UNIT-1:- INDIAN CONTRACT ACT, 1872

INTRODUCTION
Prior to this English law of contract was followed in India.
It has XI chapter.
The Indian Contract Act consists of the following two parts:
1. General Principals of the Law of Contract.
2. Special kinds of contracts.
The general principals of the Law of Contract are contained in Sections 1 to 75 of the
Indian Contract Act. These principles apply to all kinds of contracts irrespective of their
nature.
Special contracts are contained in Sections 124 to 238 of the Indian Contract Act. These
special contracts are Indemnity, Guarantee, Bailment, pledge and Agency.
1Q. Define contract? Discuss the essential elements of a valid contract?
Ans:
Meaning: A contract is an agreement made between two (or) more parties which the law
will enforce.
Definition: According to section 2(h) of the Indian contract act, 1872. An agreement
enforceable by law is a contract.
According to SALMOND, a contract is An agreement creating and defining obligations
between the parties
Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement
enforceable by law.
Section 2(e) defines agreement as every promise and every set of promises forming
consideration for each other.
Section 2(b) defines promise in these words: When the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted.
A proposal when accepted, becomes a promise.
From the above definition of promise, it is obvious that an agreement is an accepted proposal.
The two elements of an agreement are:
(i) offer or a proposal; and
(ii) an acceptance of that offer or proposal.
What agreements are contracts?
All agreements are not studied under the Indian Contract Act, as some of them are not
contracts. Only those agreements which are enforceable at law are contracts. The Contract Act
is the law of those agreements which create obligations, and in case of a breach of a promise
by one party to the agreement, the other has a legal remedy. Thus, a contract consists of two
elements:
(i) an agreement; and
(ii) legal obligation, i.e., it should be enforceable at law.
However, there are some agreements which are not enforceable in a law court. Such
agreements do not give rise to contractual obligations and are not contracts.
Examples
(1) A invites B for dinner in a restaurant. B accepts the invitation. On the appointed day, B
goes to the restaurant. To his utter surprise A is not there. Or A is there but refuses to
entertain B. B has no remedy against A. In case A is present in the restaurant but B fails to
turn-up, then A has no remedy against B.
(2) A gives a promise to his son to give him a pocket allowance of Rupees one hundred every
month. In case A fails or refuses to give his son the promised amount, his son has no remedy
against A
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ESSENTIALS OF A VALID CONTRACT

All agreements are contracts, if they are made
- by free consent of the parties, competent to contract,
- for a lawful consideration and
- with a lawful object, and
- not hereby expressly declared to be void. - Sec.10.
Offer + acceptance = Promise
+
consideration
=
Agreement
+
enforceability By Law
Contract
According to section 10, All agreements are contracts if they are made by the free consent
of the parties competent to contract, for a lawful consideration and with a lawful object and
not here by expressly declared to be void
In order to become a contract an agreement must have the following essential elements, they
are follows:1) Offer and acceptance:
To constitute a contract there must be an offer and an acceptance of that offer.
The offer and acceptance should relate to same thing in the same sense.
There must be two (or) more persons to an agreement because one person cannot enter into
an agreement with himself.
2) Intention to create legal relationship:
The parties must have intention to create legal relationship among them.
Generally, the agreements of social, domestic and political nature are not a contract.
If there is no such intention to create a legal relationship among the parties, there is no
contract between them.
Cases:- A and B agree to go to a movie on coming Sunday. A does not turn in resulting in
loss of Bs time B cannot claim any damages from B since the agreement to watch a movie is
a domestic agreement which does not result in a contract.
In case of social agreement there is no intention to create legal relationship and there the is no
contract (Balfour v. Balfour)
In case of commercial agreements, the law presumes that the parties had the intention to
create legal relations.
[an agreement of a purely domestic or social nature is not a contract ]
Example: BALFOUR (vs) BALFOUR (1919)
Facts: A husband promised to pay his wife a household allowance of L30 (pounds) every
month.
Later the parties separated and the husband failed to pay the amount. The wife sued for
allowance.
Judgment: Agreements such as there were outside the realm of contract altogether Because
there is no intention to create legal relationship among the parties.
3) Free and Genuine consent:
The consent of the parties to the agreement must be free and genuine.
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 Free consent is said to be absent, if the agreement is induced by :

A) Coercion,
b) Undue influence,
c) Fraud,
D) Mis-representation,
e) Mistake.
4) Lawful Object:
The object of the agreement must be lawful. In other words, it means the object must not be
(a) Illegal, (b) immoral, (c) opposed to public policy.
If an agreement suffers from any legal flaw, it would not be enforceable by law.
5 ) Lawful Consideration:
An agreement to be enforceable by law must be supported by consideration.
Consideration means an advantage or benefit moving from one party to other. In other
words something in return.
The agreement is enforceable only when both the parties give something and get something
in return.
The consideration must be real and lawful.
6) Capacity of parties: (Competency)
The parties to a contract should be capable of entering into a valid contract.
Every person is competent to contract if
(a). He is the age of majority.
(b). He is of sound mind and
(c). He is not dis-qualified from contracting by any law.
The flaw in capacity to contract may arise from minority, lunacy, idiocy, drunkenness, etc..,
7) Agreement not to be declared void:
The agreements must not have been expressly declared to be void u/s 24 to 30 of the act.
Example: Agreements in restraint of trade, marriages, legal proceedings, etc..,
8) Certainty:
The meaning of the agreement must be certain and not be vague (or) indefinite.
If it is vague (or) indefinite it is not possible to ascertain its meaning.
Example:
A agrees to sell to B a hundred tones of oil. There is nothing whatever to show what kind of
a oil intended. The agreement is void for uncertainty.
9 )Possibility of performance:
The terms of an agreement should be capable of performance.
The agreement to do an act impossible in itself is void and cannot be enforceable.
Example:
A agrees with B, to put life into Bs dead wife, the agreement is void it is impossible of
performance.
10)Necessary legal formalities:
According to Indian contract Act, oral (or) written are perfectly valid.
There is no provision for contracting being written, registered and stamped.
But if is required by law, that it should comply with legal formalities and then it should be
complied with all legal (or) necessary formalities for its enforceability.
Agreement is a wider term than contract where as all contracts are agreements. All
agreements are not contracts.
Conclusion:

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Thus we see that an agreement may be or may not be enforceable by law, and so all
agreement are not contract. Only those agreements are contracts, which are enforceable by
law, In short.
Contracts =Agreement + Enforceability by Law
Types of contracts
(1)
On the Basis
of creation
a. Express contract
b. Implied contract
c. Tacit contract
d. Quasi contract
e. E contract

(1)

(2) On the Basis of

Validity
a. Valid contract
b. Void contract
c. Voidable contract
d. Unenforceable
contract
e. Illegal contract

(3) On the Basis of

execution
a. Executed contract
b. Executed contract
c. Partly executed
and
party executory

(4) On the Basis

of Liability
a. Bilateral contract
b. Unilateral
contract

On the Basis of creation

(a) Express contract:- A contract made by word spoken or written. According to sec 9 in so
for as the proposal or acceptance of any promise is made in words, the promise is said to be
express.
Example : A says to B will you purchase my bike for Rs.20,000? B says to A Yes.
(b) Implied contract:- A contract inferred by
The conduct of person or
The circumstances of the case.
By implies contract means implied by law (i.e.) the law implied a contract through parties
never intended. According to sec 9in so for as such proposed or acceptance is made otherwise
than in words, the promise is said to be implied.
Example:
A stops a taxi by waving his hand and takes his seat. There is an implied contract that A will
pay the prescribed fare.
(c) Tacit contract: -A contract is said to be tacit when it has to be inferred from the conduct
of the parties. Example obtaining cash through automatic teller machine, sale by fall hammer
of an auction sale.
(d). Quasi Contracts are contracts which are created Neither by word spoken
Nor written
Nor by the conduct of the parties.
But these are created by the law.
Example:
If Mr. A leaves his goods at Mr. Bs shop by mistake, then it is for Mr. B to return the goods or to
compensate the price. In fact, these contracts depend on the principle that nobody will be
allowed to become rich at the expenses of the other.
(e). e Contract: An e contract is one, which is entered into between two parties via the
internet.
(2)

On the Basis of Validity:

(a) Valid contract:-An agreement which satisfies all the requirements prescribed by law On
the basis of creation
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(b) Void contract (2(j)):-a contract which ceases to be enforceable by law because void
when of ceased to be enforceable When both parties to an agreement are:- Under a mistake of facts [20]
- Consideration or object of an agreement is unlawful [23]
- Agreement made without consideration [25]
- Agreement in restrain of marriage [26]
- Restraint of trade [27]
- Restrain legal proceeding [28].
- Agreement by wage of wager [30]
(c) Voidable contract 2(i) :-an agreement which is enforceable by law at the option of one
or more the parties but not at the option of the other or others is a voidable contract.
Result of coercion, undue influence, fraud and misrepresentation.
(d) Unenforceable contract: -where a contract is good in substance but because of some
technical defecti.e. absence in writing barred by imitation etc one or both the parties cannot
sue upon but is described as unenforceable contract.
Example: Writing registration or stamping.
Example: An agreement which is required to be stamped will be unenforceable if the same is
not stamped at all or is under stamped.
(e) Illegal contract:-It is a contract which the law forbids to be made. All illegal agreements are
void but all void agreements or contracts are not necessary illegal. Contract that is immoral or
opposed to public policy are illegal in nature.
-

(3)

Unlike illegal agreements there is no punishment to the parties to a void agreement.

