ICA&SR Acts Presentation

The Indian Contract, 1872 & The Specific Relief Act, 1963.
 The Indian Contract, 1872 - Sections 1 to 75 . (ICA – Common Law)

 The Specific Relief Act, 1963. Sections 1 to 42 .( Equity Law)
 Indian Contract Act 1872. - Frame work of the Act
Rules regarding Performance of Contract Discharge of contracts

Ch I: Offer and Acceptance (including Ch IV: Secs. 37 to 67: -
Principles of revocation) Performance of contracts
Ch II: Secs. 10 to 30: Ch V Secs. 68 to 72: -
Remaining essentials: (Statutory) Quasi Contracts
i. Capacity of Parties. Ch VI: Secs. 73 to 75 -
ii. Consensus –ad-idem Law relating to
iii. Consideration consequences of
iv. Lawful Object. breach of
Ch III: Secs.31 to 36: Contingent contracts. Obligations.
1
The Indian Contract, 1872 & The Specific Relief Act, 1963
(Contd.)
• Meaning of Common Law: Common Law represents that body of
unwritten law which arose out of conventions and usages in England and
which had obtained the approval of Common Law Courts in England in
contra distinction with Equity Courts, which established principles of
Equity.
2 eyes to study a Statute
 First eye: Object of the Act.
 Second Eye: Application of the principle of semantics.
Object of the ICA: Based on a Latin Maxim:
“Certum Est Quod Certum Reddi Potest” That which is certain can be made
certain.\
Classification of Laws:
S: Substantive Laws: Principles on a given subject-matter.
W: Welfare Laws: Laws providing welfare to the people or society
A: Adjectival Laws: Procedural Laws – Rules for the enforcement.
P: Pecuniary Laws: Laws that bring forth revenue to the Government.
2
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.)
Definitions of the term Contract:
1. Halsbury’s Laws of England: “A contract is an agreement made
between two or more persons is intended to be enforceable by law and is
constituted by the acceptance by one party of an offer made to him by the
other party to do or to abstain from doing an act”.
2. The American Restatement of Law of Contract: “ A contract is a set
of promise/s for the breach of which the law gives a remedy, or the
performance of which the law in some way recognizes as a duty”.
3. Pollock and Mulla: “The Law of contract may be described as the
endeavor of the public authority, a more or less imperfect one by the
nature of the case to establish a positive sanction for the expression of
good faith which has grown up in the mutual dealings of men of average
right-mindedness”.
4. Sir William Anson: “The Law of Contract may be defined as that
branch of the law which determines the circumstances in which a
promise shall be legally binding”
3
Definitions of the term Contract: (Contd.)

5. Sir John Salmond: “The Law of Contract is one which creates and
defines obligations between the parties”.
6. ICA: Statutory Definition: Section 2 (h): “An agreement
enforceable by law is a contract”.
Analysis of the above definitions:
• Each definition brings out some essentials that may be found in a
contract.
• Hence there is no one definition which gives out all the essentials to be
found in a valid contract.
• However, the statutory definition appears to be built upon a succession
of the definitions of the elements that make a contract.
• But the various definitions give rise to axiomatic questions the answers
to which provide a picture regarding formation of a valid contract.
4
Axiomatic questions: are those questions/statements which are
capable of acceptance without any proof. These have the following
characteristics: 1) commands universal acceptance; 2) requires no test
in a laboratory & 3) no demonstration is required.
AXIOMATIC QUESTIONS IN LAW OF CONTRACT:
 “ All contracts are agreements while all agreements are not”
 “ The law of contract, observes Salmond, is not the whole law of
obligations nor is it the whole law of agreements”
 “Consensus” i.e., mutual assent, however elusive in practice, is at
the root of the contract”.
Against the backdrop of these questions the Statutory definition in
Section 2 (h) of ICA.
Based on the statutory definition various types of contracts which are
to be analyzed since what arises from a contract is ‘contractual
obligations’. As it is there is no such term ’contract’ in its noun form.
5
Types of Contracts:
1) VALID CONTRACT: possessing all the ingredients and having

the force of law
2) VOID AGREEMENT: nullity in the eyes of law.
3) VOIDABLE CONTRACT: Ostensibly valid contract and can be set

aside at the option of either of the
parties to the contract and not at the
instance of other/s.
4) ILLEGAL AGREEMENTS: contrary to the provisions of law and

hence incapable of enforcement.
5) UNENFORCEABLE though fulfilling the essentials of a valid

CONTRACT: contract, ceases to be enforceable for
want of technical requirements.
6
SIGNIFICANCE OF VALID CONTRACT:

 Valid Contract (VC) = ?
= Ag. + OAC3L/LB.
= Vinculum Juris (VJ) – Legal tie or bond.
EXPANSION OF OA C3 L/LB: INGREDIENTS OF A VALID
CONTRACT.
 General ingredients: O : Offer
A : Acceptance
C-1: Capacity of parties
 Statutory ingredients: C-2: Consideration
C-3: Consensus-ad-idem
L : Legality of object
LB: Legal Bar
 Validity is to be infused into each one of the ingredients so that the
contract that may result in between the parties will be valid one.
7
Essentials of Valid Offer

Essentials
a) Must beof Offer– Valid
certain Sec 29 :Illustrations given in the Section.
a) Must be certain – Sec 29 Illustrations given in the Section.
b) Must be made to an ascertained person – if not possible may be made
b) to the be
Must “ whole
made world at large” person – if not possible may be made
to an ascertained
Case Laws:
to the “vwhole
i) POWELL world
LEE 1908 at284.
99 L.T. large”
ii) CARSLILL v CARBOLIC SMOKE BALL CO, 18931 QB 256.
Case Laws:
iii) HARBHAJAN LAL v HARCHARAN LAL, AIR, 1925 ALL 539.
I) There
c) POWELL v LEE
must be 1908 99 ltof284.
communication acceptance: Secs. 3 & 4: Case Laws
i) LALMAN v GAURI DUTT, 1911, 11 All,L.J. 489.
ii)
ii) RCARSLILL v CARBOLIC
v CLARKE, (Australian case), 1927SMOKE BALL CO, 18931 QB 256.
40 C.L.R. 27.
ii) WILLIAMS v CARWARDINE, 1883, 4 B.A.D. 621.
iii) HARBHAJAN LAL v HARCHARAN LAL, AIR, 1925 ALL 539.
d) Parties must intend to create legal relationship.: Case Laws:
I) BALFOUR v BALFOUR, 1919 2 K.B. 517.
ii) MRS. MERRITT V MERRITT, 1970, 2 ALL.E.R. 76.
iii) COWARD V MOTOR INSURANCE BUREAU, 1962, 1 ALL.E.R. 53.
iv) ROSE & FRANK CO. V J.R.CROMPTON, 1933, 2 K.B. 261.
8
Offer and Invitation to offer – Distinction:

 Statements made in the following cases do not amount to “offer” – but
called as offer to an offer or an Invitation to offer.
A) TENDER / STANDING OFFER:
Case Laws:
i) SPENCER v HARDING, 1870, 5 C.P. 561
ii) BADRI PRASAD V STATE OF M.P., AIR 1970 SC 760
B) RAILWAY TIME TABLES:
Case Laws:
i) DENTON V GREAT NORTHERN RAILWAY 1856, 119 E,R, 70
C) QUOTATION OF PRICES/CATALOGUE OF PRICES
i) HARVEY v FACEY, (Bumper Hall Pen’ case):, 1893 AC 552
ii) MCPHERSON v APPANNA, 1951, SC 182 (Olympia Stadium case).
9
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.
Offer and Invitation to offer – Distinction:

D) SELF-SERVICE SHOPS:
CASE LAW:
i) PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v BOOTS
CASH CHEMISTS (LONDON) LTD., 1952 2 QB 795.
E) AUCTION SALES: CASE LAWS:
i) HARRIS v NICKERSON, 1873 QB 286.
ii) PAYNE v CAVE, 1739 100 ER 502
F) VOLUNTARY RETIREMENT SCHEME CASE LAWS:
i) BANK OF INDIA v O.P. SWARNAKAR, 2003 2 SCC 721,753.
ii) STATE BANK OF PATIALA v ROMESH CHANDER KANOJI, 2004
2 SCC 651,656.
iii) BOARD OF TRUSTEES, VISAKHAPATNAM PORT TRUST v
T.S.N. RAJU, 2006 7 SCC 664, 679.
10
DIFFERENCE BETWEEN AN EOI, RFP, RFT & RFQ.

Expansion of abbreviations:
RFI: Request (or Registration) for information.( ) Determines the
EOI: Expression of interest . ( ) course of action and
RFP: Request for Proposal. ( ) Purposes and
RFO: Request for Offer. ( ) outcome.
RFT/RFQ: Request for Tender/Quotation. ( )
**************************************************************************
RFI Stage 1 EOI,RFI Stage 2 RFI Stage 3 RFP/RFO RFT/RFQ
**************************************************************************
Stake holder Supplier Supplier Problem clearly
Requirements Participation Pre-qualification Def/solution defined
enquiry specifications
Product needs Supplier Product & Open ended Product &
Service needs interest service questions to Service
Supplier lists capability solicit solutions requirement
Profiles & designs Processes
for bids assess-
-ment & awards
11
Essentials of Valid Acceptance

• Second essential feature of a valid contract.
• Section 2 (b) of ICA deals with Acceptance.
• The word Acceptance is not exactly found, but only the term
‘accepted proposal’.
• This term represents that once the proposal is accepted there arises a
‘promise’ between the parties. And this promise becomes binding on
them.
• As per Section 2 (c) the parties become ‘promisor and ‘promisee’.
• Thus every proposal, in its ultimate analysis, is made up of a
proposal from one side and the acceptance on the other.
EFFECT OF AN ACCEPTANCE: Explained by Sir William Anson:
• “Acceptance is to offer as what a lighted match is to a train of
gunpowder”
• It produces something which cannot be recalled or undone.
12
Essentials of Valid Acceptance (Contd.)

