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PAPER-5

CONTRACT-1

Q1. “All contracts are Agreements, but all agreements are not Contract”.
Explain.
Ans. Agreement:- An agreement is defined as “Every promise and set of
promises, forming the consideration for each other, is an agreement” in section
2(e) of the Indian Contract ac Act, 1872. When a proposal is made by one party
and the same is accepted by another party, it becomes a promise and when this
promise is with some consideration by any of the parties is an agreement.

Elements of Agreement
There are four elements necessary for forming an agreement:
1. Presence of Parties: There should always be two or more parties
for the formation of an agreement. An agreement cannot be made by
one party or person, two parties are required as a promise cannot be
made by one party only.
2. Promise: When a proposal made by one party is accepted by
another party it becomes a promise. Section 2(b) of the Indian
Contract Act, 1872, defines the term “promise”. It provides: “when
one 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”.
3. Consideration: “Consideration” is definable as the “inducement to a
contract,” or the “cause, motive, price, or impelling influence which
induces a contracting party to enter into a contract.” (2)
4. Consensus Parties: The free consent of parties is necessary for
forming a valid agreement.

Contract
A contract is defined as “an agreement enforceable by law” in Section 2 (h) of
The Indian Contract Act, 1872. An agreement between private parties creating
mutual obligations enforceable by law. The basic elements required for the
agreement to be a legally enforceable contract are mutual assent, expressed by
a valid offer and acceptance; adequate consideration; capacity; and legality.
Elements of Contract
The necessary elements for forming a legally enforceable contract are:
1. Offer: An offer is a proposal made by one party to the other party
which expresses the willingness of the party to be bound on terms.
2. Acceptance: Acceptance means the offer has been accepted with
the terms of the offer by the party to whom an offer was made.
3. Consideration: A Consideration is to be made by the parties after
acceptance of the offer.
4. Intention: There must be a clear intention of both parties that the
agreement is a legally binding contract.
5. Certainty: The terms or conditions of the contract must be clear and
may be discussed between the parties and may be understood in the
same manner by both parties. The terms or conditions should not be
unlawful or unenforceable.

All Contracts are Agreements But All Agreements are not Contracts:-
All Contracts are agreements as for the formation of a contract, an agreement is
always necessary. There cannot be a contract where there is no agreement.
Without an agreement, a contract cannot be formed. Therefore, All Contracts are
Agreements. Only those agreements become contracts which give rise to a legal
obligation. If no legal duty is enforceable by an agreement, it can never be a
contract. And hence agreement is a broader term than Contract. Without an
agreement, a contract cannot be formed. Therefore, All Contracts are
Agreements. Only those agreements become contracts which give rise to a legal
obligation. If no legal duty is enforceable by an agreement, it can never be a
contract. An agreement is regarded as a contract when it is enforceable by law.
The conditions of enforceability are stated in Section 10 of the Indian contract act
1872. According to this section, an agreement becomes a contract when the
agreement is made for some consideration between the parties which are
competent to contract and are entering into the Contract with their free consent
and has a lawful objective. A lease agreement between two corporate bodies
was held legal where it was signed by one only, representing both sides because
he was a director in both the legal entities.

Q2. “An Agreement without conception is a Void”. Discuss with


Exceptions.
Ans. As per section 25 of the Indian Contract Act does not specify any exception
similar to the common law but lays down a few exceptions. It states that an
agreement without consideration is void, unless
(i). it is in writing and registered,

(ii). Or is a promise to compensate for past services,

(iii). Or is a promise to pay a time debt barred.

Exceptions:- An agreement without consideration is a void agreement. However,


there are certain exceptions where agreement without consideration is valid
according to section 25 of the Indian Contract Act. These include: -

● Voluntary Services

If a promise was given to an individual who provided a service voluntarily, then, in


that case, all agreement without consideration is legally enforceable. Aside from
voluntary service, if a person performs an act which the promisor was legally
compelled to do, then a promise made in exchange for that service is considered
valid.
For instance, let’s consider an example of a contract without consideration
is the void exception. Suppose that two individuals A and B are neighbours.
One day there was a fire at B’s house which A spotted on time and stopped from
spreading. Due to this, B promised to pay A a sum of Rs.10,000 at a later date.
This is one of the agreements without consideration which will be considered
valid by a court.

● Love and Affection

Another exception to the statement an agreement made without consideration is


void is love and affection. According to section 25(1) Indian Contract Law, an
agreement made between two individuals who are directly related to each other
through blood or are near relations of one another, where the deal is in writing
and has been registered formally, will be enforceable under law.
For example - C agreed to pay his brother D a certain sum of money every day
for a year. A formal agreement was drawn and registered in a court. This results
in agreements without consideration, where C is liable to pay that sum of money
to D.
● Time Barred Debt

Time-barred Debt is a type of Debt which was created when one individual
borrowed money from another party and did not repay on time. As a certain
amount of time has passed, it is no longer legally collectable. Nevertheless, if the
borrower made a promise in writing to return the amount, in whole or part, and he
or his authorised agent signed the agreement; then it will be considered legally
enforceable, even though it is an agreement without consideration.

● Gifts and Charity

Gift or charity is also an exception of the rule that agreement without


consideration is Void. Any gift or charity exchanged between a donor and donee
will be considered a valid agreement under the law even if there was no
consideration involved. Furthermore, a promise to make a future gift is also
binding.
Q3. Who are Competent to Contract? Discuss the Law relating to minor’s
agreement in India with the help of decided cases? Is there any difference
between Indian Law & English Law in this context?
Ans. Competent of Contract:- Every person is competent to contract who is of
the age of majority according to the law to which he is subject,1 and who is of
sound mind and is not disqualified from contracting by any law to which he is
subject. —Every person is competent to contract who is of the age of majority
according to the law to which he is subject,1 and who is of sound mind and is not
disqualified from contracting by any law to which he is subject."
Law relating to minor’s agreement in India:- Section 11 states that only
persons who have attained majority according to the law are competent to
contract. Therefore, there must be a law that defines the age of majority. In India,
the Indian Majority Act, 1875 declares the age of majority of all persons to be 18
years. If a minor has a guardian or Court of Ward looking after him, his age of
majority becomes 21 years. Hence, any contract with a party below the age of 18
years is invalid as per the Act. Indian courts have repeatedly used this judgment
to abrogate minors from contractual obligations. Hence, minors cannot enter into
agreements unless some legal provisions allow them.

