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Indian contract act 1872 bare act pdf

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This Act may be called the Indian Contract Act,.. section Ill of the Indian Evidenc. The Indian Contract Act, enforceable by law becomes void when it. The Indian Contract Act, codifies the legal principles that govern such ' contracts'. The Act There are two bare elements of a speculative transaction. Updated Bare Act of Indian Contract Act in a systematic way with direct Here is a beautiful made PDF for Indian Contract Act that you can download.


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THE INDIAN CONTRACT ACT, ______. ARRANGEMENT OF SECTIONS. ______. SECTIONS. PREAMBLE. PRELIMINARY. 1. Short title. Extent. The Indian Contract Act, (Act no. 9 of ). CONTENTS. Preamble. Preliminary. 1. Short title. 2. Interpretation clause. Chapter I Of the communication . Full text containing the act, Indian Contract Act, , with all the sections, schedules, short title, enactment date, and footnotes.

There is a limitation on such contractual freedom as they are bound by certain general provisions of law. A may perform this promise either himself or causing someone else to pay the money to B. Section 54 of the Act provides that promises may be such that: Voidable Contract: Therefore the acceptance in this case is unconditional.

Submit Search. Successfully reported this slideshow. We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime. Indian Contract Act , Bare Act. Upcoming SlideShare. Like this document? Why not share! Embed Size px. Start on. Show related SlideShares at end. WordPress Shortcode. Published in: Full Name Comment goes here. Are you sure you want to Yes No. Marishankar Marishankar.

No Downloads. These are i from the viewpoint of proposer and ii the other from the viewpoint of acceptor himself. From the viewpoint of proposer, when the acceptance is put in to a course of transmission, when it would be out of the power of acceptor.

From the viewpoint of acceptor, it would be complete when it comes to the knowledge of the proposer. At times the offeree may be required to communicate the performance or act by way of acceptance.

In this case it is not enough if the offeree merely performs the act but he should also communicate his performance unless the offer includes a term that a mere performance will constitute acceptance. Carlill bought these smoke balls and used them as directed but contracted influenza. Further as the advertisement did not require any communication of compliance of the condition, it was not necessary to communicate the same. The court thus in the process laid down the following three important principles: In term of Section 4, communication of revocation of the proposal or its acceptance is complete.

The above law can be illustrated as follows: But as far as I am concerned, it will be complete only when I receive the telegram. This revocation of acceptance by me will be complete when I dispatch the telegram and against you, it will be complete when it reaches you. But the important question for consideration is when a proposal can be revoked?

And when can an acceptance be revoked?. These questions are more important than the question when the revocation of proposal and acceptance is complete. In terms of Section 5 of the Act a proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer. An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor.

Revocation of proposal otherwise than by communication: When a proposal is made, the proposer may not wait indefinitely for its acceptance. The offer can be revoked otherwise than by communication or sometimes by lapse. Following are the situations worth noting in this regard i When the acceptor fails to fulfill certain conditions precedent to acceptance: This principle is laid down in Section 6 of the Act.

The offeror for instance may impose certain conditions such as executing a certain document or depositing certain amount as earnest money. Failure to satisfy any condition will result in lapse of the proposal. Death or insanity of the proposer would result in automatic revocation of the proposal but only if the fact of death or insanity comes to the knowledge of the acceptor iii When time for acceptance lapses: The time for acceptance can lapse if the acceptance is not given within the specified time and where no time is specified, then within a reasonable time.

This is for the reason that proposer should not be made to wait indefinitely. Ex , that a person who applied for shares in June was not bound by an allotment made in November. However these decisions now will have no relevance in the context of allotment of shares since The Companies Act, has several provisions specifically covering these issues.

In this unit the concept of consideration and the legal requirements for consideration are discussed. The judgment thus refers to the position of both the promisor, and the promisee in an agreement. From the above definition it can be inferred that, Consideration is doing or not doing something, which the promisor desires to be done or not done. Thus consideration is identified as quid pro quo from the promise or performance of the promisor.

But it is also possible that there may not be any identifiable benefit towards consideration. Is this a valid contract? Here there is sufficient consideration. This illustration is given essentially to prove the point that consideration could be not necessarily a gain or advantage to the promisor but it can even be a loss or detriment to the promisee.

Detriment to one is benefit to another. It can often be seen that consideration is mutual. This proves the point that consideration is mutual and has two sides. Thus from above it can be concluded that: Whether gratuitous promise can be enforced? It can therefore be inferred that a gratuitous promise will not result in an agreement in the absence of consideration. For instance a promise to subscribe to a charitable cause cannot be enforced. Consideration must move at the desire of the promisor, either from the promisee or some other third party.

But consideration cannot move at the desire of a third party. Where collector had passed an order that any one using the market constructed by the Zamindar, for the purpose of selling his goods should pay commission to the Zamindar, it was held that it was not a proper order as the desire to receive consideration had not emanated from the Zamindar but from a third party namely the collector [Durga Prasad Vs Baldev 3, All ] ii Consideration can flow either from the promisee or any other person: The consideration for a contract can move either from the promisee or from any other person.