• Acceptance must be made by overt acts meaning some external
manifestation because a mere mental determination to accept
unaccompanied by external implication will not be sufficient.
Ingredients of valid acceptance:
1) There must be communication of acceptance and such
communication to become complete. (Sections 3 & 4).
2) Acceptance must be made by the person to whom the offer is made.
POWELL v LEE, 1908 99 LT 284
3) No burden of refusal is to be cast on the offeree. Case Law:
FELT HOUSE v BINDLEY, 1863 L.J. 835.
4) Acceptance must be unqualified and unconditional. (Section 7).
5) Acceptance must be of the entirety of the offer. Section 8.
6) Acceptance must be made before the offer lapses or withdrawn.
(Section 6).
13
COMMUNICATION IN LAW OF CONTRACT

 Communication creates a binding link between the parties.
 Communication to become complete as stipulated in the ICA
 The legal effect of communication will have to be worked out
depending on the mode of communication adopted between the parties.
Modes of communication
Parties facing each other Parties separated by distance

(Contracts inter-praesenti) i) By Post
ii) By Telegram
iii) By Telex
iv) By Fax
v) By Internet
14
COMMUNICATION IN LAW OF CONTRACT ( Contd.)
* Based on the mode of communication adopted the place of conclusion,

the time of conclusion and the courts which will have jurisdiction to
entertain the dispute gets decided.
• Parties facing each other: In these cases no difficulty arises to decide
about the time and place and jurisdiction as well since parties will be at
that place and time when the contract is entered into
• Parties separated by distance: In these cases as parties would be at
different places the time and place of conclusion of contract revolve
around the mode of communication adopted by the parties.
• Communication by Post: This mode envisages exchange of ordinary
correspondence between the two parties. Hence, the time and place of
conclusion will have to be decided as per the following rules/principles
Rule 1: The contract gets concluded at the time and place where the letter
of acceptance is posted. - ADAMS v LINDSELL, 1818 106 E.R. 250.
Rule 2: The above principle can be applied even if the offeror has not
indicated that the offered should send the acceptance by Post. –
DUNLOP v HIGGINS 1848 1 H.L.C. 381.
15
Communication by Post – Rules – contd:
Rule 3: The rule of acceptance is complete as soon as it is posted is to be
applied even if the letter of acceptance is lost in transmission. –
HOUSEHOLD FIRE INSURANCE CO., v GRANT, 1879 Ex. D 216.
Rule 4: Communication to a wrong person or to a wrong address will not
bind the offeror. – KARAN SINGH v THE COLLECTOR,
CHATTARPUR, AIR 1980 M.P. 89.
Note: The above rules are followed in English Law to the true letter and
spirit since acceptance once posted cannot be withdrawn. However, these
rules are applicable in Indian Law also subject the manner in which
communication becomes complete as per Section 4 of ICA.
Acceptance by Telephone and Telex: Being instantaneous mode of
communications the principle regarding the place of conclusion of contract
gets modified.
Telex: ENTORES LTD. V MILES FAR EAST CORPORATION, 1955 2 Q.B.
327.
Telephone: BHAGHWAN DAS v GIRDHARILAL & CO., 1966 S.C. 543.
16

Revocation of Proposal and Acceptance:
 The above said principles are to be adopted mutatis mutandis when
revocation of proposal and acceptance are made in Indian Law.
 As in English Law once a letter of acceptance is posted it creates a binding
and irrevocable contract, revocation of acceptance cannot be made. But,
in both the laws a proposal made may be revoked.
Acceptance through e-mail communication:
 Communication as outlined in Section 3 of the Act has also been
recognized by Section 10A of the Information Technology Act, 2000.
 As per this provision a contract cannot be denied enforceability on the sole
ground that that electronic records are used in its formation.
 In PROCD INC. v MATHEW ZEIDENBERG, 1996) it has been held that
where a user indicates his assent to the displayed terms by clicking ‘I
agree’ button on a website a valid communication of both the offer and
acceptance is said to have taken place.
 In TRIMEX INTERNATIONAL FZE LTD. v VEDANTA ALUMINIUM
LTD, 2010 3 SCC 1 it has been held that communication taking place
through e-mail has been held to give rise to a valid contract.
17
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd)
.
STANDARD FORM OF CONTRACTS

 In modern days principle of negotiation and Theory of Freedom of
Contract could not be given a full play due to very many exigencies.
 This situation has given rise to Standard Form of Contracts which are
other wise called as “Printed Form of Contracts” or “Take it or Leave it
Basis Contract” or a “Contract of Adhesion”.
 When the above manner is adopted a person has to enter into a contract
containing the terms and conditions of the contract settled by the person
who supplies that Standard Form. If not signed by a party no contract
would arise.
 In these Standard Form of Contracts, when terms and conditions are
settled by one party alone, not following the principle of negotiation as in a
regular contract, there is scope of incorporation of ‘Limitation Clauses’ or
‘Exemption Clauses’ by the party who prints and supplies the standard
form.
 As the above said clauses cause harm to the party signing the contract
Courts of Law have devised methods to mitigate the rigours caused by
those clauses by developing Canons of Interpretation of those types of
contracts.
18
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd
CANONS OF INTERPRETATION
1. Notice must be given and that notice must be a reasonable one.
a) RICHARDSON v ROWNTREE, 1894 AC 217. Limitation of

liability.
b)OLLEY v MALBOROUGH CURT LTD.., 1949 1 K.B. 532. notice
of exoneration of liability cannot be informed at a different time.
c) INTERGLOBE AVIATION v N.SATCHIDANAND, 2011 7 SCC
463. Notice given but passenger not reading is no excuse and the
clauses will be binding on him.
2, There should be contractual document. CHAPLETON v BARRY
U.D.C., 1940 1 K.B. 41 C.A. Exemption from liability.
3. There should be no misrepresentation. CURTIS v CHEMICAL
CLEANING AND DYEING CO., 1951 1 K.B. 805. - representation
made did not cover the exemption clause.
4. The terms of the contract should be reasonable. M/s. LILY WHITE v
MUTHUSWAMI, AIR 1966 Mad. 13. Dry cleaner’s receipt –
restriction of liability irrespective of the nature of the cloth –
unreasonable on the ground of public pocy – hence clause is
unenforceable as demanded by the Dry cleaner.
19
CANONS OF INTERPRETATION (Continued).
5. Strict interpretation of exemption clause. – ANDREWS BROTHERS v
SINGER & CO. LTD., 1943 1 K.B. 17.
6. Fundamental Breach of contract. –
a) ALEXANDER v Railway Executive, 1951 2 K.B. 88.
b) DAVIES v COLLINS, 1945 1 ALL.E.R. 247.
7. Non-contractual liability. – WHITE v JOHN WARWICKSHIRE & CO.
1953 1 W.L.R. 1283.
SHRINKWRAP LICENCES:
 This licence gets its name from packages 9usually of retail software)
covered in plastic ‘shrink wrap’.
 This licence have written terms, mostly unsigned, stating that acceptance
on the part of the user to the license is indicated by opening the package.
 These terms which are accessible only upon opening the package are not
binding as they are not communicated prior to the formation of the
agreement. – STEP-SAVER DATA SYSTEMS INC. V WYSE
TECHNOLOGY, 1991 3rd Cir).
 But where there is an approval or return policy in the licence the customer
would be deemed to accept the terms if he continues to use the goods and
does not return them within the stipulated time. HILL v GATEWAY 2000
Inc. 105 F (7th ?Cir) 1997.
20
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd).
C1 – C3 : CAPACITY OF PARTIES
 Capacity of parties is a statutory essential as per Section 10 ICA and hence the same is
necessary to create a valid contract.
 Capacity means competency or qualification required to enter into a contract.
 While Section 10 necessitates capacity as an essential qualification, Section 11 provides

the features for the ‘Capacity’ by way of an explanation.
 The Act requires competency as an element since persons who are below the competency
level are permitted to enjoy the protection granted under the Act.
 Protection is being given since their minds are vulnerable and can be easily exploited.
 Section 11, therefore, deals with personal capacity in three distinct branches:
(a) disqualification based on age;
(b) disqualification based on mental state and
(c) other special disqualifications prescribed by law.
21
C1 – C3 : CAPACITY OF PARTIES (continued)

INCAPACITY OF PARTIES
Mental Deficiency Status

a) Alien enemies
b) Foreign Sovereigns
c) Corporations
(Sole &Aggregate)
Minors Insane Drunken d) Convicts
Persons Persons e) Bankrupts
22
Mental Deficiency: Minors.

 As per Section 11 of ICA a person’s capacity is decided on the basis of
age.
 Basis of age is to be tested subject to the law applicable to him.
 In other cases, viz., when he is or his property or both, a guardian is
appointed by a Court or of whose property is under the
superintendence is assumed by the Court of Wards such minor is said
to attain majority on completion of the age of 21 years.
 The above principle is followed since a minor’s mental composition is
considered to be weak, in the sense that he does not possesses the
required ‘compos mentis’ and as such being susceptible for
exploitation.
 In view of the above, law extends protection to a minor’s agreement by
granting immunity from liability holding that he not competent to
enter into a contract.
23
Mental Deficiency: Minors. (Continued)

Nature of a minor’s agreement: Indian Law:
 Section 9 requires competency and Section explains the meaning of the
term ‘competency’, neither of these sections speak about the legal effect
of an agreement with a minor.
 The legal effect has come to be laid down in MOHRI BIBEE v
DHARMADAS GHOSE, 1903 30 Cal 539, holding that a an agreement
with a minor is void ab-initio.
 The above decision as has been followed in (a) Mir SARWARJAN v
FAKHARUDDIN MOHAMED, 1912 39 Cal 232 and (b) MA HNIT V
HASHIM, 1920 22 Bom. L.R 531. (P.C).
Liability of a minor in English Law:
 Under the common Law of England an infant’s contract is generally not
void but voidable at his option .
 This rule was later on modified by the Infant’s Reliefs Act, 1874. which
declared certain contracts being absolutely void while other contracts
being voidable.
24
Position of a minor outside the realm of Law of contract:
 The minor’s position in Law of Contract has been settled in MOHRI
BEEBEE’s case. However, lawyers using their ingenuity attempted to
fasten liability on the minor by taking recourse to the doctrines known
to other branches of law since minor’s misrepresented their age and
this constrained the other party to enter into a contract with him. A
study is, therefore made in this regard with the help of the doctrine
invoked by the lawyers.
1. Doctrine of Estoppel:
 A negative doctrine based on the Law of Evidence under Section 115
of The Evidence Act.
VAIKUNTARAMA PILLAI v AUTHIMOOLAM CHETTIAR, ILR
1915 38 Mad 1071. – Principle that there is no estoppel against a
Statute. This decision has been followed in GADIGAPPA v
BOLANGOUDA, AIR 1931 Bom 561.
25

Position of a minor outside the realm of Law of contract: (Contd)
1. Doctrine of Estoppel (contd):
 In KHAN GUL v LAKHA SINGH, air 1928 Lah 609 – General principle of
estoppel cannot over ride the Special Law.
2. Doctrine of Ratification:
 IN ARUMUGAM v DURAISINGA, ILR 1914 37 Mad 38 – no promise made
by a person during his minority can be ratified.
 In BHOLA RAM v BHAGAVAT RAM, AIR 1927 Lahore 24,26 – since every
contract requires fresh consideration , consideration passed under an earlier
contract cannot be imported.
3. Application of Law of Torts:
 JOHNSON v PYE (1665) Contractual form of action cannot be converted
into any other form
 In BURNARD v HAGGIS, 1863 32 L.J. 189, - if contractual action is
separable from tortious action a minor can be held liable under the Law of
Torts.
26

