Indian Contract Act - 1872

About Indian Contract Act 1872 (ICA)

It tells the way we enter into a contract, execute a contract, implement provisions of a contract and effects of breach of a contract. A person is free to contract on any terms he chooses. The rights and duties of parties and terms of agreement are decided by the contracting parties Only. The court of law acts to enforce agreement, in case of non-performance. It provides a framework of rules and regulations which govern formation and performance of contract that extends to the whole of India except the State of Jammu and Kashmir

What is contract?
An agreement enforceable by law is a contract. sec- 2(h) Thus for the formation of a contract there must be;

An agreement
The agreement should be enforceable by law

What is an agreement?
Every promise and every set of promises, forming the consideration for each other, is an agreement. [section 2(e)]. A person makes a proposal (offer). When it is accepted by other, it becomes a promise For example, A agrees to pay Rs 100 to B and B agrees to give him a book which is priced at Rs 100 is an agreement if A invites B to dinner and B agrees to come, it is not an agreement as defined in Contract Act

Meaning of Proposal
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. [section 2(a)] Thus, a proposal can be to do a positive act or abstinence from act

Meaning of Promise
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. [section 2(b)]. The person making the proposal is called the promisor, and the person accepting the proposal is called the promisee. [section 2(c)].

Meaning of Consideration
When, at the desire of the promisor, the 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, such act or abstinence or promise is called a consideration for the promise. [section 2(d)]. Consideration is something in return

promise without consideration is not agreement and hence naturally, it is not a contract.

Essentials of a Valid Contract

Proposal and its acceptance Lawful consideration with lawful object Parties should be competent to contract Free consent of both parties Agreement should not have been declared as void under Contract Act or any other law Writing and registration if required by law Legal relationship

Certainty
Possibility of performance Enforceable by law

Examples Proposal and Acceptance

An acceptance with a variation is no acceptance; it is simply a counter proposal. A agrees to sell his house to B for 10,000 rupees. But B agrees to buy the house for Rs 9,000 only. The acceptance of Bs counter proposal by A will make a valid contract.

Lawful consideration with lawful object

A, B and C enter into an agreement for the division among them of gains acquired, or- to be acquired, by them by fraud. The agreement is void, as its object is unlawful. A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful.

Competent to Contracts
Every person is competent to contract who is of the age of majority according to the law to which he is subject.

who is of sound mind/ occasionally or unsound mind E.g. A sane man, who is so drunk that he cannot understand the terms of a contract or from a rational judgment as to its effect on his interests, cannot contract whilst such drunkenness lasts
Who is at the time when he makes the contract, he is capable of understanding it and of forming a rational judgment and its effect upon his interests. Disqualified by law alien enemy, convict during the period of his punishment, insolvent during his period of insovancy

Free consent of both parties

Consent defined Two or more persons are said to consent when they agree 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 or mistake.

Agreement must not be expressly declared as void

Agreement in restraint of marriage void.
- Every agreement in restraint of the marriage of any person,

other than a minor, is void.

Agreement in restraint of trade void. - Every agreement by which anyone is restrained from
exercising a lawful profession, trade or business of any kind, is to that extent void.

Agreements in restraint of legal proceedings void.

- Every agreement in which any party is restricted absolutely

from enforcing his rights under any contract, by the usual legal proceedings.

Writing and registration if required by law

Oral contract is a valid contract. But wherever required by law, the contract must be in writing and registered. E.G. Gift, Mortgage, Sale, Lease, Memorandum and Articles of Association, documents specified under Indian registration Act, 1908 etc. Situation A) - X promises, for no consideration, to give to Y Rs. 1,000.This is a void agreement Situation B) - X for natural love and affection, promises to give his son, Y, Rs. 1,000. X puts his promise to Y into writing and registers it. This is a contract.

Legal relationship
Agreements that create legal relations or are capable of creating legal relations are contracts E.g. Agreements to buy/sell, to marry etc. are contracts Existence of a legal relationship is determined by their intentions of parties. E.g. Agreement between two parties having a clause that the agreement is not subject to any legal jurisdiction is not creating a legal relations Agreements of a social or domestic nature do not contemplate legal relations

Certainty
Agreements, the meaning of which is not certain, or capable of being made certain, are void

Situation 1.) A agrees to sell to B "a hundred tons of oil ". There is nothing about what kind of oil was intended. The agreement is void for uncertainty.
Situation 2.) A, who is a dealer in cocoanut-oil only, agrees to sell to B "one hundred. tons of oil". The nature of A's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.