Rules relating to Agreement with Minor Parties

Although, as a general rule, a contract with minors is void, we must keep in mind
the following rules as well:
1) A contract with a minor is void and, hence, no obligations can ever arise on
him thereunder.

2) The minor party cannot ratify the contract upon attaining majority unless a law
specifically allows this.

3) No court can allow specific performance of a contract with minors because it is


void altogether.

4) The Partnership Act also prohibits minors from becoming partners in a firm.
They can, however, receive the benefits of partnership and ratify the same upon
attaining majority.

5) The rule of estoppel under evidence law does not apply to minors under
contractual obligations. In other words, even if a minor forms a contract claiming
majority age, legal obligations cannot arise against him.

6) Parents or guardians of minors can name them in contracts only if it benefits


them. But even in this case, the minor cannot be personally liable.

Decided Cases in Law relating to Minor’s Agreement

Mohori Bibee v. Dharmodas Ghosh

In this case, the privy council held that a contract by a minor is void-ab-initio
(from the start) it was held in 1903.

● Facts of the case:

The respondent Dharmodas Ghose on the 20th July of 1895 executed a


mortgage deed in the favor of a moneylender named Brahmo Dutt carrying
on business in Calcutta and elsewhere but throughout the transaction
Brahmo Dutt was absent from the Calcutta. The business was carried out
for him by his attorney Kedar Nath Mitter. The respondent mortgaged
immovable property to his house for the repayment of Rs. 20,000 at the
rate of 12% (Twelve Percent) interest, the amount increased in the dispute.
At that time the respondent was a minor. On the 15th of July 1895, Kendar
Nath received information that the respondent was still minor through a
letter sent by Bhupendra Nath Bose, an attorney. Kedar Nath denied
receiving any letter but court held that he did personally receive the letter
on 15th July and the evidence is conclusive.

Issues:-

● Whether the contract was void or not under The Indian Contract act
of 1872 Section 2 Section 10 and most important Section 11;
● Whether the respondent was liable to pay back the loan to the
Defendant;
● Whether the contract of mortgage was avoidable or not.

● Judgment:
1. First, the trial court held that the contract between the Plaintiff and
Defendant was void because at the time of the contract the Plaintiff was a
minor.
2. Later Defendant filed an appeal in the Calcutta High Court where the High
Court agreed with the verdict of the trial court and dismissed the appeal.
3. Again, Brahmo Dutta went to the Privy Council to appeal and the Privy
Council also dismissed the case and held that the contract between
appellant and respondent is void.
4. The final decision passed by The Privy Council was:
5. The contract with any minor is void-ab-initio (from the beginning).
6. The Dharmodas Ghose was not held liable for the repayment of the loan
because the contract was void-ab-initio.

Sri Kakulam Subrahmanyam Vs. Kurra Subba Rao

● Facts of the case: The respondent and his father were living in a joint
Hindu family. The respondent’s father died on the 4th of October 1935.
The respondent was and still is a minor living with her widow mother.
The respondent’s father before the death he has incurred few debts,
including Rs. 16,000 owing to appellants securing with two promissory
notes and one debt of Rs. 1,200 owing to Ramayya and secured by the
mortgage. The respondent is a minor, mother of the respondent that is
guardian entered into an agreement in writing for the sale of the land to
the appellant at the cost of Rs. 17,200. The purchase price has to be
applied at Rs. 16000 for discharging the promissory note and the
remaining Rs.1,200 the mortgage debt owing to Ramayya. The contract
stated that the sale deed was to be executed, registered, and delivered
to the appellant at their request upon their expenses. The appellants
paid off the RS. 1,200 debt and they were let into possession of the sold
land but there was never a sale-deed executed or registered. 10th of
September 1938 the respondent and his mother led this suit for claiming
the property.

● Issues:
● Whether the contract made by his guardian is valid.
● Who should be in the possession of the land.

● Judgment:
● First, the subordinate judge held that the appellants are protected under
the Section 53A of the Transfer of Property Act and dismissed the suit.
● The District Court overruled the judgment of the subordinate and
ordered possession of the land in the favor of the respondent.
● The High Court of Madras dismissed the appeal made by the current
appellant.
● The Privy Council held that the contract was entered by the mother of
the respondent. It was made for the benefit of a minor and the order of
the Subordinate Judge was restored and the claim for the relief by the
respondent was dismissed. The respondent must pay the cost of appeal
and proceedings in India to the appellant.

Difference between Indian Law and English Law in the context of


Minor’s Agreement in India

Age Of Majority : As Per English And Indian Law:-


Indian statute: As per section 3, a minor becomes a major i.e. he attains
majority when he becomes 18years old and the day on which person was born is
included, but as per the superintendence of court age of majority is attained at
21years of age. The two ages laid down in India leads to confusion and
inconvenience
England's law: In England there are no separate cases or circumstances for a
minor to be considered as a major. In England a common law prevails as per
which the age of majority is attained when a person becomes 21 years old.

Initial laws determining majority


Indian contract act came into existence in 1872 so before it the Hindus used to
determine there majority as per Hindu law, Muslims as per Muslim law and
Englishmen as per English law. thus different laws had different age of majority.
Due to this, later a fixed age of majority was defined under an Act of 1875 which
gave a uniform rule and helped in fixing the age of majority at 18 for Hindus and
Muslims as well as for all the British subjects living in British India. This was a
significant step, but the Act did not cover the cases of British subjects living in
this country for the time being and having their domicile in countries.

Validity Of Minors Agreement


In England the agreements entered in by the minors are governed and regulated
by the famous act of 1874. As per the act, for getting loan or for mortgaging
property or for giving or receiving of some goods, until and unless they are
necessaries are considered to be absolutely void as per the doctrine of English
law. The above mentioned term absolutely void led to the rise of controversial
situation under which some jurist considered that absolutely void means that cont
is totally null and is zero in the eyes of law whereas according to some jurist
absolutely void refers to the fact that contract is voidable at the option of minor
and it depends on the factual situation. There are cases in which the court
interpreted the case in its strict literal sense. Such situations favors the minor to
enjoy his position which he obtained under common law.

Q4. “An Agreement in restraint of Trade is void”. Explain what are its
Exceptions?
Ans. “An Agreement in restraint of Trade is void”:- Section 27 provides that
every agreement by which anyone is restrained from exercising a lawful
profession or business of any kind, is to that extent void. Every person in India is
free to carry on any lawful business, trade or engage in any profession. This
freedom has been guaranteed to every citizen by the Constitution of India. The
right of trade and profession is as important as the right of life. Just as a person
does not have a right to deprive himself of his life, similarly, he cannot deprive
himself of the right of trade and profession. An agreement. which puts restraint
upon a party’s freedom of trade and profession shall not be enforceable.