Illegal agreements are void from the very beginning agreements are void from the very
beginning but sometimes valid contracts may subsequently becomes void.
On the Basis of execution:

(a) Executed contract :-A contract in which both the parties have fulfilled their obligations
under the contract.
Example:A contracts to buy a car from B by paying cash, B instantly delivers his car.
(b) Executory contract:-A contract in which both the parties have still to fulfilled their
obligations.
Example: D agrees to buy Vs cycle by promising to pay cash on 15th July. V agrees to deliver
the cycle on 20th July.
(c) Partly executed and partly executory:-A contract in which one of the parties has
fulfilled his obligation but the other party is yet to fulfill his obligation.
Example: A sells his car to B and A has delivered the car but B is yet to pay the price. For A, it
is excuted contract whereas it is executory contract on the part of B since the price is yet to be
paid.
(4) On the Basis of Liability:
(a) Bilateral contract:-A contract in which both the parties commit to perform their
respective promises is called a bilateral contract.
Example :A offers to sell his fiat car to B for Rs.1,00,000 on acceptance of As offer by B, there
is a promise by A to Sell the car and there is a promise by B to purchase the car there are two
promise.
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(b) Unilateral contract:-A unilateral contract is a one sided contract in which only one party
has to perform his promise or obligation party has to perform his promise or obligation to do or
forbear.
Example: - A wants to get his room painted. He offers Rs.500 to B for this purpose B says to A
if I have spare time on next Sunday I will paint your room. There is a promise by A to pay Rs
500 to B. If B is able to spare time to paint As room. However there is no promise by B to Paint
the house. There is only one promise.
DEFINITIONS (Sec 2)
1. Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to another his willingness
to do or to abstain from doing anything, with a view to obtaining the assent of that other
person either to such act or abstinence, he is said to make a proposal.
2. Acceptance 2(b):-When the person to whom the proposal is made, signifies his assent
there to , the proposal is said to be accepted.
3. Promise 2(b) :-A Proposal when accepted becomes a promise. In simple words, when an
offer is accepted it becomes promise.
4. Promisor and promise 2(c) :-When the proposal is accepted, the person making the
proposal is called as promisor and the person accepting the proposal is called as promisee.
5. Consideration 2(d):-When at the desire of the promisor, the promisee or any other person
has done or abstained from doing something or does or abstains from doing something or
promises to do or abstain from doing something, such act or abstinence or promise is called a
consideration for the promise.
Price paid by the one party for the promise of the other Technical word meaning QUID-PROQUO i.e. something in return.
6. Agreement 2(e) :-Every promise and set of promises forming the consideration for each
other. In short,
agreement = offer + acceptance.
7. Contract 2(h) :-An agreement enforceable by Law is a contract.
8. Void agreement 2(g):-An agreement not enforceable by law is void.
9. Voidable contract 2(i):-An agreement is a voidable contract if it is enforceable by Law at
the option of one or more ofthe parties thereto (i.e. the aggrieved party), and it is not
enforceable by Law at the option of the other or others.
10. Void contract :-A contract which ceases to be enforceable by Law becomes void
when it ceases to be enforceable.

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OFFER
Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to another his willingness to
do or to abstain from doing anything, with a view to obtaining the assent of that other person
either to such act or abstinence, he is said to make a proposal.
To form an agreement, there must be at least two elements one offer and the other
acceptance. Thus offer is the foundation of any agreement.
When one person signifies to another his willingness
to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to
make a proposal.
The person who makes an offer is called Offeror or Promisor and the person to whom the
offer is made is called the Offeree or Promisee.
Example
Mr. A says to Mr. B, Will you purchase my car for Rs.1,00,000? In this case, Mr. A is making
an offer to Mr. B. Here A is the offeror and B is the offeree.
HOW AN OFFER IS MADE?
An offer can be made by (a) any act or (b) omission of the party proposing by which he intends
to communicate such proposal or which has the effect of communicating it to the other
(Section 3).
An offer can be made by an act in the following ways:
(a) by words (whether written or oral). The written offer can be made by letters, telegrams,
telex messages, advertisements, etc. The oral offer can be made either in person or over
telephone.
(b) by conduct. The offer may be made by positive acts or signs so that the person acting or
making signs means to say or convey. However silence of a party can in no case amount to
offer by conduct. An offer can also be made by a party by omission (to do something). This
includes such conduct or forbearance on ones part that the other person takes it as his
willingness or assent.
An offer implied from the conduct of the parties or from the circumstances of the case is
known as implied offer.
Examples
(1) A proposes, by letter, to sell a house to Bat a certain price. This is an offer by an act by
written words (i.e., letter). This is also an express offer.
(2) A proposes, over telephone, to sell a house to Bat a certain price. This is an offer by act (by
oral words). This is an express offer.
(3) A owns a motor boat for taking people from Bombay to Goa. The boat is in the waters at
the Gateway of India. This is an offer by conduct to take passengers from Bombay to Goa. He
need not speak or call the passengers. The very fact that his motor boat is in the waters near
Gateway of India signifies his willingness to do an act with a view to obtaining the assent of
the other. This is an example of an implied offer.
Specific and General Offer
An offer can be made either:
1. to a definite person or a group of persons, or
2. to the public at large.
Essential elements of an offer:(1) There must be two parties.
(2) The offer must be communicated to the offeree.
(3) The offer must show the willingness of offeror. Mere telling he plan is not offer.
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(4)
(5)
(6)
(7)

The offer must be made with a view to obtaining the assent of the offeree.
A statement made jokingly does not amount to an offer.
An offer may involve a positive act or abstinence by the offeree.
Mere expression of willingness does not constitute an offer.

A tells B that be desires to marry by the end of 2008, if does not constitute an offer
marriage by A to B A further adds will you marry me. Then it become offer.

of

Legal Rules as to valid offer:1. Offer must be communicated to the offeree: The offer is completed only when it has
been communicated to the offeree. Until the offer is communicated, it cannot be accepted.
Thus, an offer accepted without its knowledge, does not confer any legal rights on the
acceptor.
Example: LALMAN SHUKLA (VS) GAURI DATT. (1913)
Facts sent his servant, L to trace his missing nephew. He then announced that anybody
would be entitled to a certain reward. L traced the boy in ignorance of his announcement.
Subsequently, when he came to know of his reward, he claimed it.
Judgment: He was not entitled for the reward.
2. The offer must be certain definite and not vague unambiguous and certain.
Example:
A offered to sell to B. a hundred tons of oil. The offer is uncertain as there is nothing to show
what kind of oil is intended to be sold.
3. The offer must be capable of creating legal relation. A social invitation is not create
legal relation. A social invitation, even if it is accepted does not create legal relationship
because it is not so intended to create legal relationship. Therefore, an offer must be such as
would result in a valid contract when it is accepted.
Example:
A invited B to a dinner and B accepted the invitation. It is a mere social invitation. And A will
not be liable if he fails to provide dinner to B.
4. Offer may be express and implied
The offer may be express or implied; An offer may be express as well as implied. An offer
which is expressed by words, written or spoken, is called an express offer. The offer which is
expressed by conduct, isc alled an implied offer [Section 9].
5. Communication of complete offer
Example:
A offered to sell his pen to B for Rs.1,000. B replied, I am ready to pay Rs.950. On As refusal
to sell at this price, B agreed to pay Rs.1,000. held, there was not contract at the acceptance
to buy it for Rs.950 was a counter offer, i.e. rejection of the offer of A.
Subsequent acceptance to pay Rs.1,000 is a fresh offer from B to which A was not bound go
give his acceptance.
6. Counter offer A counter offer amounts to rejection of the original offer
7. Cross offer do not conclude a contract
8. An offer must not thrust the burden of acceptance on the offeree.
Example:
A made a contract with B and promised that if he was satisfied a sa customer he would
favorably consider his case for the renewal of the contract. The promise is too vague to create
a legal relationship.
The acceptance cannot be presumed from silence. Acceptance is valid only if it is
communicated to the offeror.
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9. Offer must be distinguished from invitation to offer.

Example:
Menu card of restaurant is an invitation to put an offer.
Example ;
Price tags attached with the goods displayed in any showroom or supermarket is also an
invitation to proposal. If the salesman or the cashier does not accept the price, the or the
cashier does not accept the price, the interested buyer cannot compel him to sell, if he wants
to buy it, he must make a proposal.
Example:
Job or tender advertisement inviting applications for a job or inviting tenders is an invitation to
an offer.
Example: An advertisement for auction sale is merely an invitation to make an offer and not
an offer for sale. Therefore, an advertisement of an auction can be withdrawn without any
notice. The persons going to the auction cannot claim for loss of time and expenses if the
advertisement for auction is withdrawn.
Offer
1. Show his readiness to enter into a
contract, it is called as an offer
2. Purpose of entering contract
3. Results in a contract
Example
Application filled in by a prospective
applicable to the Institution, a student seeking
admission in educational Institution.

Invitation to offer
1. Person invites offer to make an offer to
him.
2. Purpose of enter offer
3. Results in offer.
Example
Issue of prospectus by
education Institution.

Company,

an

10. Offeror should have an intention to obtain the consent of the offeree. A offer to
do (or) not to do something must be made with a view to obtaining the assent of the other
party addressed and it should not made merly with a view to disclosing the intention of
making an offer.
11. Offer may be specific (or) general: An offer is said to be specific when it is made to a
definite person, such an offer is accepted only by the person to whom it is made. On the other
hand general offer is one which is made to a public at large and maybe accepted by anyone
who fulfills the requisite conditions.
Example: Carilill (vs) Carbolic Ball company (1893).
Facts: A company advertised in several newspapers is that a reward of L100 (pounds) would
be given to any person contracted influenza after using the smoke ball according to the
printed directions. Once Mr. Carilill used the smoke balls according to the directions of the
company but contracted influenza.
Judgment: she could recover the amount as by using the smoke balls she accepted the offer.
Express
offer

Implied
offer

Specific
offer

KINDS OF OFFER
General
Cross
offer
offer

Counter
offer

Standing Open
and Continuous
offer

I. Express offer -When the offeror expressly communication the offer the offer is said to be
an express offer the express communication of the offer may be made by Spoken word or
Written word
II. Implied offer when the offer is not communicate expressly. An offer may be implied
from:- The conduct of the parties or
- The circumstances of the case
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III. Specific:-It means an offer made in

