AMITY LAW SCHOOL

AMITY UNIVERSITY
LUCKNOW

SESSION: 2017-2022
Topic:- Nature and scope of law of contract 1872

SUBMITTED TO:- SUBMITTED BY:-

MS. Preeti Singh Harsh Mishra

B.A. LL.B(H)
 Acknowledgement

I would like to express my special thanks of gratitude to my teacher Ma’am Preeti Singh who
gave me the golden opportunity to do this wonderful project on the topic “nature and scope of
contract law “ which also helped me in doing a lot of research and I came to know about so
many new things.
Secondly, I would also like to thanks my parents and friend who helped me a lot in finalizing
this project.
Table Of Content:
 Introduction
 Definition of contract
 Nature of contract
 Object and scope of contract
 Essential elements of contract
 Cases on contract law
 Balfour v Balfour
 Mohoribibi vs. Dharmodas Ghose
 Lalman Shukla vs. Gauri Dutt
 Carlill vs. Carbolic Smoke Ball Co
 Philips vs. Brooks
 Donoghue vs. Stevenson
 Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co
 Damodar Murlidhar vs. Secretary of State of India
 Chappell & Co. Ltd. vs. Nestle Co. Ltd.
 Dickinson v. Dodds 2 Ch. Div.
 Bibliography
Introduction:
Definition of Contract:
A contract is an agreement between two or more parties to perform a service, provide a
product or commit to an act and is enforceable by law. There are several types of contracts,
and each have specific terms and conditions.
Section 2(h) of the Indian Contract Act provides that, “An Agreement enforceable by law is a
contract”. Therefore in a contract there must be (1) an agreement and (2) the agreement must
be enforceable by law.
An agreement comes into existence whenever one or more persons promise to one or others,
to do or not to do something, “Every promise and every set of promises, forming the
consideration for each other, is an agreement. Some agreements cannot be enforced thought
he courts of law, e.g., an agreement to play cards or go to a cinema. An agreement, which can
be enforced through the courts of law, is called contract.

Nature of contract:
The law relating to contracts in India is contained in the Indian Contract Act, 1872. The Act
provides the general principles and rules governing contracts. All transactions that relate to
the agreements and obligations of the contracting parties come under the purview of the Act.
However, there are some contracts, which are governed by separate Acts. They are —
Partnership Act, Sale of Goods Act, Negotiable Instruments Act, Insurance Act etc.
The Indian Contract Act deals with two aspects. The first aspect is the general principles of
the law. Secs. 1 to 75 deals with them. The second aspect is certain special contracts such as
indemnity, guarantee, bailment, pledge and agency. The provisions relating to these contracts
are contained in Secs. 124 to 238 of the Act.
The Law of Contract came into force on 1 September 1872.
1. The Indian Contract Act was passed and implemented to control various kinds of
commercial and business contracts.
2. This act is not complete code of contracts. It deals with general principles of The Law
of Contract and special Contract.
3. The act is applicable to the whole India except for the state of Jammu and Kashmir.
4. The Contract Act only provides rules and regulations for the purpose of contract. It
does not list any rights and liabilities between parties to the contract.
5. Rights and liabilities and their manner of performance are decided by the parties
themselves under the contract but it is within the purview of the act.

Object and Scope:

The Law of Contract deals with agreements which can be enforced through courts of law.
The Law of Contract is the most important part of commercial law because every commercial
transaction starts from an agreement between two or more persons.
According to Salmond a contract is an “agreement creating and defining obligations between
the parties.” According to Sir William Anson, “A contract is an agreement enforceable at law
made between two or more persons, by which rights are acquired by one or more to acts or
forbearances on the part of the other or others.
The object of the Law of Contract is to introduce definiteness in commercial and other
transactions. How this is done can be illustrated by an example. X enters into a contract to
deliver 10 tons of coal of Y on a certain date. Since such a contract is enforceable by the
courts, Y can plan his activities on the basis of getting the coal on the fixed date. If the
contract is broken, Y will get damages from the court and will not suffer any loss.
Sir William Anson observes as follows: “As the law relating to property had its origin in the
attempt to ensure that what a man has lawfully acquired he shall retain, so the law of contract
is intended to ensure that what a man has been led to expect shall come to pass; and that what
has been promised to him shall be performed.”

