LAW OF CONTRACT

1. Principle: A contract with a minor would be void if the other party knew about the
minority.
Problem: Hitesh is a leading seller of the computer hardware items in the city. His
sixteen years old son has Rohan as his best friend. Rohan is also of the same age. Hitesh
knowing the age of Rohan entered into a contract with him for a set of laptops for a sum
of Rs. 20 lakhs to him. When Histesh sent the consignment of the laptops, Rohan refused
to take them and dishonored the contract. Hitesh sues Rohan for the damages suffered by
him. Decide the legal outcome of the situation.
A. Hitesh would be able to get compensation for the damages from Rohan.
B. Hitesh would not be able to get the damages by can force Rohan to buy the laptops from
him.
C. Hitesh would not be able to get the damage as the contract is void.
D. The court could grant exemplary damages to Hitesh.

Explanation: The contract would be void because the minority of Rohan was known to the
Hitesh and as per the principle this will make the Hitesh incompetent to claim any damages from
Rohan.

2. Principle: 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.
Problem: Ram tells Shyam that he is selling his car and Shyam can pay him in cash. Is it
a valid offer?
A. Yes, because Ram has given an option to Shyam regarding payment in cash.
B. No, because Ram has not mentioned the details of the car.
C. No, because Shyam has not yet accepted the proposal.
D. No, because Ram has not given any proposal because he never asked for the assent
of Shyam.
Explanation: As per the principle given, a valid proposal is one where the willingness has been
expressed in order to obtain the willingness, in the present case Ram never asked for the assent
of Shyam.

3. Principle: 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, whereas, 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.
Problem: Kunal’s nephew went missing one day. He sent his servant Ram for searching
his nephew and thereafter declared the cash prize to the person who will be able to find
his nephew. Ram successfully found out his nephew and went back home with him. After
few days, he got to know about the prize declared and claimed the same from his master
Kunal which he refused to pay. Decide whether he will be able to recover the same?
A. Ram will be entitled to the prize as he successfully met with all the conditions of the
offer declared by his master Kunal.
B. Ram will not be able to claim it as he was not aware of the offer at the time when it
was declared and so he cannot claim it.
C. Ram is not entitled to the offer money because he did not gave his consent at the time
when he found the nephew of the master.
D. Both B and C.

Explanation: As per the principle, Ram cannot claim the offer money because he was not
aware of the fact that such an offer was declared by his master and so he cannot give
acceptance for it. The expression “when the person to whom the proposal is made” given in
the principle suggests the same.

4. Principle: A suit for breach of contract shall be instituted in the court within whose
jurisdiction the cause of action arises; or the defendant actually and voluntarily resides or
carries on business, or personally works for gain.
Problem: 'Y' carries on business in Mumbai.' Z' carries on business in Delhi. 'Z' buys
goods of 'Y' in Mumbai through his agent and request 'Y' to deliver them at Delhi.
 Accordingly, 'Y' delivered the goods at Delhi. But he did not get the price of the goods
delivered in Delhi. Therefore, he intends to move the Civil Court for recovery of amount
from 'Z'. Which court may 'y' approach?
A. 'Y' may institute the suit either at Delhi where Z carries on business or at
Mumbai where the cause of action arose.
B. 'Y' may institute the suit at Delhi where 'z' carries on business.
C. 'Y' may institute the suit simultaneously at Delhi where 'Z' caries on business and
at Mumbai where the cause of action arose.
D. 'Y' may institute the suit at Mumbai where the cause of action arose.

Explanation: Y may institute the suit either in Delhi or in Mumbai because the rule itself
says “a suit may be instituted in the court within whose jurisdiction the cause of action
arises; or the defendant actually and voluntarily resides or carries on business, or
personally works for gain.”

5. Principle: The acceptance of an offer will be valid only if it is made in the way it was
expected to be made.
Problem: There was a telephonic discussion between 'J' and 'K' for negotiating the sale of
the shop of former to the latter. Upon reaching an agreement as to the price of the shop of
'J' at Rs. 20 lakh, 'J' told 'K' to send a letter to him within two weeks confirming that she
wishes to buy the shop for the price finalized. Two days thereafter, 'K' gave her
acceptance to 'J' over telephone but sent the letter of confirmation after lapse of one
month. Is 'J' bound by acceptance of 'K'?
A. Yes, because the acceptance was conveyed within two weeks over telephone and
it was followed by a letter of acceptance as stipulated.
B. No, because the mode specified by the offer was not followed.
C. No, because sale of immovable property cannot be finalized online; neither any
acceptance can be given over phone. Hence, the entire negotiation is invalid.
D. Yes, because no law can compel the purchaser to give his acceptance through the
mode prescribed by the vendor.
Explanation: No contract is formed and J is not bound because the mode of acceptance and the
time limit given was not followed by K.

