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Model Q & Ans. for Judicial Service Main Exam on The Indian Contract Act, 1872 Q.

1 Distinguish an offer from an invitation to offer referring case law. Ans S -2(a) of I.C. Act provides that When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. e.g.: A bid at an auction sale is an offer or proposal. A proposal, when accepted, becomes promise and that is how a contract comes into formation. On the other hand, an invitation to offer is different from making an offer. In Grainger & Son Vs Gough 1896 Lord Herschell had observed that the transmission of a price list does not amount to an offer to supply unlimited quantity of the wine described in the price list, rather pricelist is only an invitation to offer. Thus a shopkeepers catalogue of price is not an offer. It is only an invitation to offer to buy at the indicated prices. Similarly in Pharmaceutical Society of Great Britain Vs. Boots cash chemist Ltd 1952. Lord Goddart said It would to wrong to say that the shopkeeper is making an offer to sell every article in the shop to any person who might come in and that person can insist on buying an article by saying I accept your offer. e.g. In most bookshops customers are invited to go in and pick up books, but there is no contract, until they proposes to buy and same is accepted by shopkeeper. Here shopkeeper is not bound to sell the book to him. Thus the display of goods in a shop with price chits attached to them is not an offer, even if there is a self service system in the shop.

S.K. Shukla

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Similarly where a taxi driver, with his taxi on road, calling the passengers, to sit in has taxi, actually makes an invitation. He is not bound to allow every one, who comes to him, to sit in his taxi, because his calling is not an offer, that can be accepted by any one, rather passengers are to make an offer to sit in his taxi to go certain destination, subject to acceptance or refusal by the taxi driver. Only on acceptance by taxi driver, the proposal of passengers becomes contract. Thus a menu card at a restaurant is also not an offer. It is only an invitation to offer. In State of M.P. Vs Hakim Singh AIR 1973 MP 24 it was held that a bidder at auction sale only makes an offer, which he can withdraw before its acceptance as contemplated by the terms of the auction. Similarly a notice calling for tenders is invitation to offer, the reason being that by way of notice, a party furnishes some information calling upon others to make offers. Q. 2 All illegal agreements are void, but all void agreements are not necessarily illegal. Explain. Ans As per S -2(h) An agreement enforceable by law is a contract. S -2(g) Says An agreement not enforceable by law is said to be void. An illegal agreement is an agreement, which is forbidden by law. But a void agreement may not be forbidden by law. e.g. (1) A promises to pay Rs. 1 , 00,000 to B, if he kidnaps X. It is an illegal contract. All agreements of such type are necessarily void. No court can enforce them. (2) A makes promise to put life in dead body is void agreement, but it is not illegal. Similarly X promises to find out a treasure by magic, is a void agreement, but not an illegal agreement. In such a situation, courts would not enforce such an agreement. In case of an illegal agreement and void agreement main or primary agreement
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S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

is unenforceable and as such if something has been paid under such an agreement, same cannot be recovered subject to certain exceptions. So it is said that all illegal agreements are void, but all void agreements are not necessarily illegal. Q. 3 Acceptance is to offer what a lighted match is to a train of gun powder. It produces something which cannot be recalled or undone. But the powder may have lain till it has become damp the man who lain the train may remove it before the match is applied. Explain with illustration the principles sought to be expressed in the above passage. Ans Effect of Acceptance The statement in question is made by Sir William Anson in the context of offer and acceptance. It deals with the binding effect of acceptance. It says If once offer is accepted, it cannot be revoked. Offer is just like a train carrying gun powder and acceptance is just like a lighted match. As soon as lighted match is applied to train carrying gun powder, the train is destroyed. Similarly as soon as offer is accepted, offer is destroyed, and converted into an agreement, which cannot be revived, after once burnt. But the person, who has lain over the train carrying proposal in form of gun powder, can remove his train before lighted match is applied. Similarly a person who has made a proposal, can withdraw it any time before its acceptance, but not afterwards, just like burnt train cannot be revived or removed. The statement of Sir William Anson is relevant in the context of section -5 of the ICA 1872. It reveals the character and effect of proposal and acceptance. S -5 says A proposal may be revoked at any time, before the communication of its acceptance is complete as against the proposer, but not afterwards.