The Essential Elements of a Contract:

An agreement becomes enforceable by law when it fulfils certain conditions. These
conditions, which may be called the Essential Elements of a Contract, are explained below.
 Offer and Acceptance: There must be a lawful offer by one part and a lawful
acceptance of the offer by the other and acceptance must conform to the rules laid
down in the Indian Contract Act regarding offer and acceptance.
 Intentions to create Legal Relationship: There must be an intention (among parties)
that the agreement shall result in or create legal relations. An agreement to dine at a
friend’s house is not an agreement intended to create legal relations and is not a
contract. But an agreement to buy and sell goods or an agreement to marry, are
agreements intended to create some legal relationship and are therefore contracts,
provided the other essential elements are present.
 Lawful Consideration: Subject to certain exceptions, an agreement is legally
enforceable only when each of the parties to it gives something and gets something.
An agreement to do something for nothing is usually not enforceable by law. The
something given or obtained is called consideration. The consideration may be an act
(doing something) or forbearance (not doing something) or a promise to do or not to
do something. Consideration may be past (something already done or not done). It
may also be present or future. But only those considerations are valid which are
“lawful”.
 Capacity of Parties: The parties to an agreement must be legally capable of entering
into an agreement; otherwise it cannot be enforced by a court of law. Want of capacity
arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any of
the parties to the agreement suffers from any such disability, the agreement is not
enforceable by law, except in some special cases.
 Free Consent: In order to be enforceable, an agreement must be based on the free
consent of all the parties. There is absence of genuine consent if the agreement is
induced by coercion, undue influence, mistake, misrepresentation, and fraud. A
person guilty of coercion, undue influence etc. cannot enforce the agreement. The
other party (the aggrieved party) can enforce it, subject to rules laid down in the Act.
 Legality of the Object: The object for which the agreement has been entered into must
not be illegal or immortal or opposed to public policy.
  Certainty: The agreement must not be vague. It must be possible to ascertain the
meaning of the agreement, for otherwise it cannot be enforced.
 Possibility of Performance: The agreement must be capable of being performed. A
promise to do an impossible thing cannot be enforced.
 Void Agreements: An agreement so made must not have been expressly declared to
be void. Under Indian Contract Act there are five categories of agreements which are
expressly declared to be void They are:
 Agreement in restraint to marriage.
 Agreement in restraint of trade.
 Agreement in restraint of proceedings.
 Agreements having uncertain meaning.
 Wagering agreement.
 Writing Registration and Legal Formalities: An oral contract is a perfectly good
contract, except in those cases where writing and/or registration is required by some
statute. In India writing and/or registration is required by some statute. In India
writing is required in cases of lease, gift, sale and mortgage of immovable property:
negotiable instruments; memorandum and articles of association of a company etc.
Registration is compulsory in cases of documents coming within the purview of
Section 17 of the Registration Act, e.g., mortgage deeds covering immovable
property. The terms of an oral contract are sometimes difficult to prove. Therefore
important agreements are usually entered into writing even in cases where wiring is
not compulsory.
 “All agreements are not contracts, but all contracts are agreements”. Discuss the
statement explaining essential elements of a valid contract.

Cases On Contract Law:

Balfour v Balfour:
Mr. and Mrs. Balfour were enjoying leave in England. When the time came for Mr. Balfour to
return to Ceylon where he was employed, the wife stayed back in England for health
reasons. Mr. Balfour promised to pay her allowance every month for her maintenance. Mr.
Balfour stopped paying when the differences arose and the wife sued her husband for
allowance. Lord Atkins explained that there should be intention between the parties to
create a contract which was missing in the present case and the parties shall intend that
they shall be attended by legal consequences.

Mohoribibi vs. Dharmodas Ghose 30 IA 114 : 30Cal 539 (1903)

A minor mortgaged his property in favour of the defendant and took some money in
advance. He thereafter went on to file an action to cancel this mortgage. However defendant
pleaded that he should be allowed his money back relying upon Section 64 of Indian Contract
Act 1872 which deals with voidable contracts. The Court held that the contract entered by a
minor was void ab initio and not voidable. Therefore the minor is not liable to pay any sum of
money already advanced to him.

