This document are related to the contact act and its explain law regarding the same

1. INDIAN CONTACT ACT,1872
AABIL HUSAIN
ASSISTANT PROFESSOR
PRESTIGE INSTITUTE OF MANAGEMENT & RESEARCH, GWALIOR

2. BUSINESS LEGISLATION
• THE INDIAN CONTRACT ACT, 1872
• THE SALES OF GOODS ACT, 1930
• THE PARTNERSHIP ACT, 1932
• CONSUMER PROTECTION ACT, 1986
• NEGOTIABLE INSTRUMENT ACT, 1881
• INDIAN COMPANIES ACT, 2013
• INTELLECTUAL PROPERTY RIGHTS (IPR)-
i) THE PETENT ACT, 1970
ii) THE COPYRIGHT ACT, 1957
iii) THE TRADEMARK ACT, 1999

3. THE INDIAN CONTACT ACT, 1872
PURPOSE/ OBJECTIVE - “ TO ENSURE THAT THE RIGHTS AND
OBLIGATIONS ARISING OUT OF A CONTRACT ARE HONORED AND THAT
LEGAL REMIDIES ARE MADE AVILABLE TO THOSE WHO ARE AFFECTED”
APPLICATION OF ACT- (SECTION 1)
• ASSENT OF PRESIDENT- 25 APRIL 1872
• COME INTO FORCE- 1ST SEPTEMBER 1872
• WHOLE OF INDIA

4. INDIAN CONTACT ACT, 1872
• SECTION 1 – 75 (GENERAL PROVISIONS)
• SECTION 76 – 123 (SALES OF GODS) BUT NOW IT IS A THE SALES OF
GODS ACT, 1930
• SECTION 124 – 147 (INDEMINTY AND GUARANTEE)
• SECTION 148 – 181 (BAILMENT AND PLEDGE)
• SECTION 182 – 238 (AGENCY)
• SECTION 239 – 266 ( PARTNERSHIP) BUT NOW IT IS A THE
PARTNERSHIP ACT, 1932

5. HOW AGREMENT AND CONTRACT FORM
• PROPOSAL/ OFFER (SECTION 2(A))- “ 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
PERSON. HE IS SAID TO MAKE A PROPSAL.”
• AN OFFER IS VLAID ONLY WHEN COMMUNICATED TO THE OTHER
PARTY.
• COMMUNICATION OF OFFER CAN BE THROGH POST, EMAIL,
TELEPHONE OR SIMPLE BY WORD OF MOUTH.
• EXAMPLE- A ASK B WILL YOU BUY MY FLAT FOR RUPEES 5 LAKH. THIS
IS AN OFFER MADE BY A TO B. B ANSERS YES I WILL BUY YOUR FLAT
THAN OFFER IS SAID TO BE ACCEPTED.

6. ICA,1872-
• PROMISE (SECTION 2 (B))- “WHEN THE PERSON TO WHOM THE
PROPSAL IS MADE SIGNIFIES HIS ASSENT THERETO THE PROPOSAL IS
SAID TO BE ACCEPTED. A PROPOSAL WHEN ACCEPTED BECOMES A
PROMISE”
• CONSIDERATION (SECTION 2 (D))- “WHEN AT THE DESIRE OF THE
PROMISER, THE PROMISEE OR ANY OTHER PERSON HAS DONE OR
DOING OR DOES.”
• AGREEMENT (SECTION 2 (E))- “EVERY PROMISE AND EVERY SET OF
PROMISES FORMING THE CONSIDERATION FOR EACH OTHER IS AN
AGREEMENT.”

7. ICA, 1872
• CONTRACT (SECTION 2 (H))- “AN AGREEMENT ENFORCEBLE BY LAW IS
CONTRACT.”
“ALL CONTRACT ARE AGREEMENTS
BUT ALL AGREEMENTS ARE NOT CONTRACTS”

8. CONTRACT
ACCORDING TO SECTION 2 (H) OF INDIAN CONTRACT ACT, 1872
DEFINES- “ AN AGREEMENT ENFORCEABLE BY LAW IS CONTRACT.”
CONTRACT= AGREEMENT+LEGAL OBLIGATIONS( ENFORCEABLE BY LAW)
WHAT AGREEMENT ARE CONTRACT?
ONLY THOSE AGREEMENT WHICH ARE CREATE LEGAL OBLIGATIONS IS
CONTRACT.
EXAMPLE- A GIVES A PROMISE TO HIS SON TO GIVE HIM A POCKET
ALLOWANCE OF RUPEES 1OO EVERY MONTH. IN CASE A FAILS OR
REFUSE TO GIVE HIS SON THE PROMISED AMOUNT HIS SON HAS NO
REMEDY AGAINST A.

