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Law of Contract

(Section 01- 25 of the contract Act, 1872)

The contents of the Act can be divided into two broad categories:
1. General laws relating to contract
2. Laws relating to some particular types of contracts
Each categories can be divided into three broad parts:
1. General laws relating to contract:
a. Formation of contract
b. Performance of contract
c. Breach of Contract and remedies
2. Laws relating to some particular types of contracts:
a. Contracts of indemnity and guarantee
b. Contracts of Bailment and Pledge
c. Contract of Agency
 The Contract Act 1872 is not exhaustive and where the Act does not cover the case the court is
bound to follow the principles of the English Common Law

Conflict of Laws/Jurisdiction
Conflict of laws may arise:
-Where the Contract is made in one jurisdiction and is to be performed in another jurisdiction or other
countries
-is sued upon in a jurisdiction where it was not made or to be performed,
 It becomes necessary to determine the law of which legal system will govern the contract, or
any particular aspect of it.
Our act is silent on this issue!

FORMATION OF CONTRACT

• Definition of Contract:
 According to section 2(h) of Contract Act,1872 –“An agreement enforceable by law is a
contract.”
 Alternatively, it may be defined as a promise or set of promises which the law will enforce.
 Abul Gani Sheikh V. Jagadish Chandra Mridha and others.
 Agreement: According to section 2(e) of Contract Act, 1872- “Every promise or set of promises
forming the consideration for each other.”
 Promise: According to Section 2(b) of Contract Act,1872 – “A proposal, when accepted
becomes a promise”
 Proposal: According to section 2(a) of Contract Act,1872- “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”
 Promisor and Promisee : According to Section 2(c) of Contract Act,1872 – “The person making
the proposal is called the "promisor" and the person accepting the proposal is called the
"promisee"
 Consideration: According to section 2(d) of Contract Act,1872- “ Promisee or any other person
has done or abstained from doing, or does or abstains from doing, or promises to do or to
abstain from doing, something..”
 Agreement not Contract: According to Section 2(g) of Contract Act, 1872 –“An agreement not
enforceable by law is said to be void”

 Essential Elements of Valid Contract:

 An agreement becomes enforceable by law when it satisfies the essentials laid under SECTION
10 of Contract Act. 1. Competency of parties, 2. Free consent, 3. Lawful object, 4. Lawful
Consideration, 5. Not declared by law as void.

Classification of Contract: The classification made under certain modes, is not expressly said in the
Contract Act, 1872

A. On the basis Enforceability:

1. Valid Contact: Valid contract is that contract which satisfies all the essentials of section 10 of
Contact Act 1872 like: - lawful offer & acceptance, free consent, etc.

For example: - A ask B if he wants to buy his bike for Rs.10, 000. B agrees to buy bike. It is agreement
which is enforceable by law. Hence, it is contract.

2. Void Contract: “A contract which ceases to be enforceable by law becomes void when it ceases
to be enforceable” [Section 2(j)]
For example: - X agrees to sell his horse to Y for Rs. 5,000. But the horse died in an accident. It
become impossible to perform the contract due to destruction of the subject. Thus, a valid
contract changes into void contract because of impossibility of performance.
3. Void Agreement: - An agreement not enforceable by law is said to be void.
For example: - X supplies luxury goods to Y a minor for a consideration of Rs. 10,000. Y refused to
make payment. X cannot enforce the agreement in the court of law since the agreement is void
because Y is minor.
4. Voidable Contract Sec.2 (i):- an agreement which is enforceable by law at the option of one or
more of the parties thereto, but not at the option of other, is voidable contract. Such a contract
come into existence where of consent of one or more parties is not free.

For example: - X promise to sell his scooter to Y for Rs. 500000. However, the consent X has been
procured by Y at a gun point. X is an aggrieved party & the contract is voidable at his option.
5. Illegal Agreement:- an agreement which is prohibited by law or against the policy of law is known as
illegal agreement.

For example:- X agrees to kill Y if Z pays him Rs.10,000. it is an unlawful as well as void agreement

6. Agreement discovered to be void:- an agreement whose void nature becomes known to parties only
subsequent to its formation

For example:- X agrees to sell his car to Y, both not knowing that the car has been badly damaged
in accident the previous night.

