LAW OF CONTRACT : A in law of contract is that branch of law which determines the circumstances in which

promises made by the parties to a contract shall be legally binding on them.

 Its rules defines the remedies that are available in the court of law against the person who fails to
perform his contract and conditions under which remedies are available.

Formula For Contract :

Offer + Acceptance = Agreement ( if valid ) = Contract

Offer + Acceptance = Agreement ( if void ) = only agreement but not contract

Offer + Acceptance = Agreement ( if voidable )

It may be valid or void

DEFINATION OF CONTRACT & AGREEMENT

Section 2 (a) : PROPOSAL

A Person is said to make a proposal when “he signifies to another his willingness to do or to abstain from doing
anything with a view to obtaining assent of that other to such act or abstainence.”

PROPOSAL = WILLINGNESS TO DO OR ABTAIN FROM DOING + WILLINGNESS TO OBTAIN ASSENT OF THE OTHER
PARTY TO SUCH ACT OR ABSTAINENCE.

Section 2 (b): PROMISE

When a 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.

PROMISE = PROPOSAL + ACCEPTANCE

Section 3 (c) : AGREEMENT

An Agreement means, “Every promise or every set of promises, forming consideration of each other.

AGREEMENT = PROMISE(S) BY ONE PARTY + PROMISES BY THE OTHER PARTY

Section 2 (h) : CONTRACT

A Contract is “an agreement enforceable by law.”

CONTRACT = AGREEMENT + ENFORCEABLE BY LAW.

CLASSIFICATION OF CONTRACT

 Classification according to validity : ( valid, void, voidable, illegal & unenforceable )

 Valid Contract: An Agreement which have all the essential elements of a contract is called a valid contract.
 A Valid contract can be enforced by law.

 Voidable Contract : ( Section 2 (i)) An Agreement which is enforceable by law at the option by one or more
of the parties there to, but not the option of the other or others, is a voidable contract.
 Void Contract : ( Section 2(j)) A Void contract is a contract which ceases to be enforceable by law. A
Contract when originally entered into may be valid and binding on the parties. It may subsequently
become void.
 Void Agreement : (Section 2 (g)) An agreement not enforceable by law is said to be void. Such agreement
does not confer any right to any of the parties to it.
 Un enforceable contract : A contract which cannot be enforced by law because of some technical defect.
These contracts are neither void nor voidable.
 Illegal Agreement: An Agreement is illegal if it forbidden by law; or is of such nature that, if permitted,
would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or
property of another, or court regards it is immortal or opposed to public policy.these agreements are
punishable by law. They are void ab initio.

All illegal agreements are void agreements but all void agreements are not illegal.

2) Classification according to formation :

 Express Contract: When the terms of contract are expreesly agreed upon in words ( written or spoken
) at the time of formation, the contract is said to be express contract.

Where the offer or acceptance or any promise is made in words, a promise is said to be express [S-9]

An Express promise results in an express contract.

Express contract can be either oral or written.

 Implied Contract: An implied contract is one which is inferred from the act or conduct of the parties
or from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in
words, promise is said to be implied.
 Quasi Contract: A Quasi contract is created by law. Thus, quasi contracts are strictly not contracts as
there is no intension of parties to enter into a contract. It is legal obligation which is imposed on a
party who is required to perform it. A quasi contract is based on the principle that a person shall not
be allowed to enrich himself at the expense of another.

3) Classification according to Performance:

 Executed Contract: An Executed Contract in which the both the parties have performed their respective
obligation.
 Executory Contract: An Executory where both the parties to the contract have still to perform their
obligations in future.

Essential’s of valid contract

 Proposal & Acceptance

 Legal Relationship
 Lawful Consideration
 Capacity of parties
 Free consent
 Lawful object
 Certainly of terms
 Possibility of performance
 It should not be a vord agreement
 Legal formalities

1)Proposal & Acceptance

There must be a lawful proposal by one party and a lawful acceptance of the proposal by the other
and acceptance must conform to the rules laid down in the Indian contract act regarding offer and
acceptance.