That the consideration can legitimately move from a third party is an accepted principle of law in India though not in England. On the same day, D executed a document agreeing to pay annuity accordingly but declined to pay after sometime. B sued D. It was contended on behalf of D, that there was no consideration from B and hence there was no valid contract.

Where it consists only of a promise, it is executory. Insurance contracts are of the same type. A forbearance by the promisor should however be considered as an executed consideration provided the forbearance is sufficient at the time of contract. The next issue is whether past consideration can be treated as consideration at all.

This is because consideration is given and accepted along with a promise concurrently. But in the event of services being rendered in the past at the request or desire of the promisor the subsequent promise is regarded as an admission that the past consideration was not gratuitous.

The plaintiff rendered services to the defendant at his desire during his minority. He also continued to render the same services after the dependant attained majority.

It was held to be good consideration for a subsequent express promise by the defendant to pay an annuity to the plaintiff but it was admitted that if the services had not been rendered at the desire of the defendant it would be hit by section 25 of the Act.

Bom ] v Adequacy of Consideration: Consideration need not necessarily be of the same value as of the promise for which it is exchanged. But it must be something which can be inadequate as well. Inadequate consideration would not invalidate an agreement but such inadequate consideration could be taken into account by the court in deciding whether the consent of the promisor was freely given.

In Chijjitumal Vs. In the said case, the father had died leaving his house to two sons. They had agreed to partition the house which did not admit the division in exactly equal parts and one of the sons had agreed not to construct a door at a certain place in his portion of the house.

The Supreme Court came to the conclusion that the motive for the said agreement at the time when it was made, was to avoid any dispute in future, and held that it was sufficient consideration.

The above view is in tune with explanation 2 to section 25 of the Act, which provides that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate. Where there is valuable consideration, Court will not interfere and inquire into the adequacy of it but leave the matter to the parties to make their own bargain. But inadequate consideration might raise suspicion about the free will of the promisor. Promisor could be treated as victim of some imposition but this would not render the agreement void.

The performance of an act by a person what he is legally bound to perform, the same cannot be consideration for a contract. Hence, a promise to pay money to a witness is void, for it is without consideration. Hence such a contract is void for want of consideration. Similarly, an agreement by a client to pay to his counsel, a certain sum over and above the fee, in the event of success of the case would be void, since it is without consideration.

But where a person promises to do more than he is legally bound to do, such a promise provided it is not opposed to public policy, is a good consideration. For instance during a civil strike, a question arose as to how best to protect a coal mine.

The police authorities thought that surveillance by a mobile force would be adequate but the colliery manager desired a stationary police guard. It was held that the promise to pay the amount was not without consideration. The police, no doubt, were bound to afford protection, but they had discretion as to the form it should take. The undertaking to provide more protection than what they deemed to be necessary was a consideration for the promise of reward.

Glamorgan Country Council A. The doctrine says that only parties to a contract can enforce the contract. The parties stranger to a contract cannot sue and be sued. Example, a contract by the purchaser of a mortgaged property to pay off the mortgage cannot be enforced by the mortgagee who was not a party to the contract between vendor and vendee. However there are exceptions to the above principle.

These are: In the case of a trust, the beneficiary can sue enforcing his right though he was not a party to the contract between the trustee and the settler. It was held by the Privy Council that though the bride was not a party to the contract between her father and father in law, she could enforce her claim in equity.

In the case of family settlement, if the terms of settlement are reduced in writing, members of the family who were not a party to the settlement can also enforce their claim. Shuppu Vs Subramanian 33 Mad. In the case of certain marriage contracts a female member can enforce a provision for marriage expense based on a petition made by the Hindu undivided family Sunder Raja Vs Lakshmi Mad Where there is an assignment of a contract, the assignee can enforce the contract for various benefits that would accrue to him on account of the assignment.

In case of part performance of a contractual obligations or where there is acknowledgment of liability on account of estoppel, a third party can sue for benefits. Where a piece of land which is sold to buyer with certain covenants relating to land and the buyer is kept on notice of the covenants with certain duties, there the successors to the seller can enforce these covenants.

Not only that, even inadequate consideration would render the enforceability of the contract quite difficult as the free consent of the parties would become suspect. The Act however contains certain exceptions to this important rule. A written and a registered agreement made between parties out of natural love and affection does not require consideration.

Indian Contract Act, 1872

Such an agreement is enforceable even without consideration. It is important that parties should be of near relation like husband and wife to get this exemption Rajlukhee Devee Vs Bhootnath.

A promise to compensate wholly or in part for past voluntary services rendered by someone to promisor does not require consideration for being enforced. However the past services must have been rendered voluntarily to the promisor.

Further the promisor must have been in existence at that time and he must have intended to compensate. Where there is a promise in writing to pay a debt, which was barred by limitation, is valid without consideration. In term of section of the Act, no consideration is necessary to create an agency v In case of completed gifts, no consideration is necessary. Move at the desire of promisor by promisee and any other person.