Position of a minor outside the realm of Law of contract: (Contd)
4. Doctrine of Restitution:
 Leslie (R) Ltd v Sheil, 1914 3 K.B. 607 – Money cannot be returned
on the basis of Restitution.
 Restitution can be applied to goods and more so in the case of minor
Restitution is limited to specie only. ’Restitution stops when
repayment begins’.
5. Doctrine of Compensation: Sections 64 & 65 ICA:
This doctrine cannot be applied to a minor’s agreement since these
sections presuppose an agreement being discovered to be void or
when a contract becomes void.
But under Section 33 of the Specific Relief Act an action may be
made against a person incompetent to contract and on the basis of
equity compensation may be awarded.
27

Minor’s position : Liability for ‘Necessaries’:
 Though a minor cannot be generally held liable on the basis of ‘a
contract’ he can be held liable for ‘necessaries’ supplied to him on the
basis of ‘Quasi-contractual liability’ under Section 68 of ICA and the
liability may be enforced as against his property.
 Ingredients of Section 68:
i) Necessaries have been supplied.
ii) To a person who is incapable of making a contract.
iii) To a person who is dependent upon such person incapable of making a
contract.
iv) For reimbursement no personal action can lie against the minor but
reimbursement can be obtained from the property of such incapable
person.
28

Minor’s position : Liability for ‘Necessaries (Continued) CASE LAWS:
i) JOHNSTONE v MARKS, 1667 19 QBD 509 – necessaries include
articles required to maintain in the state, degree and station in life in
which he is. This principle has been followed in JAGON RAM v
MAHADEO PRASAD, 1909 36 (Cal) 778,779.
ii) NASH v INMAN, - Fancy waist coats ordered by the infant with a
tailor were considered as not necessaries.
iii) CLYDE CYCLE COMPANY v HARGREAVES, 1898 78 LT 296 –
racing cycle was held as a necessary one for an apprentice learning
cycle racing.
iv) RYDER v WOMBWELL, 1869, LR 4 Ex. 32 – For an infant earning
meagre income cryst5als and diamonds were considered as not
necessaries.
v) KUNWARLAL v SURAJMAL, AIR 1963 M.P. 53 – House given for
rent for continuing studies was considered as necessaries.
29

BENEFICIAL CONTRACTS OF SERVICE AND APPRENTICESHIP
Position in English Law regarding Apprentice contract:
 Under English Law an infant is bound by the contract of
apprenticeship or service because such contracts are beneficial to hi8m
and help him in earning his livelihood. - CHAPLIN v LESLIE
FRENIN PUBLISHERES LIMITED, 1968, 3 All.E.R. 764. In other
words contracts of apprenticeship should on the same footing as
contract of necessaries.
Position in Indian Law: Indian Law does not make a minor bound by the
contract of apprenticeship except when contracts of apprentice is
entered into based on the provisions of Indian Apprenticeship Act,
1850. However, if such contracts are entered into validly by the
guardian of a minor on behalf of a minor the same shall be binding on
the minor.
Contracts of service: RAJ RANI V PREM ADIB , AIR 1949 Bom 215.
30