9. ICA,1872
• EXAMPLE- A AGREES TO SELL HIS MOTOR BIKE TO B FOR RUPEES
5000. THE AGREEMENT GIVES RISE TO A LEGAL OBLIGATION ON THE
PART OF A TO DELIVER THE MOTOR BIKE TO B AND ON THE PART OF B
TO PAY RUPEES 5000 TO A. THE AGREEMENT IS A CONTRACT. IF A
DOES NOT DELIVER THE MOTOR BIKE THAN B CAN GO TO A COURT
AND FILE A SUIT AGAINST A FOR NON PERFORMANCE OF THE
PROMISE ON THE PART OF A.

10. ESSENTIALS ELEMENT OF VALID CONTRACT
1/2
• THERE MUST BE AN OFFER (S.2(A))
• THERE MUST BE ACCEPTANCE OF THE OFFER (S.2 (B))
• THERE MUST BE CONSIDERATION ( S.2 (D))
• INTENTION TO CREATE LEGAL OBLIGATION B/W THE PARTIES.
CASE LAW- BALFOUR VS BALFOUR (1919)
IN THIS CASE A HUSBAND AGREED TO PAY 30 POUND TO HIS WIFE EVERY
MONTH WHILE HE WAS ABORAD. AS HE FAILED TO PAY THE PROMISED
AMOUNT HIS WIFE SUED HIM FOR THE RECOVERY OF THE AMOUNT. THE
COURT HELD THAT SHE COULD NOT RECOVER AS IT WAS A SOCIAL
AGREEMENT AND THE PARTIES DID NOT INTEND TO CREATE ANY LEGAL
RELATIONS.

11. 2/2
• THE PARTIES MUST HAVE CONTRACTUAL CAPACITY
• THE CONTRACT MUST NOT BE UNLAWFUL OR AGAINST PUBLIC
POLICY (S.23).
• THE CONTRACT MUST BE IN THE FORM REQUIRED BY LAW (S.7)

12. OFFER/PROPOSAL
• ACCORDING TO SECTION 2 (A) OF 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 PERSON. HE IS SAID TO MAKE A
PROPSAL.”
• AN OFFER IS VLAID ONLY WHEN COMMUNICATED TO THE OTHER
PARTY.
• COMMUNICATION OF OFFER CAN BE THROGH POST, EMAIL,
TELEPHONE OR SIMPLE BY WORD OF MOUTH.

13. ESSENTIAL ELEMENT OF A VALID
OFFER/PROPOSAL
AN OFFER MUST HAVE CERTAIN ESSENTIALS IN ORDER TO CONSTITUTE
IT A VLAID OFFER-
1) OFFER MUST BE MADE WITH A VIEW TO OBTAIN ACCEPTANCE.
2) OFFER MUST BE MADE WITH THE INTENTION OF CREATING LEGAL
RELATIONS. (B V. B)
3) OFFER MUST BE DEFINTE AND CERTAIN. (EX. CLOTHES).
4) OFFER MUST BE COMMUNICATED TO THE OFFEREE.
5) OFFER MUST BE EXPRESS OR IMPLIED.

14. KINDS OF OFFER/PROPOSAL 1/4
1) GENERAL OFFER
A GENERAL OFFER IS NOT MADE BY ANY SPECIFIED PARTY. IT IS ONE
THAT IS MADE BY THE PUBLIC AT LARGE. ANY MEMBER OF THE PUBLIC
CAN ACCEPT THE OFFER AND HAVE THE RIGHT TO THE
REWARDS/CONSIDERATION.
EXAMPLE- A ADVERTISES IN THE NEWSPAPER THAT WHOSOEVER FINDS
HIS MISSING SON WOULD BE REWARDED WITH 2 LAKHS. B READS IT
AND AFTER FINDING THE BOY. NOW A IS ENTITLED TO PAY 2 LAKH TO B
FOR HIS REWARD.

15. 2/4
• CASE LAW- CARBOLIC SMOKE BALL COS. VS CARLIL (1813)
THE PATENT- MEDICINE COMPANY ADVIRTISED THAT IT WOULD GIVE A
REWARD OF 100 POUND TO ANYONE WHO CONTRACTED INFLUENZA AFTER
USING THE SMOKE BALLS OF THE COMPANY FOR A CERTAIN PERIOD
ACCORDING TO THE PRINTED DIRECTIONS. MRS CARLIL PURCHASED THE
ADVIRTISED SMOKE BALL AND CONTRACTED INFLUENZA IN SPITE OF USING
THE SMOKE BALL ACCORDING TO THE PRINTED INSTRUCTIONS. SHE
CLAIMED THE REWARD OF 100 POUND. THE CLAIM WAS RESISTED BY THE
COMPANY ON THE GROUND THAT OFFER WAS NOT MADE TO HER AND THAT
IN ANY CASE SHE HAD NOT COMMUNICATED HER ACCEPTANCE OF THE
OFFER. SHE FILED A SUIT FOR THE RECOVERY OF THE REWARD. THE COURT
HELD THAT SHE COULD RECOVER THE REWARD AS SHE HAD ACCEPTED THE
OFFER BY COMPLYING WITH THE TERMS OF THE OFFER.

