Indian contract act 1872

	Indian Contract Act, 1872
Unit 1 Nature of Contracts
1	Section	2h	Contract		“an agreement enforceable by law”.
2	Section	2e	Agreement		“every promise and every set of promises, forming the consideration for each other”.
3	Section	2b	Promise		“when the person to whom the proposal is made signi es his assent there to, the proposal is said to be accepted. Proposal when accepted, becomes a promise”.
					Agreement = O er/Proposal + Acceptance
					Contract = Accepted proposal/Agreement + Enforceability by law
4	Section	10	ESSENTIALS OF A VALID CONTRACT		“all agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void”.
			Case 1		Gujarat vs. Ramanlal S & Co.
			Case 2		Balfour v. Balfour
5	Section	2j	Void contract		“A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. Thus a void contract is one which cannot be enforced by a court of law.
6	Section	2i	Voidable contract		“an agreement which is enforceable by law at the option of one or more parties thereto, but not at the option of the other or others is a voidable contract”.
7	Section	2g	Void agreement		“an agreement not enforceable by law is void”.
8	Section	2a	Offer/Proposal		“when one person signi es to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”.
			Case 3	General offer	Carlill Vs. Carbolic Smoke Ball Co. (1893)
			Case 4	General offer	Lalman Shukla v. Gauri Dutt
			Case 5	Special/speci c o er:	Boulton v. Jones
			Case 6		Harvey vs. Facie [1893] AC 552
			Case 7		Mac Pherson vs Appanna [1951] A.S.C. 184
			Case 8		Harris vs. Nickerson (1873).
			Case 9	The acceptance must be communicated:	Brogden vs. Metropolitan Railway Co. (1877)
			Case 10	Same notes	[Neale vs. Merret [1930] W. N. 189].
			Case 11	Same notes	[Union of India v. Bahulal AIR 1968 Bombay 294].
			Case 12	Same notes	(Bhagwandas v. Girdharilal)
			Case 13	Same notes	[Heyworth vs. Knight [1864] 144 ER 120].
			Case 14	Mere silence is not acceptance:	Felthouse vs. Bindley (1862)
			Case 15	Communication of special conditions:	Mukul Datta vs. Indian Airlines [1962] AIR cal. 314
			Case 16		[Lily White vs. R. Mannuswamy [1966] A. Mad. 13].
			Case 17	Standard forms of contracts:	[Raipur transport Co. vs. Ghanshyam [1956] A. Nag.145].
9	Section	4	communication of revocation		communication of revocation (of the proposal or its acceptance) is complete.
			Case 18	Modes of revocation of o er	Ramsgate Victoria Hotel Co. Vs Monte ore(1866 L.R.Z. Ex 109),
			Case 19	Modes of revocation of o er	India Cooperative Navigation and Trading Co. Ltd. Vs Padamsey PremJi.
UNIT 2 : CONSIDERATION
			Case 20		Misa v. Currie
10	Section	2d	Consideration		“When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing or promises to do or abstain from doing something, such an act or abstinence or promise is called consideration for the promise”.
					Consideration = Promise / Performance that parties exchange with each other.
					Form of consideration = Some bene t, right or pro t to one party / some detriment, loss, or forbearance to the other
			Case 21	Consideration must move at the desire of the promisor:	Durga Prasad v. Baldeo,
			Case 22	Consideration may move from promisee or any other person	[Chinnayya vs. Ramayya (1882)]
11	Section	25(1)	Natural Love and A ection:
12	Section	25(2)	Compensation for past voluntary services:
13	Section	25(3)	Promise to pay time barred debt:
14	Section	148	Bailment
			Case 23	Charity:	(Kadarnath v. Gorie Mohammad)
UNIT 3 : OTHER ESSENTIAL ELEMENTS OF A CONTRACT
15	Section	11	competent to contract		“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disquali ed from contracting by any law to which he is subject”.
			Case 24	A contract made with or by a minor is void ab-initio:	Mohori Bibi vs. Dharmo Das Ghose (1903),
16	Section	10	incompetent to contract		It is especially provided in Section 10 that a person who is incompetent to contract cannot make a contract within the meaning of the Act.
17	Section	12	Person of sound mind:		“a person is said to be of sound mind for the purposes of making a contract if, at the time when he makes it is capable of understanding it and of forming a rational judgement as to its e ect upon his interests.”
18	Section	13	Free consent		“two or more persons are said to consent when they agree upon the same thing in the same sense.”
19	Section	14	De nition of ‘Free Consent’
20	Section	15	Coercion		“Coercion’ is the committing, or threatening to commit, any act forbidden by the Indian Penal Code or the unlawful detaining, or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.”
21	Section	19	Eff ects of coercion
22	Section	71			A person to whom money has been paid or anything delivered under coercion must repay or return it. (Section 71)
23	Section	16	Undue in uence		“A contract is said to be induced by ‘undue in uence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and he uses that position to obtain an unfair advantage over the other”.