(a) a particular person or
(b) a group of person: It can be accepted only by that person to whom it is made
communication of acceptance is necessary in case of specific offer.
IV. General offer: -It means on offer which is made to the public in general.
General offer can be accepted by anyone.
If offeree fulfill the term and condition which is given in offer then offer is accepted.
Communication of acceptance is not necessary is case of general offer
Example
Company advertised that a reward of Rs.100 would be given to any person who would suffer
from influenza after using the medicine (Smoke balls) made by the company according to the
printed directions. One lady, Mrs, Carlill, purchased and used the medicine according to the
printed directions of the company but suffered from influenza, She filed a suit to recover the
reward of Rs.100. The court held that there was a contract as she had accepted a general offer
by using the medicine in the prescribed manner and as such as entitled to recover the reward
from the company.
Carlill v Carbilic Smoke Ball Co. 1893
V. Cross offer:- When two parties exchange identical offers in ignorance at the time of each
others offer the offers are called cross offer.Two cross offer does not conclude a contract. Two
offer are said to be cross offer if
1. They are made by the same parties to one another
2. Each offer made in ignorance of the offer made by the
3. The terms and conditions contained in both the offers are same. \
Example : A offers by a letter to sell 100 tons of steel at Rs.1,000 per ton. On the same day, B
also writes to A offering to buy 100 tons of steel at Rs.1,000 per ton. When does a contract
come into existence: -A contract comes into existence when any of the parties, accept the
cross offer made by the other party.
VI Counter offer :-when the offeree give qualified acceptance of the offer subject to modified
and variations in the terms of original offer. Counter offer amounts to rejection of the original
offer.
Legal effect of counter offer:(1) Rejection of original offer
(2) The original offer is lapsed
(3) A counter offer result is a new offer.
In other words an offer made by the offeree in return of the original offer is called as a counter
offer.
Example:
A offered to sell his pen to B for Rs.1,000. B replied, I am ready to pay Rs.950. On As
refusal to sell at this price, B agreed to pay Rs.1,000. Held, there was not contract as the
acceptance to buy it for Rs.950 was a counter offer, i.e. rejection of the offer of A. Subsequent
acceptance to pay Rs.1,000 is a fresh offer from B to which A was not bound to give his
acceptance. VII Standing, open and continuous offer:-An offer is allowed to remain open for
acceptance over a period of time is known as standing, open or continually offer. Tender for
supply of goods is a kind of standing offer.
Example:
When we ask the newspaper vendor to supply the newspaper daily. In such case, we do not
repeat our offer daily and the newspaper vendor supplies the newspaper to us daily. The offers
of such types are called Standing Offer. V. Cross offer:- When two parties exchange
identical offers in ignorance at the time of each others offer the offers are called cross offer.
Two cross offer does not conclude a contract. Two offer are said to be cross offer if
1. They are made by the same parties to one another
2. Each offer made in ignorance of the offer made by the
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3. The terms and conditions contained in both the offers are same.
Example : A offers by a letter to sell 100 tons of steel at Rs.1,000 per ton. On the same day, B
also writes to A offering to buy 100 tons of steel at Rs.1,000 per ton. When does a contract
come into existence: -A contract comes into existence when any of the parties, accept the
cross offer made by the other party.
VII Standing, open and continuous offer:-An offer is allowed to remain open for
acceptance over a period of time is known as standing, open or continually offer. Tender for
supply of goods is a kind of standing offer.
Example:
When we ask the newspaper vendor to supply the newspaper daily. In such case, we do not
repeat our offer daily and the newspaper vendor supplies the newspaper to us daily. The offers
of such types are called Standing Offer.
LAPSE OF AN OFFER
An offer should be accepted before it lapses (i.e. comes to an end). Section 16, of the Indian
contract act, 1872 deals with various modes of revocation of offer. According to it, an offer is
revoked/lapses (or) comes to an end under following circumstances. An offer may come to an
end in any of the following ways stated in Section 6 of the Indian Contract Act:
1. By communication of notice of revocation: An offer may come to an end by
communication of notice of revocation by the offeror. It may be noted that an offer can be
revoked only before its acceptance is complete for the offeror. In other words, an offeror can
revoke his offer at any time before he becomes before bound by it. Thus, the communication
of revocation of offer should reach the offeree before the acceptance is communicated.
Example: HARRIS (VS) NIKERSON (1873).
Facts: An auctioneer in a newspaper that a sale of office furniture would be held. A broker
came from a distant place to attend that auction, but all the furniture was withdrawn. The
broker there upon sued auctioneer for his loss of time and expenses.
Judgment: A declaration of intention to do a thing did not create a binding contract with those
who acted upon it. So, that the broker could not recover
2. By lapse of time; Where time is fixed for the acceptance of the offer, and it is not
acceptance within the fixed time, the offer comes to an end automatically on the expiry of
fixed time. Where no time for acceptance is prescribed, the offer has to be accepted within
reasonable time. The offer lapses if iti s not accepted within that time. The term reasonable
time will depend upon the facts and circumstances of each case.
Example: Ramsgate victoria Hotel Company (vs) Monteflore (1886)
Facts: On June 8th M offered to take shares in R Company. He received a letter of
acceptance on November 23rd . he refused to take shares.
Judgment: M was entitled to refuse his offer has lapsed as the reasonable period which it
could be accepted and elapsed.
3. By failure to accept condition precedent: Where, the offer requires that some
condition must, be fulfilled before the acceptance of the offer, the offer lapses, if it is accepted
without fulfilling the condition.
4. By the death or insanity of the offeror: Where, the offeror dies or becomes, insane,
the offer comes to an end if the fact of his death or insanity comes to the knowledge of the
acceptor before he makes his acceptance. But if the offer is accepted in ignorance of the fact
of death or insanity of the offeror, the acceptance is valied. This will result in a valid contract,
and legal representatives o fthe deceased offeror shall be bound by the contract.
On the death of offeree before acceptance, the offer also comes to an end by operation of law.
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5. By counter offer by the offeree: Where, a counter offer is made by the offeree, and
then the original offer automatically comes to an end, as the counter offer amounts to
rejections of the original offer.
Example: Hyde (vs) Wrench (1840)
Facts: W offered to sell a farm to H for L1000 (pounds). H offered L950 (pounds) W
refused the offer. Subsequently, H offered to purchase the farm for L1000 (pounds).
Judgment: There was no contract as H by offering L 950 (ponds) had rejected the original
offer because the counter offer to a proposal amounts to its rejection.
6. By not accepting the offer, according to the prescribed or usual mode: Where
some manner of acceptance is prescribed in the offer, the offeror can revoke the offer if it is
not accepted according to the prescribed manner.
7. By rejection of offer by the offeree: Where, the offeree rejects the offer, the offer
comes to an end. Once the offeree rejects the offer, he cannot revive the offer by
subsequently attempting to accept it. The rejection of offer may be express or implied.
8. By change in law: Sometimes, there is a change in law which makes the offer illegal or
incapable of performance. In such cases also, the offer comes to an end.
COMMUNICATION OF OFFER AND REVOCATION OF OFFER:
An offer, its acceptance and their revocation (withdrawal) to be complete when it must be
communicated to the offeree. The following are the rules regarding communication of offer
and revocation of offer:
(a) Communication of offer:
i) The communication of an offer is complete when it comes to the knowledge of the person to
whom it is made.
ii) An offer may be communicated either by words spoken (or) written (or) it may be inferred
from the conduct of the parties.
iii) When an offer/proposal is made by post, its communication will be complete when the
letter containing the proposal reaches the person to whom it is made.
(b) Revocation of offer: A proposal/offer may be revoked at anytime before the
communication of its acceptance is complete as against the proposer, but not afterwards.

ACCEPTANCE
Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there
to , the proposal is said to be accepted. On the acceptance of the proposal, the proposer is
called the promisor/offeror and the acceptor is called the promise/offeree.
Examples
A trader receives an order from a customer and executes the order by sending the goods. The
customers order for goods constitutes the offer which was accepted by the trader by sending
the goods. It is a case of acceptance by conduct. Here the trader is accepting the offer by the
performance of the act.
Who can Accept?
In the case of a specific offer, it can be accepted only by that person to whom it is made. The
rule of law is that if A wants to enter into a contract with B, then C cannot substitute himself
for B without As consent.
Example
Boulton v. Jones.
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The facts of this case were as follows:

B, who was a manager with X, purchased his business. J, to whom, X owed a debt, placed an
order with X for the supply of certain goods. B supplied the goods even though the order was
not addressed to him. J refused to pay B for the goods because he, by entering into contract
with X, intended to set-off his debt against X.
Held : The offer was made to X and it was not in the power of B to have accepted the same. In
the case of a general offer, it can be accepted by anyone by complying with the terms of the
offer.
Example
Carlill v.Carbolic Smoke Ball Co.*
Legal Rules for the Acceptance:
1. Acceptance must be absolute and unqualified:
An acceptance to be valid it must be absolute and unqualified and in accordance with the
exact terms of the offer.
An acceptance with a variation, slight, is no acceptance, and may amount to a mere counteroffer (i.e.., original may or may not accept
Example: A offers to sell his house to B for Rs. two lakhs. B accepts the offer and promises to
pay the price in four installments. This Is not pay the acceptance as the acceptance is with
variation in the terms of the offer.
2. Acceptance must be communicated: Mere mental acceptance is no acceptance, But
there is no requirement of communication of acceptance of general offer.
For a valid acceptance, acceptance must not only be made by the offeree but it must also be
communicated by the offeree to the offeror.
Communication of the acceptance must be expressed or implied.
A mere mental acceptance is no acceptance.
Example: The manager of Railway Company received a draft agreement relating to the supply
of coal. The manager marked the draft with the words Approved and put the same in the
drawer of his table and forgot all about it. Held, there was no contract between the parties as
the acceptance was not communicated. It may however, be pointed out that the Court
construed a conduct to parties as railway company was accepting the supplies of coal from
time to time.
3. Manner of acceptance
General rule say that it must be as per the manner prescribed by offeror. If no mode is
prescribed in which it can be accepted, then it must be in some usual and reasonable manner.
Communication of the acceptance must be expressed or implied.
A mere mental acceptance is no acceptance.
4. If there is deviation in communication of an acceptance of offer, offeror may reject such
acceptance by sending notice within reasonable time. If the offeror doesnt send notice or
rejection, he accepted acceptance of offer.
Example: A offers B and indicates that the acceptance be given by telegram. B sends his
acceptance by ordinary post. It is a valid acceptance unless A insists for acceptance in the
prescribed manner.
5. Acceptance of offer must be made by offeror.
Example: A applied for the headmastership of a school. He was selected by the appointing
authority but the decision was not communicated to him. However, one of members in his
individual capacity informed him about the selection. Subsequently, the appointing authority
cancelled its decision. A sued the school for breach of contract. The Court rejected the As
action and held that there was no notice of acceptance. Information by unauthorized person
is as insufficient as overhearing from behind the door.
6) Acceptance must be expressed (or) implied:
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 An acceptance may be given either by words (or) by conduct.