16. 3/4
2) SPECIFIC OFFER
IT IS OFFER MADE TO A SPECIFIC PERSON OR GROUP OF PERSONS AND
CAN BE ACCEPTED BY THE SAME NOT ANYONE ELSE.
EXAMPLE- A OFFERS TO SELL HIS HOUSE TO B. THUS A SPECIFIC OFFER
IS MADE TO A SPECIFIC PERSON AND ONLY B CAN ACCEPT THE OFFER.
3) CROSS OFFER
TWO PARTIES MAKE THE SAME OFFER AT THE EXACT TIME TO EACH
OTHER.
EXAMPLE- A AND B BOTH SEND LETTERS TO EACH OTHER OFFERING TO
SELL AND BUY B HOUSE AT THE SAME TIME.

17. 4/4
4) COUNTER OFFER
WHERE THE OFFEREE OFFERS TO QUALIFIED ACCEPTANCE OF THE OFFER
SUBJECT TO MODIFICATION IN THE TERMS OF ORIGINAL OFFER. HE IS SAID
TO HAVE A COUNTER OFFER.
EXAMPLE- A OFFERS B TO SELL HIS HOUSE FOR RUPEES 10 LAKHS. B AGREES
TO BUY IT FOR RUPEES 8 LAKHS. IT AMOUNTS TO COUNTER OFFER. THIS
WILL RESULT IN TERMINATION OF A OFFER.
5) STANDING OFFER/OPEN OFFER
AN OFFER WHICH IS ALLOWED TO REMAIN OPEN FOR ACCEPTANCE OVER A
PERIOD OF TIME IS CALLED STANDING OFFER.
EXAMPLE-TENDER OF ANY COMPANY FOR SELL AND BUY

18. ACCEPTANCE
According To Section 2(b) Of Indian Contract Act 1872, “ When The
Person To Whom The Proposal Is Made Signifies His Assent There To
,The Proposal Is Said To B Accepted.”
Acceptance May Be Express ,Implied And By Performance Of Some
Required Act .
Acceptance Make Done By Anyone ( General Offer ) And Any Specific
Person ( Specific Offer )

19. Essentials of a valid Acceptance 1/3
1) Acceptance Must Be Absolute And Unconditional (S .7).
Ex – A Offer To Sell His House To B For Rs 1000 . B Replies I Can Pay Rs 800 For It.
2) Acceptance Must Be Communicated To The Offeror.
Case Law – Brogdon Vs Metropolitan Rail Company
B, a Supplier Sent To a Draft Agreement Relating To The Supply Of Coal And Coke To The
Manager Of A Railway Company For His Acceptance .The Manager Wrote The Word
Approved On The Same And Put The Draft In The Drawer Of His Table . By An
Oversight ,The Draft Agreement Remained In The Drawer. The Court Held That There
Was No Contract As The Manager Had Not Communicated His Acceptance To The
Proposer .

20. 2/3
3) Acceptance Must Be According To The Mode Prescribed.(S.7(2))
4) The Proposer Can’t Prescribe The Method Of Refusal.
Ex – A Writes To B That He Wants To Sell His Car To Him For 100000
And If He Dose Not Get Reply From B.By Return Post He Would
Presume That B Has Agreed To Buy The Car .

21. 3/3
5) An Action Without The Knowledge Of The Proposal Is No
Acceptance.
Case Law- Lalman Shukla Vs Gauri Dutt
Lalman Shukla Was The Employee Of The Gauri Dutt . When Gauri
Dutt Nephew Was Missing, He Sent Lalman To Search For Him, later
He Announced That Whoever Finds His Nephew Would Be Rewarded
Rs.501. Lalman Did Not Know Of The Announcement. As Per The
Earlier Instruction ,He Found Gauri Dutt Nephew And Brought Him
Back . He Had No Right To The Reward Because He Had No
Knowledge Of Gauri Dutt Proposal .

22. Consideration 1/2
According To Section 2(d) Of Indian Contract Act 1872, “When At The
Desire Of The Promisor The Promisee Or Any Other Person Has Done
Or Abstains From Doing Or Does Or Abstains From Doing Or Promises
To Do Or Promises To Abstain From Doing Something Such Act Or
Abstinence Or Promise Is Called A Consideration For The Promise.”
The Term Consideration Is Used In The Sense Of Quid-pro-quo Means
“Something to return” , Profit ,Right ,Interest In Return .

23. 2/2
Consideration May Be Present, Past And Future Consideration. It is
Adequate ,Not Fix.
Example – A Makes A Contract To Sell His Watch To B Rs 1000 . For A
Rs 1000 Is The Consideration And For B The Consideration Is Watch .

24. Essential element of consideration 1/3
1) Consideration Must Move At The Desire Of The Promisor.
Accordingly ,At Act Done At The Desire Of A Third Party Is Not A
Consideration .
2) Consideration May Move From The Promise Or Any Other
Person.
It Is Not Necessary That The Consideration Is From The Promise , It
May Come From Any Other Person.

