Indian contract act, 1872

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Indian ContractIndian Contract
Act, 1872Act, 1872

Indian Contract Act, 1872
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BBusiness Lawusiness Law
Chapter – 1Chapter – 1
Nature and EssentialNature and Essential
of a Contractof a Contract

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`The term “Contract” in ordinary sense means an
agreement between two persons.
The law of contract seeks to regulate the behavior of
persons who make contracts, so that any conflict
arises between these persons later may be resolved.
Meaning of Contract:
Sec. 2 (h) defines a contract: “ An agreement
enforceable by law is a contract.”
e.g. C makes an agreement with D to sell him some
goods for Rs. 25000.

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-B invites a friend S to dinner. He makes elaborate
preparations. S fails to turn up for dinner and all the
preparation made by B go waste. Since this was a
contract between the parties, B cannot take S to
court for legal action against him for breaking the
commitment to come for the dinner.
• How could it be said that the above was not a
contact although it was clearly an agreement
between the two friends?

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1.An Agreement or offer and acceptance:
-Agreement = Proposal + their acceptance
-Agree. Must made by two person, one is making
offer and another is accepting this offer.
2.Intention to create legal relation
-Court would like to measure the degree of
seriousness.
-Not every loose conversation, not any exchange of
pleasantries, not a casual social commitment,
consider as a contact.
Essential of Valid ContractEssential of Valid Contract

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3.Competentnce of Parties
Everybody is able to make contract except Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.
4.Consideration
“Something in Return”
e.g. B promise to S that He will buy his bike for
Rs.35000.
5.Free Consent
If the parties make the agree. without any kind of
pressure or misguidance, then the agree. would be
the result of Free Consent.
“Consensus ad item” between parties, which means
that there must be complete understanding of each
other’s mind between them.

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6.Lawful object and consideration
e.g. I will kill you Mr. if you will give mw 100 bottle
wine.
7.Not expressly declared void (Cancelled) agreement
Always void i.e. without legal effect because of their
nature.
e.g. Agree. made without consideration
Agree. to do impossible act.
Agree. on the meaning of which uncertain etc.
8.Certain Formalities
-Necessary fulfillment of certain formalities for
making certain specific types of contract
-Made in written or in presence of witness.

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• A invite B to out for dinner together. B accepts the offer. A hires a
taxi but B does not turn up. A has to give the dinner some
compensation. Can A recover it from B?
• V offer to donate Rs. 11000 to hospital. The hospital accept the offer.
Can it recover the amount ?
Case Law

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Chapter – 2Chapter – 2
OFFER
AND
ACCEPTANCE

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• Formation of Agreement required two steps ,
making of a proposal by one person and
acceptance of this proposal by other.
• Agreement= Offer + their acceptance
OFFER AND ACCEPTANCE

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The Proposal or Offer
Sec. 2 (a) define an offer in these words:
“When one person signifies to another
his willingness to do or to abstain from doing
anything,
with a view to obtaining the assent (acceptance) of
that other to such act or abstinence, he is said to
make a proposal”
e.g. R tells S : “ I am ready to sell my machine for
Rs.9000,are you ready to buy”.
This is clear offer from R to S.
The Proposal or Offer
Sec. 2 (a) define an offer in these words:
“When one person signifies to another
his willingness to do or to abstain from doing
anything,
with a view to obtaining the assent (acceptance) of
that other to such act or abstinence, he is said to
make a proposal”
e.g. R tells S : “ I am ready to sell my machine for
Rs.9000,are you ready to buy”.
This is clear offer from R to S.