7. Unenforceable Contract:- A contract which is valid in all respects but because of non – fulfillment of
some technical formality, it cannot be treated as enforceable.

VOID AGREEMENT V/S VOIDABLE CONTRACT

 B. On the basis of Formation:


1. Express Contract:-
The contract is said to be an express contract when terms of contract have been agreed upon between
the parties expressly i.e. oral or written, at the time of formation.
2. Implied Contract:- an implied contract is one which come into existence by the acts, the conduct of
the parties.
For example:- Order placed for a cup of coffee in a restaurant.
3. Quasi Contract:- in quasi contract, there is no intention of the parties to form a contract but created
by law.
For example:- X, a trader, leaves certain goods at house of Y by mistake. This imposes an obligation
on “Y” either to return the goods to X or to make the payment if he treats the goods as his own.
4. E.com Contract:- contract created on the internet.
For example:- any business deal done on internet
 C. On the basis of Performance
1. Executed Contract:- a contract is said to be executed contract where both the parties or at least one
party to a contract have performed their respective obligations.
For example:- all the transactions of cash sales are executed contract.
2.Executory Contract:- an executory contract is one where both the parties are yet to perform their
respective obligations.
 D. On the basis of Obligation
1.Bilateral Contract:- A bilateral contract is one in which both the parties are required to perform their
obligations at the time of formation of contract.
For example:- X promises Y to pay Rs.1200 for his cycle. Neither of them has performed his obligation.
2. Unilateral Contract:- A contract is said to be unilateral where one party has performed his obligation
and the performance of obligation is outstanding on the part of other party.
For example:- X buys a railway ticket for journey from Dhaka to Noakhali. X has performed his
obligation under the contract by paying the fare. But, the railways are yet to perform their duty i.e.
carrying ‘X’ from Dhaka to Noakhali.
Discussion
 On the basis of the lecture try to set examples of different types of contract that are used to
be formed in our daily life.

(CAPACITY OF PARTIES)
Sec: 11. Every person is competent to contract who is of the age of majority according to the law to
which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to
which he is subject.
So, we get three conditions to be fulfilled by a person to be competent to enter into a contract, that the
person is- 1. Of the age of majority, 2. Of sound mind, 3. Not disqualified from……..
So, the following persons cannot enter into a contract- 1. Minors, 2. Persons of unsound mind, 3.
Persons disqualified by any law.
The person must be of the age of majority: In Bangladesh, according to section 3 of the Majority Act,
1875, the age of majority is 18 years unless the superintendence of his property has been assumed by
the Court of wards in which case it is 21 years.
The person must be of sound mind:
Sec-12. 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 is capable of understanding it and of forming a rational judgment as to its effect upon his
interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when
he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract
when he is of unsound mind.
So, if one has the following two capabilities, he will be deemed to be of sound mind- 1. To understand
the contract, 2. To form a rational judgment considering its effect upon his own interests.
A person may lose these capabilities due to idiocy, lunacy, drunkenness etc.
The principle of the case Inder singh Vs. Parmeshwardhari Singh, {AIR 1957 Pat 491}, The person
entering into the contract must be a person who understands what he is doing and is able to form a
rational judgement as to whether what he is about to do is to his interest or not.
Contract in Lucid Interval: 2nd paragraph of sec 12.
Effect of agreement entered into by a person of unsound mind: In Bangladesh, thus agreement is void.
But in English law, the contract of this person is voidable.
The person must not be declared disqualified by the law: Insolvent Person etc.
Nature of Minor’s agreement: This issue was finally settled in 1903 in the famous case of Muhuri Bibi
Vs. Dharmadas Ghose, where it was held that a minor’s agreement is void ab initio, that means without
of any legal effect at all- it is born as a void one.
Application of doctrine of estoppel against minor: Estoppel may be described as a rule by which, in
some cases, one will not be allowed to plead the contrary of a fact or state of things which he has
formerly asserted by words or conduct.
This is a principle of law of evidence which has been embodied in section 115 of the Evidence Act, 1872,
as applicable in Bangladesh. In fact, sec-115 is founded on the rule laid down in the famous case of
Pickard Vs. Sears. 1831.
The doctrine of ‘estoppel’ cannot be applied against the minor, because, there is no estoppel against the
statute.