S.K. Shukla

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Illustration A proposes by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not after words. S-7 says In order to convert a proposal into a promise, the acceptance must be absolute and unqualified. Thus an offer before it is accepted unconditionally it can be withdrawn, but when offer is once accepted unconditionally, it cannot be withdrawn because upon its acceptance, it gets converted into a contract and then remains no offer which can be withdrawn. In Florabel Skinner Vs Ramlila Mandal AIR 1980 the Full Bench of P&H. High Court observed that under the law of contract; an offer made by a party to another merely remains an offer and can be withdrawn at any time before it is accepted by the other party. But it is settled principle of law that once offer is accepted, an agreement comes into being and the party making offer cannot rescind from the offer and in spite of resiling from the same, would remain bound by the contract. Thus in light of provision and illustration made U/S -5 of ICA 1872 and observation of full bench of P&H. High Court in this context in the aforesaid case, we come to conclusion that the statement made in question is rightly observed by Sir William Anson. Q. 4 - Mention the circumstances in which a contract by a minor is (i) void (ii) voidable or (iii) valid. Ans (i) Void: In terms of I.C. Act 1872 A void contract is actually not a contract, because same is void from the very beginning. Vide S -10 The parties to contract must be competent to contract, while vide S -11 only those persons are competent to contract, who are major under their own law, and of sound mind and not disqualified by law to make contract. So incapacity to contract saves the minor to bind him by the contract. However a minor can still derive benefit there under. Where a minor has obtained any benefit, he
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cannot be directed to refund the money. As it is laid down in Mohari Bibi Vs Dharmdas Gosh (1903) 30 cal 539 A contract with a minor is void-ab-initio. So no one can enforce contract against a minor, even a minor cannot ratify contract entered into by him, while he was a minor, on attaining the age of majority. (ii) Voidable: When a contract is enforceable by law at the option of one party, but not at the option of the other, same is termed as a voidable contract. Since contract with a minor is void ab initio, same cannot be termed to be voidable. Valid: Vide S -2(h) agreement enforceable by law is contract. Contract with a minor being void ab initio, same is nullity in the eye of law. However S -68 of the I.C. Act provides for the liability of a minor in respect of necessaries supplied to him. Such a contract is actually a quasi-contract and valid in the eye of law. e.g.: In case of money advanced to a minor to meet his educational expenses or medical expenses, minor would be liable to the creditor. However only property of the minor would be liable and minor personally is not liable. Q. 5 When the consideration or object of an agreement is said to be lawful? Ans S -23 of the I.C. provides that the consideration or object of an agreement is lawful unless: (i) (ii) (iii) (iv) (v) It is forbidden by law or is of such a nature, 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. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
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(iii)

