such compensation is not to )e +i"en for any remote and indirect loss of dama+e sustained )y reason of the )reach. Compensation for failure to dischar+e o)li+ation resem)lin+ those created )y contract J /hen an o)li+ation resem)lin+ those created )y contract has )een incurred and has not )een dischar+ed, any person in8ured )y the failure to dischar+e it is entitled to recei"e the same compensation from the party in default, as if such person had contracted to dischar+e it and had )ro6en his contract. xlanation J In estimatin+ the loss or dama+e arisin+ from a )reach of contract, the means %hich eisted of remedyin+ the incon"enience caused )y non-performance of the contract must )e ta6en into account. (llustrations KaL contracts to sell and deli"er & maunds of saltpetre to A, at a certain price to )e paid on deli"ery. )rea6s his promise. A is entitled to recei"e from , )y %ay of compensation, the sum, if any, )y %hich the contract price falls short of the price for %hich A mi+ht ha"e o)tained & maunds of saltpetre of li6e s ship to +o to Aom)ay, and there ta6es on )oard, on the first of Ganuary, a car+o, %hich is to pro"ide, and to )rin+ it to Calcutta, the frei+ht to )e paid %hen earned. A>s ship does not +o to Aom)ay, )ut has opportunities of procurin+ suita)le con"eyance for the car+o upon terms as ad"anta+eous as those on %hich he had chartered the ship. a"ails himself of those opportunities, )ut is put to trou)le and epense in doin+ so. is entitled to recei"e compensation from A in respect of such trou)le and epense. KcL contracts to )uy of A, at a stated price, & maunds of rice, no time )ein+ fied for deli"ery. after%ards informs A that he %ill not accept the rice if tendered to him. A is entitled to recei"e from , )y %ay of compensation, the amount, if any, )y %hich the contract price eceeds that %hich A can o)tain for the rice at the time %hen informs A that he %ill not accept it. KdL contracts to )uy A>s ship for ', rupees, )ut )rea6s his promise. must pay to A, )y %ay of compensation, the ecess, if any, of the contract price o"er the price %hich A can o)tain for the ship at the time of the )reach of promise. KeL , the o%ner of a )oat, contracts %ith A to ta6e a car+o of 8ute to 4irDapur, for sale at that place, startin+ on a specified day. :he )oat, o%in+ to some a"oida)le cause, does not start at the time appointed, %here)y the arri"al of the car+o at 4irDapur is delayed )eyond the time %hen it %ould ha"e arri"ed if the )oat had sailed accordin+ to the contract. fter that date, and )efore the arri"al of the car+o, the price of 8ute falls. :he measure of the compensation paya)le to A )y is the difference )et%een the price %hich A could ha"e o)tained for the car+o at 4irDapur at the time %hen it %ould ha"e arri"ed if for%arded in due course, and its mar6et price at the time %hen it actually arri"ed. KfL contracts to repair A>s house in a certain manner, and recei"es payment in ad"ance. repairs the house, )ut not accordin+ to contract. A is entitled to reco"er from the cost of ma6in+ the repairs conform to the contract. K+L contracts to let his ship to A for a year, from the first of Ganuary, for a certain price. rei+hts rise, and, on the first of Ganuary, the hire o)taina)le for the ship is hi+her than the contract price. )rea6s his promise. Fe must pay to A, )y %ay of compensation, a sum es mill, informin+ A that his mill is stopped for %ant of machine. A unreasona)ly delays the deli"ery of the machine, and , in conse
procure other iron, and A, in conses mode of conductin+ his )usiness. )rea6s his promise, and A, ha"in+ no cotton, is o)li+ed to close his mill. is not responsi)le to A for the loss caused to A )y closin+ of the mill. Ks ship, sailin+ on the first of Ganuary, and A pays to , )y %ay of deposit, one-half of his passa+e-money. :he ship does not sail on the first of Ganuary, and A, after )ein+, in conse
9ama+es for )reach of contract /hen there is a )reach of contract, party to the contract cannot determine as to %ho has committed )reach. 9ama+es could )e reco"ered from the person %ho has committed )reach only after the same is determined. :he conditions of contract %ould )e considered as li
'. Co%ensation of breach of contract $here enalty stiulated for 1
[/hen a contract has )een )ro6en, if a sum is named in the contract as the amount to )e paid in case of such )reach, or if the contract contains any other stipulation )y %ay of penalty, the party complainin+ of the )reach is entitled, %hether or not actual dama+e or loss is pro"ed to ha"e )een caused there)y, to recei"e from the party %ho has )ro6en the contract reasona)le compensation not eceedin+ the amount so named or, as the case may )e, the penalty stipulated for. xlanation.B stipulation for increased interest from the date of default may )e a stipulation )y %ay of penalty.] xcetion.B /hen any person enters into any )ail-)ond, reco+niDance or other instrument of the same nature or, under the pro"isions of any la%, or under the orders of the 2[Central =o"ernment] or of any 3[State =o"ernment], +i"es any )ond for the performance of any pu)lic duty or act in %hich the pu)lic are interested, he shall )e lia)le, upon )reach of the condition of any such instrument, to pay the %hole sum mentioned therein. xlanation.B person %ho enters into a contract %ith =o"ernment does not necessarily there)y underta6e any pu)lic duty, or promise to do an act in %hich the pu)lic are interested. (llustrations KaL contracts %ith A to pay A !s. 1, if he fails to pay A !s. & on a +i"en day. fails to pay A !s. & on that day. A is entitled to reco"er from such compensation, not eceedin+ !s. 1,, as the Court considers reasona)le.