Exceptions: The general rule is that all the agreements in restraint of trade are
void. However, following are the exceptions to the above general rule.

Sale of goodwill: According to Section 27, One who sells the goodwill of a
business may agree with the buyer to refrain from carrying on a similar business,
within specified local limits, so long as the buyer or any person deriving title to
the goodwill from him, carries on a like business therein. Provided that such limits
appear to the court reasonable, regard being had to the nature of the business.

Partners agreement: Partners may agree that A partner shall not carry on any
business, other than that of the firm, while being partner. [Section 11(2) Indian
Partnership Act, 1932]. A partner ceasing to be a partner will not carry on any
business. similar to that of the firm within a specified period or within local limits.
The agreement shall be valid if the restrictions are reasonable. [Section 32 (2)
Indian Partnership Act, 1932]. Partners may in anticipation of dissolution make
an agreement that some or all of them will not carry on a business similar to that
of the firm within a specified period or within specified local limits and such
agreement shall be valid if the restrictions imposed are reasonable. [Section 54
Indian Partnership Act, 1932]. A partner may, upon sale of goodwill of a firm,
make an agreement that such partner will not carry on any business similar to
that of the firm within a specified period or local limits provided the restriction is
reasonable. [Section 55, Indian partnership Act, 1932].

Trade combinations: Trade combinations which have been formed to regulate


the business or to fix prices are not void, but the trade combinations which tend
to create monopoly and which are against the public interest are void. Example:
An agreement between certain people to carry on business with the members of
their caste only is void.

Sole selling agreements: There is a usual practice among manufacturers that


they give right to only one agent or distributor to sell their products in a particular
local limit so long as the buyer or his representatives carry on the business is
valid. But the restriction should be reasonable in the opinion of the court.
Service Agreements: The agreement between an employer and the employee
may contain certain terms which put restrictions upon employee’s freedom. Some
of such restrictions may be valid. A promise by an employee that he will not work
anywhere else so long as he is working with the present employer would be
valid.

Q4. Define Proposal? Discuss essential elements of a valid offer? What is


the difference between offer and invitation to offer?

Ans. According to the Indian Contract Act 1872, proposal is defined in Section
2(a) as “when one person will signify to another person his willingness to do or
not do something (abstain) with a view to obtain the assent of such person to
such an act or abstinence, he is said to make a proposal or an offer.” The entire
process of entering into a contract begins with the proposal or an offer made by
one party to another. The proposal must be accepted to enter into an agreement.
An offer, by one person to another, of terms and conditions with reference to
some work or undertaking, or for the transfer of property, the acceptance whereof
will make a contract between them.

Essential elements of a valid Offer:-


There are mainly three essential elements of a valid offer:

(1) The offer must be Communicated


Communication or expression of the willingness by the offeror to enter into a
contract or abstain from doing so is essential for a valid offer. Mere desire or
willingness to do or not to do something is not enough and will not constitute an
offer.

(2) Terms of the offer must be clear and definite


Knowledge of the Intention of the parties is very essential as without this the
courts will not be able to decide what the parties want to do. Therefore the terms
of the offer must be clear and definite and not vague and loose.

(3) Must create a legal relationship


It is essential for a valid proposal that it must be made with the intention of
creating a legal relationship otherwise it will only be an invitation. A social
invitation may not create a social relationship. An offer must lead to a contract
which creates legal obligations and legal consequences in the case of
non-performance of the contract.

Differences between Offer and Invitation to Offer:-


The principal points of difference between offer and invitation to offer are as
follows:

1. An offer is the final willingness of the party to create legal relations. An


invitation to offer is not the final willingness but the interest of the party to
invite the public to offer him.
2. An offer is defined in section 2 (a) of the Indian Contract Act, 1872.
Conversely, an invitation to offer is not defined in the Indian Contract Act,
1872.
3. An offer is an essential element to make an agreement between the
parties, but an invitation to offer is not an important element until it
becomes an offer.
4. An offer becomes an agreement when accepted. On the other hand, an
invitation to offer becomes an offer when the public responds to it.

Q6. What do you understand by “Contract''? Explain the essential elements


of a Valid Contract.

Ans. Contract:- In the simplest definition, a promise enforceable by law. The


promise may be to do something or to refrain from doing something. The making
of a contract requires the mutual assent of two or more persons, one of them
ordinarily making an offer and another accepting. If one of the parties fails to
keep the promise, the other is entitled to legal redress. The law of contracts
considers such questions as whether a contract exists, what the meaning of it is,
whether a contract has been broken, and what compensation is due the injured
party. A contract is like a promise between people. It is an understanding, a deal
between two or more people or organisations to do certain things. Each person
or organisation who agrees to do something in a contract is called a party. An
agreement, or a contract, says what you and the other person or organisation
have agreed to do. It is a written list of the promises you have made. The best
form of contract is written on paper and signed by each party.

Essential elements of a Valid Contract:-


Offer and Acceptance
In order to create a valid contract, there must be a 'lawful offer' by one party and
'lawful acceptance' of the same by the other party. Any contract has to have an
offer from one party which has to be accepted by another party.

Intention to Create Legal Relationship.


This is stated in the definition of the contract. If the parties do not wish to create a
Legal Relationship, there is no necessity of a contract and hence, it is not
considered as a contract at all.

Lawful Consideration.
Consideration is something which is paid by the offering party to the offered
party. It may be time, money, knowledge, service etc. Without a Lawful
consideration one cannot fight a case in the court.

Capacity of parties.
The parties to an agreement must be competent to contract. If either of the
parties does not have the capacity to contract, the contract is not valid. According
the following persons are incompetent to contract.
(a) Miners,
(b) Persons of unsound mind, and
(c) persons disqualified by law to which they are subject.

Free Consent.
'Consent' means the parties must have agreed upon the same thing in the same
sense.
Consent is said to be free when it is not caused by-

● Coercion
● Undue influence
● Fraud
● Misrepresentation
● Mistake
An agreement should be made by the free consent of the parties.
.
Lawful Object.
Object has nothing to do with consideration. It means the purpose or
design of the contract. Thus, when one hires a house for use as an office
for an e-Commerce company, the object of the contract is to run an
e-Commerce Company. The Object is said to be unlawful if-
(a) it is forbidden by law;
(b) it is of such nature that if permitted it would defeat the provision of any
law;
(c) it is fraudulent;
(d) it involves an injury to the person or property of any other;
(e) the court regards it as immoral or opposed to public policy.