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

e.g.: (1) A, B and C enter into an agreement of the division amon g them of gains acquired or to be acquired by them by fraud. The agreement is void, as its object is unlawful. (2) A is to obtain for B an employment in the public service and B promises to pay Rs. 1,00,000/- to A. The agreement is void, as the consideration for it is unlawful. In Oswal Agro Furane Ltd Vs Oswal Agro Furane workers union, AIR 2005 SC 1555 the S.C held that A contract which may otherwise be valid, however, must satisfy the tests of public policy, not only in terms of the provisions of sections 25-O and 25-N of Industrial Disputes Act, but also in terms of section -23 of the Indian Contract Act. In Jayamma Vs maria Bai AIR 2004 SC 3957 Apex Court held that When an assignment or transfer is made in contravention of statutory provisions, the consequence thereof would be that the same is invalid and thus being opposed to public policy, the same shall attract the provisions of S-23 of the I.C. Act. Q. 6 A writes to B offering to sell him his house at a certain price. B at the same time and date, writes a letter offering to buy the same house at the same price. The two letters cross each other. Is there a contract between A and B. Ans S -2(a) of the I.C. Act 1872 says When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. S -2(b) says When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted. A proposal when accepted becomes a promise. So when a proposal is made, the other to whom it is made has to signify his assent thereto. In this case, A is alleged to have offered to sell his house to B. The offer has been made by writing a letter. At the same time and on the same day, B is alleged to have made an offer to A, by writing him a letter, to buy the very house offered by A in his letter. But both the letters cross each other. Both
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these letters are letters of offer addressed by one to the other written without knowing about the letter of the other. Neither A nor B wrote his letter signifying his assent to the letter of offer. Under I.C. Act offer becomes promise only when it is accepted. In the given circumstances, only when B accepts the offer conveyed to him by A in his letter, it would become promise. Similarly only when A accepts the offer conveyed to him by B in his letter, it would become promise. Here none of letters is by way of an acceptance of the offer made by the other. So this is a case of cross offers with no acceptance. Consequently this is not a case of contract between A and B. Q. 7 Explain the doctrine of frustration or impossibility with illustrations. Ans Doctrine of Frustration Each party to a valid contract is legally bound to perform their respective part of the agreement. At times, after the contract is formed, performance of part of agreement by one or the other party becomes impossible for one reason or the other. Sometimes, after the contract is arrived at, the contract, itself becomes unlawful. e.g.: After formation of the contract for import of goods, import of goods is forbidden by the government or the goods get perished or the property in question is destroyed, in such an eventuality, it would have a case of subsequent impossibility or frustration. It is significant to note that an agreement arrived at between the parties to do an act which is impossible in itself is void. For example Where A agrees with B to join two straight lines, the agreement is void. Section 56 of the I.C. Act 1872, deals with the doctrine of frustration It says (1) An agreement to do an act impossible in itself is void.
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S.K. Shukla

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(2)

A contract to do an act, which, after the contact is made, becomes impossible or by reason of some event, which the promisor could not prevent, becomes void, when the act becomes impossible or unlawful. e.g.: (1) A contracts with B to put life in a dead body is void contract, because it is an agreement to do an act impossible in itself. (2) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad, the contract becomes void, due to subsequent impossibility of the performance of contract. Doctrine of frustration or subsequent impossibility generally occurs in the following circumstances.

(1) (2) (3) (4) (5)

Destruction of the subject matter of contract Change of circumstances Non-happening of an event contemplated by the parties. Intervention or restriction by the government Declaration of war. However, it is noteworthy that frustration should not be self created or self induced. S -65 of the I.C. Act provides as to the rights of the parties, when an agreement is discovered to be void or when a contract becomes void. It says that when an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such an agreement or contract ,is bound to restore it or to make compensation for it, to the person from whom he received it. e.g.: (1) A pays B, Rs. 1,00,000/ - in consideration of Bs promise to marry C, As daughter. C is dead at the time of promise. The agreement is void, but B must repay A the Rs. 1,00,000/-.

S.K. Shukla

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(2) A contracts to sing for B at a concert for Rs. 10,000/-, which are paid in advance. A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made, if a had been able to sing, but A must refund to B the Rs. 10,000/- paid in advance. Q. 8 Whether the remedies available U/S -73 & 74 for the breach of contract also contemplate a void agreement. Ans Remedies available U/Ss 73 & 74 of the I.C. Act 1872, contemplate only a valid and binding agreement between the parties and not a void agreement. If the forfeiture clause is contained in an agreement which is void, it cannot be enforced, as the agreement itself is void U/S -20 of the contract Act. It is well settled that a void agreement cannot split up. None of the parties to the agreement can be permitted to seek enforcement of a part only of the contract through a Court of law. If the agreement is void, all its terms are void, except in certain known exceptions. These exceptions may be like a case where the clause is treated to constitute separate and independent agreement, servable from the main agreement. In such a situation such a clause of agreement can be enforced separately and independently. S -73 of the Act, deals with one of the remedies available for the breach of contract. It is provided that where a party sustain a loss on account of breach of contract, he is entitled to receive, from the party, who has broken the contract, compensation for such loss or damages S -74 of the Act comes into application, where the parties to the agreement stipulate either a particular amount which is to be paid in case of breach or an amount may be mentioned to be paid by way of penalty. In such a situation, the party complaing of the breach is entitled, whether or not actual damage or loss is proved to have been caused, to receive from the party, who has committed the breach of contract, compensation not exceeding the amount mentioned in the agreement or the penalty stipulated therein. However this provision of law also contemplates a valid and binding agreement between the parties.