Doctrine of restitution: This means if a minor takes any property or goods by misrepresentation of his
age, then he will be compelled to restore things so obtained so long as the goods will be found in his
possession and if the goods are already sold or converted by the minor, he cannot be compelled to
repay the value of goods, because that would amount to enforce a void agreement.
Doctrine of ‘Ratification’: There is no scope of ratification for minor’s agreement. It was held in Julhash
Mollah (Md) and another Vs. Ramani Kanta Malo [1914] and another that an agreement which is void
ab initio cannot be validated by ratification.
Beneficial Contract: It was observed in Ashraf Ali Vs. Etim Ali [1959, 11 DLR 185], that- in an executed
contract where the minor’s part has been performed and nothing is left to be executed by the minor,
i.e., obligation, such a contract is enforceable by the minor as it is a contract for the benefit of the
minor.
Though according to English Law the minor would be liable in this case, it is clear under section 11, the
minor’s contract (it should be agreement) being void, the minor would not be held liable.
Liability for Necessaries: Section 68 of the Contract Act, 1872, says- “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 has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.”
In Chappel Vs. Copper [1844], it was observed that- Things necessary are those without which an
individual cannot reasonably exist. In the first place, food, raiment, lodging and the like.
The minor will also be liable for the reimbursement for necessaries supplied to a person whom he is
legally bound to support. However, the liability of the minor has the following two characteristics-
The nature of such liability is quasi contractual, and no case it is contractual.
Minor is not personally liable, rather his liability is limited against his property.

FREE CONSENT
Sec-13. “Two or more persons are said to consent when they agree upon the same thing in the same
sense.”
Thus, there are two statutory requirements to be a consent that the consent must be given-
 To the same thing and in the same sense. So, if the parties agree upon different things or in
different senses then this will not be treated as ‘consent’. Of course, the term ‘thing’ used in the
first requirement means ‘the consents of agreement’.

MEANING OF FREE CONSENT: [PAGE-97, (1)]


 To make a contract valid not only consent is necessary but the consent should also be free.
 Section 14 says that the consent is said to be free when it is not caused by any of the following :
(a) Coercion, as defined in sec 15, or
(b) Undue influence, as defined in sec 16, or
(c) Fraud, as defined in Sec 17, or
(d) Misrepresentation, as defined in sec 18, or
(e) Mistake – subject to the provisions of sections 20, 21 and 22.
MEANING OF COERCION
Section 15 says- “ Coercion” is the committing, or threatening to commit, any act forbidden by the
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.
Explanation- It is immaterial whether the penal code is or is not in force in the place where the coercion
is employed.
(So, if someone does any of the above acts in any place other than Bangladesh where the penal code is
not in force that will not prevent the act to be termed as coercion because of this reason.)
Analyzing the above the definition we see that there are two types of elements of coercion-
1. Substantial Element: To be a coercion any of the following four acts must take place-
i. Committing any act forbidden by the penal code, 1860.
ii. Threatening to commit any act forbidden by the penal code, 1860.
iii. Unlawful detaining any property, to the prejudice of any person whatever.
iv. Threatening to detain, any property, to the prejudice of any person whatever.
2. Psychological Elements: It requires that the above act must be done with the intention of causing any
person to enter into an agreement.
MEANING OF UNDUE INFLUENCE: Section 16 says-
1. 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.
2. In particular and without prejudice to the generality of the foregoing principle, a person is deemed
to be in a position to dominate the will of another:
(a). where he holds a real or apparent authority over the other or where he stands in a fiduciary relation
to the other, or
(b). where he makes a contract with a person whose mental capacity is temporary or permanently
affected by reason of age, illness, or mental or bodily distress.
3. Where a person who is in a position to dominate the will of another, enters into a contract with him,
and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the
burden of proving that such contract was not induced by undue influence shall lie upon the person in a
position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Evidence Act, 1872.
(Transaction must be unconscionable and it may be appear in either of the two ways- that are above
mentioned.)
Ingredients of Undue Influence:
1. Between two parties, one must be in a position to dominate the will of other. That means
Superior.
2. The above relation must be used to obtain an unfair advantage.
In the following cases a person will be deemed to be in a position to dominate the will of another-
1. Where he holds a real authority over the others,-(Police officer-Accused)
2. Where he holds an apparent authority over the other – (Master-Servant)
3. Where he stands in a fiduciary relation to the other- (Parents-child; Doctor-patient; Lawyer-
Client; Teacher-Student).
4. Sub section 2(b) of Section -16 of the Contract Act, 1832.
It was observed in Purnendu Kumar Das Vs. Hiran Kumar Das [1969, 21 DLR 918], that- ‘ The fact that
since the agreement was entered when there was a case under section 406 of the Penal Code, 1860, we
are of the view that this is sufficient ground for holding that there was coercion and undue influence
exercised on the defendant.’