Certainty of Meaning.
Agreement the meaning of which is not Certain or capable of being made
certain are void. A poorly drafted agreement which is ambiguous in nature
is not legally valid.

Possibility of Performance.
If the act is impossible in itself, physically or legally, it cannot be enforced
at law. For example, Mr. A agrees with B to discover treasure by magic.
Such Agreements are not enforceable. Hence all agreements need to be
physically and legally enforceable.

Not Declared to be void or Illegal.?


The agreement though satisfying all the conditions for a valid contract must
not have been expressly declared void by any law in force in the country.
For example an agreement to form a cartel to curb competition is illegal in
India.

Legal Formalities.
An oral Contract is a perfectly valid contract, except in those cases where
writing, registration etc. is required by some statute. In India writing is
required in cases of sale, mortgage, lease and gift of immovable property,
negotiable instruments; memorandum and articles of association of a
company, etc. Registration is required in cases of documents coming
within the scope of section 17 of the Registration Act.
Q7. What do you understand by discharge of a Contract? Discuss the
Circumstances under which a Contract is discharged.
Ans. Discharge of a Contract:- Discharge of contract means termination
of the contractual relationship between the parties. When the rights and
obligations arising out of a contract are extinguish, the contracts is said to
be discharged. A contract may be discharged either by the acts of the
parties of the operation of law. Act of parties may take different forms like
performance, agreement, breach, etc. While operation of law includes
death, insolvency, etc.

A contract may be discharged:


1. Discharge by Performance: Performance is the natural modes of discharge.
When the parties to a contract perform their shares of the promises, the contract
is discharged. If only one of the several parties performs the promise, he alone is
discharged. Performance of contract is the most usual mode of its discharge.
Performance may be,
a.Actual performance
b.Offer of performance or tender
2. Discharge by Agreement or consent: A contract can also be discharged by
the fresh agreement between the same parties. A contract may be terminated by
agreement in any of the following ways:
a. Novation- Novation of contract means replacement of an existing contract by
another contract. In novation the parties may change. If the parties are a not
changed then the material terms of the contract must be altered the new contract
because a mere variation of some of the terms of a contract is not novation but
alteration.
b. Alteration- Alteration of a contract takes place when one or more of the terms
of the contract are changed. If a material alteration in a written contract is made
with the consent of all the parties the original contract is discharged by alteration
and a new contract takes its place. An alteration may be a change in the amount
of money, the rate of interest, or the names of the parties. In such cases, the old
contract may be discharged.
c. Remission- Remission means the acceptance of lesser sum than what was
due from promise made. According to the section 63, a person who has a right to
demand the performance of a contract may:
i.Remit or give up the whole or part of a debt
ii.Extend the time for performance

3. Discharge by Subsequent Impossibility:

Initial Impossibility: According to section 56, “An agreement to do impossible


act is void ab-initio. “ It means agreement which is obliviously impossible cannot
be binding, e.g. an agreement to discover treasure by magic is void agreement.
Subsequent Impossibility: Sometimes, a contract capable of being performed
after formation becomes impossible or unlawful and as a result void.
4. Discharge by laps of time- A contract is discharged by lapse of time. The
Limitation Act, 1908 laws down that a contract should be performed within a
specified period. If the contract is not performed and no legal action is taken by
the promise within the period of limitation, he is deprived of his remedy at law;
the contract is termination in such a case.
5. Discharge by Operation of Law- A contract terminates by operation of law in
the following cases:
a. Insolvency: The insolvency Act for discharge of contract under particular
circumstances. Where the court declares a person as insolvent, the rights and
duties of such a person are transferred to the officer of court, known as Official
Receiver, after the order of the court such person is discharged from his liabilities
incurred before his insolvency.
b. Merger: Merger takes place when an inferior right available to a party merges
into a superior right available to the same party under some other contract. As a
result of the merger the former contract stands discharged automatically.
6. Discharge by Breach of Contract- A contract must be performed according
to its terms. But where the Promisor fails to perform the contract according to the
terms of the contract, there is breach of contract by him. Breach of contract may
be of two kinds:
a. Actual Breach: It occurs when a party fails to perform a contract, when
performance is due. But, if a party who has failed to perform the contract at the
appointed time, subsequently expresses his willingness to perform, he can do so
after paying compensation, if time is not the essence of the contract.
b. Anticipatory Breach: It occurs when a party to an executor contract declares
his intention of not performing the contract before the performance is due. He
may do so-
i.By expressly renouncing his obligation under the contract
ii.By doing some act so that the performance of his promise becomes
impossible.
Q8. Explain the following with the help of decided cases.
(a) General and Special Damages
(b) Liquidated damages and Penalty
(c) Misrepresentation and Fraud
(d) Doctrine of Quantum Meruit
Ans. (a) General and Special Damages
General damages monetary recovery (money won) in a lawsuit for injuries
suffered (such as pain, suffering, inability to perform certain functions) or breach
of contract for which there is no exact dollar value which can be calculated.
Decided Case of General Damage:-
In the case of Hadley v. Baxendale, the crankshaft of a mill broke and it was
necessary for it to be sent to the manufacturers as a pattern for the new one. The
mill owners engaged carriers for this purpose, but the carriers delayed delivery,
and the mill owners were unable to use the mill for longer than if there had been
no delay. Consequently, the loss of profits suffered by the millers was greater
than if no delay had occurred. The millers sued the carriers for such loss of
profits. The courts held that since the only information given by the millers was
that the article to be carried was the broken shaft of a mill, and it was not made
known to them that the delay would result in loss of profits, they were not liable
for the loss of profits.
Special damages are damages like car dents or medical expenses that can
actually be ascertained, and they are contrasted with general damages, which
refer to damages for things like intentional infliction of emotional distress which
do not have a set monetary cost.
Decided Case of Special Damage:-
In the case of Victoria Laundry Ltd v. Newman Industries Limited, the launders
and dyers required a boiler for the purpose of expanding their business. V
entered into an agreement with N where N was to supply the Bolier on June 5th.
Due to the fault of N, the Bolier was not delivered till November 8th.
Consequently, V could not service his new customers and had a loss of lucrative
profits worth 278 Pounds. V claimed this loss from N. N contended that he did
not know about V’s lucrative business contacts. The court held that V could
recover the loss of ordinary laundry profits but not the loss resulting from some
lucrative contacts with specific customers because N was not aware of these
contacts and such a loss was not in contemplation of both the parties when the
contract was made.
Liquidated Damages and Penalty
'Liquidated Damages' means that it shall be taken as the sum which the parties
have by the contract assessed as damages to be paid whatever may be the
actual damage. The parties to the contract may agree at the time of contracting
that, in the event of a breach, the party in default shall pay a stipulated sum of
money to the other, or may agree that in the event of breach by one party any
amount paid by him to the other shall be forfeited. It is a genuine pre-estimate of
damages likely to flow from the breach. However, this liquidated damage shall be
distinguished from the term penalty which is an amount intended to secure
performance of the contract.
Decided case in Liquidated Damages