2)Legal Relationship
There must be an intension (among parties) that the agreement shall result in or create legal
relation. An agreement to dine at a friend’s house is not an agreement indented to create legal
relations and is not a contract. But an agreement to buy and sell goods or an agreement marry, are
agreements intended to create some legal relationships and are therefore contracts, provided the
other essential elements are present.

3)Lawful consideration
Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to
it gives something and gets something. An agreement to do something for nothing is usually not
enforceable by law. The something given or obtain is called consideration. The consideration may be
an act (doing something) or forbearance (not doing something) or a promise to do or not to do
something. Consideration may be past (something already done or not done). It may also be present
or future. But only those considerations are valid which are ‘lawful’.

4)Capacity of parties
The parties to an agreement must be legally capable of entertains into an agreement, otherwise it
cannot be enforced by a court of law. Want of capacity arises from minority, lunary, idiocy,
drunkenness and similar other factors. If any of the parties to the agreement suffers from any such
disability, the agreement is not enforceable by law, except in some cases.

5) Free Consent: In order to be enforceable, an agreement must be based on the free consent of all
the parties. There is absence of genuine consent if the agreement is induced by coercion, undue
mistake, misinterpretation and fraud
A person guilty of coercion, undue influence etc., cannot enforce the agreement.
The other party ( the aggrieved party) can enforce it, subject to rules laid down in the Act.

6) Legality of the object: The object of which the agreement has been entered into must not be
illegal immortal or opposed to public policy.
 7) Certainly of Terms : The agreement must not be vague. It must be possible to as certain the
meaning of the agreement for otherwise it cannot be enforced.

8) Possibility of performance: The agreement must be capable of being performed. A promise to do

an impossible thing cannot be enforced.

9) Void Agreement : An agreement so made must not have been expressly declared to be void. Under
Indian contract Act there are five categories which are expressly declared to be void.
 Agreement in restraint to marriage
 Agreement in restraint to trade
 Agreement in restraint of proceedings
 Agreement having uncertain meaning.
 Wagering agreement.
 Writing registration & legal formalities.

Definition of Proposal or Offer

Indian Contract Act defines a proposal / Offer

When one person signifies to another his wiliness to do or to abstain from doing anything , with a view to
obtaining the assent of that other to such act abstinence, he is said to make a proposal.

Modes of Offer

1. By express words spoken

2. By conduct
3. In writing.

Legal Rules as to Offer

Offer must be capable of creating legal relationship.

If the offer does not intend to give rise to legal consequences, it not a valid contract.

The terms of offer must be definite and certain .

Absence of which creates no binding obligation. Thus an agreement to agree in future is not a contract, because
the terms of agreement are uncertain as they are yet to be settled.

The Offer must be communicated.

The offer must be communicated to the person to whom it is made. An offer becomes effective only when it is
communicated to the offeree.
Untill the offer is made known to the offeree, there can be no acceptance and no contract.
Doing anything in ignorance of the offer can never be treated as its acceptance for there was never a consensus of
will.

The offer must be conditional.

An offeror may attach any terms and conditions to the offer he makes. He may
even prescribe the mode of acceptance.
Unless all the terms are agreed and accepted contract do not come into existence

The Offer may be special or general.

An offer is said to be‘specific’ when it is made to a definite person or persons. Such an
offer can be accepted only by the person or persons to whom it is made.
A ‘General offer’, on the other hand, is one which is made to the world at large or public
in general and may be accepted by any person who fulfills the requisite conditions

The offer must be made with a view to obtaining assent.

Offer must not trust the burden of acceptance.

Standing Offer : An Offer for the continuous supply of certain article of certain rate over definite period.