Presumption of Undue Influence and The burden of Proof: The general principle is that he who claims
anything must prove it. So, if someone claims that his consent is caused by undue influence then he
must prove the fact. But there is an exception when the burden of proof will shifted according sub
section-3 of section 16.
The court in Bindu Mukhi Vs. Sm. Sarda Sundari [1954, 6 DLR 97] observed that- ‘The burden of proof
lies in the first instance on the party who raises the plea of undue influence. If that party proves that the
other party was not only in a position to dominate his will, but that the transaction entered into was
unconscionable, then the burden of proof will be on dominated party.”
Effect of Undue Influence: The effect of Undue Influence is that the agreement which is induced by
undue influence becomes a voidable contract at the option of the party whose consent was so caused.
Section- 19A. When consent to an agreement is caused by Undue influence, the agreement is a contract
voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has
received any benefit thereunder, upon such terms and conditions as to the court may seem just.
DEFINITION OF FRAUD
 According to section 17 of the Contract Act 1872-
Fraud means and includes any of the following acts:
Committed by a party to a contract or by any one with his connivance or by his agent with intent to
deceive another party thereto or his agent or to induce him to enter into contract:
(a) A suggestion as to fact of that which is not true by one who does not believe it to be true
(b) An active concealment of a fact by one having knowledge or belief of the fact.
(c) A promise made without any intention of performing it.
(d) Any other act fitted to deceive
(e) Any such act or omission as the law specially declares to be fraudulent.

EXPLANATION:
• Mere Silence as to facts likely to affect the willingness of a person to enter into a contract is not
fraud,
• Unless the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak, or unless his silence is, in itself equivalent to speech.
ESSENTIALS OF FRAUD
 There must be a representation and it must be false. [Peek vs Gurney(1873) L.R 6 H .L 377]
 The representation must relate to material fact [Bisset vs Wilkinson (1972) A.C 177]
 The representation must have been made before the conclusion of the contract with the
intention of inducing the other party to act upon it.
 The other party must have been induced to act upon the representation.
 The other party must have relied upon the representation and must have been deceived.
[Horsefull vs Thomas, (1862) 1 H & C 90]