Case of Oil & Natural Gas Corporation Limited v. SAW Pipes Limited Civil
Appeal of 2001 in the course of the hearing on 15th December instant and which
is directly on the issue and is in favour of the appellant. In the said decision the
Hon'ble Supreme Court has referred to the observation in another case of
Raman Iron Foundry wherein the above said interpretation cited by the D.R. has
been produced. However, their Lordships have observed that in the case of
Kamaluddin Ansari & Co. v. Union of India and Ors. The three Judge Bench of
The Supreme Court has overruled the decision in Raman Iron Foundry's case
and have further observed that the Court while interpreting the similar term of the
contract have observed that it gives wider power to the Union of India to recover
the amount claimed by appropriating any sum then due... Hon'ble Supreme Court
has observed that 'If the terms (of contract with customer) are clear and
unambiguous stipulating the liquidated damages in case of breach of the contract
unless it is held that such estimate of damages/compensation is unreasonable or
is by way of penalty, party who has committed the breach is required to pay such
compensation and that is what is provided in Section 73 of the Contract Act.
Thereafter the Hon'ble Supreme Court has laid down the criteria adopted in
allowing the appeal for recovery of liquidated damages.

Decided case in Penalty

Sivagaminatha Moopanar & Sons vs Income-Tax Officer:- The petitioner is a


yarn dealer. Part of his business consists of exports to Ceylon. For the
assessment year 1944-45 he submitted a return to the Income-tax authorities
claiming a loss of Rs. 23,891. In regard to the next year, 1945-46, his return
disclosed a net profit of Rs. 25,152. The returns in respect of both the years were
taken up for consideration together by the then Income-tax Officer, Madurai, Sri
Rathnaswami, who came to the conclusion that the returns of the petitioner
should not be accepted and that he had deliberately furnished false particulars
regarding his income and after making some additions computed his total income
for the year 1944-45 as resulting in a profit of Rs. 3,914. The tax payable on this
income was Rs. 183-15-0 for which a demand notice was issued. For the year
1945-46 the Income-tax Officer determined the net assessable income at Rs.
1,28,376. The tax computed on the basis of this figure came to Rs. 67,951-4-0
for which a demand notice was issued under section 29 of the Act. The
assessments were completed and these assessment orders were passed on
31st March, 1947. On the previous day, that is on 30th March, 1947, he issued a
notice to the petitioner to show cause why a penalty should not be levied for the
deliberate concealment of his income and for furnishing false particulars of such
income under section 28(1) (c). The assessee took the assessment order in
appeal to the Appellate Assistant Commissioner and when that was dismissed, to
the Income-tax Appellate Tribunal. This appeal was dismissed on 10th
December, 1949. We shall complete the narration of the assessment
proceedings for the years 1946-47 and 1947-48 before referring to the penalty
proceedings in regard to which notice had been issued relating to the years 1944
to 1946. For the year 1946-47 the assessees return disclosed a net income of
Rs. 18,668 while for 1947-48 the assessee returned an income of Rs. 16,623.
The assessments in respect of these two years were taken up at the same time
by Sri Ram, Income-tax Officer, Madurai, who had succeeded Sri Rathnaswami.
This was completed by an order dated 22nd December, 1949. The Income-tax
Officer found that there had been suppression of income and adding back the
items not disclosed in the accounts, the income for 1946-47 was computed in the
figure of Rs. 52,270 and that for the succeeding year 1947-48 at Rs. 43,205 and
tax on the above basis was demanded. The petitioner did not file any appeal
against the assessment orders relating to these two years but applied to the
Commissioner in revision. These revisions were disposed of by an order dated
22nd November, 1950. The result of this order was that in respect of the year
1946-47 the assessee got some relief by the cancellation of an addition of Rs.
7,444 to his income, while the revision in respect of this assessment for 1947-48
was completely dismissed.

We have already referred to the fact that in respect of the years 1944-45 and
1945-46 Sri Rathnaswami, the Income-tax Officer who passed the assessment
order on 31st March, 1947, had issued a notice under section 28(1) (c) on 30th
March, 1947, calling upon the assessee to show cause why penalty should not
be levied. The assessee replied on 16th April, 1947, denying the charge
generally and requesting that he might be furnished with particulars of the
concealment etc. with which he was charged. This letter however was not
attended to immediately. Meanwhile the assessments for 1946-47 and 1947-48,
as has been said already, were completed by the Income-tax Officer by an order
dated 22nd December, 1949. Four days before this date, i.e., on 18th December,
1949, the Income-tax Officer, Sri K. Ram, who completed the assessments
issued notices to the assessee to show cause why penalty should not be levied
in respect of the returns regarding these two years. The assessee replied on
22nd December, 1949, denying the charges as usual and asking for details. On
24th December, 1949, the Income-tax Officer replied stating that the assessment
order itself was self-explanatory and calling for a reply from the assessee by 1st
January, 1950, and this was received on 2nd January, 1950. Meanwhile in
respect of the notice issued on 30th March, 1947, in respect of the years 1944-45
and 1945-46 a further communication was sent to the assessee on 6th
November, 1951, requiring him to send a detailed reply which was received by
the officer and 22nd November, 1951. The penalty proceedings in respect of the
four years were then dealt with together and Sri Sowrirajan, who was then the
Income-tax Officer, passed an order on 14th February, 1953, whereby he levied a
penalty of Rs. 200 for 1944-45, Rs. 60,000 for 1945-46, Rs. 13,000 for 1946-47
and Rs. 12,000 for 1947-48 the variations being due to the difference in the
amounts of the tax said to have been evaded by submitting false returns. It is the
validity of these levies of penalties in respect of these four years that is
challenged as illegal and ultra vires in these four writ petitions. We might premise
by saying that it is not alleged that the quantum of the penalty imposed is in
excess of that prescribed by section 28.