S.K. Shukla

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Q. 9 What is the law relating to restitution in case of a void agreement? Ans S -65 of the I.C. Act deals with an obligation of person, who has received advantage under void agreement or contract that becomes void. It says that 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. S -65 is based on equitable doctrine. It may often be that the parties may realize, after having entered into the agreement or after having signed the contract, that one of the matters which was essential to the agreement, was not understood by them in the same sense and that both of them were at the time of entering into the agreement or executing the document. Such realization would have the effect of invalidating the agreement U/S -20 of the Act. On such realization it can be legitimately said that the agreement was discovered to be void. Comprehend a sit uation in which the parties were suffering from a mistake of fact from the very beginning, but had not realized, at the time of entering into the agreement or signing of the document, that they were suffering from any such mistake and therefore had acted bona-fide on such agreement. The agreement in such a case would be void from its inception, though discovered to be so at a much later stage. So the provision of S -65 i.e. for restitution would come into application in case of an agreement which is void ab initio, but the parties had not realized that it was void. Q. 10- A stranger to contract cannot sue on it. Explain this statement in context of Doctrine of privity of contract. Discuss this doctrine of British Law in context of India with its exceptions. Ans Doctrine of privity of contract The doctrine of privity of contract had its genesis in English common law, because first time it was adopted by the Court of kings Bench in Dutton Vs Poole 1677. In this case A person had a daughter to marry and in order to provide her a marriage portion, he intended to sell a tree, which was possessed by him at that time. His son the defendant promised that if the
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father would forebear to sell at his request, he would pay to her sister 1,000/pond. The father accordingly forbore, but defendant did not pay 1000 pond to her sister. So the sister and her husband sued him for the promised amount. It is here clear that the defendant gave his promise to his father and it was the father alone, who by not selling the tree, in contract, had furnished the consideration for the promise of defendant. The plaintiff was neither privity to contract nor interested in the consideration. But it is equally clear that the whole object of the agreement was to provide a portion to the plaintiff. It would have been highly inequitable to allow the son to keep the tree and amount both, and deprive his sister of her portion. Accordingly he was held liable to pay 1000 pond to his sister, as promised by him. But after about 200 years this principle was rejected by Lord Whiteman in Tweddle Vs Atkinson 1861. He held that the doctrine of privity of contract is well settled principle of English common Law, so third person cannot sue on a contract made by the contracting parties, even for his benefit. Once again this principle laid down by Lord Whitman was affirmed by Lord Haldane in Dunlop Vs Selfridge case in 1915 and he held that only a person, who is party to contract alone can sue upon it. This doctrine is even today in practice in England with some exceptions. Applicability of the Doctrine in India: In India consideration may proceed from a stranger to the contract i.e. third party, but only a party to contract is legally entitled to bring an action for enforcement of contract in Court. In Jamma Das Vs Ram Autar 1911, it was held that the purchasers contract to pay off a mortgage debt could not be enforced by the mortgage, who was not a party to the contract. The Supreme Court has endorsed this principle of privity of contract in a number of cases; particular reference may be made to (1) M.C. Chako Vs
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The State of Trakancore AIR, 1970 and (2) Khusha bhai patel Vs Mohd. Hussain AIR, 1981. Exception to the doctrine: some main exceptions to the doctrine of privity of contract are: (1) (2) (3) Where a trust is created in favour of the stranger, as held in Canady Vs Canady 1880. Where provision is made in the marriage settlement as held in Khwaja Mohd. Khan Vs Hussain; Begum 1910. Where provision is made in a partition or family arrangement for maintenance or marriage of a female member or minor as held in Dhankaur Vs Sarla Devi 1914. Where a charge is created in favour of a stranger as held in Abdul Gafar Vs Mohd. Salim. Where there is a direct agreement to pay to the defendant, who constitute himself as the agent of the third party as held in Venkta Reddy Naidu Vs Narsimha Rao 1935. It is clear from the above matters that so far as the exceptions to the rule are concerned, they are similar both under Indian and English Law. Q. 11- Explain the terms Bailment, Bailor and Bailee with Illustrations. What are essentials of Bailment. Ans Bailment, Bailor & Bailee S -148 of I.C. Act defines the term Bailment, Bailor and Bailee as follows: A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall when the purpose is accomplished, be returned or otherwise disposed of according to direction of person delivering them. The person delivering the goods is called Bailor. The person to whom they are delivered is called the bailee.
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(4) (5)