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Requirements for Valid OfferRequirements for Valid Offer
1.Offer must be express or implied
-Must be made in a manner which leave no doubt about
it.
-Proposal made in words, the promise is said to be
express, and proposal mad otherwise than in words, it is said
to be implied.
e.g. B tells S : “Can you repair my computer?” – Express
offer
A street seller of photo-albums quietly extends a
piece before a passer –by who takes it in his possession.-
Implied offer to sell.
2.Offer must intend to create legal relation
3.Offer must be certain and not vague in meaning
Offer must be definite and certain in meaning

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4.Offer may be specific or General
There must be destination of offer.
-If offer is targeted for one specific person, it is called a
specific offer.
-If it is targeted for the whole world at large, it is called
general offer. e.g. Advertisement
5. Offer must be communicated
Lalman Shulka vs Gauri Dutt
6.Offer must be distinguished from invitation to offer
e.g. Availability of Books in Book Store being available for
letting out. Display of suit with price tag-All are example of
invitation to offer. Advertiser may or may not sell this.
e.g. Publishing of Time Table by railways are example of
expression of an intention.

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What is difference between Invitation to Offer and General
Offer?
Invitation to Offer: Aims at taking the customer to the
advertiser to start negotiation.
General Offer: Aims at leading the offeree (to whom offer
made) to the performance of specified condition which
would amount to acceptance of offer.
7.An Offer should not contain a term forcing an action
on Offeree
e.g. B tells S that in case no reply is receiving from S
within days , it will treated as acceptance of his offer.
S are not bound by this offer.

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The AcceptanceThe Acceptance
Sec. 2 (b) “When a person to whom the proposal is made ,
signifies his assent thereto, the proposal is said to be
acceptance.”
A proposal , when accepted become a promise.
Requirements for Valid Acceptance
1.By a proper person-
-The proper person to accept the offer is the one to
whom it is targeted.
-Offeror cannot be forced to be bound in a contract
with a person with whom he did not want to be involved.
2..Within proper time
Time specified by Offeror.
e.g. Advertisement of IPO

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3.Must be absolute and unqualified(total and without
condition)
Offeree should neither add to nor reduce from the
offer anything from his side.
-B offer to sell his Car to S at Rs.20,000. S accept the
offer with the condition that payment shall take after
a month.
This is counter offer from S to B. The offer
from B stand rejected.
4.Must be Communicated
Mental acceptance is no acceptance.
5.Must be given in a proper Mode.
-If Offeror prescribed ay mode of acceptance , it must
be adopted by offeree for acceptance. E.g. by fax, by
mail, by registered post etc
e.g. A makes an offer to B and says : “If you accept the
offer, replay by e-mail only.” B send the reply by post.

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6.Accepatnce must succeed the offer
Two identical cross offers can not form an
agreement.
e.g. A sends a letter to B containing an offer. Almost
at the same time, B also sends a latter to A containing an
offer on exactly same lines The two offer cross each other
during postal journey. So they called identical cross offer.
Can both of them together form an agreement between A
and B on the logic that they represent a common desire and
common understanding ?
Only two offer are made and there is no acceptance.

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7. Offer once rejected can not be accepted.
B makes an offer to give job to H at Rs. 7000 pm salary. S
says, “No, I want Rs. 8000 pm month. B refuses. S says, “ Alright ,
I will work for Rs.7000”. B says , “I am not interested in you.”
There is no contract between B and S because B’s initial offer came
in to end with its rejection by S through a counter offer. Now, it is
S’s offer to work for Rs. 7000 which B is rejecting. (Hyde vs
Wrench)

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1.Communication of Offer
An offer is said to have been made when it
comes to knowledge of the other person for
whom it was intended.
2.Communication of Acceptance
For Acceptance two steps required: (i) Offeree
transmits his acceptance and (ii) Message
reaches the Offeror.
Brogden Vs Metropolitan railways Co.
i. Communication of acceptance from offeree is
binding upon the Offeror as soon as the latter of
acceptance is posted so as to be beyond the
Offeree’s control.
ii. Communication of acceptance from offeree is
binding upon the offeree himself only when it
comes to the knowledge of the Offeror.
Communication of Offer, Acceptance and
Revocation

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e.g. Mr. X sends a latter of offer to Y on August 5 which
may reach Y on August 10. Y post his latter of
acceptance on August 15 which may comes to
knowledge of X on August 20.
Offer said to be made on = August 10
Offer said to be accepted for Y on = August 15
Offer said to be accepted for X on = August 20
Position of time gap between August 15 to August 20 =
This time is available for Y to withdraw his acceptance.