Situation 3.) A agrees to sell to B " my white horse for rupees five hundred or rupees one thousand". 'There I is nothing to show which of the two prices was to be given. The agreement is void

Possibility of performance Contact based on impossibility of performance are not valid. Contact must be capable of being performed E.g. An artist agrees to make a painting for A for consideration. Artist looses both his hands in an accident. The contract becomes void
Enforceable by law Any agreement not enforceable by law is a mere agreement and not contract An agreement should be able to get relief through law in case of breach of contract There should exist any evidence or correspondence exchanged between parties which can show that there existed a contract.

Classification of contracts Classification according to Validity

Valid Contract when all the essentials of valid contract are present then it becomes a valid contract.

Void Contract sec 2(j) Not enforceable by law. A contract may be valid at the time of entering but can get void later e.g. Contract with A abroad becomes void with the outbreak of war with that country - All illegal agreements are void contracts.

Classification according to Validity cont

Voidable Contract Sec2(i) An agreement that is enforceable by law at the option of one or more parties but not at the option of others. E.g. A in contract with B prevents B to perform his duties for what so ever reason - A in contract with B for certain period and if A fail to complete the task in time. - Any agreement under undue influence, coercion, misrepresentation, fraud or mistake

Classification according to Formation

Express contract The terms of contract are expressly agreed upon whether in writing or by words at he the time of formation of the contract.

Implied contract Contracts that are inferred from the acts or conduct of the parties or course of dealings between them E.g. Getting into a public bus - Taking a cup of tea in a restaurant

Classification according to Formation

Quasi Contacts Quasi contracts are created by law and not by intension of the parties. A person is not allowed to enrich himself unjustly at the expense of another E.g. A tradesman leaves goods at Cs place by mistake. If C uses the goods then C is liable to pay for the goods

Classification According to Performance

Executed contract - Contracts that are done Executory contracts - Where both the parties are yet to perform their obligation. A contract can be partly executed or party Executory. Contract with executed consideration/ Unilateral Contracts that comes into existence after execution by one party.
E.g.- Railway coolie

Unenforceable contract- The contracts are valid but due to lack of proof they can not be enforced

Classification as per English law

Contracts of record Contracts that are taken on record by court e.g. judgments Contract under Seal / Specialty contract Contracts that are in writing , signed, sealed and delivered by parties Consideration is not necessary in such contracts like gifts Simple contracts Contracts that are not under seal are simple contracts

Offer
Definition sec 2(a)- When a person signifies to other his willingness to do or 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 Essentials of a valid offer Apart from willingness there must be and expression of request An offer must be intended and capable of creating legal relations Invitation to offer Advertisements, price lists, catalogues, invitation by companies to subscribe for the shares etc. are no offers but are invitation to make offers

Offer continued
The offer must be to a definite person to create legal relations

Terms of offer must be certain and unambiguous

An offer can be expressed or implied An offer must be communicated to an offeree

An offer may be conditional but the conditions may be clearly communicated

Offer can be withdrawn before it is accepted New offer in rejection of the original offer is a counter offer. Proposer cannot dictate terms

Offer in Auction Sale Offer precedes from bidder and the auctioneer accepts the offer The acceptance is signified with the fall of hammer In case of auction held by court, the bidder can withdraw his offer before its accepted by court
Standing offer/ Open offer Advertisement inviting tenders is not an offer i.e. mere intention to invite offer is called a standing or an open offer

Acceptance
Definition As per sec 2(b), When a person to whom a proposal is made signifies his assent thereto, the proposal is said to be accepted. Essentials of valid acceptance (sec 7) 1.) Acceptance must be absolute and unqualified/ unconditional.
E.G. An offer to sell is accepted subject to the title being approved by the solicitors. This is not an acceptance but only allows the purchaser to claim a common right of investigating the title to the land.