An acceptance which is expressed by words (i.e.., spoken or written) is called expressed
acceptance.
An acceptance which is inferred by conduct of the person (or) by circumstances of the case
is called an implied or tacit acceptance.
Example: Carilill (vs) Carbolic Ball company (1893).
Facts: A company advertised in several newspapers is that a reward of L 100 (ponds) would
be given to any person contracted influenza after using the smoke ball according to the
printed directions. Once Mr. Carilill used the smoke balls according to the directions of the
company but contracted influenza.
Judgment: she could recover the amount as by using the smoke balls she accepted the offer.
7. Time limit for acceptance
If the offer prescribes the time limit, it must be accepted within specified time.
If the offer does not prescribe the time limit, it must be accepted within reasonable time.
Example: A applied (offered) for shares in a company in early June. The allotment
(Acceptance) was made in late November. A refused to take the shares. Held, A was entitled to
do so as the reasonable time for acceptance had elapsed.
8. Acceptance of offer may be expressly (by words spoken or written); or impliedly (by
acceptance of consideration); or by performance of conditions (e.g.in case of a general offer)
9. Mere silence is not acceptance of the offer
Example: A offers to B to buy his house for Rs.5 lakhs and writes If I hear no more about it
within a week, I shall presume the house is mine for Rs.5 lakhs. B does not respond. Here, no
contract is concluded between A and B.
10. However, following are the two exceptions to the above rule. It means silence amounts as
acceptance of offer.
Where offeree agrees that non refusal by him within specified time shall amount to
acceptance of offer.
When there is custom or usage of trade which specified that silence shall amount to
acceptance.
11. Acceptance subject to the contract is no acceptance
If the acceptance has been given subject to the contract or subject to approval by certain
persons, it has not effect at all. Such an acceptance will not create binding contract until a
formal contract is prepared and signed by all the parties.
General Rules as to Communication of Acceptance
1. In case of acceptance by post
Where the acceptance is given by post, the communication of acceptance is complete as
against the proposer when the letter of acceptance is posted. Thus, mere posting of letter of
acceptance is sufficient to conclude a contract. However, the letter must be properly
addressed and stamped.
2. Delayed or no delivery of letter
Where the letter of acceptance is posted by the acceptor but it never reaches the offeror, or it
is delayed in transit, it will not affect the validity of acceptance. The offeror is bound by the
acceptance.
3. Acceptance by telephones telex o rtax
If the communication of an acceptance is made by telephone, tele-printer, telex,fax machines,
etc, it completes when the acceptance is received by the offeror. The contract is concluded as
soon as the offeror receives not hears the acceptance.
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4. The place of Contract

In case of acceptance by the post, the place where the letter is posted is the place of contract.
Where the acceptance is given by instantaneous means of communication (telephone, fax,
tele-printer, telex etc.), the contract is made at the place where the acceptance is received,
5. The time of Contract
In case of acceptance by post, the time of posting the letter of acceptance to the time of
contract. But in case of acceptance by instantaneous means of communication, the time of
contract is the time when the offeror gets the communication, the time of contract is the time
when offeror gets the communication of acceptance.
6. Communication of acceptance in case of an agent.
Where the offer has been made through an agent, the communication of acceptance is
completed when the acceptance is given either to the agent or to the principal. In such a case,
if the agent fails to convey the acceptance received from offeree, still the principal is bound by
the acceptance.
Q. Write a short notes on consensus-ad-idem.
Ans: The essence of an agreement is the meeting of the minds of the parties in full and final
agreement; there must, be consensus-ad-idem. The expression agreement as defined in
section 2 (e) is essentially and exclusively consensual in nature (i.e.., before there can be an
agreement between the two parties, there must be consensus-ad-idem).
This means that the parties to the agreement must have agreed about the subject-matter of
the agreement in the same sense and at the same time. Unless there is consensus-ad-idem,
there can be no contract.
Example: A who owns two horses named Rajhans and Hansraj. A selling horse Rajhans to
B. B thinks that he is purchasing horse Hansraj. There is no consensus-ad-idem, there can
be no contract.
When is communication complete?
An offer, its acceptance and their revocation (withdrawal) to be complete when it must bec
ommunicated. When the contracting parties are face to face and negotiate in person, a
contract comes into existence the movement the offeree gives his absolute and unqualified
acceptance to the proposal made by the offeror. Rules regarding the communication of offer,
acceptance and revocation are laid down insection 4, as follows.
Communication of offer:
The following are the rules regarding communication of offer:
1) The communication of an offer is complete when it comes to the knowledge of the person to
whom it is made.
2) An offer may be communicated either by words spoken (or) written (or) it may be inferred
from the conduct of the parties.
3) When an offer/proposal is made by post, its communication will be complete when the letter
containing the proposal reaches the person to whom it is made.
Example: A makes proposal to B to sell his house at a certain price. The letter is posted on
10th July. It reaches B on 12th July. The communication of offer is complete when B receives
the letter (i.e.., on 12th July).
Communication of acceptance:
The following are the rules regarding communication of acceptance:1) Communication of an acceptance is complete:a) As against the proposer/ offeror when it is put into the certain course of transmission to him,
so as to be out of the power of the acceptor.
b) As against the acceptor, when it comes to knowledge of the proposer.
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2) When a proposal is accepted by a letter sent by the post the communication of acceptance
will becomplete:a) As against the proposer when the letter of acceptance is posted and
b) As against the acceptor when the letter reach the proposer.
Communication of revocation:
The following are the rules regarding communication of revocation:
1) As against the person who makes it, when it put into a course of transmission.
2) As against the person to whom it is made, when its comes to his knowledge.
Example: A proposes by a letter, to sell a house to B at a certain price. The letter is posted
on 15thmay. It reaches B on 19th may. A revokes his offer by telegram on 18 th may. The
telegram reaches B on 20th may. The revocation is complete against A when the telegram is
dispatched (i.e.., in 18th may). It is complete as against the B when he receives it (i.e.., on
20th may).

Consideration
Meaning:Consideration is a technical term used in the sense of quid-pro-quo (i.e.., something in return).
When a party to an agreement promises to do something, he must get something in return.
This something is defined as consideration.
According to Sir Frederick Pollock, consideration is the price for which the promise of the
other is bought and the promise thus given for value is enforceable.
Definition:- According to section 2(d) of the Indian contract Act, 1872, defines consideration
as when at the desire of the promisor, the promise (or) any other person has done (or)
abstained from doing, (or) does (or) abstains from doing, (or) promises to do (or) to abstain
from doing, something, such act (or) abstinence (or) promise is called a consideration for the
promise
Example: Abdul Aziz (vs) Masum Ali (1914)
Facts: The secretary of a mosque committee filed a suit to enforce a promise which the
promisor had made to subscribe Rs.500/- for rebuilding a mosque.
Judgment: The promise was not enforceable because there was no consideration in the
sense of benefit, as the person who promised gained nothing in return for the promise made,
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and the secretary of the committee to whom the promise was made, suffered no detriment
(liability) as nothing had been done to carry out the repairs. Hence the suit was dismissed.
Essentials of a valid consideration:The following are the essentials of a valid consideration (OR) legal rules as to consideration.
1. It may be past, present (or) future:
The words has done (or) abstained from doing refer to past consideration.
The word does (or) abstains from doing refer to present consideration.
Similarly the word promises to do (or) to abstain from doing refers to the future
consideration. Thus, the consideration may be past, present (or) future.
2. It must move at the desire of the promisor:
In order to constitute a legal consideration, the act (or) abstinence forming the consideration
for the promise must move at the desire (or) request of the promisor.
If it is done at the instance of a third party (or) without the desire of the promisor, it will not
be a valid contract.
Example: Durga Prasad (vs) Baldeo (1880);
Facts: B spent some money on the improvement of a market at the desire of the collector of
the district. In consideration of this D who was using the market promised to pay some
money to B.
Judgment: The agreement was void being without consideration.
3. It must not be illegal, immoral (or) not opposed to public policy:
The consideration given for an agreement must not be unlawful, illegal, immoral and not
opposed to public policy.
Where it is unlawful, the court will not allow an action on the agreement.
4. It need not be adequate:
Consideration need not be any particular value.
It need not be approximately equal value with the promise for which it is exchanged. But it
must be something which the law would regard as having some value.
In other words consideration, as already explained, it means something in return. This
means something in return need not be necessarily be an equal in value to something given.
Example:
A agreed to sell a watch worth Rs.500 for Rs.20, As consent to the agreement was freely
given. The consideration, though inadequate. Will not affect the validity of the contract.
However, the inadequacy of the consideration can be
considered in order to know whether the consent of the promisor was free or not . [Section 25
Explanation II]
5. It must be real and not illusory:
Consideration must not be illegal, impossible (or) illusory but it must be real and of some
value in the eyes of law.
The following are not real consideration:
(a) Physical impossibility,
(b) Legal impossibility,
(c) Uncertain consideration,
(d) Illusory consideration.
6. It must move from the promise (or) any other person:
Under English law consideration must move from the promisee itself. But, under Indian law,
consideration move from the promisee (or) any other person (i.e.., even a stranger).
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 This means as long as there is a consideration for a promise, it is immaterial who has
furnished it. But the stranger to a consideration will be sue only if he is a party to the contact.
Example: Chinnaya (vs) Ramayya (1882).
Facts: An old lady, by a deed of gift, made over certain property to her daughter D, under
the directions that she should pay her aunt, P (sister of old lady), a certain sum of money
annually. The same day D entered into an agreement with P to pay her the agreed amount
later D refused to pay the amount on the plea that no consideration had moved from P to
D.
Judgment: P was entitled to maintain suit as consideration had moved from the old lady,
sister of P, to the daughter, D.
7. It must be something the promisor is not already bound to do: A promise to do what
one is already bound to do, either by general law (or) under an existing contract, is not a good
consideration for a new promise, since it adds nothing to the pre-existing legal or contractual
obligation.
8. It may be an act, abstinence (or) forbearance (or) a return promise: consideration
may be an act, abstinence (or) forbearance (or) a return promise. Thus it may be noted that
the following are good considerations for a contract.
Forbearance to sue.
Compromise of a disputed claim.
Composition with creditors.
EXAMPLE:- A promise to perform a public duty by a public servant is not a consideration.