Lalman Shukla vs. Gauri Dutt (1913) 11 All LJ 489

 Defendant’s nephew was absconded from home. His servant was sent to find out the child.
Meanwhile, the defendant through handbills proposed to pay Rs 501 to anyone who find out
the child. The servant found the child but came to know of the offer afterwards. The servant
then claimed for the award by filing an action in the court of law but it was dismissed on the
principle- In order to constitute a contract, there must be acceptance of an offer and there can
be no acceptance unless there is knowledge of the offer.

Carlill vs. Carbolic Smoke Ball Co (1893) 1 QB 256

A company, through an advertisement, offered to pay 100 British pounds to anyone who
infects with epidemic influenza, cold or any other disease after using their Carbolic ball
according to the directions. A person who used it accordingly filed an action to recover the
amount. The company contended that the offer was not made to anyone personally and hence
they are not bound by the advertisement offer. The contention was not accepted and it was
observed that in cases of general offer, communication of acceptance is not necessary and it
can be claimed by anyone who comes and performs the said condition.

Philips vs. Brooks (1919) 2 KB 243

A person named North went to a jewellery shop and purchased some ring in the name of
another person Sir George Bollough and also issued the cheque in favour of him by this
name. After verifying the address told by North of George in the directory, the shopkeeper
allowed North to take a ring with him. After some time, when the shopkeeper discovered of
the fraud, North has already pledged the ring in favour of some other person. The shopkeeper
filed a case against that other person for his ring. It was observed by the Court that- The
minds of the parties met upon the terms of the sale. The fact that the seller was induced to sell
by the fraud of the buyer made the sale voidable and not void. The sale could not be avoided
because there was intention to sell the product to the person present.

Donoghue vs. Stevenson [1932] AC 562

A man ordered ginger beer for her lady friend in a restaurant. The ginger beer came in a dark
bottle and the contents of the bottle were not visible from outside. After drinking some of the
beer, the lady friend poured the remaining into a tumbler where a snail in a decomposed
condition fell. The lady friend complained of stomach pain and she filed a case against the
manufacturer. The court ruled in her favour on the principle- The manufacturer owed a duty
of care towards the final consumer even in the absence of a contract. The element of privity is
not essential for a consumer to sue the manufacturer for negligence.

Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co UKHL 1, AC 847

The plaintiff Co. sold tyres to Dew & Co. with an undertaking that they shall not sell the
product to anyone below the list prices. Dew & Co. sold some tyres with the similar
undertaking that they shall not sell it below the list price. However the defendant company
sold the tyres below the list price and the plaintiff brought an action against them. The
doctrine of privity was applied in this case and it was held that there was no contract between
the plaintiff and the defendant and therefore plaintiff cannot sue the defendants for breach of
contract as there was no contract between them.
Damodar Murlidhar vs. Secretary of State of India (1894) 18 Madras 88

Government carried out some repairs in the irrigation tank the benefit of which was enjoyed
by the villagers as well as some zamindars. The repairs made by the government was done
for its preservation and was a result of non-gratuitous act. The court held that government is
entitled to the proportional contribution towards the expenses of repairs on the principle-
Even though the party making payment or rendering services was personally interested in the
matter, he can recover proportional representation from the parties enjoying the benefits.

Chappell & Co. Ltd. vs. Nestle Co. Ltd. [1960] AC 8

The Court in the instant case held that the consideration to a contract should be sufficient and
need not be adequate. Nestle offered to sell a music record, whose copyright was possessed
by Chappel, to anyone who bring in three wrappers of “6D” Chocolate bars. The court held
that the wrappers, even though does not possess monetary consideration, was a sufficient
consideration and thus the contract entered into by such consideration is binding upon the
parties.
Dickinson v. Dodds 2 Ch. Div. 463 (1876)
Defendant made an offer to the plaintiff to sell certain property and the offer was left open to
accept by the plaintiff till 9 p.m. of Friday. However the defendant sold the property before
Friday and plaintiff gave his acceptance on Friday. In an action by the plaintiff, the court held
that the plaintiff had neither given his acceptance nor any consideration finalizing his
intention to buy the property. Therefore it was a mere promise which the defendant was not
bound to comply with.
Bibliography:

 Book:- Avtar singh

Bare act

 Website:- www.simplynotes.in/m-comb-com-2/law-of-contract-1872
lawnn.com/top-10-landmark-judgements-law-contracts