 Position of a minor as a Plaintiff: As per the decision in Mohri Bibi’s
case a minor is incompetent to contract and hence he cannot be made a
defendant in a suit. However, a minor can be a Plaintiff in a suit as has
been held in the case of RAGHAVACHARIAR v SRINIVASA, AIR
1917 Mad 630.
 But the legal Position of a minor as settled in MATHAI MATHAI v
JOSEPH MARY, 2015, 5 SCC 622. must also be noted as it remains to
be the law as on date.
“As per the Indian Contract Act, 1872 it is clearly stated that for an
agreement to become a contract, the parties must be competent to contract
wherein age of majority is a condition for competency, The law cannot be
read differently for a minor who is a mortgagor and a minor who s a
mortgagee as there are rights and liabilities in respect of immovable
property would flow out of such a contract on both of them”
31
C1 – C3 : CAPACITY OF PARTIES (continued)
INCAPACITY OF PARTIES (continued)
Mental Deficiency: Based on Sound mind: 2nd ingredient:
 Section 12: Meaning of Sound mind: If a person is capable of
understanding the contract signed and forming a rational judgment as
to its effects upon his interests he is said to possess sound mind and
otherwise not.
 3rd ingredient: No disqualification is placed on a person by any law
applicable to him. In other words the ‘Status’ of a person is decided
based on the law applicable to him.
 Classes of person falling under the category are:
1) Alien enemies,
2) Foreign Sovereigns
3) Corporations (Sole & aggregate)
4) Convicts
5) Bankrupts
***********************
32
C2 – C3 : CONSIDERATION
 Is a statutory ingredient set out in Section 10 of the ICA.
 Based on the Latin Maxim: ‘EX NUDO PACTO NON ORITUR
ACTIO’ – out of a naked agreement no cause of action arises.
 This doctrine is to be studied in relation to Section 2 (d), Section 24 &
25 of ICA.
 Section 2 (d) explains the meaning of the term ‘Consideration’; Section
24 relates consideration to the Object of the contract and Section 25
lays down the legal effect of an agreement without consideration
followed by Exceptions to that principle.
 Shortly called as ‘Nudum Pactum’ – Naked Agreement.
 Definitions of the term ‘Consideration’:
 SIR FREDERICK POLLOCK: “An act or forbearance of one party,
or the promise thereof, is the price for which the promise of the other is
bought and the promise thus given for value is enforceable”
33
C2 – C3 : CONSIDERATION (Continued)
Definitions of the term ‘Consideration’ (Continued)
 BLACKSTONE: Consideration is the recompense given by one party to
another.
 LUSH.J in the case of CURIE v MISA:.: “ A valuable consideration in
the sense of the law may consist either in some right, interest, profit or
benefit according to one party. or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the other”.
 Justice Patterson: “Consideration means something which is of some
value in the eyes of law. It may be some benefit to the plaintiff or some
detriment to the defendant”.
 FAZALADIN v PANCHANAN DAS: AIR 1957 Cal 92.
“Consideration is the price of a promise .return or QUID PRO QUO,
something of value received by the promisee as an inducement of the
promise”
34
Definitions of the term ‘Consideration’ (Continued)
 Statutory Definition: Section 2 (d): Ingredients of this section:
1. Consideration must be given at the desire of the promisor.
2. Consideration must be provided by the promisee or any other person.
3. Consideration may be past, present or future.
4. Consideration may be act or abstinence.
Explanation to the Statutory ingredients:
1, “At the desire of the promisor”: On the demand of the promisor
Case Laws:
 DURGA PRASAD v BALDEO AND OTHERS, 1880 3 All 221. –
Held: consideration not present at the desire of the promisor
 KEDAR NATH V GORIE MOHAMED, 1886 ILR 14 Cal. – Held:
consideration was present and based on the same the promisee
altered his position.
35
Explanation to the Statutory ingredients:
1, “At the desire of the promisor”: Case Laws (continued):
 The decision in KEDAR NATH”s case has been followed in DISTRICT
BOARD OF RAMNAD v Md. IBRAHIM, AIR 1933 Madras 624.
 ABDUL AZIZ v MASUM ALI, AIR 1914 All 22 – Held: Consideration
promised can be recovered as the promisee has altered his position.
2nd ingredient: “Consideration must be provided by the promisee or any
other person:
 According to Indian consideration may be provided either by the
promisee or by any other person; while in English Law consideration
should be provided only by the promisee and not by any other person.
 This ingredient has given rise to 2 doctrines viz., Doctrine of Stranger
to Contract and Doctrine of Stranger to consideration
 These doctrines are also known as Doctrine of Privity to Contract or
Doctrine of Privity of Consideration.
36
2nd ingredient: Explanation: (Continued):
 The question of consideration being provided by the promisee or by
any other person had its genesis in English Common Law, having been
adopted by the Court of King’s Bench as early as 1677 in DUTTON v
POOLE, (83 E.R. 523). - On the basis of Equity the court decided the
liability ,
 After 200 years later in the case of TWEEDLE v ATKINSON, 1871 121
ER 762, the Court refused to follow the decision laid down the case of
DUTTON v Poole stated supra, holding that the established principle
in English Law is that “No stranger to consideration can take
advantage of a contract although made for his benefit.
 This case laid down the foundation of what subsequently came to be
known as the doctrine of “PRIVITY OF CONTRACT” which means
that a contract is a contract between the parties and no third person
can sue upon it even it is intended for his benefit.
37
Doctrine of Stranger to Contract: Position In Indian Law:
 DUNLOP PNEUMATIC TYRE CO v SELFRIDGE & COMPANY 1915
AC 847. – Held that a stranger to contract cannot sue upon a contract.
Exceptions to the Doctrine of Stranger to Contract:
 To the Rule of Stranger of Contract, in course of time .the courts have
introduced a number of exceptions in which the rule of Privity of
Contract does not prevent a person from enforcing a contract which
has been made for his benefit but without his being a party to it.
 Many of these exceptions are connected with the special branches of
law of contract such as Negotiable instruments, agency etc. The
exceptions may be considered under the following captions:
1) Trust or Charge
2) Marriage Settlement, Partition or other Family arrangements.
38
Exceptions to the Doctrine of Stranger to Contract: (Continued):
3) Acknowledgment or Estoppel
4) Covenants running with the land.
1) Trust or Charge: A person in whose favour a charge or other interest
in some specific property has been created may enforce it though he is
not a party to the contract.
 Examples for Charge: KHWAJA MOHAMAED KHAN v HUSSAINI
BEGUM, 1910 37 IA 152
 Example for Trust: RANA UMA NATH BAKSH SINGH v JANG
BAHADUR, AIR 1938 PC 245.
 Constructive Trust: CHANDHAN AMIR ULLAH v CENTRAL
GOVT., 1959 All.L.J. 271.
39
 2nd ingredient: Explanation: (Continued):
 Exceptions to the Doctrine of Stranger to Contract: (Continued):
2. Marriage Settlement, Partition or other Family arrangements.
a) Marriage Settlements: ROSE FERNANDEZ v JOSEPH
GONSLAVES, AIR 1925 Bom. 97.
b) Partition Arrangement: SHUPPU AMMAL v SUBRAMANIAN,
IKLR 1910 37 Mad 233.
c) Family Arrangement: DAROPTI v JASPAT RAI, 1905 PR 171.
3. Acknowledgement or estoppel:
a) DEVARAJ URS v RAM KRISHNAIAH, AIR 1962 Mys.109.
b) GUJARAT STATE FINANCIAL CORPORATION v M/s., LOTUS
HOTELS (P) LIMITED, AIR 1983 S.C. 848: Promissory Estoppel.
4. Covenant running with the land: TULK v MOXHAY, 1919 88 LT
K.B. 861.
40
Position of Stranger to Contract in English Law:
 A contract cannot be enforced by a person who is not a party to
contract to it even though it is made for his benefit . He is a stranger to
contract and can claim no rights under it. In this regard the position
is similar in English Law and Indian Law.
Stranger to consideration; Position in English Law:
 In English Law consideration must move from the promisee only.
This is because as LORD VISCOUNT HALDANE declared in
Dunlop’s Case that “in the Law of England certain principles are
fundamental. One is that only a person who is a party to a contract
can sue on it. Our Law knows nothing of a JUS QUAESITUM
TERTIO arising by way of a contract. Such a right may arise under
special laws. A second principle is that if a person enters in to a
contract under seal he must be able to enforce it by establishing
passing of consideration”
41
Stranger to consideration; Position in English Law: (Continued):
 The position in English Law has been generally criticized. In 1937
the Law Revision Committee under the Chairmanship of Lord
Wright also criticized this doctrine and recommended its abolition.
The Committee stated ‘where a contract by the express terms
purports to confer a benefit directly on a third party, the third party
shall be entitled to enforce the promise in his own name provided that
the promisor shall be entitled to raise against 3rd party any defence
that would have been valid against him’. But no steps were taken by
the English Parliament till 1966.
 Therefore, in the case of BESWICK v BESWICK, 1966 3 All.E.R. 1 a
departure was made from the regular doctrine and a judgment was
given in favour of a third party to whom benefit enured through a
contract between two other persons.
42
Stranger to consideration; Position in English Law: (Continued):
Present Position:
 The Contracts (Rights of Third Parties) Act, 1999 has been enacted. As
per this law Contracts can be enforced by a Third party if it confers a
benefit to him. This means that, as on date, the Doctrine of Stranger to
Consideration, as was previously applied, is no longer a good law.
 However, this provision does not apply if on a proper construction of the
contract it appears that the parties did not intend the same to be
enforceable by the third party.
 This rule, therefore, raises a rebuttable presumption in favour of a third
party. But, benefit of doubt is given in favour of the third party.
 The onus of proof is on the person who contends that the contracting
party did not intend the contract to be enforceable by a third party.
43
Stranger to consideration; Position in Indian Law:
 In Indian Law consideration may be provided either by the promisee
or any other person.
 This has been substantiated by the decision in CHINNAYYA v
RAMAYYA, 1876-1882 ILR 1-4 Mad 930 – gift by mother to daughter
on her promise to pay annuity to aunt , claim by aunt to enforce
daughter’s promise.
3rd ingredient: Consideration may be past, present or future: Explanation:
a) Present consideration: In this kind of consideration promise and
payment of consideration are done simultaneously. In other words,
promise and consideration to be contemporaneous. There is no
difference between English Law and Indian Law in this regard.
b) Future consideration: This means that a promise may be at one point
of time and payment of consideration being made later. This is called
as EXECUTORY CONSIDERATION. Both the Indian Law and
English Law accept this principle.
44
3rd ingredient: Consideration may be past, present or future: Explanation:
C) PAST CONSIDERATION: Position in English Law:
 It has been an accepted principle that Consideration should always be
present. Hence past consideration is no consideration.
 However, an exception has been made, which is as old as the rule
itself, and established as early as 1616 in LAMPLEIGH v
BRAITHWAIT 180 ER 255. - that a past act done at the request will
be good consideration for a subsequent promise.
PAST AND EXECUTED CONSIDERATION: DISTINCTION:
 Past consideration always consists of an act done without any promise.
 Executed consideration means an act which was done in response to a
positive promise.
PAST CONSIDERATION: Position in Indian Law:
 Indian Law recognizes, in Section 2 (d), Past consideration as the ICA
states that when a person ‘has done or abstained from doing’ an act
the same would amount to consideration.
45
4th ingredient: An act or abstinence promise:
 ICA recognizes an act or abstinence or promise as amounting to
consideration.
 But it is not every act or abstinence would amount to consideration.
 Such act or abstinence must be of some value in the eyes of law.
 In WHITE v BLUETT (1853) 23 LT C 36 – Held that there was no
consideration. This type of consideration is called as “ILLUSORY
CONSIDERATION”.
 In Indian Law also it has been laid down in the case of CHIDAMBARA
v RANGA, AIR 1965 SC 193 ‘that consideration shall be something
which not only the parties regard but the law also regard as having
SOME VALUE”.
 But the courts have been liberal in this regard and have always tried to
find some value. KULASEKHARA PERUMAL; v PATHAKUTTY, air
1961 Mad 405.
46
Adequacy of consideration:
 It is not necessary that consideration should be adequate.
 The courts hardly assume the job of setting what should be the
appropriate consideration for a promise. It is left entirely to the
parties.
 If a party gets what he has contracted for and if it is some value, which
may be great or small, the courts will not enquire whether it is an
equivalent to the promise which he gets in turn.
 The adequacy is for the parties to consider at the time of making the
agreement and not for the court when it was sought to be enforced.
 Therefore, parties are said to be the best judges to determine the
consideration.
 This principle has been followed both in English Law and in Indian
Law as per Explanation to Section 25.
47
Adequacy of consideration: (Continued):
 As part of the study of adequacy of consideration inadequacy of
consideration when being imposition of law is to be studied.
 Inadequacy of imposition of law will be accepted by the court of law
when a party alleges that the contract has arisen out of one of the
vitiating factors and not otherwise.
 In view of the above the courts have recognized the prevalence of
valuable consideration in the following cases:
1) Forbearance to sue.
2) Compromise good irrespective of merits.
3) Performance of existing duties.
4) Performance of contractual obligations.
5) Promise to pay less amount than due.
6) Doctrine of promissory estoppel.
48
Adequacy of consideration: Valuable consideration: (Continued):
1) Forbearance to sue: means that the plaintiff has a certain right of
action against the defendant or any other person and on the promise by
the defendant the plaintiff refrains from exercising his action. DEBI
RADHA RANI v PREM ADIB, AIR 1941 Patna 282.
2) Compromise good irrespective of merits: Compromise of pending
suit is a good consideration for the agreement of compromise.
3) Performance of existing duties: Existing legal obligations:
Performance of a legal duty is no consideration for the promise. This
principle of English Law has been adopted in Indian Law by the
Madras High Court in SASHANNA CHETTI v RAMASAMY
CHETTY, 1868 4 MHC 17.
Pre-existing contractual obligations: RAMACHANDRA
CHINTAMAN v KALU RAJU, 1877 2 Bom. 362.
49
Position in English Law:
5) Promise to pay less amount than due: A promise to pay less amount
than due cannot be regarded as a consideration for a higher sum.
PINNEL’S CASE, 1602, 77 ER 237.
The decision in this case is known RULE IN PINNEL’S case. Part
payment of a debt cannot operate as satisfaction of the liability of the
entire debt.
In English Common Law a creditor might accept anything in
satisfaction of the debt except less amount of money.
The Rule in Pinnel’s case has also been followed in England 3 centuries
later in FOAKES v BEER, 1884 9 AC 605. (Payment of the Principal
by instalments in full discharge of the judgment –debt).
In D&C BUILDERS v REES, 1966 2 QB 607 the above principle was
applied. ( receipt of a Cheque for a lower sum from the debtor in full
payment of a higher sum) 50
Position in English Law: Exceptions to the Rule in Pinnel’s case.
 In England the Law Revision Committee 1937 has recommended
abolition of the Rule in Pinnel’s Case.\; but the recommendation, so far,
find no place in the Statute Book. But vario9us exceptions have been
recognized in England.
1) Payment in Kind.
2) Payment before due date.
3) Part payment by a third party.
4) Composition with Creditors.
5) Doctrine of Promissory Estoppel. – CENTRAL LONDON
PROPERTIES Trusts Limited V HIGH TREES HOUSE LTD, 1947
KB 130. (Known as ‘High Tree’s case)
51
Exceptions to the Doctrine of Consideration:
 Section 25 of ICA, as a general rule, declares that an agreement made
without consideration is void. This section, however, mentions
exceptions to this rule. They are:
1. Promise due to love and affection.
2. Compensation for past voluntary services.
3. Promise to pay a time-barred debt.
 Section 24:
Agreements void, if considerations and objects unlawful in part:
If any part of a single consideration for one or more objects, or any
one any part of any one of several considerations for a single object, is
unlawful, the agreement is void.
****************
52
C3 – C3 : CONSENSUS-AD-IDEM
 Remains A Statutory ingredient – Section 10 ICA
 creates an ostensibly valid contract.
 likely to be vitiated for want of free consent.
 ‘Consent’ defined in Section 13 & ‘Free consent defined in Section 14.
 Section 13: agreement upon the same thing in the same sense.
 Section 14: said to be ‘free’ when it is not vitiated by the factors set
out in the Section.
 Vitiating factors are:
1) Coercion, as defined in Section 15. or
2) Undue influence, as defined in Section 16. or
3) Fraud, as defined in Section 17, or
4) Misrepresentation, as defined in Section 18, or
5) Mistake, subject to the provisions of Sections 20,21 and 22.
 Consent is said to be so caused when it would not have been given
but for the existence of these factors.
53
C3 – C3 : CONSENSUS-AD-IDEM (continued)
Explanation to vitiating factors: 1st vitiating factor: Coercion:
Ingredients:
1. There must be the commission of an act against a person, or
2. There must be a threat to commit an act. against a person,
3. Such commission or threat must be one punishable under I.P.C, 1860.
4. There must be detention of property, or
5. There must be a threat to detain the property .
6. Such detention or threat to detain is to cause prejudice to the other
person.
7. The person causing the above said acts must intend to enter into a
contract.
Explanation: It is immaterial whether the Indian Penal Code. 1860 is or is
not in force in the place where the coercion is employed.
54
Explanation to vitiating factors: 1st vitiating factor: Coercion: (contd.)
 An act forbidden by I.P.C.:
1) RANGANAYAKA AMMA v ALWAR CHETTI, ILR 1889 13 Mad 24. -

Adoption Deed was signed under threat of an act punishable under
Section 297 of I.P.C. – Held coercion employed.
2) CHICKAM AMIR RAJU v CHICKAM SHESHAMMA, ILR 1918 41