Ans.(c) Misinterpretation & Fraud

Misinterpretation:- A misrepresentation is a false statement of a material fact


made by one party which affects the other party's decision in agreeing to a
contract. If the misrepresentation is discovered, the contract can be declared void
and, depending on the situation, the adversely impacted party may seek
damages. In this type of contract dispute, the party that is accused of making the
misrepresentation is the defendant, and the party making the claim is the plaintiff.

Decided case in Misinterpretation

Royscot Trust Ltd v Rogerson:-The case a British Contract Law case, in this,
The C finance company was falsely made to enter into a hire-purchase
transaction with Mr. Rogerson as a result of a misrepresentation by the D car
dealers. Ds falsely stated that the car price was 8,000 when the cost of it was
7,600 but the customer paid 1,600 deposit instead of 1,200 which was the rightful
amount. Later it was discovered that D was not dishonest. So, the Cs had the
power to gain back their real deprivation as a result of misrepresentation,
whether or not that loss could be predicted by a reasonable individual.

The case Based on Misrepresentation. In the case, The C finance company was
induced to enter into a hire-purchase transaction with Mr. Rogerson as a result of
a misrepresentation by the D car dealers. Ds falsely stated that the car price was
8,000 when it was 7,600 and the customer paid a 1,600 deposit instead of 1,200
(20% of the car price).

Fraud:- Fraud is an intentionally deceptive action designed to provide the


perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud
include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy
fraud. Fraudulent activity can be carried out by one individual, multiple individuals
or a business firm as a whole.

Decided cases of Fraud

Metrocall of Delaware v. Continental Cellular

Fraud litigation settled. One party subsequently alleged that there were certain
facts that were not disclosed as part of the settlement, i.e., negotiations by other
party to sell an interest in the business. Concealment of fact that is material to
transaction, knowing that other party is acting on assumption that no such fact
exists, is as much fraud as if existence of such facts were expressly denied.
Critical element of fraud is justifiable reliance. In this case, record clearly showed
that there was no justifiable reliance. When negotiating or attempting to negotiate
a compromise in an existing controversy over fraud, dishonesty and self dealing,
it is unreasonable to rely on the representations of the alleged dishonest party.

(d) Doctrine of Quantum of Meruit

Quantum meruit is a legal action based on equitable compensation. It is an


alternate remedy to an action on a contract which can be brought for partial
performance. A claim in quantum meruit can at best be described as residual
equity. Procedurally, quantum meruit is the name of a legal action brought to
recover compensation for work done and labour performed "where no price has
been agreed. The term literally means "as much as is deserved and often can be
seen as the legal form of equitable compensation or restitution. In a claim of
quantum meruit, the plaintiff does not seek a precise sum of money, nor a sum
representing the general damages incurred by the plaintiff as a consequence of
some unjust act on the part of the defendant, but a sum which will provide the
plaintiff, the value of what the plaintiff has done for the defendant, usually
calculated in terms of the market price or value of those services.

Decided Case under Doctrine of Quantum of Meruit

The Supreme Court of India in the case of Mahanagar Telephone Nigam Limited
v. Tata Communications differentiated between the claims in quantum meruit and
the damages in breach of contract. The question before the Hon'ble Court was
whether, when parties are governed by contract, a claim in quantum meruit under
Section 70 of the Indian Contract Act, 1872, would be permissible. While
deciding the aforesaid question, the Hon'ble Court referred to a number of
judgments:

First, it referred to the split verdict of two judges in the case of Moselle Solomon
v. Martin & Co. where Lord William. J held that the remedy provided by Section
70 is not dependent upon the law relating to the liabilities of principal and agent.
It is an independent remedy, which is based upon a different cause of action,
namely, upon whether a person has lawfully done anything for another or has
delivered anything to him not intending to do so gratuitously, and such other
person has enjoyed the benefit thereof. If so, he must either make compensation
in respect of, or restore the thing so done or delivered. On the contrary Jack. J
held that where there is an express contract, Section 70 has no application, as
shown by the heading of Chapter V of the Act, in which the section finds a place.

Q9. Write short notes on following:-

(a) Doctrine of Frustration of Contract


(b) Agreement by the way of Wager
(c) Temporary Injunction

Ans. Doctrine of Frustration of Contract:- The doctrine of frustration is a


“doctrine” of a special case of the discharge of contract by an impossibility to
perform it. The Indian Contract Act, 1872 (“Contract Act) does not define the term
frustration. The Black’s Law Dictionary defines frustration in relation to contracts
as “the doctrine that if a party’s principal purpose is substantially frustrated by
unanticipated changed circumstances, that party’s duties are discharged and the
contract is considered terminated,” also termed as the frustration of purpose.In
India, courts nuanced: “The expression ‘frustration of the contract’ is an elliptical
expression. The fuller and more accurate expression is ‘frustration of the
adventure or of the commercial or practical purpose of contract’. This doctrine is
a device to reconcile the rule of absolute contracts with a special exception which
is demanded in certain circumstances in the name of justice. The origin of the
doctrine can be traced back to the Queen’s Bench judgment in the case of Taylor
v Caldwell in 1863 in England. Prior to this judgment, in both Roman Law and
Common Law, the law regarding contractual obligation was extremely rigid.
Supervening unforeseen events, owing to which the performance has become
impossible or more onerous, were not regarded as an excuse for
non-performance. With the evolution of the doctrine, “loss of object”, “radical
change in the obligation”, “implied condition” and the need to find a “just and
reasonable” solution have become established justifications, as explained below,
for excusing the performance of a contract. The doctrine of frustration applies
where unforeseen events occur which render performance of a contract
impossible or only possible in a radically different way from that originally
contemplated. The doctrine of frustration basically talks about the impossibility
of performance of the contract. It means a contract cannot be executed
because of an incident beyond the control of parties. The performance of such a
contract becomes frustrated i.e. it becomes complicated, impossible or even
illegal.

The effect of the doctrine of Frustration:-

The contract is frustrated automatically– The general rule is that the


occurrence of the frustrating event puts an end to the contract automatically. The
parties are not required to rescind the contract as the obligations of the parties
get terminated immediately after the contract is frustrated.