Define consideration? A contract not supported by consideration is unenforceable

discuss what are it exceptions.
(Or)
A contract without consideration is void- Discuss its exceptions?
(Or)
Insufficiency of consideration immaterial; but an agreement without consideration
is void. Comment.
(Or)
Explain the term consideration and state the exceptions to the rule No
consideration, no contract
Ans.
An Agreement made without consideration is void Section-25 of the Indian Contract Act
declares the General rule that an Agreement made without consideration is void. Section,10
also says that an Agreement becomes a Contract only when there is some lawful
Consideration for it. Thus the Cumulative effect of these two Sections is that every Agreement
must be Supported by Consideration.
Validity of an agreement without consideration:
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The general rule is that an agreement made without consideration is void. In the following
cases, the agreement though made without consideration, will be valid and enforceable
according to section 25 and 185 are as follows:1. Nature love and affection:
An agreement made without consideration is valid if it is made out of love, nature and
affection such agreements are enforceable if
The agreement is made in writing and registered.
The agreement must be made between the parties standing in near relations to each other
and
There must be nature, love and affection between the parties.
Example:- An elder brother, on account of natural love and affection, promised to pay the
debts of his younger brother. Agreement was put to writing and registered. Held, agreement
was valid.
Example: Venkatswamy (vs) Rangaswamy (1903):
Facts: By a registered agreement, V, on account of nature, love and affection for his brother,
R, promises to discharge debt to B. If V does not discharge the debt.
Judgment: R may discharge it and then sue V to recover the amount. Therefore it is a valid
agreement.
2. Compensation for past voluntary services :
A promise made without consideration is valid if, it is
a person who has already done voluntarily done something for the promisor, is enforceable,
even though without consideration. In simple words, a promise to pay for a past voluntary
service is binding.
Example:- A finds Bs purse and give to him. B Promise to give A Rs.500. This is a valid
contract.
3. Promise to pay Time-Bared debt:
An agreement to pay a time-bared debt is enforceable if the following conditions are satisfied.
The debt is a time bared debt
The debtor promises to pay the time barred debt.
The promise is made in writing.
The promise is signed by the debtor.
Example: A owes B Rs.10,000 but the debt is barred by Limitation Act. A signs a written
promise to pay B Rs.8,000 on account of debt. This is a valid contract
4. Completed gifts: The rule No consideration No contract does not apply to completed
gifts. According to section 1 to 25 states nothing in section 25 shall affect the validity, as
between the donor and donee, of any gift actually made.
Section.25 Provides that as between the donor and the donee any Gift actually made will be
valid through there be no registered deed. Nearness of relationship or natural love.
In order to bring into operation this explanation the gift must be completed. Thus if a person
gives a gift of certain properties to another according to the Provisions of the Transfer of
Property Act, he cannot subsequently demand the Property back on the ground of want of
Consideration. Because Gift is Complete.
5. Agency:
According to section 185, no consideration is necessary to create an agency. Generally an
agent is remunerated by way of Commission for Services rendered but no Consideration is
immediately necessary at the of the Appointment.
6. Charitable subscription:
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Where the promisee on the strength of promise makes commitments (i.e.., changes his
position to his liability/detriment).
Example: Kedernath (vs) Ghouri Mohammed (1886).
Facts: G had agreed to subscribe Rs.100/- towards the construction of a town hall at
Howrah. The secretary, K, on the faith of the promise, called fro plans and entrusted the work
to contractors and undertook the liability to pay them.
Judgment: The amount could be recovered, as the promise resulted in a sufficient detriment
to the secretary. However, be enforceable only to the extent of the liability incurred by the
secretary. In this case, the promise, even though it was gratuitous, became, enforceable
because on the faith of promise the secretary had incurred a detriment.
Difference between English and Indian law of Consideration
English Law
1. Under English Law past Consideration is
no consideration

Indian Law
1. But Indian law past consideration is a good
consideration.

2. English Law consideration should move

from the promise and Promise alone and
not from a Third person

2. But under the Indian law consideration can

move either from the promise or any other person
but it must proceed at the desire of the Promisor.

3. In English Law real consideration

necessary

3. Consideration need not be adequate of Indian

is

CAPACITY TO CONTRACT
Who is competent to make a contract:Section 11. Every person is competent to contract who is of age of majority according to the
Law to which he is subject, who is of sound mind and not is disqualified from contracting by
any Law to which he is subject.
Age of majority:- According to section 3 of Indian majority Act-1875every person domiciled
in Indian attains majority on the completion of 18 years of age.
Exception:- 21 years- in the following cases.
a. Where a guardian of a minors person or property is appointed under the Guardian and
wards Act, 1890.
b. Where minors property has passed under the superintendence of the court of words.
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.
Q. Explain the term MINOR? Explain the legal rules regarding agreement by a
minor?
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Definition:
According to section 3, of the Indian majority act, 1875 A minor is a person who has not
completed 18 years of age. However, minority will continue up to 21 years in case, if
Hon.court has appointed guardian for a minors property.
Legal rules regarding an agreement by a minor:
A minor is incompetent to contract u/s 11of the Indian contact act, 1872. Minors
incompetence is not a punishment but it is a protection given to minors by law. The law
becomes the guardian of minors to protect their rights because their mental capacity is not
well developed. The following are the legal rules regarding minors agreement are as follows:1. An agreement by minor is absolutely void: Where a minor is charged with obligations
and the other contracting party seeks to enforce these obligations against minor, in such a
case the agreement is deemed as void-ab-initio.
Example: Mohiri Bibi (vs) Dharmodas Ghose (1903).
Facts: A minor mortgaged his house in favour of money-lender to secure a loan of Rs.20000/out of which the mortgagee ( Dharmodas Ghose a money lender) paid the minor a sum of
Rs.8000/-.
Subsequently, the minor sued for setting a side the mortgage, stating that he was underage
when he executed the mortgage.
Judgment: The mortgage was void and, therefore, it was cancelled. Further the money
lenders request for the repayment of the amount advanced to the minor as part of the
consideration for the mortgage was also not accepted.
2. He can be a promisee (or) a Beneficiary: Any agreement which is some benefits to the
minor and under which he is required to bear no obligation is valid. Thus, a minor can be a
beneficiary (or) a promisee.
3. His agreement cannot be ratified by him an attaining the age of majority: An
agreement by minor is void-ab-initio and therefore ratification by minor is not allowed. There is
a fundamental principal in law (i.e., an agreement Void-ab-initio cannot be validated by
subsequent action).
4. If he has received any benefit under a void agreement, he cannot ask to
compensate (or) pay for it: Under section 64 and 65 of the act, provides a minor cannot be
ordered to make compensation for a benefit obtained in a void agreement. Because section 64
and 65, which deals with restitution of benefit.
5. Minor can always plead minority: A minors contract being void, any money advanced
to a minor on a promissory note cannot be recovered even though a minor procures (or) take a
loan by falsely representing that he is of full age it will not stop him from pleading his minority
in a suit, to recover the amount and the suit will be dismissed. The rule of estoppel cannot be
applied against a minor.
Example: Leslie (vs) Shiell (1914).
Facts: S, a minor, by fraudulently representing himself to be of full age, induced L to lend
him L 400 (pounds). He refused to repay it and L sued for his money.
Judgment: The contract was void and S was not liable to repay the amount.
6. There can be no specific performance of the agreement entered into by him as
they are void-ab initio: A contract entered into, on behalf of a minor by his parent/guardian
(or) the manager of his estate can be expressly enforced by (or) against the minor, provide the
contract is
Within the authority of the guardian and
For the benefit of the minor.
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7. He cannot enter into a contract of partnership: A minor being incompetent to contract