EXAMPLES OF FRAUD
 Hasib was induced to buy shares in a company on account of a false statement made by a
stranger. It was held that he could not get out of the bargains because false statement was not
made by the company or its agent.
 Tarek says to Depak his coat is made of pure wool, though he knows that it is untrue. Depak
purchases the coat believing Tarek’s statement to be true, it is a fraud by Tarek and therefore
contract is voidable at Depak’s option.
DOES MERE SILENCE AMOUNT TO FRAUD?
The general principle is that mere silence does not amount to fraud. According to the ‘explanation’ to
section 17 it appears that silence amounts to fraud only in the following two circumstances-
i. If the silence is in breach of duty. That means considering the nature and circumstances of the
transaction if it appears that it was the duty of that person to speak but the remains silent then
such silence shall amount to fraud.
ii. If the silence is equal to speak fraudulent statement.
(Concealment by mere silence is not fraud)
DECIDED CASE ON SILENCE IS NOT A FRAUD
 HANDS VS SIMPSON, FAWCETT & CO LTD (1928) 44T LR 295
H a commercial traveler, obtained an employment with S. S regarded driving as an essential part of H’s
duties but he did not specifically ask H if he is qualified to drive a car. H kept quiet about his
disqualification to drive a car.
S contended that H’s silence is misrepresentation. But it was held that H was under no duty to volunteer
the information and there was no misrepresentation.
EFFECT OF FRAUD
• Section 19 of the Contract Act 1872:
• The party whose consent to the contract is obtained by fraud can exercised any of the following
rights:
• He may avoid the contract and may (i) ask for the damages suffered because of the non-
fulfillment of the contract
• He may insist for the performance of the contract.
EXAMPLES OF FRAUD
a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the
horse's unsoundness. This is not fraud in A.
b) B is A's daughter and has just come of age. Here, the relation between the parties would make
it A's duty to tell B if the horse, is unsound.
C) A and B, being traders, enter upon a contract. A has private information of a change in prices
which would affect B's willingness to proceed with the contract. A is not bound to inform B.
NOTE:
• Misrepresentation of facts may be intentional or innocent.
• Intentional misrepresentation has been termed as Fraud and innocent misrepresentation has
been termed simply as ‘misrepresentation’ in the contract act.

SEC- 18. MISREPRESENTATION MEANS AND INCLUDES-


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;
2. Any breach of duty which, without an intent to deceive, gains and advantage to the person
committing it, or any one claiming under him, by misleading another to his prejudice or to the
prejudice of any one claiming under him;
3. Causing, however innocently, a party to an agreement to make a mistake as to the substance of
the thing which is the subject of the agreement.
MISREPRESENTATION
• According to Section 18 of The Contract Act 1872:
• Misrepresentation is a false representation made innocently without any intention of
deceiving the other party .It may include two things:
• (a) Wrong statement of a material fact not known to be false.
• (b) Non-disclosure of facts where there is a legal duty to disclose without intention to
deceive.
Difference between fraud and misrepresentation
Misrepresentation Fraud

There is no intention to deceive or to gain In fraud the false statement is made deliberately
any undue advantage with a clear intention of deceiving the other party
It makes the other contract only voidable In fraud the injured party besides avoiding
at the option of the party whose consent the contract may also claim the damages.
has been so caused

Effect of Misrepresentation:
Like fraud.
Sec-19. When consent to an agreement is caused by coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent was so caused.

MISTAKE
• Mistake are of two type:
(a) Mistake of law: Sec-21. A contract is not voidable because it was caused by a mistake as to any
law in force in Bangladesh, but a mistake as to a law not in force in Bangladesh has the same
effect as a mistake of fact.
(b) Mistake of fact: Sec-20. Where both the parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void.

Mistake of Law
Mistake of law is further divided into two categories
(a) Mistake of Bangladeshi law: Like original mistake of law.
(b) Mistake of Foreign law: Like mistake of fact.
Here, the agreement will be void in case of bilateral mistake only.
Mistake of fact
• Bilateral mistake: If both parties to an agreement are under a common mistake, which is
termed bilateral mistake.
• Unilateral mistake: If only one party to an agreement is under a mistake, but not the other or
others, it is called unilateral mistake. [Sec-22. A 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.]

Nature of the mistake -----------------------------------------------------------------legal consequence
Bilateral mistake of fact --------------------------------------------------------------- Agreement becomes void
Bilateral mistake of law----------------------------------------Contract does not become voidable
Unilateral mistake of law ------------------------------------- Contract does not become voidable
Unilateral mistake of fact------------------------------------- Contract does not become voidable
Bilateral mistake of fact—
Becomes void on fulfillment of the following three conditions as mentioned in section 20 –
The mistake must be bilateral.
The mistake must be of fact.
The mistaken fact must be essential to the subject matter of the agreement. So, if any tiny bilateral
mistake of fact occurs the agreement will not be void.

Mistake as to possibility of performing the contract


a) Physical impossibility
b) Legal impossibility
Unilateral mistake
• One party to a contract is under a mistake of fact, the contract is voidable. Unilateral mistake do
not affect the validity of contract unless they concern some fundamental
• Example: A agreed to buy certain wheat from B believing that they were old. In fact wheat
offered were new. It was held that A could not avoid the contract on the ground that he had a
mistaken impression as to the oldness of wheat.