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3.Communication for Revocation
Sec 5 provide rule about revocation of offer and
acceptance. It states:
“A proposal may be revoked at any time before the
communication of its acceptance is complete from
acceptor as against the proposer, but not afterward.”
“An acceptance may be revoked at any time before the
communication of the acceptance is complete as
against the acceptor ,but not afterward.”

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X makes an offer to Y on 5th
May, it reach to Y on 10th
May.
Y posted of his acceptance to X on 15th
May. It reaches to X
on 20th
May.
X send withdrawal of his offer on 9th
May, it reaches to Y
on 14th
May.
-It will come to effect on 14th
May only, even though X
send on 9th
May. It is called revocation of offer.
Y send withdrawal of his acceptance on 17th
May , it reaches
to X on 19th
May.
-It will come to effect on 19th
May only, not on 17th
May.
It is called revocation of Acceptance.

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1. X makes an offer to Y on 1th
May, it reach to Y on 5th
June.
When Offer is completed?
-It is competed only on 5th
June.
2. Y posted of his acceptance to X on 10th
June. It reaches
to X on 30th
June. When acceptance is completed?
- It is completed only on 30th
June.
3. X want to withdraw his offer, which is the last date?
-It must be before 10th
June, not thereafter.
4. Y want to cancel his acceptance, which is the last date
for cancellation?
-It must be before 30th
June, not thereafter.

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• Loss of letter of Acceptance in the Postal transit
– Acceptance is complete as against Offeror as soon
as the latter of acceptance is posted. The contract
is completed even if the latter of acceptance lost in
the post.
– But it is important that the latter of acceptance is
correctly addressed, sufficiently stamped and
posted.
• Contract over telephone or telex or oral
communication
– The offeree must make sure that his acceptance is
properly received i.e. heard and understood by the
Offeror.

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When does an offer come to an end?
An offer come to end by Two Revocation or laps and
Rejection of Offer.
A. Revocation or laps or Withdrawal of Offer (Sec.6)
1.By communication of notice of revocation by Offeror
before its acceptance is completed against him
2. By laps of time
- X offer Y to sell some goods on 1st
May and agreed
to give him three days time to accept. Y accepted
offer on 5th
May.
3. By non-fulfillment of condition by offeree
- X offer to sell some goods to Y, if Y give full amount
before certain date.

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4.By death of Offeror
- If offeree accept the offer in ignorance of the
death of Offeror, the acceptance is valid.
5. If counter offer is made
6.If Offer is not accepted according to prescribed
mode
7.If law is change
B. Rejection of Offer by Offeree
1. Express Rejection i.e. by words written or spoken
2.Implied rejection
-when offeree make counter offer
-When offeree make conditional acceptance
-Not following prescribed time

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Case Law
1. A garment store gave the following
advertisement in a newspaper: “Special sale for
tomorrow only. Men’s Suits reduced from Rs.
200 to Rs. 100.” Is it offer?
2. P says to Q, “I will sell you a camera.” Is it
offer?
3. A advertises in ToI that he would pay Rs. Rs.200
to anyone who finds and return his knowledge.
Is it offer?
4. A offer by a latter to sell his car to B for Rs.
15000. B, at the same time, offer by latter to
buy A’s car for Rs.15000. The two letters cross
each other in the post. Is there a contract
between A and B?

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-“Something in Return”
Sec. 2 (d) defines consideration as follow : “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 to abstain from doing,
something, such act or abstinences or promise is
called a consideration for promise.”
Consideration

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1.Consideration at the desire of the promisor
e.g. A saves B’s goods from fire without being asked to do
so. A can not demand payment for his service.
2. Consi. from promisee or any other person.
It is immaterial who provides the consideration for a
person’s promise so long as consideration is there.
3. Con. may be past, present or future.
Past Con. : A finds B’s Son and B promises to pay
A 10000.
Present Con. : At the time of making promise
Future Con. : A promises to deliver goods to B when the
ship arrives and b promises to pay A Rs 1000 against the
receipts of goods. Its future, as both the parties will
perform after the arrival of ship.
Legal Rules as to Consideration

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4. Con. need not be adequate
e.g. X sell his house worth Rs 1 lac for Rs. 100 to Y.
5. Con. must be real and not illusory.
i. Physically Impossibility
e.g. X promises to put life into Y’s dead wife should Y
pay him Rs. 500.
ii. Legal Impossibility
iii. Uncertain Consideration
6.Con. must be something which promisor not already bound
to due.
e.g. There was a promise to pay to the Vakil an additional
sum if the case was successful.
7.It must not be illegal, immoral or opposed to public policy.