			Case 25	Unconscionable bargains	Kirpa Ram vs. Sami-Ud-din Ad.Khan (1903)]
24	Section	19a	Power to set aside contract induced by undue in uence
25	Section	17	Fraud		Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with an intent to deceive another party thereto or his agent, or to induce him to enter into the contract: (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act  tted to deceive; (5) any such act or omission as the law specially declares to be fraudulent.
			Case 26	Mere silence is not fraud	[Word vs. Hobbs. (1878)].
			Case 27	Silence is fraud: Fiduciary Relationship:	(Regier V. Campbell Staurt)
			Case 28	Contracts of marriage:	(Hazi Ahmed v. Abdul Gassi).
26	Section	18	Misrepresentation
27	Section	19	Legal e ects of agreements without free consent
28	Section	23	the consideration or object of an agreement is said to be unlawful:		Section 10 of the Indian Contract Act provides for the legality of consideration and objects thereto. Section 23 of the Act also states that every agreement of which the object or consideration is unlawful is void.
	VOID AGREEMENTS
29	Section	11	1. Made by incompetent parties
30	Section	20	2. Agreements made under Bilateral mistake of fact
31	Section	23	3. Agreements the consideration or object of which is unlawful
32	Section	24	4. Agreement the consideration or object of which is unlawful in parts
33	Section	25	5. Agreements made without consideration
34	Section	26	6.Agreement in restraint of marriage
35	Section	27	7. Agreements in restraint of trade
36	Section	28	8. Agreement in restraint of legal proceedings
37	Section	29	9. Agreement the meaning of which is uncertain
38	Section	30	10. Wagering Agreement
39	Section	56	[Refer Unit 2] 11. Agreements to do impossible Acts
			Case 29	Crossword Puzzles and Competitions:	State of Bombay vs. R.M.D. Chamarbangwala AIR (1957)
UNIT 4 : PERFORMANCE OF CONTRACT
40	Section	37	OBLIGATIONS OF PARTIES TO CONTRACTS		The parties to a contract must either perform, or o er to perform, their respective promises unless such performance is dispensed with or excused under the provisions of the Contract Act or of any other law. Promises bind the representatives of the promisor in case of death of such promisor before performance, unless a contrary intention appears from the contract
41	Section	40	Person by whom promise is to be performed-		If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.
42	Section	41	Eff ect of accepting performance from third person		When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor. That is, performance by a stranger, if accepted by the promisee, this results in discharging the promisor, although the latter has neither authorised not rati ed the act of the third party.
43	Section	42	Joint promisors:		When two or more persons have made a joint promise, then unless a contrary intention appears by the contract, all such persons must jointly ful ll the promise. If any of them dies, his legal representatives must, jointly with the surviving promisors, ful ll the promise. If all of them die, the legal representatives of all of them must ful ll the promise jointly
44	Section	38	EFFECT OF REFUSAL TO ACCEPT OFFER OF PERFORMANCE		where a promisor has made an o er of performance to the promisee, and the o er has not been accepted, then the promisor is not responsible for non performance, nor does he thereby lose his rights under the contract.
45	Section	39	EFFECT OF A REFUSAL OF PARTY TO PERFORM PROMISE		when a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signi ed, by words or conduct, his acquiescence in its continuance.
46	Section	42	Devolution of joint liabilities		When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives and after the death of any of them, his representative jointly with the survivor or survivors and after the death of last survivor, the representatives of all jointly, must ful l the promise.
47	Section	43	Any one of joint promisors may be compelled to perform		When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise.
48	Section	44	Eff ect of release of one joint promisor-		The effect of release of one of the joint promisors is dealt with in Section 44 which is stated below: Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors, neither does it free the joint promisors so released from responsibility to the other joint promisor or promisors.
			TIME AND PLACE FOR PERFORMANCE OF THE PROMISE
49	Section	46	Time for performance of promise, where no application is to be made and no time is speci ed		Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is speci ed, the engagement must be performed within a reasonable time. Explanation to Section 46 - The expression reasonable time is to be interpreted having regard to the facts and circumstances of a particular case.
50	Section	47	Time and place for performance of promise, where time is speci ed and no application to be made		When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promise, the promisor may perform it at any time during the usual hours of business, on such day and the place at which the promise ought to be performed
51	Section	48	Application for performance on certain day to be at proper time and place		When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business
52	Section	49	Place for the performance of promise, where no application to be made and no place  xed for performance		When a promise is to be performed without application by the promisee, and no place is  xed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such a place.
53	Section	50	Performance in manner or at time prescribed or sanctioned by promisee		The performance of any promise may be made in any such manner, or at any time which the promisee prescribes or sanctions.
54	Section	51	Promisor not bound to perform, unless reciprocal promise ready and willing to perform		When a contract consists of reciprocal promises to be simultaneously performed, no promisor need to perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
55	Section	52	Order of performance of reciprocal promises		When the order of performance of the reciprocal promises is expressly  xed by the contract, they shall be performed in that order; and where the order is not expressly  xed by the contract, they shall be performed in that order which the nature of the transaction requires.
56	Section	53	Liability of party preventing event on which the contract is to take e ect		When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented ; and he is entitled to compensation from the other party for any loss he may sustain in consequence of the non- performance of the contract.