It is must for every contract though not necessarily be adequate but must be real and not illusory and should be of some value in terms of money. Contract without consideration is void subject to certain exceptions- agreement on account of natural love and affection, promise to compensate for voluntary services and promise to pay a time —barred debt, gift actually made, and in agency.

In the previous units we discussed all aspects of offer, acceptance, revocation, and consideration. In this unit we will discuss other elements, which would constitute a contract. We have earlier seen that in terms of section 10 of the Indian Contract Act, a legally enforceable agreement should be made with the free consent of the parties who are competent to contract for a lawful consideration with a lawful object.

Further the agreement should not have been expressly declared as void by law. These elements would be examined hereunder. Absence of identity of minds would arise when there is an error on the part of the parties regarding a nature of transaction or b person dealt with or c subject matter of agreement. In such cases there would be no consent. However cases of fundamental errors have to be distinguished from cases of mutual mistakes.

Where the persons refer to a ship of a name in the contract but each of them had a different ship in mind though of same name, there is no identity of minds and hence there is no consent. That there is no contract in the absence of consent was considered in the case of Cundy Vs Lindsay.

Blenkarn in turn sold the goods to Lindsay.

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Cundy discovered his mistake, brought a suit against Lindsay for recovery of goods. Hence there was no contract at all. The suit was decreed against Lindsay. Consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake Section When the consent is caused by mistake, the agreement is void, but when caused by other factors it is voidable. Now let us discuss each of these factors, which should not influence consent. But Y can enforce the contract if he finds the contract to his benefit.

An agreement induced by coercion is voidable and not void. That means it can be enforced by the party coerced, but not by the party using coercion. It is immaterial whether the Indian Penal Code, is or is not in force at the place where the coercion is employed.

Where husband obtained a release deed from his wife and son under a threat of committing suicide, the transaction was set aside on the ground of coercion, suicide being forbidden by the Indian Penal Code. Amiraju Vs. Seshamma 41 Mad, 33 A person to whom money has been paid or anything delivered under coercion, must repay or return it. A person is deemed to be in a position to dominate the will of the other, when he holds authority, real or apparent over the other, or when he stands in a fiduciary relation to other.

The essential ingredients of undue influence are: One of the parties dominates the will of the other and i he has real or apparent authority over the other; ii he is in a position to dominate the will of the other and iii the dominating party takes advantage of the relation. The burden of proof in situations like the above that there is no undue influence in an agreement would be on the person who is in a position to dominate the will of the other.

indian contract act, 1872

The stronger party must act in good faith and see that the weaker party gets independent advice. The following two decisions would enable us to understand the law. Money lending operations and undue influence: This is because lenders are in a position to dominate the will of the borrowers. Such high rate of interest will be treated as unconscionable where parties are not on same footing. Difference between Coercion and Undue Influence: Having discussed in detail the concepts of coercion and undue influence, let us understand the difference between the two: Coercion involves physical force and sometimes only threat.

Undue influence involves only moral pressure. Coercion involves committing or threatening to commit any act prohibited or forbidden by law, or detention or threatening to detain a person or property. In undue influence there is no such illegal act involved. In coercion there need not be any relationship between parties; whereas in undue influence, there must be some kind of relationship between parties, which enables to exercise undue influence over the other.

Coercion need not proceed from the promisor. It also need not be directed against the promisee. Undue influence is always exercised by one on the other, both of whom are parties to a contract. Where there is coercion, the contract is voidable. Where there is undue influence the contract is voidable or court may set aside or enforce it in a modified form. In case of coercion, where the contract is rescinded by the aggrieved party any benefit received has to be restored back.

Fraud means and includes any of the following act committed by a party to a contract or with his connivance or by his agent with intent to deceive another party thereto or his agent or to induce him to enter into the contract. The following can be taken as illustration of fraud: It was held any person who had purchased shares on the faith of such misstatement can repudiate the contract on the ground of fraud. A seller of a property should disclose any material defect in the property.

Concealing the information would be an act of fraud. Any other act committed to deceive is fraud. Mere silence would amount to fraud under certain circumstances. Although a mere silence as to facts which is likely to affect the willingness of a person to enter into a contract is no fraud, where there is a duty to speak or where his silence is equivalent to speech, then such silence amounts to fraud.

This would be clearly seen from the explanation to Section 17 of the Indian Contract Act, This situation often arises in Insurance contracts. In the case of fire insurance contract between person standing in fiduciary relationship, non- disclosure of certain information would amount to fraud as there is a duty to make special disclosure. These are also know as uberrimae fidei contract. Similarly the insurer is not bound by the policy issued by him where he is misinformed about insurance policy previously taken by the insured.

A contract which is hit by misrepresentation can be avoided by the person who has been misled. For example, A makes the statement on an information derived, not directly from C but from M.

B applies for shares on the faith of the statement which turns out to be false. The statement amounts to misrepresentation, because the information received second-hand did not warrant A to make the positive statement to B [Section 18 1 ] Now let us analyse the difference between fraud and misrepresentation.

In case of misrepresentation, the person making the statement believes it to be true which might later turn out to be untrue. In spite of this difference, the end result is that the other party is misled.