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Exceptions (Sec. 25)
1.Love and Affection
e.g. A father promises to pay his son 1000 out of affection and
love and registers it. It’s a contract
2.Compensation for voluntary services
e.g. X finds Y’s purse and give it to him. Y promises to give X Rs.
50. This is contract.
3. Promise to pay a time-barred debt.

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‘Capacity’ means Competency of the parties to enter into a valid contract.
Sec.11 declares the following persons to be incompetent to contact:
i. Minor
ii. Persons of Unsounded Mind
iii. Persons disqualified from any other law.
Capacity to Contract

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Minor
• According to Indian Minority Act,
1875., a person who has completed
his 18th
year of age is considered too
be minor.

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• Law Relating to minor’s Agreements:
“NO LEGAL ACTION TAKEN AGAINST MINOR”
1.Absolutly Void
Agree. of minor is absolutely void and nullify.
e.g. A minor take loan of Rs. 20000 from moneylender and
put mortgage of his house in favor of moneylender. Later,
minor started an action to get the mortgage cancelled.
2. Agree. may be enforced for minor’s benefits.
e.g. A minor may give loan to a person and the
borrower may refuse to return money on the ground
that agreement is void.
-Fundamental rule, aim to protect the minor.

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3. “Rule of Estoppel” does not apply against minor
-If minor mislead the other party to believe that he is
of the majority age, and then some benefits get under an
agreement , he will be permitted to deny latter the fact that
he was of minority age. Thereby , he will have no liability
towards the other party.
4. Normally , no restitution would be permitted
-No recovery from Minor
Law regarding restitution is according to Sec.33 of Specific
Relief Act 1963
5.Apprenticeship agreements are enforceable
Such Agreement are made for minor’s benefit to enable him
to acquire skill under trained person for future.
-Agreement must be made under Apprentice Act 1961.

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6. Service argee. for minor is not enforceable
e.g. Film Producer agreed with the guardian of minor girl to
give to the girl the role in his film. Later, he gave role to
other girl. Can girl make case on Film producer?
7. Normally , specific performance of promises shall not be
ordered.
Agree. By minor may be ordered for specific performance if
some condition are satisfied.
i. It is made by guardian on behalf
ii. The Guardian is competent to make that agreement
iii. The agreement for minor’s benefit
8. No ratification on attaining majority age.
e.g. K (minor) take loan from B of Rs.10000 and give
promissory note in favor of B .K will not be liable under this
P/Note even after attaining majority age by K.

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9. Minor’s liability for necessaries
If person provide any support or necessities to minor who
are not enable to make contract, this person who had
provide necessity have right to reimburse from the
property of the minor, because it is benefit of the minor.
10.Minor as a member of partnership firm
-Minor can not be partner.
11.Minor as shareholder
A minor can become a shareholder in a company
through his guardian who will act as his trustee.
Minor directly can not entered into contract with the
company.
12.Minor as an agent
A minor can be appointed as a agent because agent do not
incur personal Liability

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13.Position of Minor’s Parents
-Parents are not liable for Minor’s act
14. Position of a joint contract of major and minor
-Minor will not be liable major (adult) are liable.
15. Insolvency of Minor
- Court can not be declared insolvency by court.