25. 2/3
Case Law – Chinayya Vs Ramayya.
A Old Lady Left Her Entire Property To His Daughter Ramayya Under
The Condition That She Will Pay A Certain Amount Of Money
Annually To Chinayya Her Uncle. Ramayya Promised To Pay The
Agreed Amount Annually But Stopped Doing If After A Time On The
Plea. That No Consideration Moved From Chinayya To Her Self But
The Plea Was Rejected By The Court .It Was Held That An Indirect
Consideration Had Moved From Her Uncle.

26. 3/3
3) Consideration Need Not Be Adequate .
Ex – A Agrees To Sell A Horse Worth Rs 1000 For Rs 100 A Denies That His Consent To
The Agreement Was Freely Given. Then Court Should Take In To Account In Considering
Whether Or Not A ,Consent Was Freely Given.
4) Consideration May Be Real And Certain .
Ex – If X Promises To Given An Amount Of Money To Y And Y Promises To Pray For X
Long Life, it Would Be Consideration Which Is Not Real For X .
5) Consideration Must Be Lawful .
A Contract Where In The Consideration Is Illegal Is Void .
Ex – If A Promises To Pay Rs – 10000 To B To Beat Up C ,It Would Be An Illegal
Consideration For B .

27. Exceptions
The General Rule Of Law Is That An Agreement Without Consideration
Is Void But There Are A Few Exceptional Cases Where A Contract
Even Though Without Consideration Is Enforceable.
1) Natural Love And Affection (S .25 (1))
2) It Is Promise To Compensate Wholly Or In Part. A Person Who Has
Already Done Something .(S .25 (2))
3) when the promisor was liable himself for the time – barred debt .
(S.25(3))

28. CAPACITY OF CONTRACT 1/3
We have mentioned earlier that one of the essentials of a valid
agreement is that the parties to the contract must be competent to
contract (section 10).
According to section 11 of ICA, 1872- “ Every person is competent to
contract who is of the age of majority according to the law to which
he is subject and who is of sound mind and is not disqualified from
contracting by any law to which he is subject.”

29. 2/3
I- Minors Agreements
Section 11 clearly states that minor is not competent to contract. It
means-
i) A contract made with or by a minor is void-ab-initio (from the very
beginning)(a contract was void as soon as it was created).
ii) Minor can be beneficiary only.(partnership form
iii) No ratification after attaining majority.

30. 3/3
iv) A minor can always plead minority.(falsely, 16 year but tell 18 year,
he can take benefit of minority).
v) Contract for supply of necessaries. (if any person take care of minor
then he can liable for the rebursement).

31. Case Law- Mohri Bibi vs. Dharmodas Ghosh
(1903)
• A minor, Dharmodas mortgaged some property in favour of Brahm
Dutt , husband of Mohri for a loan of rupees 20000, out of which
Brahm Dutt paid the minor a sum of rupees 8000. he become a major
a few months later and filed a suit for the declaration that the
mortgage executed by him during his minority was void and should be
cancelled. It was held that a mortgage by a minor was void and Brahm
Dutt was not entitled to repayment of money.

32. II- Persons of Unsound Mind
• Any person with an unsound mind is incompetent to contract only a
person with a sound mind can enter contract and a sound mind
person can take rational judgment and understanding.
• Example- A patient in a lunatic asylum, who is at intervals of sound
mind may contract during those intervals.

33. III- Disqualified persons from contracting by
any Law
• It refers to statutory disqualifications imposed on certain persons in
respect of their capacity to contract.
• Example- Alien enemy, foreign sovereigns and diplomatic staff,
Insolvents, Convicted persons.

34. FREE CONSENT 1/4
• Consent, “when two or more persons are said to consent when they
agree upon the same thing in the same sense. (Section 13)
• According to Section 14 of ICA 1872, Consent is said to be free when
it is not caused by-
1) Coercion (section 15)- Coercion is threat or force used by one party
against another for compelling him to enter in to an agreement.

35. 2/4
Example- A threatens to shoot B. if B does not let out his house to him, B agrees to
do so. The agreement has been brought about by coercion.
2) Undue Influence (section 16)- Undue Influence where the relations subsisting
(like a contract) between the parties are such that one of the parties is in a
position to dominate the will of the other and uses the position to obtain an
unfair advantage over the other.
Example- A is a rich land owner and B a poor farmer. B has a jersey cow valued at
rupees 5000. if A uses his authority and forces B to sell the cow for rupees 2000.
he would be using undue influence.

36. 3/4
3) Fraud (section 17)- The term fraud includes all acts committed by a person with
an intention to deceive another person.
Example- if A sells a shoe to B and says that it is made from calf leather while in
reality the shoe is made from ordinary leather. A would be committing a fraud.
4) Misrepresentation (section 18)- Misrepresentation means false representation
made innocently with an honest belief as to its truth by a party without any
intention to deceive the other party.
Example- A intends to sell his horse to B and says my horse is perfectly sound. A
genuinely believes the horse to be sound although. He does not know that the
horse has fallen sick yesterday. There is misrepresentation on the part of A.