Further obligations are discharged- Both the parties are discharged from any
obligations after the contract is said to be frustrated.

Accrued obligations- The legal rights or obligations already accrued before the
frustrating event occurred are left undisturbed.

(b) Agreement by the way of Wager:-Literally the word ‘wager’ means ‘a bet’
something stated to be lost or won on the result of a doubtful issue, and,
therefore, wagering agreements are nothing but ordinary betting agreements.
Agreements by way of wager are void under the Section 20 of Indian Contract
Act, 1872. Agreements by way of wager are not enforceable by law, and hence
are considered illegal, However The Indian Contract Act,1872 does not define
wager or agreements by way of wager it simply states that agreements by the
way of wager are void, and no party can take an action to file a suit for recovery
of the waging amount in any form of court, Wagering agreements have
characteristics of contingent contract, but cannot be enforced by law under
Section 30. According to Supreme Court Agreements by the way of wager are
void and hence illegal, but not forbidden by the law. Agreements by way of wager
are void; and no suit shall be brought for recovering anything alleged to be won
on any wager, or entrusted to a person to abide by the result of any game or
other uncertain event on which any wager is made. Exception in favor of certain
prizes for horse-racing : This section shall not be deemed to render unlawful a
subscription or contribution, or agreement to subscribe or contribute, made or
entered into for or toward any plate, prize or sum of money, of the value or
amount of five hundred rupees or upwards, to be rewarded to the winner or
winners of any horse-race.

Effects of Wagering Agreement:- A wagering agreement is void ab initio, and


S. 65 has no application to it.[x] Money paid directly by a third party to a winner of
a bet cannot be recovered from the loser.[xi] Even if a loser makes a new
promise to pay for his losses in consideration of his not being posted, the
promise cannot be enforced; but if he gives a cheque in discharge of his liability,
the cheque may not be tainted with illegality because of the winner’s promise not
to have the name posted. The cheques will not be enforceable by the original
payee, but may be enforced by a third party holder of the cheque, even if he
knew of the facts leading up to giving of the cheque. Though a wager is void and
unenforceable it is not forbidden by law .Hence a wagering agreement is not
unlawful under section 23 of the Contract Act and therefore the transactions
collateral to the main transaction are enforceable.

(c) Temporary Injunction:- An Injunction is a judicial process whereby a party is


required to do, or refrain from doing, any act. It is the remedy in the form of an
order of the court addressed to a person that either prohibits him from doing or
continues to do such an act. Thus, Injunction is a relief that (prevents or restricts
from doing an act) or (may include the order from doing any act for the purpose
of prevention). A temporary or interim injunction restrains a party temporarily
from doing the specified act and can be granted only until the disposal of the suit
or until the further order of the court. It is regulated under the provisions of Order
-XXXIX of CPC and may be granted at any stage of the suit.

Grounds of Temporary Injunction:-


O39 R1 provides that Temporary Injunction may be granted by court:
1. Property in dispute is in danger of being WASTED, DAMAGED or
ALIENATED by any party to the suit, or WRONGFULLY SOLD IN
EXECUTION OF DECREE.
2. Where defendant: THREATENS or INTENDS TO REMOVE or DISPOSE
OF HIS PROPERTY with a view to defraud creditors.
3. Where defendant: THREATENS TO DISPOSSESS the plaintiff or
otherwise CAUSE INJURY to the plaintiff in RELATION TO THE
PROPERTY IN DISPUTE
4. Defendant is about to COMMIT BREACH OF PEACE OR CONTRACT OR
OTHERWISE (Order 39 Rule 2).
5. Where the court is of opinion that INTEREST OF JUSTICE, so required.

Q10. Discuss the Facts, Arguments, Decisions and Principles of Law laid
down in any of the following cases.
(a) Bhagwan Das v/s Girdharilal, AIR 1966 SC 543
(b) Lalman Shukla v/s Gauri Dutt (1913) 11
Ans. Bhagwan Das v/s Girdharilal, AIR 1966 SC 543
Facts:- The facts of the case are as follows:
1. In the immediate case, the plaintiffs made an oral offer on phone from
Ahmedabad for the purchase of cotton seed cake from the defendants.
2. The defendants accepted this offer on phone Khamgaon. The defendants
later having failed to supply the requisite cotton seed cake were sued by
the plaintiffs.
3. In order to get compensation for the monetary loss of the plaintiff, they
(plaintiff) demanded compensation amounting to Rs.31,150 for the breach
of contract. The suit was filed at Ahmedabad.
4. The defendants contended that the Ahmedabad Court had no jurisdiction
as the contract was completed by the acceptance of offer on a telephone,
at Khamgaon. On the other hand, the plaintiffs contended that the contract
was struck when the acceptance was communicated to him (when he
heard the acceptance through telephone) at Ahmedabad and, therefore,
the suit was within the jurisdiction of the Ahmedabad Court.
5. The Supreme Court, after considering the facts and evidence of the case
held that the contract was made at Ahmedabad where the acceptance was
communicated and the part of action for an action for the breach of
contract in this case had arisen within the jurisdiction of the Ahmedabad
Court.

Arguments on behalf of the Plaintiff (Bhagwan Das):-

● In the case of a contract by telephone, only the court within whose


territorial jurisdiction the acceptance of offer is spoken into telephone
has jurisdiction to try any suit regarding the contract.
● Sections 3 and 4 of the Indian Contract Act (1872) are applicable in
determining the place where a contract is made and not the decisions of
UK courts.

Arguments on behalf of the Respondents (Girdhari Lal):-

● The making of an offer is a part of cause of action in a suit for damages


for breach of contract. Hence, the court in whose territorial jurisdiction
such an offer was made can try such a suit.
● The contract is formed where the acceptance of offer is intimated to the
offeree. Hence, the court in whose territorial jurisdiction such
acceptance of the offer was intimated can try such a suit.
Decision:- On the issue of jurisdiction, the Trial Court took cognizance of
the fact that the plaintiffs had made an offer from Ahmedabad by long
distance telephone to the defendants to purchase the goods and that the
defendants had accepted the offer at Khamgaon, that the goods were
under the contract to be delivered at Khamgaon and that payment was
also to be made at Khamgaon. The court was of the view of the contract to
be performed at Khamgaon, and because of the offer made from
Ahmedabad to purchase goods the Ahmedabad Court could not be
invested with jurisdiction to entertain the suit. However, the Trial Court held
that when a contract is made by conversation on telephone, the place
where acceptance of offer is intimated to the offeror, is the place where the
contract is made, and therefore the Civil Court at Ahmedabad had
jurisdiction to try the suit. Upon examining the nature of the contract
entered into by phone, the Supreme Court observed, that in case of a
telephonic conversation, in a sense that parties are in the presence of
each other, each party is able to hear and perceive the voice of the other
party. There is an instantaneous communication of speech intimating offer
and acceptance, rejection or counter-offer. Intervention of an electrical
impulse which results in the instantaneous communication of messages
from a distance does not alter the nature of the material of conversation so
as to make it analogous to that of an offer and acceptance through post or
by telegraph. Post office acts as an agent between the offeror and the
offeree but in case of telephonic phone call, the intervention ends when the
two parties are connected telephonically and can hear each other
instantaneously.