Fraud not only enables the party to avoid the contract but is also entitled to bring action. Misrepresentation merely provides a ground for avoiding the contract and not for bringing an action in court. In order to sustain an action for deceit, there must be proof of fraud. As earlier discussed fraud can be proved only by showing that a false statement was made knowing it to be false or without believing it to be true or recklessly without any care for truth.

One is for action against deceit and the other is action for recession of the contract. In the case of mis-representation the person may be free from blame because of his innocence but still the contract cannot stand.

In case of misrepresentation, the fact that plaintiff had means of discovering the truth by exercising ordinary diligence can be a good defence against the repudiation of the contract, whereas a defence cannot be set up in case of fraud other than fraudulent silence.

The tenuous difference between fraud and misrepresentation was beautifully brought out in the famous case of Derry vs. In the said case the plaintiff brought an action of deceit against the promoters of a tramway company. According to him, the promoters in the prospectus had not mentioned that they had not obtained the permission of the board of trade which was necessary for using mechanical power [to run a train] and here this was deceit.

The Court verified the position and concluded that there was no deceit and the plea for action for deceit was dismissed. It is seen that in all these cases though the agreement amounts to a contract, it is voidable. The injured party might insist on being placed in the same position in which he might have been had the vitiating circumstances not been present. But the estate is subject to mortgage. But, where it is possible to discover the truth with ordinary diligence, and though the consent might have been obtained by misrepresentation or silence, then the contract cannot be avoided.

Where a party to contract perpetrates fraud or misrepresentation, but the other party is not misled by such fraud or misrepresentation, then the contract cannot be avoided by the latter. Where for instance, the seller of specific goods deliberately conceals a fault in order that the buyer may not discover it even if he inspects the goods, but the buyer in fact does not make any inspection at all, the buyer cannot avoid the contract as he is not deceived by the seller.

Where a contract is voidable and the party entitled to avoid it decides to do so by rescinding it, he must restore any benefit which he might have received from the other party.

Where the party seeking to rescind the contract had received only benefit, the contract will be set aside by the court upon such terms and conditions deemed fit. A student was induced by his teacher to sell his brand new car to the latter at less than the purchase price to secure more marks in the examination.

Accordingly the car was sold. However, the father of the student persuaded him to sue his teacher. State on what ground the student can sue the teacher? A contract brought about as a result of coercion, undue influence, fraud or misrepresentation would be voidable at the option of the person whose consent was so caused. Where parties to an agreement are under a mistake as to a matter of fact which is essential to the agreement, then the agreement is void.

As we all know a void agreement cannot be enforced at all. But in fact, just before the bargain was struck, the ship carrying the cargo was cast away because of storm and rain and the goods were lost.

Neither of the parties was aware of it. The agreement is void. However a question on foreign law would become a matter of question of fact. Similarly the existence of a particular private right though depends upon rules of law, is only a matter of fact. For instance where a man promises to buy a property which already belongs to him without him being aware of it, then such a promise is not binding on him. However a family arrangements or a compromise of doubtful rights cannot be avoided on the ground of mistake of law.

Yet another issue to remember in mistake is that it must be of an essential fact.

Whether the fact is essential or not would again depend on how a reasonable man would regard it under given circumstances. A mere wrong opinion as to the value is not an essential fact. Both the parties should be under mistake. A unilateral mistake would not render the contract invalid. From the foregoing it is clear that: Mistake should be a matter of fact b. Mistake should not be a matter of law c. Mistake should be a matter of essential fact d.

Mistake should not be unilateral but of both the parties, and e. Consent is said to be free when it has not been obtained by coercion, undue influence, fraud, misrepresentation or mistake. Such a contract is voidable.

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A contract caused by undue influence is voidable. Even court is also empowered to set aside such contract absolutely or conditionally. Remedies in the above cases are same, except the right to claim damages in case of fraud. It may be either of fact or of law. Mistake renders the contract void. Unilateral mistake made by one of the parties. It is a valid contract, unless it is caused by misrepresentation or fraud. Even unilateral mistakes as to fact renders the contract void.

Every person who a has attained the age of majority b is of sound mind and c is not otherwise disqualified from contracting, is competent to contract. Now let us discuss each one of these requirements.

In terms of the Indian Majority Act, , every domiciled Indian attains majority on the completion of 18 years of age. However where a guardian is appointed by a court to protect the property of a minor and the court takes charge of the property before the person attains 18 years, then he or she would attain majority on completion of 21 years. An agreement entered into by a minor is void against the minor and the question of its enforceability does not arise.

The Privy Council in Mohiri Bibee vs. Dharmodos Ghose [] LR 30, Cal , decided that an agreement where minor is a party is altogether void. In this case a minor executed a mortgage in favour of the husband of Mohiri Bibee.

The question for consideration is whether the mortgage is valid. The main reason for such a view is that a minor is incapable of performing his part of the contract imposing a legal obligation. Though a minor is not competent to contract, nothing in the Contract Act prevents him from making the other party bound to the minor. Thus, a promissory note duly executed in favour of a minor is not void and can be sued upon by him, because he though incompetent to contract, may yet accept a benefit.

