Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Effect of Flaw in consent 1. Right of rescission of the contract (Ss 19, 19A, and S. 27, SRA); and 2. Right to claim compensation. Modes of Rescinding a Contract Car and Universal Finance Co Ltd v Caldwell (1961) 1 QB 525.

Slide-01

Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Limitation on the Right of Rescission [S. 27 (2), SRA]

1. By affirmation or ratification[S. 27 (1) (a)]; or 2. Where restitution in intergrum is not possible[S. 27 (1) (b)]; or 3. Acquisition/intervention of rights of third parties[S. 27 (1) (c)]; or 4. Where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract[S. 27 (1) (d)]; or 5. Lapse of reasonable time.
Slide-02 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Limitation on the Right of Rescission [S. 27 (2), SRA]

Long v Lloyd (1958) 1 WLR 753. Wallis v Pratt (1911) AC 394. Phillips v Brooks Ltd (1919) 2 KB 243.

Slide-03

Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Mistake Mistake operates in two ways: 1. Where there is no consensus ad idem: when the consent is unreal. 2. Mistake as to a matter of fact essential to the agreement: when mistake misleads the parties as to the purpose which they contemplated. Raffles v Wichelhaus (1864) 2 H&C 906.
Slide-04 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Mistake As To a Matter of Fact Essential to the Agreement Section 20: Essentials: 1. Both the parties to the agreement should be under a mistake (Supplemented by S. 22); 2. Mistake should be regarding a matter of fact (Supplemented by S. 21); and 3. The fact regarding which the mistake is made should be essential to the agreement.
Slide-05 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Haji Abdul Rehman Allarakhia v Bombay & Persia Steam Navigation Co (1892) 16 Bom 561. Certain Facts That Are Essential To The Agreement:

1. The identity of the parties; 2. The identity and nature of the subject matter of the agreement; and 3. The nature and content of the promise.
Slide-06 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

The identity and nature of the subject matter of the agreement Mistake as to the existence of subject-matter
Couturier v Hastie (1856) 5 HL Cas 673.

Mistake as to the substance of the subject-matter

Seikh Bros Ltd v Ochener (1957) AC 136 (PC).

Mistake as to the quality of the subject-matter

Smith v Hughes (1871) LR 6 QB 597. Bell v Lever Bros Ltd (1932) AC 161.
Slide-07 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Mistake as to the title or rights to the subjectmatter:

Cooper v Phibbs (1867) LR 2 HL 149.

Mistake as to the identity of the parties Mistake caused by taking over of business
Boulton v Jones (1857) 27 LJ Ex 117.

When identity is specially important

Said v Butt (1920) 3 KB 497.
Slide-08 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Mistake of identity caused by fraud

Cundy v Lindsay (1878) 3 App Cas 459.

Where parties contract in each others presence

Phillips v Brooks Ltd (1919) 2 KB 243. Lewis v Averay (1971) 3 All ER 907.

Slide-09

Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Mistake as to the nature of promise Hartog v Colin and Sheilds (1939) 3 All ER 566.

Exception: Explanation to S. 20
State of Karnataka v Stellar Construction Co AIR 2003 Kant 6.

Slide-10

Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts)

Legality of Object and Consideration

What consideration and objects are lawful, and what not (S. 23) The consideration or object of an agreement is lawful, unless
1. 2. 3. 4. 5. 6. It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
Slide-11 Date: 16/08/2011

Lecture-8

Legal Aspects of Infrastructure Business-I (General Principles of Contracts) Object and Consideration Forbidden by Law
Brij Mohan v MPSRTC AIR 1987 SC 29.

Defeat the provisions of any law Fraudulent Agreements injurious to the person or property of another Immorality Opposed to Public Policy
Gheru Lal Parekh v Mahadeodas Maiya AIR 1959 SC 781. Ratanchand Hirachand v Askar Nawaz Jung AIR 1976 AP 112.

Slide-12

Date: 16/08/2011

Lecture-8

1. 2. 3.

4. 5.

Legal Aspects of Infrastructure Business-I (General Principles of Contracts) Heads of Public Policy Trading with enemy: Trafficking in Public offices: Interference with the administration of justice: i. Interference with the course of justice ii. Stifling prosecution Ouseph Poulo v Catholic Union Bank AIR 1965 SC 166. iii. Maintenance and champerty Marriage Brokerage agreements: Unfair or unreasonable dealings: Agreements void, if consideration and objects unlawful in part (S. 24)
Slide-13 Date: 16/08/2011