37. 4/4
5) Mistake (section 20)- where both the parties to an agreement are
under a mistake as to a matter of fact essential to the agreement, the
agreement is void.
Example- A agrees to buy from B a certain horse. It turns out that the
horse was dead at the time of the bargain. Neither party was aware
of the fact. The agreement is void.

38. LEGALITY OF OBJECT 1/2
an agreement will not be enforceable if its object or the consideration is
unlawful and if found such type of agreement it will be a void.
according to section 23 of the Indian contract act,1872- the consideration
and the object of an agreement are unlawful in the following cases-
1) If it is forbidden by law (illegal)
Example- A contract is physically harm or kill a person.
2) If a act defeats the provisions of law.
Example- A promise to B obtain an employment in the public service and B
promises to pay 1 lakhs to A. The agreement is void behalf of unlawfulness.

39. 2/2
3) if it is fraudulent. ( cheat with any person)
4) if it involves injury to the person or property of another.
Example- A ask an editor of a newspaper to publish a defamatory
article against B and promises to pay 4000 rupees for the work. The
agreement is void.
5) if the court regards it as immoral .
Example- A agrees to let her daughter to B for export foreign country of
illegal work. The agreement is void.

40. VOID AGREEMENT 1/5
Another essential element of a valid contract is that the agreement
must not be declared void under any provision of law.
According to section 2 (e) of Indian contract act, 1872, “ a void
agreement is one that can not be enforced by law.”
Agreements which are void under the provisions of law include-
a) An agreement made by incompetent.
Example- a minor or a person with unsound mind.
b) A agreement made under a mutual mistake of fact.
c) An agreement made without consideration with some exceptions

41. 2/5
D) an agreement the consideration or object of which is unlawful.
Besides the above some agreements have been declared as void under the
Indian Contract Act are-
1) Agreement in restraint of marriage (section 26)
Restraint in marriage means stopping a person from getting married. Any
agreement that has the object of stopping a person from getting married or
limiting his or her right in selecting a marriage partner is void because it is
against public policy. (But minor)
2) Agreements in restraint of trade (section 27)
Every agreement by which any person is restrained from exercising a lawful
profession, trade or business of any kind is void.

42. 3/5
3) Agreements in restraint of legal proceedings (section 28)
Every Indian has the right to take the advantage of law to demand and
protect his rights as a citizen of the country. If an agreement seeks to
obstruct the process of justice it is a void agreement.
4) Agreements involving uncertainty (section 29)
Agreements the meaning of which is not certain or capable of being
made certain are void.
Example- if A makes an agreement to sell 100 tons of oil to B and does
not clarify as to what kind of oil A has agreed to sell. The agreement is
void.

43. 4/5
5) Wagering agreements (section 30)
It is an agreement between 2 parties. Based on uncertain events
happening or non-happening and neither party should have a control
on the uncertain event. There is mutual chance of profit and loss to
both parties. Like lottery, bet (not skill or knowledge)
Example- A makes an agreement with B that if it rains today he will pay
rupees 500 to B. if it does not then B will pay the same amount to him.
It is a wagering agreement because whether or not it will rain is
uncertain.
(Exceptions- horse riding,kbc, LIC etc.)

44. 5/5
6) Agreements to do impossible acts. (section 56)
An agreement to do an impossible act is void-ab-intio.
Example- A makes a promise to sell his horse to B for rupees 10000 and
B accepts it but both are not aware that the horse is already dead. The
contract would be void.

45. CONTINGENT CONTRACT (Section 31-36)
CONTRACT
1. Absolute Contract- contract make without any condition
2. Conditional Contract- contract make with some condition( Contingent
Contract) (Insurance Company)
According to Section 31 of Indian Contract Act, 1872,- defines contingent
contract-
As a contract
To do or not to do something
 if some event collateral to such contract.
Does or does not happen

46. 2/2
• Example- A contracts to pay B rupees 10,000. if B house is Burnt. This
is contingent Contract.
• Thus contingent contract is enforceable depending on happing or non
happening of an event.
• Example- contract of insurance, Indemnity and Guarantee. Except life
insurance.

47. ESSENTIALS OF CONTINGENT CONTRACT
1) Contingent Contract are conditional
2) Contingent Contract depend on happening or non- happening of
some future event.
3) The event must be collateral(connected/incidental) to the main
contract.
4) The happening of the event must be uncertain.

48. DISCHARGE OF CONTRACT
• When the parties to the contract fulfill their obligation the contract is
to be executed.
• Discharge of contract implies termination of the contractual
obligation.
• Upon discharge the rights and obligations created by the contract
comes to an end.
• When a contract is discharged it is no longer upon the parties.

49. Modes of Discharge of Contract
1) By performance
2) By mutual consent or agreement
3) By impossibility of performance
4) By lapse of time
5) By operation of law
6) By breach of contract

50. 1) Discharge by performance
• Discharge takes place when the parties meet their obligation within
the time and in the manner prescribed in the contract.
• Example- A contracts to sell his car to B on the agreed price. As soon
as the car is delivered to B and B pays the agreed price for it.