but be a partner of a partnership firm, but u/s 30 of the Indian partnership Act, provides he can
be admitted for the benefits of a partnership with the consent of all the partners.
8. He can be an agent: A minor can be an agent. It is so because the act of the agent is the
act of the principal and therefore, the principal is liable to the third parties for the act of a
minor agent.
9. His parents/guardian is not liable for the contracts entered into by him: The
parents/guardian is not liable for the contract entered into by minor. The parents can held
liable for contracts for their minor children only when they are acting as agent.
10. A minor is liable in tort (A civil wrong): Minors are liable for negligence causing injury
(or) damage to the property that does not belongs to them.
11. A minor is liable for necessaries: Minors estate is liable for necessaries supplied to
minor during minority. Minor does not personally liable for the supply of necessaries. The
necessaries such as food, clothing, and shelter etc.., necessaries also include goods and
services.
12. Guarantee for and by minor: A contract of guarantee in favour of a minor is valid.
However, a minor cannot be a surety in a contract of guarantee. This is because, the surety is
ultimately liable under a contract of guarantee whereas a minor can never be held personally
liable.
13. Minor as a trade union member
Any person who has attained the age of fifteen years may be a member for registered trade
union, provided the rules of the trade union allow so. Such a member will enjoy all the rights of
a member.
Q.what are necessaries when he is a minor on a contract for necessaries?
(OR)
Minors liability for necessaries?
Definition:
According to section 3, of the Indian majority act, 1875 A minor is a person who has not
completed 18 years of age. However, minority will continue up to 21 years in case, if
Hon.court has appointed guardian for a minors property.
Thus, minor estate is liable for necessaries supplied to minor during minority. Minor does not
personally liable for the supply of necessaries.
According to the section 68 of the Act, If a person incapable of entering into a contract, (or)
any one whom he is legally bound to support, is supplied by another person with necessaries
suited to his condition in life, the person who had furnished such supplies is entitled to be
reimbursed from the property of such incapable
There are two essentials:1. The things supplied must be suited to his condition in life (i.e.., position and financial status
of the minor).
2. The things supplied must be necessaries of life (i.e.., food, clothing, shelter, etc..,)
Necessaries also includes:(a) Necessary goods: Necessary goods are not restricted to articles which are required to
maintain a bare existence, such as bread and clothes, but it also include goods which are
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reasonably necessary to the minor having regard to his station in life. (i.e.., watch, bicycle,
etc..,)
Example: Nash (vs) Imran (1908).
Facts: I, a minor, bought eleven fancy waistcoats from N. he was at that time adequately
provided
with clothes.
Judgment: The waistcoats were not necessaries, and I was not liable to pay for any of them.
(b) Services rendered: Certain services rendered to a minor have been held to be
necessaries.These include education, training for a trade, medical advice, hose given to a
minor on rent for the purpose of living and continuing his studies etc.., As regards contracts
which are not for the supply of necessaries but which are undoubtedly beneficial to the minor,
in such a case the minor private estate is liable.
Example: Roberts (vs) Gray (1913).
Facts: G, a minor, entered into a contract with R, a noted billiards player, to pay him a
certain sumof money to learn the game and play matches with him during his world tour. R
spent time andmoney in making arrangements for billiards matches.
Judgment: G was liable to pay as the agreement was one for necessaries as it was in effect
for teaching, instruction, and employment and was reasonable for the benefit of the infant.
Loans incurred to obtain necessaries: A loan taken by a minor to obtain necessaries also binds
him and is recoverable by the lender as if he himself had supplied the necessaries. But the
minor is not personally liable. It is only his estate which is liable for loans.
Q. Person of unsound mind
Ans:
According to section 12 of the Indian contract Act, 1872 A person is said to be of sound mind
for the purpose of making a contract if, at the time when he makes it, he his capable of
understanding it and of forming a rational judgment as to its effects upon his interests.
Soundness of mind of a person depends on two facts:
1. Ability to understand the contract at the time of making.
2. Ability to form a rational judgment about the effect of the contract on his interest.
Unsoundness may arise from idiocy, lunacy, drunkenness, hypnotism, mental decay because
of old age and delirium (high temperature) etc..,
A person who is usually of unsound mind and occasionally of sound mind can contract when he
is of sound mind.
A person who is usually of sound mind and occasionally of unsound mind cannot contract
when he is of unsound mind.
Thus, the burden of proof will be lie upon the person who claims that he was not of sound mind
at the time of making a contract.
At time of entering into a contract, a person must be sound mind. Law presumes that every
person is of sound mind unless otherwise it is proved before court. An agreement by a person
of unsound mind is void. The following are categories of a person considered as person of a
unsound mind.
An idiot
An idiot is a person who is congenital (by birth) unsound mind. His incapacity is permanent
and therefore he can never understand contract and make a rational judgment as to its effects
upon his interest. Consequently, the agreement of an idiot is absolutely void ab initio. He is not
personally liable even for the payment of necessaries of life supplied to him.
delirious persons
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A person delirious from fever is also not capable of understanding the nature and implications
of an agreement. Therefore, he cannot enter into a contract so long as delirium lasts.
Hypnotized persons
Hypnotism produces temporary incapacity till a person is under the effect of artificial induced
sleep.
mental decay
There may be mental decay or senile mind the to old age or poor health. When such person is
not capable of understanding the contract and its effect upon his interest, he cannot enter into
contract.
Lunatic is not permanently of unsound mined. He can enter into contract during lucid
intervals i.e., during period when he is of sound mind.
Q. Contract by disqualified person.
(Or)
Person expressly disqualified (other person).
Besides minors and persons of unsound mind, there are also other persons who are
disqualified from contracting partially (or) wholly. So, the contracts by such persons are void.
If, by any provisional legislation, a person is declared disqualified proprietor, he is not
competent to enter into any contract in respect of the property.
The following persons are disqualified from contracting;
(a) Alien enemy.
(b) Foreign sovereign states.
(c) Corporations.
(d) Insolvents.
(e) Convicts.
Person Disqualified by Law:
Alien enemy
An alien is a person who is a foreigner to the land. He may be either an alien friend or an
alien enemy. If the sovereign or state of the alien is at peace with the country of his stay, he is
an alien friend. An if a war is declared between the two countries he is termed as an alien
enemy.
During the war, contract can be entered into with alien enemy with the permission of
central government.
Foreign sovereigns diplomatic staff and representative of foreign staff can enter
into valid contract. However, a suit cannot be filed against them, in the Indian counts without
the prior sanction of the central Government.
Body corporate or company or corporation
Contractual capacity of company is determined by object clause of its memorandum of
association. Any act done in excess of power given is ultra virus and hence void.
Insolvent
When any person is declared as an insolvent, his property vests in receiver and therefore, he
cant enter into contract relating to his property. Again he becomes capable to enter into
contract when he is discharged by court.
Convict cant enter into a contract while he is undergoing imprisonment. But he can enter
into a contract with permission of central government while undergoing imprisonment. After
the imprisonment is over, be becomes capable of entering into contract. Thus the incapacity is
only during the period of sentence.
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FREE CONSENT
According to section13. Two persons are said to have consented when they agree upon
same thing in the same sense. It is essential to the creation of a contract that both parties
agree to the same thing in the same sense. When two or more persons agree upon the same
thing in the same sense, they are said to consent.
In English law, this is called consensus ad idem
Effect of absence of consent:
When there is no consent at all, the agreement is void ab initio. It is not enforceable at
the option of either party
Example 1:X have two car one Maruti car and one Honda city car. Y does not know that X has two cars Y
offers to buy car at Rs.50,000. Here, there is no identity of mind in respect of the subject
matter. Hence there is no consent at all and the agreement is void ab inito.
Example 2:An Illiteratewoman signed a gift deed thinking that it was a power of attorney no consent at
all and the agreement was void ab inito [ Bala Devi V S. Manumdats ]
Free consent
Consent is said to be free when it is not caused by [ Section 14]
(a) coercion [Section 15]
(b) Undue influence [Section 16]
(c) Fraud [Section 17]
(d) Misrepresentation [ Section 18]
(e) Mistake [Section 20, 21,22]
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For a contract to be valid it is not only necessary that parties consent but also that they
consent freely. Where there is a consent, but no free consent, there is generally a contract
voidable at the option of the party whose consent was not free.
Coercion [Section 15]
Coercion is the committing, or threatening to commit any act forbidden by the Indian Penal
Code or the unlawful detaining, or threatening to detain, any property, to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement.
(a)
(b)
(c)
(d)

Committing any act which is forbidden by the IPC

Threatening to commit any act which is forbidden by the IPC.
Unlawful detaining of any property or
Threatening to detain any property.

Examples
(1) A Hindu widow is forced to adopt X under threat that her husbands corpse (dead body)
would not be allowed to be removed unless she adopts X. The adoption is voidable as having
been induced by coercion [Ranganayakamma v. Alwar Setti, 13 Mad. 24.].
(2) A threatens to kill B if he doesnt transfer his house in As favour for a very low price. The
agreement is voidable for being the result of coercion.
(3) An agent refused to hand over the books of accounts of the principal unless he (principal)
released him from all liabilities concerning past transactions.
Held: The release so given was not binding, being the outcome of coercion [Muthia v.
Karuppan 50 Mad. 780].
Note that, it is not necessary that coercion must have been exercised against the promisor
only; it may be directed at any person.
Examples
(1) A threatens to kill B(Cs son) if C does not let out his house to A. The agreement is caused
by coercion.
(2) X threatens to kill A if he does not sell his house to Bat a very low price. The agreement is
caused by coercion though X is stranger to the transaction. Further, note that, it is immaterial
whether the Indian Penal Code is or is not in force in the place where the coercion is employed
(Explanation to Section 15).
Example
A, on board an English ship on the high seas, causes B to enter into an agreement by an act
amounting to criminal intimidation under the Indian Penal Code. Afterwards sues B for breach
of contract at Calcutta. A has employed coercion, although his act is not an offence by the law
of England, and although the Indian Penal Code was not in force at the time or place where the
act was done.
Essential elements of coercion
Above four [a d]
(e) Coercion need not necessary proceeds from party to contract.
(f) Coercion need not necessary be directed against the other contracting party.
(g) It is immaterial whether the IPC is or is not in force at the time or at the place where the
coercion is employed [Bay of Bengal caption]
Threat to Commit SuicideIs it Coercion?
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The doubt arises because suicide though forbidden by the Indian Penal Code is for obvious
reasons not punishable. A dead person cannot be punished. But, since Section 15 declares that
committing or threatening to commit any act forbidden by the Indian Penal Code is coercion, a
threat to commit suicide should obviously be so regarded (suicide being forbidden).
The same view was held in Ammiraju v. Seshamma (1917) 41 Mad. 33. In this case, A
obtained a release deed from his wife and son under a threat of committing suicide. The
transaction was set aside on the ground of coercion.
Effect of threat to file a suit:- A threat to file a suit (whether civil or court)does not amount to
coercion unless the suit is on false charge. Threat to file a suit on false charge is an act
forbidden by the IPC and thus will amount to an act of coercion.
Duress V Coercion
English Law- Duress does not include detaining of property or threat to detain property.
- Duress can be employed only by a party to the contract or his agent.
Effect:
-when coercion is employed to obtain the consent of a party the contract is
voidable at the option of the
party where consent was obtained by coercion.
A threat to strike by employees in support of their demands is not regarded as coercion. This is
because the threat to strike is not an offence under the I.P.C. it is a right given under the
Industrial Disputes Act.
Detaining property under mortgage: Detention of property by a mortgage until the payment of
loan does not amount to coercion.
Undue influence [Section 16]
Meaning of undue influence:-dominating the will of the other person to obtain unfair
advantages over the others.
(a) Where the relation subsisting between the parties must be such that one party is in
position to dominate the will of the other.
(b) The dominant party uses his position.
(c) Obtain an unfair advantage over the other.
A 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.
Example: - A Poor Hindu widow agreed to pay interest at 100% P.a because she need the
money to established her right of maintenance. It was held that the lender was in position to
dominate the will of widow.
Essential elements of undue influence
1. There must be a Pre-existing relationship between the persons who make the contract.
2. The relationship is of such a nature that one of the two is in a position to dominate over the
will of the other person.
3. The dominant person uses his position to acquire an unfair advantage over the person in
weaker position.
Difference between coercion and undue influence
Coercion
Undue influence
Parties to a contract may as may not be Parties to a contract are related to each
related to each other.
other under some sort of relationship
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 Consent is obtained by giving a threat of an

offence or committing an offence
It involves physical pressure
It can be exercised even by a stranger to
the contract.
The party committing the crime may be
punishable under I.P.C.
Benefit - Back
No. Presumption of Domination of will:1. Landlord and Tenant
2. Creditor and Debtor
3. Husband and wife (other than Pardanashin)
4. Principal and Agent

Consent is obtained by dominating the will.