Explanation If a person is already in possession of the goods of other, contracts to hold them as a bailee, he thereby becomes the bailee and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment. Case Law (1) As per A T. Trust Ltd. Vs Trippunthure Devasworm 1954 Bailment is a technical term of the common law. Though etymologically it might mean any kind of handing over, it involves change of possession. One has custody without possession, like a servant or guest using his hosts goods, is not a bailee. On the whole a bailment might be described as a delivery on condition to which the law usually attaches an obligation to re-deliver goods or otherwise deal with them as directed, when the condition is satisfied. In UOI Vs S.N. Traders AIR 1992 Karnataka H.C. held U/S -73 of the Railways Act, the responsibility of railway administration as a carrier and also as a bailee commences from the moment the goods are entrusted to the railway administration for transit to carried by railway and continue until the goods are unloaded at the destination point. In Kavita Trehan Vs Balsara Hygiene Products Ltd. AIR, 1992 Delhi H.C. held In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would under similar circumstances. This observation of Delhi H.C is based on S -151 of I.C. Act 1872, which deals with care to be taken by bailee. Essential Elements of Bailment According to S -148 of I.C. Act 1872, there are three essential elements of a valid bailment: (1) (2) Delivery of goods by the bailer. Delivery of possession upon a contract and
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(2)

(3)

S.K. Shukla

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(3) (1)

Bailee bound to return goods or to disposes of goods according to directions of bailor. Delivery of goods: To constitute bailment, there must be a delivery of goods from one person to another for some specific purpose. As per S -149 The delivery to the bailee may be made by doing anything, which has effect of putting the goods in the possession of intended bailee or of any person authorized to hold them on his behalf.

(2)

Contract: There can be no bailment without contract. Hence for bailment, the essentials of contract U/S -10 are to be satisfied. In Ram Gulam Vs State of U.P. Allahabad H.C held that obligation of bailee can arise only out of a contract of bailment and not otherwise.

(3)

Return or Disposal of Goods: In Bailment the goods are delivered for specific purpose. VIZ safe custody, repair, carriage etc. After the purpose is accomplished, the goods may be returned to the bailer in the same or altered condition or may be disposed of as directed by the bailer.

Q. 12- What are the ways of discharge of a contract? Ans A contract may be discharged in any of the following ways: (1) (2) (3) (4) (5) (1) Performance of contract. Impossibility of performance By agreement By breach and By operation of law. Performance of contract: Each party to a contract is bound to perform his part of obligation. After the parties have made due performance of contract, their liability under the contract comes to an end. In such a case contract is said to be discharged by performance.
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S.K. Shukla

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(2)

Impossibility of performance: According to Anson Most legal systems make provision for the discharge of contract, where subsequent to its formation a change of circumstances renders the contract legally or physically impossible of performance. In English law, such a situation is provided by the doctrine of frustration and in India it is covered by S -56 of I.C. Act 1872. In Satyabrata Ghosh Vs Mugneeram AIR, 1954 the S.C observed when change in circumstances makes the performance of contract impossible the parties are absolved from the further performance of it, as they did not promise to perform an impossibility.

(3)

Discharge of contract by agreement: According to S -62 of I.C. Act: If the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract need not be performed. Thus within the meaning of S -62 if parties substitute a new contract for the old, or revoke it or alter it the original contract is discharged. Example A owes money to B under the contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at end and a new debt from C to B has been contracted.