Mad 32 – Under threat of suicide by husband wife signed a release deed –
Majority held coercion was employed – one Judge differed by saying under
Section 309 I.P.C. what is punishable is only an attempt to commit suicide
and not threat to commit suicide.
NOTE: The Law commission has recommended in its 12th Report – 1958 – P.21
– inclusion of offences under other penal laws also. Bur, no steps has been
taken by Parliament to amend this section.
55
Explanation to vitiating factors: 1st vitiating factor: Coercion: (contd.
Unlawful detention of property:
 According to Section 15 coercion would also be covered by the unlawful
detaining or threat to detain any property to the prejudice of any person
whatever with the intention of causing any person to enter into an
agreement.
 In other words, if the detention is not unlawful there is no coercion.
 In BENGAL STONE v JOSEPH, 1918 Cal.L.J. 78, that coercion is not
caused when the mortgagee refuses to permit the equity of redemption
except on the terms dictated by him.
 To the prejudice of a person:
 This means that the act causing coercion should not necessarily be
directed against the contracting party. It is enough if the act is to the
prejudice of any person whatever and with the intention of making any
person to enter into a contract.
 It is also not necessary that the wrongful act of coercion should proceed
from the party to the contract.
56
Explanation to vitiating factors: 1st vitiating factor: Coercion: (continued)
Approach to decide coercion:
 If threat to strike would amount to coercion: APPIN TEA ESTATE v
INDUSTRIAL TRIBUNAL, AIR 1966 Assam 115. - held threat to strike is
no coercion as the said action forms part of the bargaining power under
Industrial Laws.
 If Statutory compulsion is coercion: ANDHRA SUGARS LIMITED v State
of A.P., AIR 1968 SC 599 – Held that that the agreement could not be said
to be entered into by the lack of free consent and there was no coercion
either.
 Duress : Term used in English Law for Coercion
 Under this law , actual or threatened violence to the victim’s person would
amount to duress
 Threat is to be distinguished from mere warning. – BIFFIN V 1862 7 H&N
877. BIGNELL,
 now includes wrongful threats to property or threats to seize goods. PAO
ON v LAU YAU, 1979 3 ALL.E.R. 65.
57
Explanation to vitiating factors: 2nd vitiating factor:
UNDUE INFLUENCE: SECTION 16 ICA & 19 A:
 “The equitable doctrine of undue influence has grown out of and
been developed by the necessity of grappling with insidious forms of
spiritual tyranny and with the infinite varieties of fraud”. LINDLEY,L.J
., in ALLCARD v SKINNER, 1887 36 Ch.D 145,183.
 Section 16 contains 3 sub-clauses.
 The first sub-clause lays down the principle in general terms.
 The second and third define the presumption s by which the Court is enabled
to apply the principle.
 Contract produced by undue influence is only a voidable one and only gives
the person under undue influence a right of choice or election. Such a right
once exercised is exhausted.
 So, if by notice expressly given or implied by conduct , the promissory elects
to affirm, he cannot afterwards claim to avoid.
 Similarly, once elected to avoid, he cannot be allowed to affirm in his own
interest. KUNJA LAL v HARA LAL, AIR 1943 cal 162.
58
Explanation to vitiating factors: 2nd vitiating factor: (continued)
Specific explanation to Section 16 (1): (Continued)
o The doctrine of undue influence does not protect persons who
deliberately and voluntarily agree to the terms out of folly,
imprudence or lack of thought. GANESH NARAYAN’S CASE
(supra).
Section 16 (2) (a) (i): Real or apparent authority: Instances :
a) Employer and Employee
b) Income-tax Authority and the Assesses.
c) Police Officer and Accused.
d) Judicial Officer and Accused.
e) Licensing Authority and Licensee.
59
Essentials of Undue Influence: Section 16 (1):
i. There must subsist a relation between two persons.
ii. One party must be in a dominate position.
iii. The other person must be in a servient position.
iv. The dominant person must prevail over the will of the servient
person.
v. The dominant person should have gained an unfair advantage from
the servient person.
SECTION 16 (2): Deeming feature introduced.
i. When one person holds a real or apparent authority over the other.
ii. Where he stands in a fiduciary relation with another.
iii. Where a contract is made with a person whose mental capacity is
temporarily affected by reason of age, illness or mental or bodily
distress.
60
Section 16 (3): Unconscionable bargain - Unconscionable use of superior
power
Specific explanation to Section 16 (1):
o The principles stated in this sub-clause “applies to every case where
influence is acquired and abused, where confidence is reposed and
betrayed.”
o In HUGUENIN v BASELEY, 1807 14 Ves. 285, Sir Samuel Romily
expressed that this principle “ to all varieties of relations in which
dominion may be exercised by one person over the other”.
o Some form of pressure which the law would regard as improper
would be undue influence.
o An unconscientious use of pressure exercised under certain
circumstances and conditions, whereby the defendant was victimized
by the plaintiffs , unfair and improper conduct, the nature of the
benefit gained by the plaintiff, or the age or capacity or health and the
surrounding circumstances of the defendant are to be taken into
account. GANESH NARAYAN v VISHNU, 107, 9 Bom.L.R. 1164.
61
Specific explanation to Section 16 (Continued); Section 16 (2) (a) (ii):
Fiduciary relations: Instances:
i. Doctor and Patient - DENT v BENNETT, 41 ER 105.
ii. Solicitor and Client - SANDERSONS ND MORGAN v
MOHANLAL, AIR 1955 Cal. 310.
iii. Father and Son/Daughter – JOSEPH JOHN PETER SANDY v
VERONICA THOMAS RJKUMAR, 2013, 3 SCC 801 (Unmarried
daughter and her brother and father).
iv. Husband and Wife – TUNGABAI v YESHWANT, 1945 PC 8.
v. Paramour and Mistress – SHIVGANGAWA v BASANGOWDA,
AIR 1938 Bom. 304.
Note: In all the above cases their honourable and prudent course is to
insist on the other party to take independent advice. – P0rinciple
laid down in LILES v TERRY, 1895 2 QB 679 CA and followed in
BABU NISAR AHMED KHAN v BABU RAJA MOHAN
MANUCHA, AIR 1940 PC 204.
62
UNDUE INFLUENCE: SECTION 16 ICA & 19A.
Specific explanation to Section 16 (Continued); Section 16 (2) (b):
o Where a contract is made with person whose mental capacity is
temporarily or permanently affected by reason of age, illness, or mental
or bodily distress.
o Proof of undue influence: In dealing with cases of undue influence
there are four important questions which the court should consider, viz.,
(1) whether the transaction is a righteous transaction, i.e., whether it is a
thing which a right-minded person might be expected to do; (2) whether
it was improvident , i.e., to say whether it shows so much improvidence
as to suggest the idea that the donor was not master of himself and not
in a state of mind to weigh what he was doing. (3) whether it was a
matter requiring a legal advisor, and (4) whether the intention of making
the gift originated with the donor. All these are questions of fact. -
BELLACHI v PAKEERAN, 2009 12 SCC 95,99.
63
UNDUE INFLUENCE: SECTION 16 ICA & 19A.
Specific explanation to Section 16 (Continued); Section 16 (3):
o This clause deals with ‘unconscionable bargains’ and states that in
these cases the onus is on the dominant person to establish that the
bargain was not unfair.
o This clause was intended to embody the principle of equity in dealing
with what are called “catching bargains”.
o A bargain may be said to be unconscionable when a normal prudent
person will not enter into such a contract under ordinary circumstances.
o In CHINNI KAUR v RUP SINGH, 1889 ILR 11 All.57 - Held that
when a sum of Rs. 3700/- actually borrowed a bond was executed for
Rs.25,000/- when a person was in dire need of money to file an Appeal
in a litigation it was considered unconscionable.
o Transactions with ‘purdahnishin women’: will also be dealt with under
this category. This concept connotes complete ‘seclusion’.
64
Explanation to vitiating factors: 3rd vitiating factor
Misrepresentation: Section 18 read with Section 19.
o Means making a misstatement.
o Usage of ‘means and includes’ in this definition suggest that the
definition is exhaustive.
o As per this section 18 misrepresentation is of three kinds. They are:
o Section 18 (1): An unwarranted positive assertion of what is not true, even
though he might believe it to be true. or
o Section 18 (2): Committing a breach of duty which misleads another to his
prejudice or to the prejudice of any one claiming under him or
o Section 18 (3): Causing party to a contract to make a mistake as to the
subject-matter of the agreement.
o Under law of contract the general principle is that if a party has induced
the other to enter into a contract by misrepresentation, though innocently,
any material fact specially within his own knowledge, the party misled can
avoid the contract.
65
Explanation to vitiating factors: 3rd vitiating factor: (continued)
Misrepresentation: Section 18: (continued)
Section 18 (1): ‘Positive assertion’ means making an emphatic statement to
make the other person believe that a fact is existing, while in reality it does
not exist, but the author making the statement believes it to be true.
o The statement made is also unwarranted: This means that the statement is
made without any authority. THE OCEANIC STEAM NAVIGATION
COMPANY v SUNDERDASS DHURUMSEY, 1890 14 ILR 241 – Held
that a statement regarding the tonnage of the ship is unwarranted and the
same being untrue.
o Section 18 (2): This clause is intended to meet all those cases which are
called in the Court of Equity as cases of ‘constructive fraud’ in which there
is no intention to deceive, but the circumstances are such as to make the
party who derives a benefit from the transaction equally answerable in effect
as if he had been actuated by motive of fraud or deceit.
66
Section 18 (2): (continued):
o This sub-section presupposes that (1) a representor owes a duty to the
representee in respect of the statement, (ii) the representator makes a
statement, negligent or fraudulent or innocent, (iii) the representee is
misled to his prejudice, and (iv) the representor gains an advantage.
o The expression ‘breach of duty ‘ carries within it contracts involving a
duty on the part of the contracting party to disclose all material facts.
o Section 18 (3): This clause speaks about ‘inducement to commit a
mistake about the subject-matter of the agreement.
o The subject-matter of every agreement is supposed by the parties to
possess certain value or quality.
o If one of the parties leads the other, however innocently, to make a
mistake as to the nature or quality of the subject-matter there is
misrepresentation.
67
Section 18 (3): (continued):
o Misrepresentation must relate to a material fact.
o Material fact is to be distinguished from mere ‘commendatory
expressions’.
o A representation of one’s state of mind is also a representation of fact.
o In EDINGTON v FITZMAURICE, 1885, 23 Ch.. 459 - The Court of
Appeal pointed out that a state of man’s mind is as much as a fact of
the state of digestion. A misrepresentation being state of man’s mind,
is, therefore, a misstatement of fact.
Exception to Section 19: If consent is caused by misrepresentation the
contract, nevertheless, is not voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary diligence.
68
Explanation to vitiating factors: 4th vitiating factor:
Fraud: Section 17 read with Section 19:
 This section has its basis on the principles of SUGGESTIO FALSI
AND SUPPRESSIO VERI.
 As per this section the following are the basic ingredients:
 The acts stated in the section should have been done.
1) The acts contemplated may be committed by a party or with his
connivance or by his agent.
2) The acts must have been performed with intent to deceive another
party thereto or his agent or to induce him to enter into a contract.
The following are the acts mentioned in the section:
1) The suggestion. As a fact, of that which is not true , by one who does
not believe it to be true. ( Suggestio falsi)
2) The active concealment of a fact by one having knowledge or belief of
the fact. (Suppressio veri)
69
C3– C3 : CONSENSUS-AD-IDEM (continued)