6. Principle: All agreements are contracts if they are made by the free consent of parties,
competent to contract, for a lawful consideration and with a lawful object, and are not
hereby expressly declared to be void.
Problem: Mr. A wanted to purchase the land owned by Mr. B but B never intended to
sell the same. A approached B and offered him the double amount but B denied. By this,
A got enraged and pointed his pistol towards B. A then took the papers of the property
and made B to sign it. The contract is:
A. Valid because the B signed the contract.
B. Not valid because the consent obtained was not free.
C. Not valid because the amount offered by A was double the original amount
D. Both B and C

Explanation: The transaction happened above is not valid because as per the rule “All
agreements are contracts if they are made by the free consent of parties”.

7. Principle: Two or more persons are said to consent when they agree upon the same thing
in the same sense.
Problem: A was having a farmhouse where he had 10 horses, he pointed towards brown
horse and said “I want to sell that horse, are you willing to purchase it?”
B thinking that A is talking about black horse accepted the offer. Whether the consent
given by B is valid?
A. The consent given by B is valid as the buyer can choose the commodity himself.
B. The consent given is not valid as the offer given by A was of different horse.
C. The consent is not valid because A just expressed his willingness and it was not an
offer.
D. Both B and C.
Explanation: The consent is not valid as B does not understood the original offer and thus He
did not agreed upon the same thing in the same sense.

8. Principle: The Acceptance must be absolute and unqualified, leaving no ground for
doubt or uncertainty. If the acceptance is conditional, no valid contract is formed, and the
offer can be withdrawn at any moment till the absolute acceptance has taken place within
reasonable time of such offer.

Problem: Delhi Govt. conducted an auction for the sale of license of wine shop. X
offered the highest bid which was provisionally accepted “….subject to the confirmation
of Chief Commissioner who may reject any bid without assigning any reasons.” Since X
failed to deposit the req. amount, chief commissioner rejected the bid. The govt. held X
liable for the difference between the bid offered by him and the highest bid accepted in
re-auction, and commenced proceedings for the recovery of the sum. It was contended on
behalf of the govt. of Delhi that X was under a legal obligation to pay the difference as it
was due to his default that a resale of the excise shop was ordered and hence X was liable
for the deficiency in price and all expenses of such resale which was caused by his
default.

A. No, X is not liable to make payment as the shop was sold to the highest bidder.
B. X is liable to pay because the govt. of Delhi has to conduct re-auction and also
suffered loss in the sale of the shop.
C. X is liable because his bid was accepted but he failed to deposit the required amount
on time.
D. No, contract for sale was not complete till the bid was confirmed by the Chief
Commissioner and till such confirmation, the bidder was entitled to withdraw the bid.

9. Principle: “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 of his agent, or to induce him to enter into the contract:
 Fraud also means- the suggestion, as a fact, of that which is not true, by one who does not
believe it to be true; 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.
Problem: A sells, by auction, to B, a horse which A knows to be unsound. A says
nothing to B about the horse’s unsoundness.
A. This is not fraud because considering the situation, it was not the duty of A to speak.
B. This is not fraud because B did not asked and so A’s duty to disclose does not arise.
C. This is fraud because since the very beginning A knew the reality of the horse.
D. Both A and B.

Explanation: Considering the fact given, B did not asked A anything about the horse and so as
per the rule which says “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”. A has not committed any fraud.

10. Principle: A contract by which one party promises to save the other from loss caused to
him by the conduct of the promisor himself, or by the conduct of any other person, is
called a “contract of indemnity”, whereas, A “contract of guarantee” is a contract to
perform the promise, or discharge the liability, of a third person in case of his default.
Problem: B and C were best friends. One day, A was sitting in his office when B entered
into. B told A that he was in urgent need of the money and that he will return the same
within a reasonable time. A gave money and B left the office. After few minutes C
entered into the office of A and got to know about B. C then promised to A that if in case
B will make default in payment, he will pay it to A. Decide-
A. The transaction occurred is contract of guarantee because C promised to save A from
the loss of third party.
B. This is contract of Indemnity because the promisor C is promising to save the
promisee i.e. A from the loss that may happen in future.
C. There was no valid transaction as there was no valid consideration.
D. None of the above.
Explanation: The transaction occurred between C and A is contract of Indemnity because the
contract of Indemnity is having only two parties whereas in contract of Guarantee, there are
three parties officially. Here the transaction appeared to have taken place between 2 parties
only.