(4)

Discharge of contract by breach: Anson Says: If one of the parties to a contract breaks an obligation, which the contract imposes, a new obligation will in every case raise a right of action conferred upon the party injured by the breach. Besides this there are circumstances in which the breach not only gives rise to cause of action, but will also discharge the injured party from such performance, as may still be due from him. Breach of contract may be of two type

(i) (ii)

Anticipatory breach of contract. Breach of contract during performance of contract.


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S.K. Shukla

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(5)

Discharge of contracts by operation of law: The instances of the discharge of contract by operation of law are following: (i) Merger (ii) Discharge by judgment (iii) Alternation or cancellation of a written instrument (iv) Bankruptcy If in place of lower security, a higher security is accepted, the lower security will be deemed to be merged in the higher security and party concerned shall be discharged from its obligation in respect of lower security. A contract may also be discharged by the judgment of a court of competent and appropriate jurisdiction in favour of the plaintiff. If a party to contract makes alterlation or cancellation of a written instrument of contract, the other party is discharged from its obligations under the contract. When a person is adjudged a bankrupt by the court, he is thereby discharged from his debts and other obligations. Thus bankruptcy may also operate to discharge the obligations of a party to a contract.

Q. 13- Decide whether following are offer: (i) (ii) (iii) (iv) Ans Catalogue and display of Goods. Announcement to hold Auction Free distribution of Articles. Tender (i) Catalogues and display of Goods This topic is related to offer and invitation to offer. In Grainger & Son Vs Gough, 1896 Lord Herschell had deserved that The transmission of a price list does not amount to an offer to supply unlimited quantity of the wine described in the price list. Thus in the light of above observation A shopkeepers catalog ue of prices is not an offer. It is only an invitation to offer to buy at the indicated prices.
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Similarly in Pharmaceutical Society of Great Britain Vs Boots Cash Chemist Ltd, 1952 Lord Goddart said It would be wrong to say that the shopkeeper is making an offer to sell every article in the shop to any person who might come in and that person can insist on buying any article by saying I accept your offer. e.g.: In most bookshops customers are invited to go in and pickup books, but there is no contract. until they proposes to buy and same is accepted by shopkeeper. Here shopkeeper is not bound to sell the book to him. Thus the display of goods in a shop with price chits attached to them is not an offer even if there is a self service system in the s hop. (ii) Announcement to hold auction An auctioneers announcement that specified goods will be sold by auction on a certain day is not an offer to hold auction and he will not be liable to persons travelling up to place, if he changes his mind and does not hold auction In Union of India Vs Gangadharan Mohan Das 1997 it has been held that for cancellation of auction after due consideration, no bidder can claim anything under the doctrine of legitimate expectation. Even when an auction is held the bid is not an acceptance so as to entitle, the highest bidder to get the goods. The highest bid is nothing more than an offer to buy and it requires to be accepted by the auctioneer. In Spencer Vs Hording Court held It does not matter for this purpose that the auction was held by the Government. Even a Government auction may be cancelled before any bid is finally accepted. (iii) Free Distribution of Articles Where in pursuance of a scheme adopted by ESSO, the petrol station proprietors announced that they would give World cup Coins one to every buyer of four gallons of petrol, it was held that the distribution of the coins was not a contract of sale so as to attract the provisions of Purchase Tax Act, but only a gift.
S.K. Shukla 17 Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

The above observation was made by the court in ESSO petroleum Co Ltd. Vs Commissioner of Customs & Excise. Thus we can say that the free distribution of articles is not a contract, under contract law. So an action cannot be brought for breach of offer. (iv) Tender Tender is not an offer rather an invitation to offer. After its acceptance, it sometimes becomes what is known as a standing offer or continuing offer. A contract takes place only after the order is placed. In Bengal Co. Ltd Vs Home Wadia & Co Defendant entered into an agreement to supply a kind of coal from time to time required by the plaintiff for a period of twelve months. The plaintiff, in pursuance of the said agreement, placed certain orders and the defendant supplied the coal. But before the lapse of 12 months they withdrew their offer and refused to supply the coal any more. The plaintiff thereupon filed the suit against them for the breach of contract. The court dismissed the suit on the ground that there was no contract, and it was only a continuing offer. So d efendants have right to revoke it. However they could not revoke their offer in respect of the orders actually placed. This principle was affirmed by judicial committee of the privy council in R Vs Demers 1990. The S.C of India has also laid down the same principles in UOI Vs Madala Thathiah An offer should be distinguished from an invitation to receive offers. Q. 14 Distinguish between: (1) (2) (3) (4) (5) (6) Ans:S.K. Shukla