A minor cannot become partner in a partnership firm. However, he may with the consent of all the partners, be admitted to the benefits of partnership Section 30 of the Indian Partnership Act, Any money advanced to a minor cannot be recovered as he can plead minority and that the contract is void. Even if there had been false representation at the time of borrowing that he was a major, the amount lent to him cannot be recovered. Privy Council concurred with the views of Calcutta High Court that no discretion could be used even under that Act to grant any kind of relief to the lender of money.

When the mortgage documents had to be cancelled at the instance of minor who mortgaged the property fraudulently, Courts have ordered compensation under Specific Relief Act, to the other party to the instrument [Dattaram vs.

Vinayak 28 bom. Exchange Loan Co. N ] If a minor had obtained payment fraudulently by concealing his age, he may be compelled to restore the payment but he cannot be compelled for an identical sum as it would amount to enforcing void contract.

A minor on his attaining majority cannot validate any agreement which was entered into when he was minor, as the agreement was void. Similarly a minor cannot sign fresh promissory notes on his attaining majority in lieu of promissory notes executed for a loan transaction when he was minor, or a fresh agreement without consideration. Necessaries of life not only include food and clothing but also education and instruction. Though an agreement with minor is void, valid contract can be entered into with the guardian on behalf of the minor.

The guardian must be competent to make the contract and the contract should be for the benefit of the minor. For instance a guardian can make an enforceable marriage contract on behalf of the minor. Similarly father of bride can enter the contract with the father of bridegroom for payment of certain allowance to the bride.

But not all contracts by guardian are valid. A guardian cannot bind a minor in a contract to purchase immovable properties [Mir Sarwarjan vs. Fakharuddan However, a court appointed guardian can bind a minor is respect of certain sale of property ordered by the court. A person is competent to contract , where he is — i Major ii of Sound mind iii not disqualified by any other law of the land.

Dharmodas Ghose]. A person will be considered to be of sound mind if he at the time of entering into a contract is capable of understanding it and forming a rational judgment as to its effect upon his interest.

A person who is of unsound mind but occasionally of sound mind can enter into a contact when he is in sound mind though for temporary periods.

For example a person who is in lunatic asylum during intervals of sound mind can enter into contracts. Similarly, a person who is generally of sound mind, but occasionally of unsound mind cannot enter into a contract when he is of unsound mind. From the above it is clear that the period of lucidity would be crucial as much as the periods of lunacy.

The basic test for lunacy or lucidity is to see whether the person is able to understand the implications of a contract which he enters into on his interest. Idiots, lunatics and drunken persons are examples of persons of unsound mind. Necessaries of life supplied to a person of unsound mind: In term of section 68 of the Indian Contract Act, if a person incapable of entering into a contract is supplied by another person with necessaries of life, the person who has furnished such supplies is entitled to be reimbursed from the property of such a person.

Apart from minors and persons of unsound mind, these are the others who are not capable of entering into contract either wholly or partially. Contract by such persons are void. An alien enemy, during war cannot enter into a contract with an Indian subject, unless he is permitted by Central Government to do so he cannot sue in Indian Courts.

This disability to an alien enemy arises on account of public policy. Statutory corporations or Municipal bodies cannot enter into contracts on matters which are beyond their statutory powers or ultra vires the memorandum or articles through which they are created. An Advocate in India can enter into contracts with his clients for recovery of fees or payment of fees in certain manner unlike his counterpart in U.

K where barristers are prohibited to enter into contracts for recovery of fees from their clients [Nichal chand vs. Dilawar Khan All ] Before entering into contract with the government, certain procedure and formalities are required to be complied with. On default of it, such contract will be void.

Union of India 2 S. However, they can, at their will enter into contracts which may be enforceable in India. Speaking generally all persons enjoy freedom for entering into contracts of their choice. But this contractual freedom or their right to enter into agreements is not absolute. There is a limitation on such contractual freedom as they are bound by certain general provisions of law.

The above observation can be illustrated with the following example: Every agreement where the object or consideration is unlawful is void. Thus section 23 has set out the limits to contractual freedom. Following are examples of agreement which are void because the object is unlawful.

The agreement is void because the object being commission of fraud, is unlawful. There are seven such circumstances namely - i Agreement forbidden by law: Acts forbidden by law means acts that are punishable under any Statute or Rules or Regulations made under any Statute. Where an agreement is entered into with the object of defeating any provision of law then it is prohibited. This is a situation not very different from point ii discussed above.

The issue covered by this point can be explained by following two examples: A mere consent of parties by way of agreement to except this requirement of proof of genuineness or proper execution of will is not lawful and therefore cannot be enforced under C.

Therefore his remuneration has to be fixed by the court. Parties to certain litigations cannot add or deviate of the power of the receiver. Similarly they cannot fix salary of a receiver without the leave of the court however unconditional it may be. Such an act would be in contravention of law.

They agree to defraud a Government department by submitting a tender in the individual name and not in the firm name. This agreement is void as it is a fraud on the Government department. Following are the illustrations where the object or consideration is unlawful as it involves injury either to person or property. He is unable to pay either the principal or interest. Therefore he agrees to render manual labour for certain period failing which he agrees to pay exorbitant interest.