51. 2) Discharge by Mutual Consent or Agreement
1/3
• A contract is made by the consent or agreement of the parties to it. It
can likewise be terminated by the agreement of the parties to the
contract.
• A contract may be terminated by mutual consent in the following
ways-
i) Novation- When both parties by mutual consent agree to make a new
contract to replace the exiting one between the parties.

52. 2/3
• Example – A makes an agreement with B to supply him 500 quintals
of rice at rupees 900 per quintal on a certain date. Before the date of
delivery B proposes to buy 800 quintals of wheat from A at rupees
250 per quintal instead of rice to which A agrees. This would amount
to a novation of the contract between the two.

53. 3/3
ii) Alteration- means change in terms of original contract by mutual
consent. Alteration can be regarding time, place, quantity or price etc.
Example- a promises to supply 300 metres of a certain cloth at 10 per
metre to B within 3 months. Later A and B make an alteration in the
contract to the effect that A will supply 200 metres of a superior
quality of cloth at another price within 4 months.

54. 3) Discharge by Impossibility of performance
According to section 56 of ICA 1872- if an agreement contains
impossible act it is void-ab-intio. Any such agreement is deemed to be
void.
Example- if A makes an agreement with B to find a lost treasure by
magic. it will be a void agreement.
Case law- Taylor vs. Coldwell
A theatre was booked for a musical performance but there was a fire
and it was completely destroyed. The court held the contract to be
void and released the promisor from performing.

55. Case law- Krell vs. Henry
Henry rented a room for two days from Krell for witnessing the
coronation procession of king Edward VII. Krell know the purpose for
which the room was rented. The procession was cancelled because of
the king being sick. The court excused Henry from paying the rent
because it held that the basis of renting the room was the procession
and cancellation discharge the contract.

56. 4) Discharge by Lapse of Time
If contract is to be performed within a specified time each party to it
must perform his promise within the stipulated time. On the
completion of the stipulated time the contract is discharged.
Example- if a debater does not pay his debt by the agreed date the
creditor must file a suit within three years . If he does not sue within
that period he loses the legal right to claim the debt and the debtor is
not lawfully bound to pay.

57. 5) Discharge by operation of law
A contract may be discharged by the operation of law. Like
• Merger(when an inferior right merge into superior right, (lesser and
owner example),
• Unauthorized alteration ( alteration the original contract without the
knowledge of other party) and
• insolvency.

58. 6) Discharge by Breach of Contract
if a party to a contract without a valid or lawful reason, refuses to
perform his obligation under the contract the other party has the right
to repudiate( Cancel) the contract.
Example- Harish promises to deliver a horse to shyam on 19 April. On
the appointed day he refuses to deliver the horse.

59. Remedies for Breach of Contract
Breach of Contract
if a party to a contract does not perform his obligations or expressly
refuses to perform the contract it is called breach of contract.
In the case of a breach of contract the party who does not or refuses to
perform his obligations is called the defaulting party whereas the other
party is the aggrieved party.

60. Remedies Available to Aggrieved Party 1/5
1) Can cancel the Cancellation
When one party commits a breach of contract the aggrieved party can
assume the contract to terminate and is exempted from further
performance.
Example- Mohan makes a contract to sell certain goods to Sohan for
rupees 10000 and Sohan promises to make the payment on delivery. If
Mohan refuses to deliver the goods at the promised time Sohan can
assure the contract to terminate. In this case he is freed from his
commitment to pay 10000.

61. 2/5
2) Claim for quantum meruit
Quantum meruit literally means ‘as much as earned’ when one party at
the request of another does something or supplies some goods to the
other party and if the compensation for such goods or services has not
been defined at the time of the contract then the law decides what
should an adequate compensation for such goods or services.
Example- A promises to construct a house for B for 50000. after A has
started construction but before its completion. B abrogates the
contract and stops A from work. A can sue for an adequate
compensation for the work that he has already done can also sue for
damages.

62. 3/5
3) Claim for injunction (stay order)
It is a negative order by the court that restrains a party from doing something.
Case law- warner bros vs. Nelson
A film actress agreed to act exclusively for warner bros for a year and for no other
producer. During the year she contracted to act for another producer. It was held
that she could be restrained by injunction from doing so.
4) Claim for restitution
When a contract becomes void than any person who has received any advantage
under such contract is bound to restore it or to make compensation for it to the
person from whom he received it.
Example- A pays B rupees 1000 in consideration of B promising to marry C, A’s
daughter. C is dead at the time of promise. The agreement is void but B must repay
A rupees 1000.

63. 4/5
5) Claim for specific performance (actual carrying out of the promise)
When in the case of a breach of contract damages are not deemed to be an
adequate remedy the aggrieved party can sue the party in breach to carry
out his promise.
No standard for calculating
 money can’t provide adequate relief
6) Claim for damages
Damages are a monetary compensation allowed to the aggrieved party by
law for the loss or injury suffered by him for the breach of a contract.
The purpose here is to help the party who has suffered a loss to retain the
position it had before the loss was imposed upon the party by the breach of
contract.

