SECTION A

1.Cross offers are offers that the parties make to each other, in ignorance of each others offers. Cross
offers are identical. In the case of cross offers, the court cannot construe one offer as the offer and the
other as acceptance and as such there is no contract.

A counter offer, on the other hand is a rejection of the original offer. It is a new offer that needs
acceptance by the original promisor before a contract is made.

For e.g., If X offers Y, agreeing to sell his car and writes a letter to Y offering him to sell the car and Y
also, at the same time, sends a letter to X, offering to buy his car, there is said to be a cross offer as X
and Y are ignorant of each others offer before they make their own offers.

However, if X asks Y,Will you buy my car for $8,000? and Y says, No, but for $5,000 there is said to
be counter offer.

2. The general rule of law is "no consideration, no contract", i.e., in the absence of consideration there
will be no contract. However, the law recognizes the following exceptions to the rule of consideration.
The exceptions have been given in Sec. 25 of the Indian Contract Act. In these cases, agreements are
enforceable even if these have been made without consideration.

1. A promise made out of material love and affection. [Sec. 25]:

An agreement expressed in writing and registered under the law for the time being in force for the
registration of documents and is made on account of natural love and affection, between parties
standing in a near relation to each other, is enforceable without consideration.

Example:

A agreed to pay Rs. 5000 to his younger brother out of natural love. This promise is in writing and
registered. If A refuses to pay Rs. 5,000 to his younger brother, the latter can enforce the promise in the
Court and A cannot refuse payment on the ground of absence of consideration. It should be noted that
all the four conditions must be satisfied only then it will be valid without consideration, otherwise not.

It should be noted that nearness of relation does not necessarily mean that the agreement has been made
out of natural love.

2. A promise made to compensate for voluntary services [Sec. 25]:

A promise to compensate, wholly or in part, a person who has voluntarily done something for the
promisor, or something which the promisor was legally compellable to do, is enforceable without
consideration.

This rule, in fact, recognizes past consideration which was given without request or desire of the
promisor.
Example:

A found B's purse and gave it to him. B promised to pay a reward of Rs. 50 to A. Later on, B cannot
refuse payment on the ground that there was no consideration.

3. Written promise to pay a time-barred debt [Sec. 25(3)]:

A promise made in writing to pay a debt barred by the Law of Limitation is enforceable even without
consideration.

Example:

A owes B Rs. 1,000 but the debt is barred by the Limitation Act. A signs a written promise to pay B the
sum of Rs. 1,000. This is a valid contract.

4. Gift, etc. actually made:

Explanation I to Section. 25 provides that any gift actually made is valid.

Example

A gave a watch as a gift to B on his birthday. Later on, A cannot demand his watch (gift) back on the
ground that there was no consideration (as A did not get anything in return for the watch).

5. To create agency:

Under Sec. 185, no consideration is necessary to create an agency. Actually speaking, consideration is
there even in an agency in the sense that the principal has agreed to be bound by the acts of the agent.
Thus he undertakes the responsibility of the agent. We have seen earlier in Currie v. Misa's case that
suffering responsibility is a good consideration.

3. Coercion is the act of threatening a person, to compel him to enter into the contract. Undue
Influence is an act of controlling the will of the other party, due to his dominant position.
4 In case of Quasi Contract, there will be no offer and no
acceptance either on express base or on implied base. But under
certain circumstances Court creates contract between the parties
artificially and thus binds over the parties. Such contracts which are
created by virtue of law are called Quasi Contracts. Section 68 to 72
of Contract Act read about the situations where court can create
Quasi Contract.

Section 68 - when necessaries are supplied: When one party supplies

necessaries to the other (without request), a quasi contract comes
into force.
A case on this point is Chaval Vs Cooper.
Section 69 - When expenses of one person are paid by the other:
When expenses which are to be paid one party are paid by another
party, the parties are said to be under quasi contract.

A case on this point is Hazarilal Vs Navaranglal. In this case B

purchases A`s agricultural land. On that land cess is in arrears for a
longer period which are actually to be cleared by A, But B pays that
amount. Here Court creates a quasi contract between them under

Section 69 and thus capacitates B to recover that amount from A.

Section 70 - When one party is benefited by the activity of another

party: When one party Conducts an activity and its benefit is attained
by another party, then also Court can create a quasi Contract.

A Case on this point is DamodarModaliar Vs Secretary of State for

India. In this case A is resident of a Village. The local government
conducts repairs to the tank situated at A`s village. As a result A gets
benefited because the surrounding lands belong to A. Here Court
creates a Quasi Contract and decides that A has to bear cost of
repairs.

Section 71 - In case of finder of lost goods: Court can create a quasi

contract in case of finder of lost goods.

Related case is Hallius Vs Fowler. In this case B finds a diamond at

A`s shop and hands it over to A, requesting A to send the diamond to
true owner. True owner is not found. When true owner is not found.
Finder gets the title. No one can claim share in it. Here court creates
a bailment contract between B and A and thus capacitates B to get
diamond back.
Section 72 - When payment is made by mistake: When ever payment
is made by mistake or goods are delivered by mistake , Court can
create a quasi Contract.

A case on this point is Khaniyalal Vs Sales Tax Officer of the

Banaras. In this case Mr. A pays Sales tax by mistake though he is
need to pay. Here Court creates a quasi Contract and capacitates A to
recover that amount.

5. Novation is a legal concept that, at its core, aims to achieve a

process of substitution. It is a transaction by which, with the consent
of all the parties concerned, a new contract is substituted for one that
already exists.

The effect of a novation is to discharge the original contract between

two parties (the continuing party and the outgoing party) and
substitute it with a new contract between the continuing party and a
new party (the incoming party). The incoming party must perform
the contractual obligations (under the new contract) that were
formerly owed by the outgoing party under the original contract.

For example, it is common under a D&C arrangement for the

principal to engage a consultant to carry out design works prior to
the principal engaging a head contractor to carry out the construction
works. At some point during the project (for example when the
design has reached a particular stage) the principal may novate the
appointments of its design consultants to the head contractor.
Novation fundamentally changes the risk allocation in the project, as
the head contractor generally then assumes responsibility for the
entire design (including the prior design work).
7.