This agreement is void as rendering labour as consideration amounts to agreeing to be a slave. Slavery is opposed to public policy as well. Hence the agreement is void. Following are illustration where the agreement is void because the object or consideration is unlawful being immoral.

He also promised to marry her after divorce. Agreement, either because of their object or consideration being opposed to public policy are void and not enforceable. It can be interpreted in a narrow sense or in a broad sense. If it is understood in a narrow sense, it would cut into rights of people to enter into even genuine agreements.

But framing public policy itself is a difficult exercise since a too restrictive approach would stifle the rights of people and a too liberal approach would open the gate for many illegal transactions. This is because such a trade would be against the interest of Government of India and people of India.

Any agreement made during peace time would be suspended automatically and cannot be carried on further until hostilities come to an end. Any agreement to stifle or prevent illegally any prosecution is void as it would amount to perversion or abuse of justice. The principle is that one should not make a trade of felony.

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It must be understood however that under the Code of Criminal Procedure, many offences are compoundable. Therefore any agreement towards compounding of an offence to avoid prosecution is not void but is very much enforceable.

Maintenance is promotion of litigation in which the litigant has no interest. Champerty is bargain whereby one party agrees to assist the other in recovering property with a view to sharing the profit of litigation.

These agreements for maintenance and champerty are void in England but not in India. Hence these are not opposed to public policy. But where such advances are made by way of gambling in litigation, the agreement to share the subject of litigation is certainly opposed to public policy and therefore is void. Any agreement with the object of inducing a judicial officer or administrative officer of the state to act corruptly or not impartially is void.

Similarly an agreement to use influence in a litigation in a underhand manner is void. But an agreement to pay for to a holy man for prayers for success of a suit is valid. An agreement to negotiate a marriage for reward is void. Such marriage brokerage contracts are opposed to public policy. The following are examples of agreement that are void as they tend to create an interest against obligation. The object of such agreements is opposed to public policy. While appointing a person to certain important and high public office, merit alone should be the criteria.

This is for the reason presence of money consideration would convert the situation as sale of public office. Following are illustrations in this regard. Agreements having for their object the establishment of monopolies are opposed to public policy and therefore void.

Every agreement in restraint of marriage of any person other than a minor, is void. So if a person, being a major, agrees for good consideration not to marry, the promise is not binding. Any agreement through which a person is restrained from exercising a lawful profession, trade or business of any kind is to that extent void. The object of this law is to protect trade. The restraint, even if it is partial, will make the agreement void. The principle of law however has a number of exceptions which are discussed hereunder.

Such an agreement is valid. Such an agreement will be valid. Similarly any agreement which abridges the usual period for commencing the legal proceedings is also void. Further these agreement are also void in view of section 23 of the Indian Contract Act, as the object of the agreements are to defeat the provision of law. Nevertheless, a clause in an fire insurance policy stipulating that if the claim is made and rejected and if no suit is instituted within three months after such a rejection, all the benefits under the policy will be forfeited, is valid.

However, there are certain exceptions to the above rule: For instance, in agreement between the holder of a fire insurance policy and the insurance company that no suit shall be instituted until the question of the amount of damage sustained by the assured has first been ascertained by a reference to an arbitrator is a perfectly valid agreement.

In addition to the above, there are also other agreements which are expressly declared as void. This Section is obviously a corollary to Section 23 of the Act. Where the consideration is unlawful, the entire agreement is void as the agreement has to be looked as a whole. The general principle of law is where the legal part of an agreement can be separated from the illegal part, then the legal part if it can be given effect by rejecting the bad part and retaining the good part, then the good part is given effect.

But where no such separation is possible, the contract is altogether void.

Bare Act - The Indian Contract Act 1872

He also has interest in illegal traffic of other goods. Where the meaning of the terms of an agreement is uncertain or if it is not capable of being understood with certainty, then the agreement is void. But where the meaning is capable of being made certain, then the agreement is valid.

Let us discuss wagering contract. Wagering agreement is one which involves payment of a sum of money upon the determination of an uncertain event. The essence of wagering agreement is where there are two parties, one wins, the other loses upon an uncertain event taking place in which neither of them has legitimate interest.

This is a classic case of a wagering agreement. But where one of the parties has control over the event, the agreement is valid. An agreement by way of a wager is void. A good definition of wagering agreement would be the one given by Anson: Section 30 of the Act provides that an agreement [to buy lottery tickets] is one by way of wager and is void. While as clearly seen, wagering contracts are void, speculative transactions are valid. It is often difficult to distinguish between the two.

There are two bare elements of a speculative transaction. They are a mutual intention of parties to acquire or deliver goods or commodities and b undertaking of risk arising from movement of prices.

In wagering contract, only the element of risk is seen. Now let us take an example: In the above example if the original intention of the parties was only to settle the difference in price, than it would be a wagering contract which would be void.