Continued
Neele V. Meritt (1930)- Meritt offered a land to Neele at $280. Neele replied accepting and enclosing $30 and promising to pay the balance by monthly instalments of $50 eac. It was held that there is no contract as the parties to contract must be ad idem i.e. consenting on the same thing in he same sense.

Essentials of valid acceptance

2.) Acceptance must be expressed in some usual and reasonable manner mode of acceptance - expressed by post or by telegram or by words or by conduct are reasonable manner. - If the manner in which the acceptance is
prescribed then the valid acceptance has to be in that manner only.
E.g. If proposer prescribes the delivery of goods at certain place, then he is not bound to accept delivery at any other place

3.) Mental acceptance is not sufficient in law - Silence cannot amount to acceptance - Intent to accept an offer is also no acceptance 4.) Acceptance must be communicated to the

offerer
- In Brogden v. Metropolitan Railway Co. A draft for supply of coal was sent to Railway manager. He signed and approved on the agreement but by mistake left it in his drawer. It was held that Acceptance and intimation of acceptance both are necessary for a binding contract.

5.) Acceptance of Proposal

the terms even though offeree is ignorant of some of the terms of the offer - Except the where the terms are not apparent on the face and no reasonable caution is taken to draw attention of the acceptor
Case Mackillican v. Marittimes de France A Plaintiff purchased from defendant company a ticket to travel by steamer which was in French language. On the lost of luggage of Plaintiff, it was held that Plaintiff was at fault as he did not make acquainted with the terms and conditions

- Acceptance of proposal is the acceptance of all

Case Henderson v. Stevenson

Plaintiff sued a defendant company for the damages of the loss of his luggage on account of negligence of the servants of the company. The companys defence was that, it was protected by the conditions mentions on the back of the ticket itself. The front side of the ticket showed simply names of the places. On the back side, it was printed with small fonts that the company is not liable for any losses due to negligence of its servants.. It was held that Plaintiff had no reasonable or sufficient notice of the conditions and he could recover from the company for his losses

6.) Acceptance of the proposal need not always be expressed in Words.

- Performance of the conditions of a proposal is an acceptance of the proposal

E.g. Where the insurance company accepts the cheque as per the terms of the proposal towards the premium, encashment of the cheque is a sufficient acceptance of the proposal

7.) Acceptance must be by certain person - Offer made to an uncertain number of people or to the world at large but no contract can arise until it has been accepted by certain person. Such offer is called as general offer It closes as soon as it is accepted by a definite person E.g. A gives an advertisement in the newspaper offering
Rs.10000 to one who gives information of his lost son. B gives the information. B is entitled to the reward of Rs.10000

8.) If the act is done in ignorance of the proposal, it is not an acceptance of the proposal E.g. An advertisement for the reward of Rs.501 to anyone who gives information of his lost son. B gives information but is ignorant of the reward. After sometime he claims for the reward. B is not entitled to reward as he gave the information without being aware of the offer

9.) Acceptance must be given within a reasonable time

E.g. M offered to take shares in a company on 8th June and received acceptance on 23rd Nov. M refused to take the shares. As the reasonable period of acceptance has elapsed. He was entitled to refuse to take the shares

10.) Acceptance must be given before the offer lapses or is revoked or is withdrawn. 11.) An agreement to agree in future is no contract
E.g. An actress engaged in a theatrical company entered into a contract saying if the play is shown in London she would be compensated by mutually agreed salary

 Communication, acceptance and revocation of an offer may be by words, written or by an act. E.g. Putting up a weighing machine at public place is an offer. Putting a coin in the machine is an acceptance of the offer and switching off the machine is the revocation of the offer
Communication of the offer and acceptance (sec 4) Communication of the offer is complete when the it comes to the knowledge of the person to whom the offer was made. Communication of the acceptance is complete (a) for offeree when the letter is put in transmission (b) for offeror When the letter is received by the offerer. Communication of Revocation is complete (a) for offeror -when the revocation is put in transition (b) for offeree When the revocation is received by the offeree. Loss of letter of acceptance in postal transit - If the letter is posted with correct address and sufficiently posted then the contract is complete

Revocation or laps of offer (sec -6)

Communication by notice of revocation by offer or at any time before its acceptance is complete

Not accepted within the prescribed time

No fulfillment of a condition precedent to acceptance by an offeree Death or insanity of an offeror provided the offeree comes to know of it before acceptance In case of counter offer Offer not accepted as per prescribed or usual mode of communication If the law is changed

Practical Situations
Are the followings valid offers?