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Continued
• Contracts by person of unsound mind
– Contracts by lunatics
– Contracts by drunkards
• Contracts with Parda-Nishin women.
• Contracts by married women
• Contracts by corporation
• Contracts by insolvents

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Free Consent
According to Sec. 13 ‘Two or more person are said to consent when
they agree upon the same things in the same sense.’
This mean that there should be perfect identity of mind
(consensus ad idem) regarding the subject-matter of contract.
According to Sec. 14 consent is said to be free when it is not caused
by any of the following :
1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

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• i. A has two cars, one blue and other red. He wants
to sell his blue car. B who knows of only A’s red car,
offer to purchase A’s car for Rs. 20000. A accept the
offer thinking that it is for his blue car. This is no
consent because both the parties are not
understanding the same things in the same sense.
• ii. If B goes to A and on the point of pistol asks A to
sell his red car for sum of Rs. 20000 to him, there is
consent because both are understanding that red car
is the subject matter of the consent, but the
consent is not free because it has been obtained by
Coercion.

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Undue InfluenceUndue Influence
• Undue influence is the improper use of any power
possessed over the mind of the contracting party.
• According to Sec. 16 a contract is said to be affected by
undue influence when:
-(a) the relation subsisting between the parties are such
that one of the parties is in a position to dominate the
will of the other, and
(b) Use that position to obtain an unfair advantages over
other.

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• The person deemed to be in position to dominate the will
of the other.
- Where he holds a real or apparent authority over the
other like master and Servant , child and parents.
-Where he stand in a fiduciary relationship (Mutual
trust and confidence) like religious guru and follower,
doctor and patients, lawyer and clients.
- Where he makes a contract with a person whose
mental capacity is temporarily or permanently
affected by reason of age, illness or mental or body
distress.

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Burden of Proof
• The person who claim undue influence has to prove
that it was the cause of contract. He has to prove
that pre-existing relationship, the position of
domination, and the misuse of the position.

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Difference Between Coercion and Undue Influence
1.Mode of Obtaining Consent
- In Coercion ,Consent obtained by threatening to act.
- In U.I. , Consent obtained by using dominating power.
2. Type of Force
-In Coercion, physical force is exercised.
- In U.I. , Moral forced is used.
3. Existence of Relationship
-relationship between the promisor and the promisee is not
necessary.
-Some sort of relationship MUST exist between the two parties
to the contract.

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FRAUD
• Fraud means method of misleading a person deliberately
to cause in him a wrong understanding of so as to
obtaining that’s person’s consent for a contact.
• E.g. M falsely tells R that the car that he was offering to
sell was once owned by Sachin Tendulkar. This is a fraud
against R committed to obtain his consent to purchase
the car.

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MISREPRESENTATION
• Misrepresentation is a false representation made
innocently without any intention of deceiving the other
party. It may include two things:
(a) Wrong statement of a material facts not known to be
false
(b) Non-disclosure of the facts where there is a large
duty to disclose without any intention to deceive.

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Diff. between Fraud and Misrepresentation
1. Intention:
- In fraud, there is intention to deceive (mislead to
somebody).
-In Mis. , there is no intention to deceive.
2. Consequence:
-In Fraud, damage can be available to the affected
party for the loss suffered .
-In Mis. , no such damage are available.
3. Defense:
-In Fraud, the guilty party does not have any defense
in its favor.
In Mis. , the guilty party have defense in its favor.

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Mistake
• A mistake means an error in understanding the
fact relevant for formation of a contract.

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Case law
- X , a poor widow, borrowed Rs. 3000 from a money-lender at
100% per annum rate of interest for the purpose of enabling her
to establish her right of maintenance. Is she liable to replay the
loan on these terms?
- No, this is an unconscionable transaction and thus
amount to a contract caused by undue influence.
• A woman went to a jeweller, falsely represented herself to be a
wife of Sachin Tendulkar and took with her a ring on the
pretext of getting the approval of her husband . She deposit the
ring with Mr. Kambli. Can the jeweller recover the ring from Mr.
Kambli?
- Yes, because , there was a mistake of identity on the part
of the jeweller, Thus the agreement was void.