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Thus by now it would be clear that wagering postulates only incurring of risk. It is void because it is opposed to public policy. While gambling and wagering are prohibited by law, speculation is not. Now let us consider other peculiar situations to see whether they are wagering contracts or speculative contracts or valid contracts. Insurance policy: An insurance policy is a valid contract. But if an insurance policy is taken by a person who has no insurable interest, then it is void.

For instance a person who has no insurable interest in a ship, takes a policy against it being sunk, then the contract is void.

Promissory notes on a wagering contract: While a wagering contract is void ab initio, it is but automatic that a promissory note given out of a wagering contract is not enforceable by way of a suit. A promissory note of this character is one without consideration and hence is null and void. Suit to recover deposit: A winner of bet cannot recover the amount which he has won even if the amount is kept by way of deposit by the loser with the stakeholder. Such earmarking or identification of funds does not enhance the validity of the contract which is void.

In the above example the loser can recover the amount from stakeholders as long as the amount has not been made over by the stakeholder to the winner. Wager and collateral transactions: For instance in a wagering contract, the broker is entitled to collect his brokerage.

Similarly the principal can recover the prize money from his agent received by him on account of a wagering transactions. The acid test of validly of a collateral transaction is whether the main transaction is illegal or legal but void. If the main transaction is illegal, the collateral transaction cannot be valid. For example security given for regular payment of the rent of a house let out for the purpose of gambling cannot be recovered; the recovery of security being tainted with the illegality of original transaction cannot be enforced.

A promise made by the loser of a wager to pay the amount lost in consideration of the winners forbearance to sue him as defaulter can be enforced as a fresh contract, separate and distinct from original wagering contract though collateral to it. In the public interest, some of the agreements have been expressely declared to be void under the Act.

Contract of insurance is not a wager, it falls under the category of contingent contract. A contract being an agreement enforceable by law, creates a legal obligation, which subsists until discharged. Performance of the promise or promises remaining to be performed is the principal and most usual mode of discharge.

This unit explains, who must perform his obligation; what should be the mode of performance; and what shall be the consequences of non performance. Basic tenet of performance: In a contract where there are two parties, each one has to perform his part and demands the other to perform.

This obligation is the primary tenet. The parties would be treated as having been absolved only under the provisions of any law or by the conduct of the other party. Until such time, the performance is neither excused nor dispensed with. Not only the promisor has a primary duty to perform, even the representative in the event of death of a promisor, is bound by the promise to perform, unless a contrary intention appears from the contract [Section 37].

Invariably the promise has to be performed by the promisor where the contracts are entered into for performance of personal skills, or diligence or personal confidence, it becomes absolutely necessary that the promisor performs it himself.

Where personal consideration is not the foundation of a contract, the promisor or his representative can employ a competent person to perform it. Generally upon the death of promisor, the legal representatives of the deceased are bound by the promise unless it is a promise for performance involving personal skill or ability of the promisor.

However the liability of the legal representative is limited to the value of property inherited by him from the promisor. The question here is whether a total stranger to a contract who is identified as a third person can perform a promise. Where a promisee accepts performance from a third party he cannot afterwards enforce it against the promisor. Where two or more persons jointly promise, the promise must be performed jointly unless a contrary intention appears from the contract.

Where one of the joint promisors dies, the legal representative of the deceased along with the other joint promisor s is bound to perform the contract. Where all the joint promisors die, the legal representatives of all of them are bound to perform the promise. The law set out above can be illustrated with the following examples: A may perform this promise either himself or causing someone else to pay the money to B.

If A dies before the time appointed for payment, his representative must pay the money or employ some other person to pay the money. A promises to paint a picture for B for a certain price. A is bound to perform the promise himself. He cannot employ some other painter to paint the picture on his behalf. Later on B expresses his inability to clear the dues. Before making this payment C did tell B nothing about it. Now A can sue B only for the balance and not for the whole amount.

This became the law that legal representatives are successors. When the benefits of a contract are succeeded by a process of law, both the burden and the benefit would some times devolve on the legal heir. Unlike succession, the assignor can assign only the assets to the assignee and not the liabilities. Because when a liability is assigned, a third party gets involved in it. The debtor cannot through assignment relieve himself of his liability to creditor.

In terms of section 38 of the Act, where the promisee has not accepted the offer or tender of performance by the promisor then the promisor is not responsible for non performance. In this case the promisor does not also lose his rights under a contract. The promisor should however ensure that his tender or offer to perform his part should satisfy following conditions. The above legal principles were settled in the famous English case Start up vs.

Macdonald 6 Man. An offer to any one of the several joint promisees has the same legal consequence as an offer to all of them. Thus from the above it could be seen that the following two rights accrue to the aggrieved party- i to terminate the contract and ii to indicate by words or conduct that he is interested in its continuance.

In either case, the promisee would be able to claim damages that he suffers as a result of the breach for it is not incumbent on the promisee to decide immediately in case of an anticipated breach that the contract may be ended. He may, however, choose to do so. In that event, the loss if any suffered by him will have to be made good by the promisor.

On the other hand, if he indicates that he is interested in the performance of the contract, then he would be entitled to claim damages which accrue on the date the contract is due to be performed. It would, therefore, be clear that the rights that we have just stated above accrue to a promisee when the promisor decides not to perform the promise. It has been held by the Privy Council in Muralidhar Chatterjee vs. International Film Company 47 Cal.