Principle of Law:- Court ruled that when parties are not in each other's
presence and when they communicate in long distance by post or
telegram, both parties get bound by contract as and when the acceptor
puts the letter of acceptance in the course of transmission to offeror so as
to be out of his power to recall.

(b) Lalman Shukla v/s Gauri Dutt (1913)


FACTS:-
In this case, the defendant Gauri Dutt’s Nephew had absconded and was
nowhere to be found. After the defendant became aware of the same, Dutt
had sent all the servants in search of the missing nephew. The plaintiff
Lalman Shukla was one of the servants who had gone out in search of the
nephew. The plaintiff eventually found him and brought him back.

When Lalman Shukla had left the house to leave for Haridwar from
Kanpur he was handed some money for his railway fare and other
expenses. As soon as Lalman Shukla had left the house, the defendant
announced a reward of Rs. 501 for whosoever found Dutt’s nephew.
Shukla had no idea that such an announcement was made. The plaintiff
found the missing nephew and brought him back to his home in Kanpur.
Six months after the said incident occurred, Dutt sacked the plaintiff.

After being removed from the job, the plaintiff claimed the money from the
defendant and the latter denied to pay the said remuneration. As a result
the plaintiff Lalman Shukla filed a case against Gauri Dutt, his master, for
not rewarding him as he was entitled to.

Arguments On Behalf Of The Plaintiff (Lalman Shukla)

● The plaintiff Lalman Shukla strongly affirmed that the very performance of
him finding the missing boy was sufficient enough for him to be entitled to
the reward. According to Gauri Dutt’s condition whoever found the lost boy
and brought him back would get the reward. Therefore, as per the
condition of the defendant, the plaintiff had traced the boy and brought him
back.
● He stated that it is not important to have prior knowledge about the reward,
especially under this circumstance. He also emphasized the fact that
section 8 of the ICA 1872, states that ‘the performance of the act or the
acceptance of any consideration of a proposal is an acceptance of the
proposal’.
● He stated that it is not important to have prior knowledge about the reward,
especially under this circumstance. He also emphasized the fact that
section 8 of the ICA 1872, states that ‘the performance of the act or the
acceptance of any consideration of a proposal is an acceptance of the
proposal’.
● And in this present case, the condition as stated by the defendant Gauri
Dutt was to find the missing child to be rewarded Rs 501.
● And in this present case, the condition as stated by the defendant Gauri
Dutt was to find the missing child to be rewarded Rs 501.
● He stated that it was immaterial that the person who has performed the act
must have the knowledge of the condition to claim the reward.

Arguments On Behalf Of The Respondent

● The defendant asserted and strongly argued that the plaintiff Lalman
Shukla was not aware of the offer and had no knowledge about it before
finding the defendant’s nephew.
● So an offer without the knowledge of the offeree or the promise cannot be
accepted and also there was no such possibility for the plaintiff to accept
the offer without even knowing about it.
● Gauri Dutt argued that according to section 2(a) of the Indian 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, he is said to make a proposal”.

Further under section 2(b),

“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”

● Therefore, the defendant contended that assent was essential to


create a contract between both parties. This means that before
accepting the offer the offeree must have complete knowledge about
the facts to give assent or approval. But in this particular case, the
plaintiff was completely unaware of the reward which was associated
with it and the plaintiff was merely doing his duty.
● Therefore, according to section 2(h) of the ICA, since there was no
acceptance there was no agreement that can be enforceable by law.
● So according to the defendant Gauri Dutt, Lalman Shukla was not
entitled to get the reward and hence he couldn’t claim it.

DECISION:- In the said case, the petitioners’ appeal against the


respondent Gauri Dutt was dismissed by the court. After analyzing
all the facts of the case, the honourable high court held that for
creating or entering into a valid contract there has to be knowledge
and assent to the offeree made by the proposer. Here, the plaintiff
did not know the reward before performing his act. He only came to
know about it later, in which case there was no possibility of
accepting the offer. Hence, there was no contract. Therefore, Lalman
Shukla was not entitled to get or claim the reward. The judge
reiterated that the plaintiff was fulfilling his obligations as a servant of
tracing the missing boy which was a part of his duty. Therefore, the
plaintiff’s suit against the defendant was completely dismissed by the
court.

Principles of Law:-

Section 2(a) of the Indian contract act,1872 which tells about


proposal which means:

when one person when he or she convey or signify his or her


willingness to do something or not to do something with the view of
obtaining the approval of others to such act or abstinence is said to
make a proposal.

Section 2(b) of the contract act, which defines promise as:

when the person to whom the proposal is made he or she accepts


the proposal by signifying his or her consent to it said to have
accepted the proposal and when the proposal when accepted
becomes a promise.

Section 2(h) of the contract act 1872, which defines a contract


as an agreement which is enforceable by law is a contract.
Section 10 of the Indian contract act 1872, specifically defines what
agreements are contracts
all agreements are contracts if it has to satisfy basic criteria or conditions
such as:
It has to be made by the free consent of both the parties and the party who
is giving the consent must be free from coercion(section15), undue
influence (section16), fraud (section 17), misrepresentation( section 18
The parties must be competent to contract
The consideration or the object of agreement should be lawful (section 23)
And it should not be declared to be void.

Section 4 of the contract act which defines communication when


complete. It says that the communication of a proposal is only complete
when it comes to the knowledge of the person to whom it is made.
● A contract is an agreement
● An agreement is a promise
● A promise is an accepted proposal.

● Whether the contract was void or not under The Indias Contract act
of 1872 Section 2 Section 10 and most important Section 11;
● Whether the respondent was liable to pay back the loan to the
Defendant;
● Whether the contract of mortgage was avoidable or not.

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