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1. Agreement made by incompetent parties (Sec. 11)
Everybody is able to make contract except
Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.
2. Agree. the consideration or object of which is unlawful
in part. (Sec. 24)
I will kill you Mr. if you will give mw 100 bottle wine.
3. Agree. Made without consideration. (Sec. 25)
4. Agree. in restraint of marriage. (Sec.26)
Freedom of choice in marriage has been guaranteed to
every person who is major in age.
Void Agreement

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5. Agree. in restraint of trade. (Sec. 27)
X and Y were competitor shopkeeper in a locality in Surat. Y
agreed to pay X , a sum of money if he would close his
business in that locality.. X did so but Y refuse to pay
money.
6. Agree. in restraints of legal proceeding. (Sec. 28)
7. Agree. the meaning of which is uncertain. (Sec. 29)
8. Agree by way of wager. (Sec. 30)
A agrees with B that if there is a rain on a certain
day, A will pay B Rs. 50. If there is no rain B will pay Rs.
50.
A bet on horse race.
A bet on winning or loosing of cricket match.
9. Agree to do impossible act. (Sec. 56)
10.Agreement made under a mutual mistake of the fact.
(Sec. 20)

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• Agreement void where both parties are
under mistake as to matter of fact. Where
both the parties to an agreement are
under a mistake as to a matter of fact
essential to the agreement, the agreement
is void.
• Explanation.-An erroneous opinion as to
the value of the thing which forms the
subject-matter of the agreement is not to
be deemed a mistake as to a matter of
fact.

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• Illustrations (a) A agrees to sell to B a specific
cargo of goods supposed to be on its way
from England to Bombay. It turns out that,
before the day of the bargain, the ship
conveying the cargo had been cast away and
the goods lost. Neither party was aware of
the facts. The agreement is void.
• (b) A agrees to buy from B a certain horse. It
turns out that the horse was dead at the time
of the bargain, though neither party was
aware of the fact. The agreement is void.

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Effect of mistakes as to law
• .-A contract is not voidable because it was
caused by a mistake as to any law in force
in [India];
• Contract caused by mistake of one party
as to matter of fact.- A contract is not
voidable merely because it was caused by
one of the parties to it being under a
mistake as to a matter of fact.

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Consideration valid or not ??
• What considerations and objects are
lawful and what are not.-The consideration
or object of an agreement is lawful,
unless- it is forbidden by law ; or is of such
a nature that, if permitted, it would defeat
the provisions of any law; or is fraudulent ;
or involves or implies injury to the person
or property of another or ; the Court
regards it as immoral, or opposed to
public policy.

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• . Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here
B's promise to pay the sum of 10,000 rupees is the
consideration for A's promise to sell the house, and A's
promise to sell the house is the consideration for B's
promise to pay the 10,000 rupees.
(b) A promises to pay B 1,000 rupees at the end of six
months, if C, who owes that sum to B, fails to pay it. B
promises to grant time to C accordingly. Here the
promise-of each party is the consideration for the
promise of the other party and they are lawful
considerations.

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(c) A promises, for a certain sum paid to him by B,
to make good to B the value of his ship if it is
wrecked on a certain voyage. Here A's promise
is the consideration for B's payment and B's
payment is the consideration for A's promise and
these are ________ considerations.
(d ) A promises to obtain for B an employment in
the public service, and B promises to pay 1,000
rupees to A. The agreement is void, as the
consideration for it is unlawful

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Agreement in restraint of trade
void.-
• Every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any
kind, is to that extent void. Saving of agreement not to
carry on business of which good-will is sold.-
• Exception 1.-One who sells the good-will of a business
may agree with the buyer to refrain from carrying on a
similar business, within specified local limits, so long as
the buyer, or any person deriving title to the good-will
from him, carries on a like business therein, provided
that such limits appear to the Court reasonable, regard
being had to the nature of the business.

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Agreements in restraint of legal
proceedings void.-
• Every agreement,- (a) by which any party thereto is
restricted absolutely from enforcing his rights under or in
respect of any contract, by the usual legal proceedings in
the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or (b) which
extinguishes the rights of any party thereto, or
discharges any party thereto from any liability, under or
in respect of any contract on the expiry of a specified
period so as to restrict any party from enforcing his
rights, is void to that extent. Saving of contract of refer to
arbitration dispute that may arise.-

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Agreements void for uncertainty.-
Agreements, the meaning of which is not certain,
or capable of being made certain, are void.
Illustrations (a) A agrees to sell to B " a hundred
tons of oil ". There is nothing whatever to show
what kind of oil was intended. The agreement is
void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of
a specified' description, known as an article of
commerce. There is no uncertainty here to make
the agreement void.