It involves moral pressure.
It can be exercised only by a party
to
contract and not by a stranger.
It doesnt involve any criminal liability
Benefit order of court Back

Effect of undue Influence:-[Section 19A]

When consent to an agreement is caused by undue influence, the contract is voidable at the
option of the party whose consent was so caused.
Burden of Proof:- A contract is presumed to be induced by undue influence if the following
two condition:A party has the position to dominate the will of the others
The transaction is unconscionable (unreasonable)
In such a case dominant party is under the burden to prove the undue influence was not
employed.
[Unconscionable transactions:-if transaction appears to unreasonable the dominant party to
prove that there is no undue influence.]
Any other transaction:-weaker party to prove the influence was employed]
Where some transaction is entered into in the ordinary course of business, but due to certain
contingencies, one party is able to make the other party agree to certain terms and conditions
then it is not undue influence.
Example :
A applies to a banker for a loan at a time when there is stringency in the money market. The
banker declines to make the loan except at an unusually high rate of interest. A accepts the
loan on these terms. This is a transaction in the ordinary course of business, and the contract
is not induced by undue influence.
Example :
A spiritual guru induced his chela to donate all his property to the ashram and said that in
return of it, he will certainly get salvation. The chela did the same. Held, that this is a case, of
undue influence so it becomes void.
Contract with Pardanashin woman;Induced by undue influence
Burden of Proof
- Full disclosure is made to pardanashin women
Pardanashin Women - Understand the contract
- Receiptof competent independent advice
Fraud (17)
The term fraud means a take representation of facts made willfully with a view to deceive
the other party.

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 Sec.17- fraud means any act committed by a party to a contract or with his connivance or
by his agent with intent to deceive another party there to or his agent or to induce to enter
into contract.
Fraud means and includes any of the following acts committed by a party to a contract (or
with his connivance or by his agent) with intent to deceive another party thereto or his agent;
or to induce him to enter into the contract:
Fraud definition include
The suggestion, as to fact, of that which is not true by one who does not believe it to be
true.
The active concealment of a fact by one having knowledge or belief of the fact.
Ex. A furniture dealer conceals the crakes in furniture by polish work.
A promise made without any intention of performing it.
Any other act fitted to deceive.
Any such act or omission as the law specially declared to be fraudulent.
Ex:- T bought a can non from H. It was defective, but H had plugged it. T did not examine the
cannon, but it burst when he used it. Held as the plug had not deceived T, he was liable to pay
for the cannon.
Ex:- Where the representation was true at the time of when it was made but becomes untrue
before the contract is entered into and this fact is known to the party who made the
representation. If must be corrected. If it is not so corrected it will amount to be fraud
When the silence amount to fraud:General rule:- Mere (only) Silence as to facts likely to affect the willingness of a person to
enter into a contract is not fraud.
EXCEPTION
Where the circumstances of the case are such that regarding being had to them. It is duty of
the person keeping silence to speak. Such duty arises in the following two cases.
(1) Duty to speak exists where the parties stand in a fiduciary relationship, e.g. father and
son, guardian and ward, trustee and beneficiary etc. or where contract is a contract of
ubberima fidei (requiring utmost good faith), e.g. contracts of insurance.
Ex.:- A sells by auction to B a horse which A knows to be unsound. B is As daughter and has
just come of age. Here the relation between the parties would make it As duty to tell B is the
horse is unsound.
(2) When silence itself equivalent to speech. B says to A if you do not deny it I shall assume
that the horse is sound. A say nothing As silence equivalent to speech. A can held liable to
fraud.
Essentials of fraud:(a) By a party to the contract
(b) There must be representation [an opinion a statement of expression does not fraud].
(c) The representation must be false.
(d) Before conclusion of contract.
(e) The misrepresentation must be made willfully.
(f) The misrepresentation must be made with a view to deceive the other party.
(g) The other party must have actually been deceived.
(h) The other party has suffered a loss.
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Effect of Fraud: - Sec. 19: A contract induced by fraud is voidable at the option of the party
defrauded. Till the exercise of such option, the Contract is valid.
1. Rescinds of contract
2. Right to insist upon performance
3. Right to claim damages if he suffered loss.
Exception : The contract is not voidable in the following cases.
- When the party who consent was caused by silence amount to fraud and be has the means
of discovering the truth with ordinary diligence.
- When the party give the consent in ignorance of fraud.
- When the party after become aware of fraud takes a benefit.
- When the parties cant be restored to their original position.
- Where interests of third parties intervene before the contract is avoided.

Misrepresentation (section 18)

Misrepresentation is when a party (person) asserts something which is not true though he
believes is to be true. In other words misrepresentation is a falls representation made
innocently. It is innocent and unintentional false statement of fact told by one party to the
other during the course of negotiation is called misrepresentation.
Like fraud, misrepresentation is incorrect or false statement but the falsity or inaccuracy is not
due to any desire to deceive or defraud the other party. It is innocent. The party making it
believes it to be true.
An agreement is said to be influenced by misrepresentation if all the following conditions are
satisfied.
The party makes a representation of a fact [The representation by a stranger (By anyone with
his connivance or
by agent)to the contract does not affect the validity of the contract.
The misrepresentation was made innocently i.e. if was not made with a view to deceive the
other party.
The other party has actually acted believing the misrepresent to be true.
Misrepresentation include:Unjustified statement of facts positive assertion Believe true really not true no basis
misrepresentation
Breach of duty.
Inducing other to make mistake as to qualify or nature of subject matter.
Section 18 of the Contract Act classifies cases of misrepresentation into three
groups as follows:
(1) The positive assertion, in a manner not warranted by the information of the person making
it, of that which is not true, though he believes it to be true.
Example
X learns from A that Y would be director of a company to be formed. X tells this to B in order to
induce him to purchase shares of that company and B does so. This is misrepresentation by X,
though he believed in the truthness of the statement and there was no intent to deceive, as
the information was derived not from Y but from A and
was mere hearsay.

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(2) Any breach of duty which, without an intent to deceive, gives an advantage to the person
committing it (or anyone claiming under him), by misleading another to his prejudice or to the
prejudice of anyone claiming under him.
(3) Causing, however innocently, a party to an agreement to make a mistake as to the
substance of thing which is the subject of the agreement.
Examples
(1) X entered into contract with C for the sale of hops. X told Y that no sulphur had been used
in their growth. Y agreed to buy only if no sulphur had been used for their growth. As a matter
of fact, sulphur had been used in 5 out of 300 acres which fact was evidently forgotten by X
when he represented that no sulphur was used.
Held :That the representation that no sulphur had been used was in the nature of a primary
stipulation and in a sense a condition, without which the contract would not have been
proceeded with and, therefore, the contract could be avoided, though the representation was
not fraudulent [Bonnerman v.White (1861) 142 E.R. 658.]
(2) A chartered a ship from B which was described in the charter party and was represented
to him as being not more than 2,800 registered tonnage. It turned out that the registered
tonnage was 3,045 tons. A refused to accept the ship in fulfillment of the charter party, and it
was held that he was entitled to avoid the charter party by reason of the erroneous statement
as to tonnage [Oceanic Steam Navigation Co. v.Soonderdas Dhurumsey (1890) 14
Bom. 241].
Essential Elements of Misrepresentation :
(i) It must be a misrepresentation of some material fact;
(ii) It must be made before the concerned party enters into a contract.
(iii) It must be innocent or unintentional statement.
(iv) Misrepresentation may be committed by any of the following ways :
(a) By positive statement.
(b) By breach of duty.
(c) By causing a mistake by innocent misrepresentation.
Effect of Misrepresentation:(1) Right to Rescind contract:Cant do
- Discovering the truth with ordinary diligence.
- Give consent in ignorance of misrepresentation
- Become aware of misrepresentation takes a benefit
- Where an innocent third party before the contract is rescinds acquires consideration some
interest in the property passing under the contract.
- Where the parties cant be restored to their original position.
(2) Right to insist upon performance.
Ex.:-Unlike Fraud he cannot sue for damage
Fraud and Misrepresentation
Fraud (17)
Meaning :- wrongful representation is made
Willfully to deceive the party.
Knowledge of falsehood.
The person making the wrong statement does
not believe it to be true.
Right to claim damage
Means of discovering of truth
In case of fraud the contract is voidable even
SHUBHAM DHIMAN

Misrepresentation (18)
Meaning :- innocently without any intention
to Deceive the other party.
The person making the wrong statement
believes it to be true.
Cant claim damage
In case of misrepresentation the contract is
not voidable if the aggrieved party had the
means of discovering the truth with ordinary
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though the aggrieved party had he means of

discovering the truth with ordinary diligence.
Exception :-Silence

diligence.

MISTAKE

Mistake may be defined as an error in consensus.