57	Section	54	Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises		When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non- performance of the contract
58	Section	55	Effects of Failure to Perform at a Time Fixed in a Contract in which Time is Essential		The law on the subject is contained in Section 55 which is reproduced below: “When a party to a contract promises to do certain thing at or before the speci ed time, and fails to do any such thing at or before the speci ed time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of essence of the contract”.
59	Section	56	Agreement to do Impossible Act		Contract to do act afterwards becoming impossible or unlawful: Compensation for loss through non-performance of act known to be impossible or unlawful:
60	Section	57	Reciprocal promise to do certain things that are legal, and also some other things that are illegal		Where persons reciprocally promise,  rst to do certain things which are legal and secondly, under speci ed circumstances, to do certain other things which are illegal, the  rst set of promises is a valid contract, but the second is a void agreement.
61	Section	58	Alternative promise’ one branch being illegal		The law on this point is contained in Section 58 which says that “In the case of the alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced”.
			APPROPRIATION OF PAYMENTS
62	Section	59	Application of payment where debt to be discharged is indicated		Where a debtor, owing several distinct debts to one person, makes a payment to him either with express intimation or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.
63	Section	60	Application of payment where debt to be discharged is not indicated		Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, where its recovery is or is not barred by the law in force for the time being as to the limitation of suits.
64	Section	61	Application of payment where neither party appropriates		Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payments shall be applied in discharge of each proportionately
			CONTRACTS, WHICH NEED NOT BE PERFORMED – WITH THE CONSENT OF BOTH THE PARTIES
65	Section	62	Eff ect of novation, rescission, and alteration of contract
66	Section	63	Promisee may waive or remit performance of promise:		Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance or may accept instead of it any satisfaction which he thinks  t”. In other words, a contract may be discharged by remission.
67	Section	64	Restoration of Bene t under a Voidable Contract		The law on the subject is “When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is the promisor. The party rescinding avoidable contract shall, if he has received any bene t thereunder from another party to such contract, restore such bene t, so far as may be, to the person from whom it was received”.
68	Section	65	Obligations of Person who has Received Advantage under Void Agreement or contract that becomes void		“When an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.”
69	Section	66	Communication of rescission		You have noticed that a contract voidable at the option of one of the parties can be rescinded; but rescission must be communicated to the other party in the same manner as a proposal is communicated under Section 4 of the Contract Act. Similarly, a rescission may be revoked in the same manner as a proposal is revoked.
70	Section	67	Effects of neglect of promisee to afford promisor reasonable facilities for performance		If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non performance caused thereby.
UNIT 5 : BREACH OF CONTRACT AND ITS REMEDIES
71	Section	39	anticipatory breach of contract		An anticipatory breach of contract is a breach of contract occurring before the time  xed for performance has arrived. When the promisor refuses altogether to perform his promise and signi es his unwillingness even before the time for performance has arrived, it is called Anticipatory Breach. Anticipatory breach of a contract may take either of the following two ways: (a) Expressly by words spoken or written, and (b) Impliedly by the conduct of one of the parties.
			SUIT FOR DAMAGES
72	Section	73	Compensation for loss or damage caused by breach of contract		When a contract has been broken, the party who su ers by such a breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
			Case 30	Ordinary damages	Hadley vs. Baxendale
73	Section	74	PENALTY AND LIQUIDATED DAMAGES
74	Section	75	Party rightfully rescinding contract, entitled to compensation		A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through non-ful lment of the contract
UNIT 6 : CONTINGENT AND QUASI CONTRACTS
75	Section	31	‘Contingent Contract		“A contract to do or not to do something, if some event, collateral to such contract, does or does not happen”.
			enforcement of a contingent contract
76	Section	32	Enforcement of contracts contingent on an event happening
77	Section	33	Enforcement of contracts contingent on an event not happening
78	Section	34	A contract would cease to be enforceable if it is contingent upon the conduct of a living person when that living person does some thing to make the ‘event’ or ‘conduct’ as impossible of happening.
79	Section	35	Contingent on speci ed event not happening within  fixed time: Contingent on happening of speci ed event within the  xed time:
80	Section	36	Contingent on an impossible event		Contingent agreements to do or not to do anything, if an impossible event happens are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.
81	Section	68	Claim for necessaries supplied to persons incapable of contracting
82	Section	69	Payment by an interested person
83	Section	70	Obligation of person enjoying bene ts of non-gratuitous act
			Case 31		[ShyamLal vs. State of U.P. A.I.R (1968) 130]
84	Section	71	Responsibility of fi nder of goods
			Case 32		Hollins vs. Howler L. R. & H. L.,
85	Section	72	Money paid by mistake or under coercion
			Case 33		[Shivprasadvs Sirish Chandra A.I.R. 1949 P.C. 297]
			Case 34		Sales tax o cer vs. Kanhaiyalal A. I. R. 1959 S. C. 835
			Case 35		[Seth Khanjelekvs National Bank of India].
			Case 36		[Trikamdas vs. Bombay Municipal Corporation A. I. R.1954]