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(c) A, who is a dealer in coconut-oil only, agrees
to sell to B "one hundred. tons of oil". The nature
of A's trade affords an indication of the meaning
of the words, and A has entered into a contract
for the sale of one hundred tons of coconut-oil.
(d) A agrees to sell to B " my white horse for
rupees five hundred or rupees one thousand".
'There I is nothing to show which of the two
prices was to be given. The agreement is void,

63
Agreements by way of wager void.-
A wager agreement between two parties to the
effect that if a given uncertain event happens,
one party shall pay a certain sum to the other
and on the contrary event happening. For eg. If
the event turns out one way, one party shall lose
and the other shall gain.
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 the result of any game or other
uncertain event on which any wager is made.

64
CONTINGENT CONTRACTS
• "Contingent contract" defined.-A "
contingent contract " is a contract to do or
not to do something, if some event,
collateral to such contract, does or does
not happen. Illustration A contracts to pay
B Rs. 10,000 if B's house is burnt. This is
a contingent contract.

65
Enforcement of contracts
contingent on an event happening
• Contingent contracts to do or not to do anything if an
uncertain future event happens cannot be enforced by
law unless and until that event has happened. If the
event becomes impossible, such contracts become void.
Illustrations
• (a) A contracts to pay B a sum of money when B marries
C. C dies without being married to B. The contract
becomes void.
• (b) A makes a contract with B to sell a horse to B at a
specified price, if C, to whom the horse has been
offered, refuses to buy him. The contract cannot be
enforced by law unless and until C refuses to buy the
horse.

66
Enforcement of contracts contingent on
an event not happening.-
• Contingent contracts to do or not to do
anything if an uncertain future event does
not happen can be enforced when the
happening of that event becomes
impossible, and not before.
• Illustration A agrees to pay B a sum of
money if a certain ship does not return.
The ship is sunk. The contract can be
enforced when the ship sinks.

67
Expiry of time
• Illustrations
• (a) A promises to pay B a sum of money if a
certain ship returns within a year. The contract
may be enforced if the ship returns within the
year, 'and becomes void if the ship is burnt
within the year.
• (b) A promises to pay B a sum of money if a
certain ship does not return within a year. The
contract may be enforced if the ship does not
return within the year, or is burnt within the year.

68
Agreement contingent on
impossible events void.-
• 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.
• Illustrations
• (a) A agrees to pay B 1,000 rupees if two
parallel lines should meet. The agreement is
void.
• (b) A agrees to pay B 1,000 rupees if B will
marry A's daughter C. C was dead at the time of
the agreement

69
Cases
• In carew Co. Ltd v North Bengal, where two sugar
manufactures had entered into an agreement allocating
zones to procure sugar for meeting the needs of their
respective factories and each undertook not to draw any
cane from the zones alloted to the other factory, it was
held that the agreement was in restraint of trade and
therefore void.
• Similarly where four ginning factories entered into an
agreement fixing uniform rate for ginning cotton and
pooling their earnings to be divided between them in
certain proportions, it was held that such an agreement
was valid and enforceable.
• A combination which tends to create monopoly and
which is against the public interest is void.

70
• IN Attwood v. Lamount where the contract of service is
provided that on termination of employment the tailor
would not carry on similar business within 10 miles of his
employer, the agreement was void.
• But if same restriction is made while the term is on, it is
not restraint from trade.
• A, in bombay, enters into a contract with B in madras
with a condition that all disputes will be subject to
bombay jurisdiction. This limits the right of B to sue only
in Bombay court in case of dispute. Such an agreement
is valid.
• A agrees to sell B hundred tons of oil. The agreement is
void for uncertainty as there is nothing whatever to show
what kind of oil was intended.