1.) An auctioneer displays a refrigerator before a gathering in an auction sale.

2.) P says to Q I will sell you a camera P owns three different types of camera of various prices. 3.) An advertisement by A that he would pay Rs. 200 to anyone who finds and returns his lost dog.

Hint In 1 and 2 there is no offer. Case 3 is a valid offer. Anyone can accept it by performing the act with the knowledge of the offer.

4.) A sees a book displayed in the shop labeled as Rs. 15. He puts Rs 15 on the counter and asks for the book. The salesman refuses to give the book at Rs. 15 and says 15 is by mistake, it is actually of Rs. 50. Is the bookseller bound to sell the book at Rs.15/Hint No (Display in the shop is not an offer. Ref case Pharmaceutical society of great britain v. boots cash chemists) 5.)A sent a telegram to B Will you sell your car? Quote lowest price. B replied Lowest price 25000. A sent second telegram I agree to buy at 25000 but B refuses to sell. (a) Can A compel B to do so? (b) Is there a contract between A & b? Hint (a) No (b) No B answered the second part of the question and did not answer for the first part. Ref Case (Harvey v. Facey)

6.) A sent a letter to B offering to sell his house to B. The next day A wrote another letter revoking his offer. Meanwhile B had accepted the offer by return post. What is Bs remedy in following situation a.) If As letter of revocation reaches before Bs acceptance letter b.) If Bs letter of acceptance is lost in transit c.) If Bs letter of acceptance is posted an hour after As letter of revocation Hint In all three cases there is a concluded contract between A and B as the letter of acceptance is posted by B.

Consideration Sec-2(d)
Definition
When at the desire of the promisor, the promisee or any other person i.) has done or abstained form doing or ii.) does or abstains from doing, or iii.) Promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for he promise.

Essentials of a Valid Consideration

1.) Consideration must move at the desire of the promisor
E.g. Durgaprasad v. Baldev
D promised to pay B a commission on the articles sold through their agency in a bazaar in which they occupied shops, in consideration of B having expended money for the construction of such bazaar. Such money had been expended by B at the desire of the collector of the district. It was held that such expenditure was not consideration since it was not made at the desire of D

Continued
2.)Consideration may move from the promisee or any

other person stranger to Contract

E.g. 1.) A gifted certain property to her daughter with the condition that the daughter should pay an annuity to As brother B. Daughter failed to pay the annuity to B. B is entitled to file a suit against daughter.
E.g.2.) S bought tyres for the company on the condition that S will not sell the tyres below company price, failing to which S will pay damages. B the sub dealer to whom S sold tyres sold them below company price. Company sued B for damages. It was held that stranger to consideration may enforce a contract but not stranger to contract.

Continued
3.) Consideration can be past, present or future
i.) Past consideration Where a person has already done something and then comes a promise.
E.g. - If A finds Bs son. B promises to pay A Rs.1000

ii.) present consideration Where a person had done or

abstains from doing something is a present consideration

iii.) Future consideration Future prospective consideration.

Something to be done if future
E.g. A promises to deliver goods to B when the ship arrives and B promises to pay A Rs. 1000/- against the receipt of the goods

Continued
4.)Consideration may be an act of doing or abstaining from doing something. 5.)Consideration need not be adequate (however it should
have some value in the eyes of law) E.g. Inadequacy of consideration may be evidence that the promisees consent was not freely obtained.

6.) Consideration must be real and not illusory

- considerations which are physically or legally

perform

impossible to

7.)Consideration must not be unlawful, illegal, immoral or opposed to public policy.

Continued
8.) Performance of existing obligation is no consideration
- A person who is already bound to perform such duty under existing contract or public duty can not be consideration for contract

9.) Forbearance to sue is a good consideration

E.g. A wife agrees to not to sue her husband for maintenance allowance when B husband promises to pay her a monthly allowance by way of maintenance later.