Consideration

 It is considered Foundation of every contract. In the absence of consideration a promise or


undertaking is purely gratuitous- creates no legal binding.
 Definition of Consideration
 Pollock “Consideration is the price for which the promise of the other is bought and the
promise thus given for value is enforceable”.
 It is something which is of some value in the eyes of law.
 It may be some benefit to the plaintiff or some detriment to the defendant.
 Also called Quid- pro-quo i.e. something in return.
ESSENTIALS OF CONSIDERATION: Section 2(d) of the Contract Act 1872 defines consideration as
a. when at the desire of the promisor
b. the promisee or any other person
c. has done or abstained from doing , does or abstains from doing, or promises to do or
abstain from doing,
d. Something, such act or abstinence or promise is called a consideration for the promise.
1. It must move at the desire of the promisor
 An act constituting consideration must have been done at the desire or request of the
promisor, if it is done at the desire of the third party or without the desire of the promisor it
will not be a good consideration.
 E.g., A saves B’s goods from fire without being asked to do so. A cannot demand
consideration for his services.
Durga Prasad Vs. Baldeo, (1880): 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. Held: The agreement was void being without consideration as it had not moved at
the desire of D.
Abdul Aziz vs. Masum Ali, (1914).
The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made to
subscribe Rs. 500 to the re-building of a mosque. Held: “the promise was not enforceable because there
was no consideration in the sense of benefit”, as “the person who made the promise gained nothing in
return for the promise made”, and the secretary of the Committee to whom the promise was made,
suffered no detriment as nothing had been done to carry out the repairs. Hence the suit was
dismissed.
2.Kedar Nath vs. Gauri Mohamed, (1886)
The facts of this case were almost similar to those of the above case, but the secretary in this case
incurred a liability on the strength of the promise.Held: The amount could be recovered, as the promise
resulted in a sufficient detriment to the secretary. The promise could, however, be enforced only to the
extent of the liability (detriment) incurred by the secretary. In this case, the promise, even though it
was gratuitous, became enforceable because on the faith of the promise secretary had incurred a
detriment.
2. It may move from the Promisee or any other Person: Even a stranger. This means that as long as
there is a consideration for a promise it is immaterial who has furnished it. But a stranger to the
consideration will be able to sue only if he is a party to the contract.
 Case law (Chinnaya v/s Ramayya) :An old lady, by a deed of gift, made over certain property to
her daughter D, under the direction that she should pay her aunt, S (Sister of old lady), a certain
some of money annually. The same day D entered into an agreement with her aunt S to pay her
the agreed amount. Later, D refused to pay the amount on the plea that no consideration has
moved from S to D. Held, S was entitled to maintain suit as consideration had moved from the
old lady, sister of S, to the daughter, D.
 English Case: Tweddle Vs. Atkinson (1861) 123 ER 762
The plaintiff was to be married to the daughter of one G and in consideration of this intended
marriage G and the plaintiff‘s father entered in to a written agreement by which it was agreed that each
would pay the Plaintiff a sum of money. G failed to do so and the plaintiff sued his executors.
Whitman J considered it to be an established principle that a person cannot take advantage of a
contract, who is stranger to the contract.
3. It may be Past, Present or Future: The word used in Section 2(d) are”… has done or abstained from
doing (Past), or does or abstains from doing (Present), or promises to do or to abstain from doing
(Future), something,”
I. Past consideration:
When the consideration by the party for the present promise was given in the past, i.e.,
before the date of promise, it is said to be past consideration.
II. Present consideration: when consideration is given simultaneously with promise, i.e., at the
time of the promise, it is said to be present consideration. E.g., cash sale.
III. Future consideration: when consideration for one party to the other is to pass subsequently
to the making of the contract, it is future consideration.
IV. Executory & Executed Contract
4. It need not be adequate: Consideration as said “something in return” and this something in
return need not be equal in value to “Something given”. The law requires that the contract must be
supported by consideration and not the adequate consideration. The adequacy of the consideration
is to be determined by the parties to the contract at the time of entering into it, but the court has no
right to determine the adequacy of the consideration.