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Example- A promises to deliver 100 cycle tyres at rupees 50 each to B
on 1 may 2022 but does not perform his promise on that date. In such
circumstances if the price of a cycle tyre on 1 May is rupees 55 per tyre
then B is entitled to claim damages at rupees 5 per tyre from A and can
sue for such damages.

65. QUASI CONTRACT (Section 68-72)
Quasi contract is a transaction in which there is no contract between
the parties the law creates certain rights and obligations between them
which are similar to those created by contract.
Example- if A pays a sum of money to B believing him to be his creditor
when as a matter of fact he was not B is bound to return the money to
A on the assumption that the above sum given to him was by way of
loan.

66. CHARACTERISTICS OF QUASI CONTRACTS
1) Such contracts are not made by the desire of the parties but are
created by law of the land.
2) There is no agreement at all between the parties.
3) The contracts come into being after party has received a profit or
money.

67. TYPES OF QUASI CONTRACTS 1/4
Section 68-72 of the Indian Contract Act describe the various types of
Quasi Contracts which are as under-
1) Claims for necessaries supplied (section 68)
If a person incapable of entering into a contract or any one whom he is
legally bound to support is supplied by another person with
necessaries suited to his condition in life the supplier is entitled to
recover the price from the property of the incapable person.
Example- Ajay is a minor. He buys rice for food from Vijay. Vijay can
receive the cost of rice from Ajay’s property.

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2)Payment by an interested person (section 69)
If a person makes the payment which is the legal duty of another
person. In such cases the person who made the payment can recover
such money from the person who is legally bound to pay.
• Case law- Hazari lal vs. Naurang Lal
In this case H was lease holder of land that belonged to N who had not
paid any land revenue for many years. The state had served a notice to
N that unless the arrears of the revenue were paid by a certain date he
land would be auctioned to the arrears. H therefore paid the revenue
arrears and later claimed the same from N. the court held that N was
liable to pay H the amount he had to clear the arrears.

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3)Obligation of a person enjoying benefits of non gratuitous act (section
70)
Where irrespective of any agreement or contract a person lawfully does
something for another person on gratuitously(free) and the other person
enjoys the benefits of the thing done the latter is bound to pay
compensation to the former in respect of the thing done.
Case law- Damodar Mudaliar vs. Secretary of State for India
The government carried out repairs to an irrigation tank owned by the
government jointly with a zamindar and sued the zamindar for contribution
in respect of expenses incurred for repairs it was held that government in
carrying out the repairs had acted lawfully and had not intended to carry
them out gratuitously and that the zamindar who enjoyed the benefit of the
repairs was liable to pay compensation.

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4) Responsibility of finder of goods (section 71)
A person who finds goods belonging to another and takes them into his
custody is subject to the same responsibility as a Bailee.
5) Money paid by mistake or under coercion (section 72)
A person to whom money has been paid or anything delivered by
mistake or under coercion must repay or return it.
Example- A and B jointly owe rupees 10000 to C. A alone pays the
amount to C without the knowledge of B. later B also pays rupees
10000 to C to clear the loan. Here C is lawfully bound to return the
amount paid by B.

71. AGENCY (SECTION 182) 1/2
According to the section 182 of Indian Contract Act 1872 “ An agent is a person
employed to do any act for another or to represent another in dealings with third
persons. The person for whom such act is done or who is so represented is called
the principle.”
Who may employ an agent?
Any person who is of the age of majority according to the law to which he is subject
and who is of sound mind may employee an agent.
• No consideration is necessary to create an agency.

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Who is principle?
Any person who employs another person to perform an act and who is being
represented by another person in dealing with the third party is the principal.
Who is an Agent?
A person employed by the principle to act on his behalf represent him in the
dealings with the third party and also to bring him into a contractual relationship
with the third party is called an Agent.
• An agent is authorized by his principle to represent him.
• Agency is a contractual relation between two parties created by agreement
express or implied.

73. MODES OF CREATING AN AGENCY 1/3
Creation of agency means creation of the relationship between the
principle and the agent. The contract of agency may be created by any
of the following ways-
I. Agency by Express Agreement /Express Authority
An agency can be established by an oral or a written agreement. When
an agency is created by a written contract the agent is bound by law to
function according to the terms of such contract.
Example- X (owner of a shop) appoints Y as his agent by written
agreement to manage his shop. Here the relationship of principle and
agent has been created between X and Y by an express authority.

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II. Agency by Implied Authority
An agency is said to be implied when it is understand from the conduct
or behavior of the parties.
Example- P owns a shop in Agra but he lives in Chandigarh and visits
the shop occasionally. The shop is managed and runned by Q and he
orders the goods to R in the name of P for the purpose of the shop and
pays the amount of ordered goods out of P funds with P knowledge.
Here Q has an implied authority from P to order goods in the name of P
for the purpose of the shop.