Void and Voidable Contract Void and Illegal Contract Coercion and Duress Coercion and Undue influence Fraud and Misrepresentation Contract of Indemnity and Contract of Guarantee. (1) Distinction between Void and Voidable Contract
18 Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(1) (2) (3) (4)

Void contract is not enforceable by law, while voidable contract is enforceable by law at the option of one of the parties to the contract. Void contract has no legal binding effect, while voidable contract continues to be legal till declared void. In void contract, the defects are incurable, while in a voidable contract, the defect is curable and may be condoned. The contract becomes void, when it ceases to be enforceable. A contract becomes voidable only when consent to agreement is obtained by coercion, undue influence, fraud or misrepresentation. Void contract is defined in sec 2 (j), while voidable contract is defined in S 2(i) of Contract Act 1872. Distinction between void and Illegal Contract All void agreements are not necessarily illegal, while all illegal contracts are void. All collateral contracts to a void contract are not void while all collateral contracts to illegal contract are void. Ground for the voidness has to be proved in case of void contract, while in case of illegal contract, Court on its own motion may refuse to enforce it, even though the illegality has not been pleaded. The parties to a void contract are not necessarily liable to penalty, while parties to an illegal contract are liable to be penalized.

(5) (2) (1) (2) (3)

(4)

(3) (1)

Distinction between coercion and Duress Coercion can be employed against any person including a stronger, while Duress can be employed only against party to the contract or the members of own family.
19 Mo: 9899660723

S.K. Shukla

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(2) (3) (4) (4) (1) (2) (3)

Immediate violence need not arise from coercion, but Duress must be such as to cause immediate violence. Coercion need not be such as to affect a man with ordinary strength of mind; Duress must be such as to affect a man with ordinary strength of mind. Coercion may be employed by any person, while Duress may be employed only by the party to the contract or his agent. Distinction between Coercion and Undue Influence In coercion consent is obtained by threat of an offences while under undue influence consent is obtained by dominating the will of the giver. Coercion is mainly a physical character, while undue influence is a moral character. In case of coercion relationship between parties is not necessary, while in case of undue influence there must exist some relationship between the parties to contact. Coercion is of violent character, while undue influence is more subtle and intangible. Distinction between Fraud and Misrepresentation Fraud is more or less intentional wrong, while misrepresentation may be quite innocent. The person making misrepresentation has no knowledge as to its truth, while the person making fraud statement has full knowledge as to its truth. A party aggrieved by misrepresentation can avoid the contract, but cannot claim damages, while a party aggrieved by fraud can avoide the contract and can also claim damages. Misrepresentation by itself is not a tort, while fraud by itself is a tort.

(4) (5) (1) (2) (3)

(4)

S.K. Shukla

20

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(6)

Distinction between Contract of Indemnity and Contract of Guaranty Contract of Indemnity Contract of Guarantee (1) It is a contract to perform the promise or discharge the liability of a third person in case of his default. The primary liability is of principal debtor and the liability of surety is secondary. The contract between the surety and principal debtor is implied and between creditor and principal debtor is express. In contract of Guarantee there is three agreement Contract of guarantee is for the surety of the creditor. In case of contract of guarantee the surety does not require any subrogation for filing a suit

(1)

It is a contract to save the other from the loss caused to him by the conduct of the promisor or another person The liability of promisor is primary. No secondary liability. The contract between the indemnifier and the indemnity holder is express and specific.

(2)

(2)

(3)

(3)

(4) (5) (6)

In contract of indemnity there is only (4) one agreement Contract of indemnity protects the promisee from the loss (5)

In case of contract of indemnity the (6) promisor cannot file the suit against third person until and unless the promise subrogate his rights in favour of the promisor.

S.K. Shukla

21

Mo: 9899660723

S.S. Law Academy, Civil & judicial, B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09