5. It must be real: although consideration need not be adequate, it must be real and of some value
in the eye of law. There is no real consideration in the following cases:
 Physical impossibility: A promises to put life into B’s dead wife on the consideration of BDT. 1
Lac. A’s promise is physically impossible to perform.
 Legal impossibility: A owes BDT.500 to B. he promises to pay BDT.50 to, C the servant of B, who
in return promise to discharge A from the liability. This is legally impossible, because C cannot
discharge A from the debt due to B.
 Uncertain consideration: A engages B for doing a certain work and promises to pay a
“Reasonable some”. There is no recognized method of ascertaining the “Reasonable some”. The
promise is unenforceable due to uncertainty.
6. It must be lawful: The consideration given for an agreement must not be unlawful. A
consideration to the contract must not be against Public Policy, Immoral and illegal
7. It must be something which 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 the new promise, since it adds nothing to the pre-existing legal or contractual
obligation.
Stranger to consideration: Under the English law the consideration must move from the promisee and
not from the stranger, and a stranger to a consideration cannot enforce it.The Bangladeshi law is
different from the English law and the definition of consideration under the Contract Act 1872 clearly
provides that consideration may move from the promisee or any other person. So consideration may
flow from a stranger. It is a general law of contract that a person who is not a party to the contract can’t
sue on it. A stranger to a contract can’t sue in England as well as in Bangladesh though it may be for his
benefit. It means that unless there is privity of contract a party can’t sue on a contract.
 Privity of contract means the relationship subsisting between the parties to a contract .It means
that no one but the parties to a contract can be bound by it or be entitled under it. Only parties
to a contract can sue each other or be sued upon.
Stranger to a contract can’t sue except in the following case-
1. Trust 2. Provision is made in a marriage settlement 3. Where provision is made in a partition or family
arrangement for maintenance or marriage expenses of female members. 4. Where a charge is created in
favour of a stranger on specific immovable property. 5. Where the promisor by his conduct has created
privity of contract with the stranger 6.Where it is conducive to justice 7.Contract entered into by an
agent can be enforced by the principal 8.Covenants running with the land
CONTRACT WITHOUT CONSIDERATION IS VOID –EXCEPTIONs
Section 25 says- An agreement made without consideration is void. But exceptions-
 Agreement without consideration, void, unless it is in writing and registered or is a promise to
compensate for something done or is a promise to pay a debt barred by limitation law .
1. An agreement made without consideration is void, unless – Love and Affection: where an
agreement is expressed in writing and registered under the law for the time being in force for
the registration of the documents and is made on account of natural law and affection between
parties standing to the near relation to each other, it is enforceable even if there is no
consideration (Ram Dass vs. Krishan Dev) ( 3 conditions) [section -25(1)]
 A Hindu husband, after referring to quarrels and disagreement between him and his wife
executed a registered document in favour of his wife agreeing to pay her maintenance. But no
consideration moved from the wife. Held, the agreement was void for want of consideration
(Rajlukhy vs. Bhoothnath)
2. Promise to pay a time-bared debt: A promise to pay a time-bared debt by the debtor is
enforceable provided it is made in writing and signed by the person to be charged therewith or
by his agent generally or specially authorised in that behalf, to pay wholly or in part debt. The
debt must be such “of which the creditor might have enforced payment but for the law for the
limitation of suits” [section 25(3)] Completed gift: that nothing in this section shall affect the
validity, as between the donor and donee, of any gift actually made.
3. The second exception is mentioned in section 25(2) which is about to compensate past
voluntary service.
4. Agency: Section 185 of the contract Act provides that no consideration is necessary for creation
of agency.
  Dunlop Pneumatic Tyres Co. Ltd. Vs. Selfridge & Co. Ltd., (1915): S bought tyres from the
Dunlop Rubber Co. & sold them to D, a sub-dealer, who agreed with S not to sell these tyres
below Dunlop’s list price and to pay the Dunlop Co. £5 as damages on every tyre D undersold, D
sold two tyres at less than the list price and thereupon the Dunlop Co. Sued him for the
breach.Held: The Dunlop Co. Could not maintain the suit as it was stranger to the contract.

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