Exception to the rule An agreement without consideration is void Sec 25

Agreement made on account of natural love and affection ( parties related by blood and marriage)
E.g. 1. - An agreement with a prostitute on account of love and affection is not valid E.g. 2. - An agreement to get rid of his wife is not out of love and affection

Promise to compensate for past voluntary services

E.g. An act done by promoter before the formation of the company is not valid (The promisor must be in existence when the act was done)

Continued.
Promise to pay time barred debt
E.g. A signs a written promise to pay Rs.1000/- on account of debt which is barred by limitation act. (exception A promise to pay time barred debt of any third person is not covered)

No consideration is required for an agreement to create an agency Gifts do not require consideration Contact made in the form of deed under seal is valid without consideration If on the faith of promise the promisee suffers loss.

Unlawful consideration
Forbidden by law
(sale of liquor without a licence is forbidden by law and hence it is void)

To defeat the provisions of any law

Is fraudulent ( An agreement to with an intension to commit

offence or practise fraud.)

It involves or implies injury to the person or property of another Court regards it as immoral or opposed to public policy

Agreements against public policy

Trading with an enemy Champerty and maintenance contracts (a sharing in
the proceeds of litigation by one who agrees with either the plaintiff or defendant to help promote it or carry it on)

Exceptions 1.) suit for common interest 2.) maintained out of charity or by religious motive 3.) to assist the party to make a reasonable claim

Stifling prosecutions
offender)

(agreements not to prosecute and

Marriage brokerage agreements

Agreements interfering with administration of justice

Continued.
Agreements tending to create interest against duty Agreements as regards sale of public offices
(A promise to obtain an employment in public office as against Rs.1000/-)

Agreements tending to create monopoly Agreements in restraint of marriage Agreements in restraint of trade Agreements in restraint of legal proceedings Agreements between pleaders and clients (Agreement
with the lawyer to pay as per the result of the case)

Foreign award contrary to fundamental policy of Indian law/interest of India or justice or morality

Capacity to Contract (Sec 10)

Contracts by Minor
Minors contract is absolutely void (ref ; Mohori bibee v.
Dhurmodas ghose)

No Specific performance of a minor conrtact: ( exception when

the contract has been entered into by guardian for the benefit of minor on behalf of minor)

No Ratification of minors contract False re-presentation by minor Estoppel Liability of a third person surety for a minor Insolvency of a minor Minors marriage ( valid on the grounds of the custom and
community if entered into their parents or guardian)

Service contracts

Exceptions to the rule that minors contract is absolutely void

Promisee or transferee Minor capable of accepting
benefits

Agency

Minor can act as an agent but not liable to his principle for his acts

Partnership Minor can be added to the benefits of

partnership by his guardian with consent of other partners not personally liable for any obligations of the firm except his share in partnership

Necessaries Liable to pay for supplies necessaries to minor or

to minor dependents

 Contracts by people of unsound mind

Contracts with parda-nishin women

observe complete seclusion under any custom)

(obliged to

The court assumes that she is open to undue influence if there is not enough evidence that the deed was explained to and understood by her. E.g. An illiterate harijan woman

Contracts by Married women competent to contact

independently under Hindu or Mohammedan law

 Contracts by corporations
Can not enter into a contracts of strictly personal nature Power of corporate contacts vary according to its character Necessary or natural limitation (contracts through its agents under seal) Express or legal limitation (can not contract beyond powers mentions in memorandum and articles of association)

Contracts by insolvents Is competent to contract only

after he is discharged for his insolvency charges

Free Consent
Agreed upon the same thing in the same sense

Not caused by i) coercion ii) undue influence, iii) fraud iv) misrepresentation v) mistake
Without free consent contract becomes voidable with the option of the party whose consent was not free except the consent under mistake Contract becomes void if the consent is caused by mistake

Coercion and Undue influence

Coercion
The consent is given under committing or threading to commit an act forbidden by the Indian Penal Code or detaining or threatening to detain property unlawfully

Undue influence
The consent is given by a person who is so situated in relation to another that the other person is in a position to dominate his will. Or consent under moral influence

Is of physical nature and involves use of physical or violent force

Threat to commit suicide is coercion

Is of Moral nature and involves moral force and mental pressure

i) Relationship raises presumption of undue influence ii) Proof of influencing by relations iii) consideration as proof

Misrepresentation and fraud

Misrepresentation
Intension is not to deceive other party. Misstatement or concealment of material facts essential to contract The aggrieved party can rescind the contract or sue for restitution but not for damages The aggrieved party can not avoid the contract if it had means to discover the truth with ordinary diligence.