In other words,
An agreement is valid as a contract only when the parties agree upon the same thing in the
same sense.
Consent cannot be said to be "free" when an agreement is entered into under a mistake.
One, or both, of the parties may be working under some misunderstanding or
misapprehension of some fact relating to the agreement. Such contracts are said to be have
been caused by mistake.
Mistake is one of the causes because of which the consent is said not to be free. It is a
misconception or misimpression or misunderstanding or erroneous belief about something.
According to Section 20, Where both the parties to an agreement are under a mistake as to a
matter of fact essential to an agreement, the agreement is void.
Example:
A has two cars - an Ambassador and a Fiat. He agrees to sell one of them to B. It is not clear
as to which of the two cars he is selling. A might be thinking to sell the ambassador car while B
might be thinking to buy the Fiat car. Hence, there is no identity of mind on the subject-matter
of the agreement. Therefore, there is no sale in this case.
Mistake is of two kinds:
Mistake of law and
Mistake of fact.

Mistake of law
Mistake on a point of law does not affect the contract; Mistake on a point of law in force in a
foreign country is to be treated as mistake of fact.

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Example:
A and B make a contract grounded on the erroneous belief that a particular debt is barred by
the Indian law of limitation. This is a valid contract. The reason is that every man is presumed
to know the law of his own country and if he does not he must suffer the consequences of such
lack of knowledge ,But if in the above case, the mistake is related to the law of a limitation of
a foreign country, the agreement could have been avoided
Mistake of
1. MISTAKE
2. MISTAKE
3. MISTAKE

law may be of following types:

WITH REGARD TO ORDINARY LAW
WITH REGARD TO FOREIGN LAW
WITH REGARD TO PRIVATE RIGHT

1. Mistake WITH REGARD TO ORDINARY LAW

The contract is binding because everybody is supposed to know the law of country. According
to this: ignorance of law is no excuse and party cannot be allowed any relief on that
ignorance.
According to section 21, a contract is not voidable because it was caused by a mistake as to
any law in force in India.
Hence mistake of law does not give right to the parties to avoid the contract.
Example:
A and B make a contract under a mistaken belief that a particular debt is barred by the Indian
Law of Limitation, the contract is not voidable. However, if one of the parties makes a 'mistake
of law' through the inducement, whether innocent or otherwise, of the other party, the
contract may be avoided.
2. Mistake With Regard To Foreign Law
One is supposed to know the law of the land i.e., his own country but one is not expected to
know the law of the whole world. Thus if an Indian commits a mistake of English Law while in
India, he is not punishable.
Mistake of foreign law is excusable. It is treated as a mistake of fact. Parties can avoid the
contract on the ground of mistake of foreign law.
3. Mistake With Regard To Private Right
Mistake of private law of the parties is also excusable. A person cannot know the private law
of other parties, hence he is given the benefit of such ignorance.
Thus mistake of private law is treated at par with that of mistake of foreign law. Hence,
parties can avoid the contract on the ground of mistake of private law of parties.
II) Mistake of Fact
It may be of two types:
(a) Bilateral mistake
(b) Unilateral mistake.
(A) Bilateral Mistake
According to section-20 of the act.where both the parties to an agreement are under a mistake as to a matter of fact essential
to the agreement, there is a bilateral mistake and the agreement is void.
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Here there is no real correspondence of offer and acceptance, each party understanding the
contract in a different way. In reality there is no agreement at all, there being total absence of
consent.
An agreement will be void on the ground of mistake if:
There must be a mistake relating to the formation of contract.
The mistake must be mutual.
The mistake must relate to a fact.
The mistake is about a fact essential to law.
Bilateral mistake may be:
(1) Mistake as to the subject-matter
(2) Mistake as to the possibility of performance.
(1) Mistake as to the subject-matter
Mistake as to the subject-matter of contract means Where both the parties to an agreement
are under a mistake relating to the subject-matter of the contract, the agreement is void.
Mistake as to the subject-matter covers the following cases Mistake regarding the existence of the subject-matter
Mistake regarding the identity of the subject-matter
Mistake regarding the title of the subject-matter, i.e., its ownership
Mistake regarding the price of the subject-matter
Mistake regarding the quantity of the subject-matter
Mistake regarding the quality of the subject-matter
(a) Mistake regarding the existence of the subject-matter
Where both the parties believe that the subject-matter is in existence, but in fact the subjectmatter was not in existence at the time of contract, the agreement is void.
Example:
A agreed to sell to B his car parked in his garage. The car had already been destroyed by fire
before the date of contract. Both A and B did not know this fact. The agreement is void.
(B) Mistake regarding the identity of the subject-matter
Where both the parties are under a mistake as to the identity of the subject-matter, i.e., one
party thinks to deal with one thing and the other with something else, the agreement will be
void.
Example:
A has two scooters - a Lambretta and a Vespa. A agreed to sell one of them to B. It is not clear
which of the two scooters he is selling. A might be thinking to sell Lambretta while B might
thinking to purchase Vespa. There is no agreement.
Case 2: Raffles Vs. Wichelhaus (1864)
In Raffles Vs. Wichelhaus (1864) the buyer and the seller entered into an agreement
under which the seller was to supply a cargo of cotton to arrive ex peerless from Bombay.
There were two ships of the same name. i.e., Peerless, and both were to sail from Bombay,
one in October and the other in December. The buyer in mind Peerless sailing in October,
whereas the seller thought of the ship sailing in December. The seller dispatched cotton by
December ship but the buyer refused to accept the same.
In this case the offer and acceptance did not coincide and there was no contract and,
therefore, it was held that the buyer was entitled to refuse to take delivery
(C) Mistake regarding the title of the subject-matter, i.e., its ownership
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Where the seller and buyer believe that the seller has title to the property, but in fact it is
discovered that the property belongs to a third party, the agreement is void.
Example:
A agreed to take a fishery on lease from B. Both of them believed that B was the owner. But
later on it was discovered that fishery in fact belonged to A. It was held that the agreement
was void [Cooper v. Phibbs]
(D) Mistake regarding the price of the subject-matter
Where both the parties are under a mistake as to the price of the subject-matter, the
agreement is void.
Example:
A agreed to hire B's auditorium (Hall) at Rs. 800. But while writing the agreement, the figure
was written as Rs. 1,800 by mistake. The agreement is void. However, the Court can also
rectify this mistake, [Dagadu v. Bhana]
(E) Mistake regarding the quantity of the subject-matter
Where both the parties are under a mistake regarding the quantity of the subject-matter, the
agreement is void.
Example:
A enquired about the price of rifle from B informing that he may buy as many as 50 rifles. On
receiving a reply from B, he sent a telegram 'send three rifles'. By mistake of the telegraph
office, the message transmitted to B was "send the rifles." So B dispatched 50 rifles. A
accepted only three rifles and returned the rest. It was held that there was no contract. The
buyer was, however, liable to pay only for three rifles on the basis of an implied contract.
[Hankel v. Pope].
(F) Mistake regarding the quality of the subject-matter
Where both the parties are under a mistake as to the quality of the subject matter, the
agreements is void.
Example:
A agreed to sell to B a piece of Mona Lisa painting in his gallery. A very high price was paid for
the painting. But unknown to both of them, a thief had stolen the genuine Mona Lisa painting
and substituted a copy. After taking the delivery, B came to know that it was not the genuine
Mona Lisa painting. The agreement is void as both the parties are under a mistake regarding
the quality of the subject-matter i.e., painting.
2. Mistake as to possibility of performance
If both the parties believe that the contract is capable of performance, but due to
impossibility it cannot to performed, the agreement is void
The performance of agreement may not be possible because ofPhysical Impossibility
Legal Impossibility
1. Physical Impossibility
The act may be physically impossible to perform and hence void. The law does not compel
any person to do something which is impossible.
Example:
A agreed to hire 'B's room to witness Corporation Procession. Unknown to both of them, the
procession had already been cancelled. The agreement is void. [Griffith v. Brymer]
2. Legal Impossibility
Legal Impossibility means when an agreement requires to do that which cannot be done
legally.
The act may be legally impossible to perform and hence void.
Example:
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A agreed to sell 100 kg of rice. The Government ban the sale of rice by introducing rationing.
The contract is void.

(B) Unilateral Mistake

According to section 22 of the contract acta contract is not voidable merely because it was caused by one of the parties to it being
under a mistake as to matter of fact.
Where one of the parties to the contract is under a mistake it is called unilateral mistake. Thus
as a general rule,
unilateral mistake will not render a contract void.
A party cannot be allowed to avoid a contract on the ground of its own mistake which may be
due to its carelessness or negligence.
Example:
A buys rice from B thinking that it is old Basmati rice, but in fact, it is new Basmati rice. A
cannot avoid the contract. However, where mistake was caused by fraud or misrepresentation
of the other party, a contract will be voidable on that ground.
However, where consent given by a party under a mistake is so fundamental that it goes to
the root of the contract, the agreement becomes void.
Thus the exceptions where the Unilateral Mistake renders the contract void are as followsMistake as to the identity of the person
Mistake as to the nature of transaction
1. Mistake as to the identity of the person
When the identity of the person is fundamental to the contract and a mistake is committed
regarding that, the contract may be avoided.
It is a fundamental rule of law that if I intend to contract with Hari, Ram cannot contract with
me. If I make an offer to Hari, can Ram accept it? Obviously, not. If he accepts it, then there
will be no contract.
ExampleA women fraudulently represented to a firm of jewellers that she was the wife of a certain
baron (zamindar). She obtained two pearl necklaces under the pretext of getting the jewellery
with a pawn broker. The Court held that there was no contract between the jeweller and the
woman as the jeweller wanted to deal with the wife of the baron which she was not. .Hence
the pledge had to return the jewellery. [Lake v. Simons]
2. Mistake as to the nature of contract
Another case in which unilateral mistake renders a contract void is mistake as to the nature of
contract.
Where a person enters into a contract of different nature, which he never intended without his
own mistake but due to the mistake or fraud of the other party, the contract is void.
In such a case when he signs the document his mind does not go with his signature, i.e., he
does not intend to sign the document at all. There is absence of consent and the contract is,
therefore, void.
Such instances are very common in case of illiterate persons or persons having poor eye-sight
due to old age or other reasons.
Example:
A induced an old man of feeble sight to sign a promissory note by telling him "Baba ye power
of attorney hai. " (It is a power of attorney*).
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Promissory note is void as there is a mistake as to the nature of contract. The mind of the old
man did not go with his signature
*Power of attorney: it is a formal, legally valid document that authorizes one person or party
to act on the behalf of another

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