71
• An agreement to pay certain sum when able to pay is
void or not ?
• A agrees to sell B “ all the grains in my grainary at
Ramnagar. Is there any uncertainty ?
• A contracts to pay B a sum of money when B marries to
C. C dies without being married to B. The contract
becomes void.
• A agrees to pay Re 1000 if two parallel lines meet. The
agreement is void.
• A agrees with B to put life into a dead man. The
agreement is void.
• Money lent for the purpose of gambling can be
recovered even though lent with the knowledge of the
parties.

72
• A having advanced money to his son, B,
during his minority, upon B's coming of
age obtains, by misuse of parental
influence, a bond from B for a greater
amount than the sum due in respect of the
advance.

73
• There is no offer, no acceptance, no consensus ad
idem and in fact neither agreement nor promise.
• These contact constituted by the Law, and therefore
termed as Quasi Contact.
Quasi Contract

74
1. Supply of necessaries
2. Payment by an interested person
3. Obligation to pay for non-gratuitous acts
e.g. Mr. X , a trader, leaves goods at Y’s house by
mistake. Y treats the goods as his own. He is bound to
pay for them to X.
4. Responsibility of Finder of Goods
Mr. X picks up a diamond on the floor of Y’s shop. He
hands it over to Y to keep it till true owner is found out.
No one appears to claim it for quite some weeks inspite
of the wide advertisement in the newspapers. X claims
the diamond from Y who refuse to return. Y is bound to
return the diamond to X who is entitled to retain the
diamond against the whole world except true owner.
Kinds of Quasi Contracts (Sec. 68 to 72)

75
The finder can sell the goods in the following cases:
• 1.When the things found is in danger of perishing
• 2.When the owner cannot be found out
• 3. When the owner is found out, but he refuse to pay the
lawful charges of the finder
5. Mistake or coercion
e.g. A and B jointly owe Rs. 100 to C. A alone pays the
amount to C. and B not knowing this fact, and pays Rs.
100 to C again. C is bound to pay the amount to B.

76
Quantum Meruit
• Quantum Meruit means “as much as earned”.
• When a person has done some work under a contact, and
some event happens which makes the further
performance of the contact impossible, then the party
who has performed the work can claim remuneration for
the work he has already done.

77
The claim for quantum meruit arises in the
following cases
1. When an agreement is discovered to be void.
e.g. GE was employed as a managing director in a
company. After he rendered service for three months. It
was found that the director were not qualified to appoint
him.
2. When something is done without any intention to do so
gratuitously.
3. When there is an express or implied contract to render
service, but there is no agreement as to remuneration.
In such cases, reasonable remuneration is payable.
e.g. There was an implied agreement between P and a fire
brigade for the services of the brigade.
4. When an indivisible contract is completely performed but
badly.

78
Kinds of Contracts (Sec. 68 to 72)
Classification of Contract
Enforceability Mode of
Creation
Extent of
Execution
Implied Cont.Express Contr.
Valid VoidIllegal Unenforceable
ExecutoryExecuted

79
1. Classification of Contract on the basis of Enforceability:
a. Valid Contract:
Contract which satisfy all the essential elements of a
valid contract as laid down be Section 10.
b. Void Contract:
An agreement may be enforceable at the time when it
was made but later on, due to certain reason, it become void
and unenforceable.
c. Illegal Contract:
All illegal agreement are void but all void agreement are
not necessarily illegal.
e.g. An agreement with minor is void but not
illegal.
d. Unenforceable Contract:
Certain contract become void because the law court will
not enforce them due to not fulfillment of certain formalities.

80
2. Classification of Contract on the basis of Mode of
Creation
a. Expressed Contract:
Contract is made by words spoken or written.
b. Implied Contract:
Contract which come into being on account of the act of
the parties and not by their express words, written or spoken.
3. Classification of Contract on the basis of Extent of
Execution
a. Executed Contract
Where both the parties to the contract have fulfilled their
respective obligation, the contact said to executed.
b. Executory Contract
Where one or both the parties to the contact still to
perform certain things in future or under the terms of the
contract something remains to be done, the contract is
termed as an executory contract.

81
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