Fraud
Intension is to deceive the other party. Aggrieved party can sue for damages also

As the concealment is willful the contract is voidable even if the aggrieved party had means to discover the truth with ordinary diligence

Mistake

Mistake of law

Mistake of fact

of the country

Of foreign country

Bilateral mistake

unilateral mistake exceptions

Mistake as to subject matter regarding

Mistake as to Possibility of performance

Nature of the contract

Physical impossibility

legal impossibility

Person Contracted with

existence

identity

quality

quantity

title

price

Mistake legal implications

Mistake of law of the country can not be avoided i.e. ignorance of law is no excuse Mistake of law of foreign country is treated as mistake of fact and thus it is void. Bilateral mistake( mistake of both the parties), the agreement is void Unilateral mistake does not make contract voidable. It is not allowed as a defense is avoiding contract, except exceptions, where the agreement is void.

Agreements by way of wager

A wager is an agreement between two parties to the effect that if a given uncertain event happens, one party shall pay a certain amount and other contrary event happening. Agreements by way of wager is void. Exceptions
Speculation does not necessarily involve a wagering contract. But an agreement to pay the difference between the contract price and market price of a specified day is a wager Insurance contracts Share market transactions Games of skill or athletic competitions are not wagers

Contingent contracts V. Wagering contracts

Contingent contracts
Is a contract where the promise is conditional and the contract shall be performed only on the happening or nonhappening of some uncertain event.

Wagering contracts
A wager is an agreement between two parties to the effect that if a given uncertain event happens, one party shall pay a certain amount and other on contrary event happening Future event is the sole determining factor of the contract E.g. all agreements in the form of bet Wagering contract is void

Future event is merely collateral or incidental to the contract

E.g. Insurance, guarantee etc. Contingent contract is not void

All Wagers are contingent but all contingents are not wagers

Quasi Contracts
1.) Claim for supply of necessaries to person incapable of contracting 2.)Reimbursement of money paid, in which he is interested E.g. B holds land on lease granted by A. A is liable to pay certain
revenue to government being in arrears. On not doing so by A, the land is out for sale by government. To safeguard his interest, B paid As arrears to governement. Now A is liable to B for the amount paid

Continued.
Obligation for the person to pay for enjoying benefit of non-gratuitous act
(This includes the cases where the person while doing an act is under the impression that he would receive remuneration for his services)
E.g. A village was irrigated by a tank. The government effected certain repairs to the tank for its better preservation. It had no intention to do the act gratuitously for zamindars. Held They were liable to contribute for repairs

Responsibility of finder of the goods

His rights
He is entitled to possession until he finds the lawful owner Can retain the goods until he receives lawful charges or compensation for retaining the goods. But he can not sue for compensation He can sell the goods if
Commodity is perishable The owner can not be found The owner refuses to pay for lawful charges The lawful charges amount to 2/3rd of the value of the commodity found

Continued
His duties
He is responsible to take the due care of goods, as he would care for his own goods He must put in reasonable efforts to find the true owner of the goods

The person to whom the money or goods have been paid by mistake is bound to return the same and the other party is entitled to recover

Performance of contracts
Situations
1.) Non-personal contracts
A promises to deliver goods to B on certain day for Rs.1000/- If A dies before that day then As representatives are required to deliver the goods and B is bound to pay Rs.1000/-

2.) Personal contracts

A promises to paint a picture for B by certain day for a certain price. On the death of A before that day the contract is not enforceable by his representatives

Joint rights and joint liabilities

Jointly liable during their lives, representatives liable after
death of any or both the parties

Promisees right E.g. A, B and C jointly promises to pay D Rs.