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III. Agency by Operation of Law
At times contract of agency comes into operation by virtue of law.
Example- according to partnership act every partner is agent of the firm as
well as of other partners.
IV. Agency by Ratification
When the principle approves an act of the agent and the ratification of an
act can be express or it can be implied from the conduct of the person on
whose behalf it has been done.
Example- A gives some money belonging to B as loan to C without B
knowledge. Later B receives interest on the loan from C. B conduct in this
case implies his acceptance of A action.

76. RIGHTS OF AN AGENT 1/2
1) Right to receive remuneration
Once he has completed his work then agent is entitled to get his agreed
remuneration.
Example- A employs B to recover 1000 rupees from C. through B misconduct the
money is not recovered. B is entitled to no remuneration for his services and must
make good the loss.
2) Right of indemnification against acts done in good faith
Where the agent do acts in good faith on the instruction of principal then agent is
entitled for indemnification of any loss or damages.
3) Right to Lien
The Agent has the right to retain goods, papers and other property whether
movable or immovable.

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4) Right to compensation
The agent has the right to be compensated for injuries, damages and loss.
Example- B a broker at Calcutta by the orders of A, a merchant there
contracts with C for the purchase of 10 casks of oil for A. afterwards A
refuses to receive the oil and C sues B. B inform A who repudiates the
contract altogether. B defends but unsuccessfully and has to pay damages
and costs and incurs expenses. A is liable to B for such damages, costs and
expenses.
5) Right of stoppage of goods in transit
An agent can stop the goods in transit to the principal if he or she has
purchased the goods either by incurring a personal liability or the principal
has become insolvent.

78. DUTIES OF AGENT 1/3
1) Duty to follow principles directions or customs
The first duty of every agent is to act within the scope of authority conferred
upon him and perform the agency work according to the directions given by
the principal.
Example- B a broker in whose business it is not the custom to sell on credit
sell goods of A on credit to C whose credit at the time was very high. C
before payment becomes insolvent. B must make good the loss to A.
2) Duty to carry out the work with reasonable skills and diligence
The agent must conduct the business of the agency with reasonable
diligence and to the best of his skill.

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Example- A agent for the sale of goods having authority to sell on credit sells
to B, on credit without making the proper and usual enquiries as to the
solvency of B. B at the time of such sale is insolvent. A must make
compensation to his principal in respect of any loss thereby sustained.
3) Duty to render account
It is the duty of an agent to keep proper accounts of his principles money or
property and render them to him on demand.
4) Duty to communicate
It is the duty of an agent in cases of difficulty to use all reasonable diligence
in communicating with his principle and in seeking to obtain his instructions
before taking any steps in facing the difficulty or emergency.

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5) Duty not to deal on his own account
An agent must not deal on his own account in the business of agency. He
must not himself buy from or sell to his principal goods he is asked to sell or
buy on behalf of his principal.
Example- A directs B his agent to buy a certain house for him. B tells A it can
not be bought, and buys the house for himself. A may on discovering that B
has bought the house compel him to sell it to A at the price he gave for it.
6) Duty not to make any profit out of his agency except his remuneration
An agent
Must not make any profit out of his agency, he must pay to his principal all
moneys received by him on principal account.

81. TERMINATION OF AGENCY (Section 201-210)
1/5
When the relationship between principal and his agent is ended. It is
called termination of agency.
Termination of agency may be –
I. By the act of parties
II. By the operation of law
I. By the Act of the Parties
A) By Agreement- by mutual agreement between principal and agent
the agency can be terminated at any time or any stage.

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B) Revocation by the principal- agency can be terminated by the
principal revoking the agents authority. Revoke the authority given to
his agent at any time.
C) Revocation where authority has been partly exercised- the principal
can’t revoke the authority given to his agent after the authority has
been partly exercised.
Example- A authorizes B to buy 1,000 bales of cotton on account of A,
and to pay for it out of A's moneys remaining in B's hands. B buys 1,000
bales of cotton in his own name, so as to make himself personally liable
for the price. A cannot revoke B's authority so far as regards payment
for the cotton.

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D) Termination of agency where agent has an interest in subject
matter
Where the agent has himself an interest in the property which forms
the subject matter of the agency. The agency can’t be revoke.
Example- A gives authority to B to sell A land and to pay himself out of
the proceeds the debts due to him from A. A can’t revoke this authority
nor can it be terminated by his insanity or death.
E) Compensation for revocation by principal and agent
Where there is an express or implied contract that the agency should
be continued for any period of time.

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II. By Operation of Law
A) Completion of Business or Expiry of time- when the business of
agency is completed the relationship between principal and agent also
comes to an end automatically.
Similarly where the agency has been created for a fixed time the
agency is automatically terminated on the expiry of that time.
B) Death of the Principal or Agent- when either the principal or the
agent dies the agency relationship is automatically terminated.

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C) Insanity of Principal or Agent- when either the principal or his agent
becomes unsound mind the agency relationship is automatically
terminated.
D) Insolvency of the Principal- when the principal is declared as an
insolvent the agency relationship is terminated.
E) Subsequent impossibility- agency is also terminated when after the
creation of the agency like the subject matter of the agency business is
destroyed.