Explanation to vitiating factors: 4th vitiating factor: (Continued)
Fraud: Section 17 read with Section 19: (continued):
The following are the acts mentioned in the section: (continued):
3) A promise made without any intention of performing it.
4) Any other act fitted to deceive.
5) Any such act or omission as the law specifically declares to be
fraudulent.
 In English Law ‘fraud’ has been defined in the decision of the House
of Lords in DERRY v PEEK, 1889 14 AC 337. Lord Herschell said:
 “Fraud is proved when it is shown that a false representation has been
made a) knowingly or (b) without belief in its truth or (c) recklessly
careless whether it is true or false.
 From this it follows that the person making a false representation is
not guilty of fraud if he honestly believes in its truth. The intentional
misrepresentation is of the essence of fraud.
70
Explanation to vitiating factors: 4th vitiating factor: (Continued)
Fraud: Section 17 read with Section 19: (continued)
 The Explanation appended to this section states whether silence will
amount to fraud and if so when?
 Meaning of the term ‘silence’ is to be understood as ‘non-disclosure’.
 The general rule is that mere silence as to facts likely to affect the willingness
of a person to enter into a contract is not fraud. (Ill. (a).
Exceptions to this rule are:
1) When a person is under a duty to speak. Ill (b).
2) When silence itself is equivalent to speech. Ill (c).
3) When change of circumstances occur and such changes not disclosed. Ill
(d). RAJAGOPALA IYER v THE SOUTH INDIA RUBBER WORKS
LIMITED, 1942 2 MLJ 228.
4) Making half-truths.
NOTE: The above principles are to be understood along with the Explanation
provided under Section 19 which provides that the plaintiff will be met with
the defence of ‘means of discovery of truth’.
71
Legal efficacy of a contract arising out of the vitiation factors:
1. By Affirmation: When the party after becoming aware of his right to
rescind, affirm the contract, the right of rescission is lost. Affirmation
may be express or implied. LONG v LLOYD, 1958 1 WLR 753.
2. By lapse of time: ALLCARD v SKINNER.
3. Rights of third parties: A contract can be rescinded only before any
third party acquires rights and not afterwards. CAR UNIVERSAL
FINANCE CO LIMITED v CALDWELL, 1941 1 KB 525 CA.
4. Application of the Doctrine of Restitution: Principles states in Section
64 ICA to be followed. As per this section the benefits any obtained
under the contract the same has to be restored back to the person from
the benefit has been received.
 The victims of innocent misrepresentation is not allowed to recover any
compensation for any loss. In English Law much of the sufferings of
had been relieved by the (English) Misrepresentation Act, 1967.
******************
72
MISTAKE: Sections 20, 21 & 22::
 Ostensibly valid contract developed
 .Mistake as a vitiating factor is fundamentally different from the rest.
 Mistake operates to negative or nullify the consent
 Formation of contract is altogether prevented.
 Legal efficacy is void ab-initio.
Meaning:
= is technical and different from popular sense.
= If general meaning is applied no contract can be enforced.
= Hence to prevent objectionable results flowing, meaning is restricted
to the minimum possible extent.
= As such, the term ‘Operative mistake’ is used to denote that mistake
which avoids the contract.
73
CLASSIFICATION OF MISTAKE
Based on the party/s committing the mistake: BASED ON ICA
Bilateral (Sec.20) Unilateral

a) Common (Sec.22) Fact (Sec.21) Law
b) Mutual a) Indian Law
b) Foreign Law
 Meaning of Common Mistake: Where the promisor and the promisee
or both mistaken as to the existence of a fact, which is fundamental
that it forms the basis of the contract.
74
MISTAKE: Sections 20, 21 & 22:: Meaning of Mutual Mistake:
 Used to describe common mistake.
 But distinguished to say that each person misunderstands the other’s
intention though neither realizes that his promise has been
misunderstood by the other.
Meaning of Unilateral mistake:
 Where one of the parties alone is under a mistake of fact.
 Barred to raise the contention that there is no consensus-ad-idem
Mistake usually arises based on the occasions. They are:
a) Mistake in the expression of the contr.
b) Mistake as to the motive for entering into a contract.
c) Mistake as to the nature or contents of the contract.
d) Mistake as to the identity of the parties
75
 The following categories of mistake would arise depending on the
occasions set out above.
1) Mistake as to the identity
2) Mistake as to attributes.
3) Mistake as to the subject-matter of the contract:
a) Non-existent subject-matter.
b) Different subject-matters in mind.
c) As to the substance of the subject-matter.
d) As to the quality of the subject-matter.
4) Mistake as to title or rights.
5) Mistake as to the nature of the promise.
76
Explanation to vitiating factors: 5th vitiating factor: (continued):
MISTAKE: Sections 20, 21 & 22: Explanation to categories of Mistake:
1) Mistake as to identity of parties: will render the contract void.
 JAGANNATH v SECRETARY OF STTE, 1886, 21 Punjab Rec. no. 37 –
Personal identity – Held void.
 BOULTON v JONES, 1857, 27 LJ Ex. 117 – mistaken identity caused due to
take over of business. – Held void.
 HARDMAN v BOOTH, 1863 1 HNC 803 – identity mistaken due to fraud.
 CUNDY v LINDSAY, 1873 3 AC 459 - Defense of Attributes raised – Court
distinguished – Held the contract was void on the ground of identity.
 SAID v BUTT, 1920 3 K.B. 29 – Entry into theatre prohibited on account of
fraud.
 SOWLER v POTTER, 1940 1 K.B. 271 – Identity is of special importance –
Hence mistaken identity rendered the contract void.
77
MISTAKE: Sections 20, 21 & 22: Explanation to categories of Mistake
2) Mistake as to Attributes: will only render the contract voidable
 KING’S NORTON METAL COMPANY v EDDRIDGE MERRET &
CO., 1897 14 TLR 98 – Held no mistaken identity and hence the
contract is voidable for fraud.
 PHILLIPS v BROOKS, 1919 2 K.B. 243 – Held that the contract was
made with the person present and hence only voidable for fraud.
 LAKE v SIMMONS, 1927 A.C.467, Jewels insured - entrusted by
shopkeeper to the person who impersonated – contract void– Held
shop keeper can claim insurance for ‘theft’.
 INGRAM v LITTLE, 1961 1 Q.B. 31 - Held contract void – Hence car
is to be returned by the third party or to pay damages there for.
DISTINCTION BETWEEN ’IDENTITY’ AND ‘ATTRIBUTES’:
Resolved in LEWIS v AVERRAY, 1972 1 Q.B. 198.
78
MISTAKE: Sections 20, 21 & 22: Explanation to categories of Mistake :
3) Mistake as to subject-matter: (a) Non-existent subject-matter.
COUTOURIER v HASTIE, 1856 5 HLC 675. – Subject matter having -
been in non-existence even at the time of entering into the contract –
Hence contract is void.
b) Different subject-matters in mind: RAFFLES v WICHELHAUS, 1864 2
H&C 906 - Sale was held void on the ground of mutual mistake.
c) As to substance of the subject-matter: - SHEIK BROS. LTD. v
OCHNER, 1957 AC 136 - mistake as to material part arisen – hence
contract void.
d) As to quality of the subject-matter: - SMITH v HUGHES, 1871 LR 6 QB
597 - not a mistake essential to the agreement– Held that rights can be
adjusted through enforcement of contract – hence contract itself is not
void. Principle followed in BELL v LEVERBROS LTD., 1932 AC 161.
(Service contract).
79
4) Mistake as to title or rights: COOPER v PHIBBS, 1867 LR 2 HL 149.
5) Mistake as to the nature of the promise:
 Based on the maxim ‘SCRIPTUM PREDICTUM NON EST
FACTUM’ – ‘This script is not mine’ or ‘ It is not my deed’.
 Ancient Common Law defence applied to blind and illiterate persons
 By 19th century this defence it was extended to even literate persons
that the signatory has been mistaken about the nature of the
transaction.
 But now the general rule is that a man is estopped by his signature
thereon from denying his consent and to be bound by the provisions
contained in that deed or agreement.
80
5) Mistake as to the nature of the promise: continued):
 However, the defense of non est. factum is available where the promises
contained in the document are completely void as against the signatory
to plead the defense into whomsoever hands it has come on the ground
that the mind did not accompany the pen.
 In most of the cases in which non est. factum has been successfully
pleaded the mistake has been induced by fraud, but presence of fraud is
not a necessary factor.
 At one time a difference was made between the character of the
document and the contents of the document, but this differentiation has
been rejected by the House of Lords and the following propositions
have been laid down for the application of this doctrine.
81
The Indian Contract 1872 & The Specific Relief Act, 1963 (Contd)
1) The plea of non est factum can only rarely be established by a person of
full capacity. although it is not confined to illiterate or blind persons.
Any extension of the plea of non est factum has to be kept within
narrow limits.
2) The burden of establishing the plea falls on the3 signatory seeking to
disown the document; and he must show that in signing the document
he acted with reasonable care. Carelessness, which would preclude him
from pleading non est factum is based on the principle that no man can
take advantage of his own wrong and not an instance of negligence
operating by way of estoppel.
3) In relation to the extent and nature of the mistake relied upon to set up
the plea the distinction formerly drawn between the character and class
and the contents of the document is unsatisfactory. For the plea to
succeed it is essential that there is as regards the transaction a radical or
fundamental distinction between what the person seeking to set up the
plea actually signed and what he thought was signing.
82
4) The plea of non est factum is not strictly applicable when one person
signs a document in blank and hands it over to another to fill in the
details and details filled in are not in accordance with the signatory.
• Case Laws:
a) THOROUGH GOOD”S CASE - Illiterate man signed a deed of
release of arrears of rent but turned out to be release of all claims –
Held instrument is void on the ground of non est factum.
b) FORSTER v MACKINNON, 1869 LR 4 CP 704 – Defendant signed
a Bill of Exchange thinking that was Deed of Guarantee- Held
defendant not on the ground of non est factum.
c) LEWIS v CLAY, 1897 67 LJ QB 324 – Papers were signed under the
pretext of a witness – But turned out to be a note payable – Held non
est factum applicable.
83
Case Laws: (contd):
d) CARSLILE v CUMBERLAND BANKING COMPANY, 1911 1 KB 489 – Papers
were signed under the pretext of Insurance - papers got damaged in rain and signature
got defaced – same papers were signed again without reading the contents – Papers
turned out to be a continuing guarantee with the Bank – Held non est factum
applicable.
e) GALLILEE v LEE & ANOTHER, 1969 1 ALL.E.R. 1062 – (SAUNDERS v ANGLIA
BUILDING SOCIETY, 1971 AC 1004) – an aged woman interested in helping her
nephew signed a Deed of Sale thinking that it was a Deed of Lease – Nephew
interested in extending help to his friend mortgaged the property and helped his friend
- Later she filed a suit against the Building society pleading non est factum citing the
reason that she could not read the documents signed since her spectacles were lost –
Held plea cannot be raised.
f) BIHAR STATE ELECTRICITY BOARD v GREEN RUBBER INDUSTRIES, 1990 1
SCC 73 – Held that a person who signs a document which contains contractual terms is
normally bound by them though he had not read them or was ignorant of its precise
legal effect
*************************. 84
6TH ESSENTIAL FEATURE OF VALID CONTRACT
Legality of object
o Statutory ingredient – Section 10 ICA
o Section 23 to be read with Section 24.
Basis for this essential feature:
1. EX TURPI CUSA NON ORITUR ACTIO – Out of a turpitude no
cause of action arises.
2. EX DOLO MALO NON ORITUR ACTIO9 – Out of a wicked act no
cause of action arises.
o When these maxims are applied the contract become either unlawful or
illegal and therefore becomes void.
o When a contract becomes void on the ground that it is forbidden by
law they are termed as ‘Nugatory contracts’ in contradistinction with
contracts becoming void for want of ‘absence of consideration’ or for
want of capacity of parties to enter into a contract.
85
Legality of object (continued)
o - Section 23: Ingredients;: The consideration and object of an
agreement is lawful unless
1) it is forbidden by law, or
2) is of such a nature that, if permitted, it would defeat the provisions
of any law, or
3) is fraudulent, or
4) Involves or implies injury to the person or property of another, or
5) The Court regards it as immoral, or opposed to public policy.
o In each of the above cases the consideration or object of an
agreement is said to be unlawful .
o Every agreement of which the object or consideration is unlawful is
void.
o The word ‘object’ in this section is not used in the same sense as
‘consideration’ , but it is used as distinguished from ‘consideration’
and it means ‘purpose’ or ‘design’. - JAFFER MEHER ALI v
BUDGE BUDGE JUTE MILLS CO., 1907 34 Cal 289.
86
Section 23: Explanation to ingredients:
1) Forbidden by Law:
o This phrase, generally, takes within it fold acts punishable under the
Indian Penal Code and of acts prohibited by special legislation, or by
regulation or orders made under the authority derived from the
Legislature.
o But this phrase, in the context of section 23 is to be understood as
whether an act, or some part of a series of act, agreed upon between
parties does or does not contravene some legislative enactments or
regulation made by a lawful authority
2) Defeating the provisions of Law: This clause implies that no
agreement is to be arrived at between the parties to defeat the object
of any law. Therefore, the parties should not attempt to circumvent
the law under the colour of a contract.
87
Section 23: Explanation to ingredients: (continued):
3) Fraudulent: This clause is intended to prevent both parties jointly
practicing fraud to defeat the Governmental authorities or any other
person.
4) ‘Injury to the person or property of another’: The term ‘injury’ used
in this clause is to be understood as ‘loss’. Therefore, in whatever
manner a person or his property is subjected to ‘loss’ such an
agreement will fall under this clause. RAMALINGA PADAYACHI v
NATESA PADAYACHI, AIR 1967 Mad 461 - Sale by a non-owner to
another person (purchaser) with a view to causing injury to the real
owner – real owner filed a suit against the transferor and recovers the
property –purchaser files a suit against the fraudulent transferor and
claims damages for the loss – Held that the contract was intended to
cause harm to the real owner and hence no damages claimed on the
ground of sustenance of loss.
88
5) Court regards it as immoral or opposed to public policy:
a) Immorality:
o Generally the term immorality is used with reference to sexual immorality
and in England this approach is made.
o But, since the section uses the phrase court regards it as immoral, it should
be understood as any act which is against the good morals – CONTRA
BONOS MORES.
o The maxim IN PARI DELICTO EST CONDITIO POSITUR
DEFENDANTIS is applied. This means that if both parties to the
agreement knew that the act is against the morals, the condition of the
defendant is better. PEARCE v BROOKS, 1866 LR 1 Ex 213.
o The significance of this maxim that the application of it will deter the
parties from entering into an agreement knowingly that it is a prohibited
one.
o Immorality will include i) illicit c0habitation, ii) interference with marital
relations, iii) dealings with prostitution and iv) adultery.
89
5) Court regards it as immoral or opposed to public policy
b) Opposed to Public policy:
o The term ‘Public Policy’ is incapable of any precise definition.
o It is a dynamic concept and will be changing from time to time.
o LORD TRURO has defined it thus: “Public Policy is that principle of
law which holds that no subject can lawfully do that which has a
tendency to be injurious to the public or against the public good,
which may be termed as the policy of the law or public policy in
relation to law”.
o Public welfare might require that the court shall not entertain certain
contracts.
o ‘Public policy is an unruly horse and once one gets astride in it he will
not know where he will be led to’.
90
5) Court regards it as immoral or opposed to public policy
b) Opposed to Public policy (continued)
o In view of the above manner of operation of Public policy the Judges
are not expected to frequently expand the Heads of Public policy laid
down but only to expound the same in a given case.
o SETTLED HEADS OF PUBLIC POLICY are:
1. Trading with enemies.
2. Interference with the administration Justice (Civil cases).
3. Stifling the prosecution. (Criminal cases)
4. Trafficking in Public Offices.
5. Maintenance and Champerty.
6. Parent delegating the function of looking after the child.
o Consequences of illegality: Totally unenforceable – courts will not
recognize any cause of action founded on illegality.
91