In view of Section 64 of the Act, the promisee, in the events of his putting an end to the contract, is bound to return all the benefits received under the contract and in turn is entitled for compensation for all damages sustained by him for breach of contract by the promisee.

The above law can be illustrated with the following example. Now let us consider the position whether the promisee can enforce his right against any one of the joint promisors and if so what are the rights and duties of the other promisors to make contributions. In terms of Section 43 of the Act, i when two or more persons make joint promise, the promisor can compel any one of the joint promisors to perform the whole of promise.

From the above, it is clear that the liability of joint promisors is joint and several and in the absence of any special contract to the contrary, the amount due can be recovered from any one of the joint promisors. A joint promisor cannot claim that he be sued along with all other joint promisors only. If, however the promisee sues one of the promisors and obtains a decree against him, he is precluded from bringing a fresh suit against the remaining borrowers.

In the matter of release of one of the joint promisors, by another joint promisor, it must be understood that such a release does not discharge other joint promisors nor does the released joint promisor would stand released to other joint promisor or promisors.

The above principle of joint promises is applicable for partners, joint mortgagees and members of a Hindu Undivided Family. In all these cases there is no single promisee. Therefore in order to enforce a promise all the joint promisees should sue the promisor.

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If any one of the joint promisees refuses to sue the promisor he would not be a plaintiff but be treated as defendant. Mad 26,35, Mohammed, Isaq vs.

Shekh Haq 12 C. Where no time is specified for performance of a promise, it must be performed within a reasonable time. What is reasonable time would depend on the facts and circumstances of each case [section 46]. Where a promise is to be performed on a specified date but no time is mentioned, then it can be performed any time on that day but during business hours only. A promisee may refuse to accept delivery of goods , if it is delivered after business hours.

For example if the promisor wishes to deliver goods at a time which is beyond business hours, the promisee can refuse. As regards the place of performance, where no place is fixed for the performance of a promise, it is the duty of the promisor to ask the promisee to fix a reasonable place.

No distinction is made between an obligation to pay money and an obligation to deliver goods or discharge any other obligation. But generally the promise must be performed or goods must be delivered at the usual place of business. Where the promisor has not undertaken to perform the promisee without an application by the promisee and the promise is to be performed on a certain day, it is the duty of the promisee to apply for performance at a proper place and with in usual hours of business.

The above are subject to the position that promisor can perform any promise at any place, in any manner, at any time which the promisee prescribes or sanctions. General observation: A contract may consist of i an act and a promise or ii two promises one being the consideration for the other.

This can be illustrated with the following. These promises are reciprocal promises. The above is in contrast to another situation.

This is not a reciprocal promise. The performance of reciprocal promise can take in different forms- i Simultaneously performance of reciprocal promise [Section 51]: In this case, promises have to be performed simultaneously. The conditions and performances are concurrent.

If one of the parties does not perform his promise, the other also need not perform his promise. Where the order of performance is expressly fixed, the promise must be performed in that order only. Where the performance of reciprocal promise is not fixed expressly, some times the order is understood by implication. When in a contract consisting of reciprocal promises one party prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented.

The person so prevented is entitled to get compensation for any loss he may have sustained for the non-performance. The above can be illustrated with the following illustrations by way of two case laws. Armstrong, an Englishman was engaged by the Captain of a Japanese ship to act as fireman on a voyage from England to Japan.

During the course of the voyage Japan declared war against China. The Englishman had to leave service because had he continued in service he would have incurred penalties under Foreign Enlistment Act.

In effect because of the war, the Englishman was prevented from discharging his part of the contract. The suit filed by him was decreed in his favour in spite of being opposed by the Japanese shipping company. It should be appreciated that the Captain of Japanese ship could not have brought a case against the Englishman for non-performance as the Japanese themselves were responsible for preventing the Englishman from performing his part of the contract.

Sometimes the parties would be prevented from discharging a part of the contract but not the entire contract. In such a case, the party so prevented need not avoid the full contract but perform the rest of it. Section 54 of the Act provides that promises may be such that: This peculiar position arises because of default on the part of one of the parties. Reciprocal promise to do certain things that are legal and certain others that are not legal — Section 57 of the Act provides that if reciprocal promises have two parts, the first part being legal and the second part being illegal, the legal part is a valid contract and the illegal part is void.

In this case the first part is valid as it is legal, the second part is void as it is illegal. For example, in the nearest reversionary heir of B, agreed to transfer his inheritance to C, if he succeeded to B; and he did not transfer his own estate to C. It was held that first promise was not enforceable, as it amounted to an agreement to transfer an estate on the mere chance of succession prohibited by Section 6 of the Transfer of Property Act, but the second promise was enforceable under Section 58 as an alternative promise.

Mathura L. In terms of this Section, where it is understood between parties that time is an essential element, and where one party is unable to perform his part of the promise either in full or in part within the time specified, then the contract is voidable at the option of the party either in full or in part to the extent of non performance of the contract within the time.