3000/- D may either compel any one from A,B or C to pay Rs.3000/-

Equal contribution In the above case if C pays 3000/- to D

then he can claim 1000 from each of the other party

Sharing the loss arising out of the default equally

Release of the joint promisor In the above example A can

not be released by giving Rs. 1000/- to C. C can not sue just B and C and release A from the liability

Time and place for performance

When there is no time specified
Reasonable time is taken under consideration looking at below facts Special circumstances of the case Usage of the business Facts and intension of the parties at the time of entering into the contract E.g. An order for 500 umbrellas for the rainy season if delivered after the season is over

Where time is specified On certain day during the usual office hours
E.g. Delivery of the goods on the last day of contracted delivery time but at 12.00 in the night may not be accepted.

Effect of failure to perform at a fixed time

When time is essential
When parties have mentioned the essentiality of time in contract Where delay operates as an injury When the nature and necessity of the contract requires effective timings

Legal implication the contract becomes voidable

When time is not essential

Fixation of the period within which the contract has to be performed does not make the time as essence of the contract E.g. Normally it is assumed that sale of immovable property contracts does not fall into time essential contracts

Legal implication The contract is not voidable but the aggrieved

party can claim for compensation for the losses due to contract not happening in time

Discharge of contract
By performance By death Refusal to acceptance By breach of contract Anticipatory breach of contract
(when a party refuses to perform or communicates his inability to perform his part of contract before the actual due date of performance)

 Consequences of anticipatory breach

One may elect to rescind the contract and immediately sue for the damages One may treat the contract as still alive and wait for the time of performance date and then hold the other party responsible for all the consequences of non-performance

By impossibility of performance (supervening impossibility)

Destruction of the object necessary for the performance Change of law Outbreak of war (Difficulties of performance, commercial impossibility, strikes and lockouts, civil disturbances, default or failure of third person on whose word promisor relied etc. are not covered under supervening impossibility)

 By agreement or by consent
By novation ( substitute a new contract) By accord and satisfaction
E.g.- A owes B Rs.1000/- B agrees to accept Rs.750/- in full satisfaction. The agreement to pay Rs.750 is accord and the actual payment is satisfaction)

By remission or wavier ( Both the parties mutually agree to waive the contract)

By operation of law
By insolvency or bankruptcy ( The insolvent is discharged and the rights and liabilities are transferred to an official assignee under the Presidency Towns Insolvency act) By merger (merger of superior right into inferior right) e.g. an ordinary debt merged into a mortgage.

 By unauthorized material alteration of the contract

E.g. alteration with document of title to goods

Discharge by laps of time

e.g. If the creditor does not file a suit to recover his debt amount from the debtor within a period of limitation as laid down under the limitations act i.e. 3 years for money suit, then the contract is discharged

Consequences and Remedies for breach of contract

Remedies available to aggrieved party Suit for specific performance Suit for injunction (Court can restrain a party from
committing a breach)

Suit for damages for the losses sustained

(The injured party is placed in the same financial position as he would have been in, if the contract had been performed and then damages are calculated)

Types of damages under Quantum Meruit

(as much as he has deserved) Compensatory damages Nominal damages
( The actual damages what a plaintiff has lost as a result of a defendant's wrongful conduct) (which consist of a small sum awarded to a plaintiff who has suffered no substantial loss or injury but has nevertheless experienced an invasion of rights) (which are awarded not to compensate a plaintiff for injury suffered but to penalize a defendant for particularly egregious, wrongful conduct) e.g. Banker refusing to honour the cheque of his client having sufficient balance

Exemplary damages

Special damages (Can be recovered only if stipulated in

contract)

Rules for ascertaining damages

Rule 1 The measure of damage is between the contract price and the market price at the date of the breach.
Date of breach for fixing the damages is the last date of contract to be performed In case of supply of goods the damages will be the difference of the price the party would have paid and the price that a party could have recovered by selling is considered

Rule 2
Compensation is not given to the remote and indirect losses or damages sustained by reason of the breach
Court may allow remote damages, if special circumstances were known to both the parties at the time of making the contract

Rule 3
In estimating the loss or damage arising from breach of contract it is expected that party has taken reasonable steps to the loss

Rule 4
Quantum Meruit as much as deserved

Questions invited!!