o If an agreement is void on the ground of illegality any money
consideration paid on cannot be recovered. To this rule exceptions
have been created. They are:
i. Illegal only on performance.
ii. Locus poenetentiae – may be applied in executory contracts.
iii. Parties not in pari delicto.
iv. Defendants having a duty to account.
v. Not relying on illegality.
Section 24:
o As per this section if any part of a single consideration for one or
more objects, or any one or any part of any one of several
considerations for a single object, is unlawful the agreement is void.
92
7th essential feature: Legal Bar (Void Agreements)

(Sections 26 to 30)
• These sections are to be studied in the context of forming a valid contract
since Section 10 speaks about an agreement becoming a contract only
when the agreement encompasses subject matters which are not
prohibited by ICA.
• The above meaning is also conveyed under Section 24 when it says that ‘an
act forbidden by law’ is unlawful.
• In each of the cases falling under any one of these sections the agreement
is void.
AGREEMENT IN RESTRAINT OF MARRIAGE; Sec.26:
“Every agreement in restraint of the marriage of any person, other than a
minor. Is void”.
• Halsbury states that “A contract which is in general restraint of marriage is
unenforceable, but this rule does not apply where the restriction is only
against the marriage with a particular person, or limited class of persons,
or under a specified age or act of particular religion, nor where the
restraint relates to second marriage whether of a man or woman”.
93

(Sections 26 to 30)
AGREEMENT IN RESTRAINT OF TRADE: Sec.27:
“Every agreement by which any one is restrained from exercising a lawful
profession ,trade or business of any kind, is to the extent void”.
• In England, the doctrine of restraint of trade is one of the earliest
applications of the doctrine of public policy.
• In India it forms the subject of a statutory provision in Section 27 of
ICA.
• The principle of restraint of trade projects that an agreement in
restraint of trade to be valid must be proper and useful and not
oppressive.
• In ESSO PETROLEUM (I) LTD., v HARPERS GARAGE
(STOURPORT) LTD., 1967 1 ALL.E.R. 699, Lord Wilberforce
observed: “The doctrine of restraint of trade is one to be applied to
factual situations with a broad and flexible rule of reason”.
94
(Sections 26 to 30)
AGREEMENT IN RESTRAINT OF TRADE: Sec.27: (Continued):
• Under the early English Law . All agreements in restraint of trade were
totally void.
• It was immaterial whether the restraint was general or partial.
• But under the present law agreements which impose unreasonable
restraints are void, while those which impose reasonable restraints are
valid.
• The character of a particular trade may justify a very wide restraint.
• Thus in England , a partial restraint of trade is allowable if reasonable
and not opposed to public policy.
• The above principle was adopted in English Law in NORDENFELT v
MAXIM NORDENFELT,GUNS AND AMMUNITIONS
COMPANY LIMITED, 1894 AC 535.
• The decision in GREIG AND OTHERS v INSOLE AND OTHERS
& WORLD SERIES CRICKET PRIVATE LT5D., v INSOLE AND
OTHERS, 1978 ALL.E.R. 3 449 also incorporates the doctrine of
reasonableness in English law.
95
(Sections 26 to 30)
Indian Law:
 The Constitution of India protects the freedom of trade in its Articles
301, which provides, ”Subject to other provisions of this Part , trade,
commerce and intercourse throughout the territory of India shall be
free”
 Thus, every citizen has the liberty to carry on a trade and he is not
expected to exploit others.
 Therefore, as per Section 27 of ICA all restqint5s, whether general or
partial, qualified or unqualified are void.
 It is not, therefore, open to any Court in India to enter into any
question of reasonableness or otherwise of the restraint.
 The difference between English and Indian Law is that Doctrine of
reasonableness will be applied in England while in India a restraint
will be valid if it falls within any of the statutory or judicially created
exceptions.
96
(Sections 26 to 30)
Indian Law: Exceptions: a) Statutorily created & b) Judicially created.
a) Statutory:
i) Sale of Good will ( Exception under Sec.27 ICA
ii) Exceptions under the Partnership Act, 1932.
1) During the continuance of partnership firm.
2) After retirement from the firm
3) Not to carry on similar business after dissolution.
b) Judicially created.
i) Trade combinations.
ii) Solus agreements
iii) Agreement between members of Tide Union.
iv) Service agreements.
97
(Sections 26 to 30)
AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS: Sec.28
• Law has granted freedom to every Peron to resort to Court of Law doe
redress and relief.
• Hence jurisdiction conferred on Courts of Law cannot b ousted or
restricted by agreement.
• An agreement to oust the jurisdiction of the court is contrary to public
policy and is void
• Under English Law “an agreement purporting to oust the jurisdiction
of the court is illegal and voi8d on the grounds of public policy.
• Section 28 declares the following two classes of agreements as void
because they purport to restrain legal proceedings. They are:
1. Agreements which absolutely restrict the enforcement of right in the
ordinary course of law.
2. An agreement which has the effect of curtailing the period of
limitation prescribed is also void.
• The above provisions are subject to the 3 exceptions appended to
/section 28.
98
(Sections 26 to 30)
AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS: Sec.28 (contd)
Explanation to the clauses: 1st Clause: OUSTING THE JURISDICTION:
• Section 28 of ICA applies only to right5s arising from a contract.
• It does not apply to the cases of civil or criminal wrongs or torts.
• It does not prevent the parties to a contract from selection of one or more
of the two courts which are equally competent to try the suit.
• At the same time it is not open to the parties to agreement to confer by
their agreement jurisdiction on a court which does not possess under the
provisions of Civil Procedure Code.
• In HUKUM SINGH v M/s. GHAMMON (INDIA) LTD., AIR 1971 SC
740, been held that where two courts have concurrent jurisdiction, choice
of one will not be hit by the provisions of Section 28.
• In INTERGLOBE AVIATION v N.SATCHIDANAND, 2011 7 SCC 463,
-Jurisdiction fixed s ‘Delhi Court’ – complaint preferred in the Permanent
Lok Adalat at Hyderabad – Airlines contended ‘no jurisdiction’ - S.C
rejected the defence of Airlines since the clause provided that ‘irrespective
of jurisdiction’ courts at Delhi will have jurisdiction is void.
99
(Sections 26 to 30)
(contd) Explanation to the clauses: 2nd Clause: CURTAILMENT
OF TIME LIMIT:
• The second clause of this section provides that if an agreement
provides that a suit should be brought for the breach of any terms of the
agreement within a time shorter than the period of limitation prescribed
by the Limitation Act is void to that extent.
• The effect of the aforesaid agreements is to restrict the parties from
enforcing their rights after the expiration of the stipulated period,
though it may be within the period of limitation.
• At the same breath, it is pointed out that an agreement providing for a
longer period of limitation than the law permits, does not fall within
Section 28.
• This sort of agreement, though keep subsisting the rights of the
parties to enforce the rights is also void as it tends to defeat the
provisions of Law under Section 23 of ICA.
100
(Sections 26 to 30)
(contd) Explanation to the clauses: 2nd Clause: CURTAILMENT OF
TIME LIMIT (continued):
• Though curtailment of time limit would amount to restriction of
enforcement of rights and therefore void to that extent void, the same
has to be distinguished from release or forfeiture of rights.
• Clauses relating to release or forfeiture are binding on the parties Thus,
a clause in a fire insurance policy may stipulate that after the rejection of
a claim if no suit is brought within 3 months after such rejection all
benefits under that policy shall stand forfeited and this has been held to
be a valid one.
• The above principle has also been followed in BARODA SPINNING
AND WEAVING CO.LTD. v SATYANARAYANA MARINE & FIRE
INSURANCE CO.LTD., ILR 1914 38 BOM 344.
101
(Sections 26 to 30)
(continued) : EXCEPTIONS:
• To the above rule that an agreement in restraint of legal proceedings
is void 3 exceptions are provided under the Section. They are:
1. Saving of contract to refer to arbitration dispute that may arise.
2. Saving of contract to refer questions that have already arisen.
3. Saving of a guarantee agreement of a bank or a financial institution.
(w.e.f. 18.01.2013)
• The above stated exceptions 1 & 2 applies to a class of contracts as
in SCOTT v AVERY,1885 5 HL 81, where the parties have agreed
that no action shall be brought until some question of amount has
first been decided by a reference - say the amount of damage which
the assured has sustained in a marine or fire policy. Such an
agreement does not exclude the jurisdiction of the Courts; it only
stays the plaintiff's hands till some particular amount of money has
been first ascertained by reference.
102
(Sections 26 to 30)
AGREEMENTS VOID FOR UNCERTAINTY: Section 29:
• -According to Section 29 of ICA ‘agreements, the meaning of which is not certain or
capable of being made certain , are void’.
• An agreement is not5 certain either because it is ambiguous or vague or because it is
incomplete and such agreements of uncertainty are void.
• Section 29 provides that the meaning of an agreement shall be clear on the face of it.
• Under this Section a contract is not void if its terms are capable of being made certain.
• It is not enough to show that the meaning of the contact is uncertain, it should further be
shown that it is incapable of being made certain.
• Mere vagueness or uncertainty which can be removed by proper interpretation. Cannot
make a contract void. A contract of which there can be more than meaning or which when
construed can produce in its application more than one result, is not void or uncertain.
• A contract will be void for uncertainty only if its essential terms are uncertain.
• A contract which is intended to be binding may be enforceable even though certain terms
have not been precisely agreed, f the nature of the terms can be ascertained by implication.
• Section 93 to 98 of The Evidence Act will be employed to determine the vagueness under
this Section 29.
103
(Sections 26 to 30)
AGREEMENT BY WAY OF WAGER,VOID: section 30:
• “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 any
person to abide by the result of any game or other uncertain event on
which wager is made.”
• Meaning:
• ‘Wager, means a ‘bet.
• A wager is a contingent contract.
• It is an agreement to pay money or money’s worth on the happening or
non-happening of a sp0ecifid uncertain event.
• Sir William Anson: defined wager agreement as ‘a promise to give money
or money’s worth upon the determination of an uncertain event’.
• Cockburn J: “A wagering contract is a contract by A to pay money to B on
the happening of a given event in consideration B’s promise to pay money
to A on the event non-happening.”
104

(Sections 26 to 30)
• AGREEMENT BY WAY OF WAGER,VOID : Section30:(continued):
• Meaning: (continued):
• Cotton C.J.: “ The essence of gaming and wagering is that one party
is to win and the other to use upon a future event which at the time of
the contract is of an uncertain nature i.e., that if the future event turns
out one way A will lose, but if it turns out the other way he will win”
• Justice Hawkins J: in CARLILL v CARBOLIC SMOKE BALL CO.,
1892, 2 QB 488, states: “A wagering contract is one way by which two
persons professing to hold opposite vies touching the issue of future
uncertain event mutually agree that, dependent on the determination
of that event, one shall win from the other and the other shall pay or
handover to him, a sum of money or other stakes , neither of the
contracting parties have any other interest in that contract that the sum
or stake so won or lost, there being no other real consideration for the
making of such contract by either of the parties”
105
(Sections 26 to 30)
• AGREEMENT BY WAY OF WAGER,VOID : Section30:(continued):
• A wager may have all the other requisites of a legal contract , viz.,
parties, consideration , subject-matter and the meeting of minds; but it
has this peculiarity, that its performance is in the alternative i.e., by one
party to another according as the one or the other of losses.
• The mere fact that a provision is unreserved in the contract by which
certain unusual circumstances the date for the performance of the
contract may be anticipated and the measure of damages does not make
it a wager.
• Where there is a perfectly lawful contest in a game of skill between two
persons the prize for success in the contest is recoverable if it is
subscribed by outsider; otherwise if the amount is subscribed by the
competitors themselves. BABASHEB v RAJARAM, AIR 1931
Bom.264.
• A wager differs from a conditional contract and a guarantee. The main
distinguishing feature is that in a conditional contract parties will have
some interest other than the event while it is not so in case of wager.
106
(Sections 26 to 30)
AGREEMENT BY WAY OF WAGER,VOID : Section30:(continued):
Exceptions to the Doctrine of Wager:
1. In favor of horse racing.
2. Cross-word competitions.
3. A chit fund does not come within the3 scope of wage. NARAYANA v
VELLACHAMI, 1927 ILR 50 Mad 583
4. Shares, though speculative do not come within the scope of wager.
5. Contract of agency for sale of raffle tickets is not an agreement of wager.
6. A contract of insurance is not a wagering agreement.
EFFECTS OF WAGER:
• Under English Law, all kinds of wager are not only void but also illegal.
• Hence collateral transactions in respect of wagers are also void and
amount paid under wagering contract cannot be recovered.
• In England reforms have been made through Gambling Act, 2005
replacing the Gaming Act of 1845 stating that an agreement would not
be void if at least one of the parties entered into it for legitimate business
purposes.
107
(Sections 26 to 30)
• AGREEMENT BY WAY OF WAGER,VOID :Section30: ( continued):
EFFECTS OF WAGER: (continued):
• Under Indian Law , wagering agreements are void but not illegal except
in the States of Maharashtra and Gujarat.
• Hence the amounts won on a wager cannot be recovered.
• Promissory notes given on a wager cannot be enforced.
• Though a wagering contract is a void transactions incidental or collateral
to a wagering transaction are not void. They are valid and binding.
• In GHERULAL PAREKH v MAHADEV DAS MAIYA, AIR 1959 SC
781, the Supreme Court haws held that “though a wager is void and
unenforceable, it is not forbidden by law”.
• Wagering agreement and Insurance Contract: Though an Insurance
contact has some similarities with wager, the element of Insurable
interest required in insurance contacts make it as not one of wager.
– ************************************************************************************************
108

ICA&amp;SR Acts Presentation

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The Indian Contract, 1872 & The Specific Relief Act, 1963.

 The Indian Contract, 1872 - Sections 1 to 75 . (ICA – Common Law)

Rules regarding Performance of Contract Discharge of contracts

Definitions of the term Contract: (Contd.)

1) VALID CONTRACT: possessing all the ingredients and having

3) VOIDABLE CONTRACT: Ostensibly valid contract and can be set

4) ILLEGAL AGREEMENTS: contrary to the provisions of law and

5) UNENFORCEABLE though fulfilling the essentials of a valid

SIGNIFICANCE OF VALID CONTRACT:

Essentials of Valid Offer

Offer and Invitation to offer – Distinction:

Offer and Invitation to offer – Distinction:

DIFFERENCE BETWEEN AN EOI, RFP, RFT & RFQ.

Essentials of Valid Acceptance

Essentials of Valid Acceptance (Contd.)

COMMUNICATION IN LAW OF CONTRACT

Parties facing each other Parties separated by distance

* Based on the mode of communication adopted the place of conclusion,

COMMUNICATION IN LAW OF CONTRACT ( Contd.)

STANDARD FORM OF CONTRACTS

a) RICHARDSON v ROWNTREE, 1894 AC 217. Limitation of

 Capacity means competency or qualification required to enter into a contract.

 While Section 10 necessitates capacity as an essential qualification, Section 11 provides

C1 – C3 : CAPACITY OF PARTIES (continued)

Mental Deficiency Status

Mental Deficiency: Minors.

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

Mental Deficiency: Minors. (Continued)

 An act forbidden by I.P.C.:

1) RANGANAYAKA AMMA v ALWAR CHETTI, ILR 1889 13 Mad 24. -

2) CHICKAM AMIR RAJU v CHICKAM SHESHAMMA, ILR 1918 41

C3– C3 : CONSENSUS-AD-IDEM (continued)

Based on the party/s committing the mistake: BASED ON ICA

Bilateral (Sec.20) Unilateral

6TH ESSENTIAL FEATURE OF VALID CONTRACT

7th essential feature: Legal Bar (Void Agreements)

7th essential feature: Legal Bar (Void Agreements)

7th essential feature: Legal Bar (Void Agreements)

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