Lapse of an Offer : Section 6

 By notice

 By lapse of time (if time stipulated or if time out stipulated)

An offer lapses if acceptance is not communicated within the time prescribed in the offer, or if no time is
prescribed, within a reasonable time

 By failure to fulfill a condition precedent.

 By death or insanity.
If the offeror dies or become insane before acceptance, the offer lapses provided that the fact of his death or
insanity comes to the knowledge of the acceptor before acceptance.

An acceptance in ignorance of the death or insanity of offeror leads to a valid contract.

Death or insanity of the offeror would not put an end to the offer untill it comes to the notice of the acceptor
before acceptance

An offeree’s death or insanity before accepting the offer puts an end to the offer and his heirs cannot accept for
him

 By counter offer
An offer terminates by counter-offer by the offeree. When in place of accepting the terms of an offer as they are,
the offeree accepts the same subject to certain condition or qualifica- tion, he is said to make a counter-offer

 By rejection
An offer lapses if it has been rejected by the offeree. The rejection may be:- Express (words spoken or written) or
Implied (counter offer and conditional acceptance)
 ACCEPTANCE

The Indian Contract Act, 1872 defines an acceptance as follows:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said
to be accepted” [Section 2 (b)].
Thus, acceptance is the act of giving consent to the proposal. A proposal when accepted becomes a
contract.

Modes of acceptance :

1. By express words spoken

2. In written
3. Conduct

Legal rules as to acceptance:

(1)Acceptance must be absolute and unqualified. (Section 7). An acceptance to be valid must be absolute and
unqualified and according to the exact terms of the offer. An acceptance with a variation, however slight, is no
acceptance, and may amount to a mere counter offer which the original offeror may or may not accept

(2)Acceptance must be communicated to the offeror. The communication of acceptance may be express or
implied. A mere mental acceptance is no acceptance. A mere mental acceptance means that the offeree is
assenting to an offer in his mind only and has not communicated it to the offeror

(3) Acceptance must be according to the mode prescribed.(Section 7). Where the offeror pre-

scribes a particular mode of acceptance, then the acceptor should follow that mode. In case no mode of
acceptance is prescribed by the proposer, then the acceptance must be according to some usual and rea- sonable
mode. If the proposer prescribed a manner in which it is to be accepted, and the acceptance is not made in such
manner, the proposer may, within a reasonable time after the acceptance is communi- cated to him, insist that his
proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the
acceptance.

(4) The acceptance must be in response to offer. There can be no acceptance without offer. Acceptance cannot
precede offer. For instance, no allotment of shares in a company can be made unless the allottee has applied for
them beforehand (Section 41 of the Companies Act)

(5) The acceptance must be made before the offer lapses or is terminated, revoked or with-
drawn. If the offer lapses, then there is nothing to accept

(6) Acceptance can be given by the person to whom the offer is made. However, in the case
of a general offer, acceptance can be given by any member of the public

Effects of silence on acceptance:

  Where the offerer having reasonable opputunity to reject the goods or services derives any benefit from
them, it will amount to an acceptance.
 In view of the past dealings, the offerer has given the proposer, reason to understand that the silence was
intended by the offeree as a manifestation of assent and the proposer does so understand.

COMMUNICATION OF OFFER, ACCEPTANCE AND REVOCATION

RULE 1

As mentioned earlier that in order to be a valid offer and acceptance.

(i) the offer must be communicated to the offeree, and
(ii) the acceptance must be communicated to the offeror.

Similarly, revocation of offer by the offeror to the offeree and revocation of the acceptance by the
offeree to the offeror must be communicated.
According to Section 4,the communication of a proposal is complete when it comes to the knowl-
edge of the person to whom it is made

RULE 2

The completion of communication of acceptance has two aspects, viz:

(i) as against the proposer, and
(ii) as against the acceptor.

The communication of acceptance is complete:

(i)as against the proposer, when it is put into a course of transmission to him, so as to be out of
the power of the acceptor;
(ii)as against the acceptor, when it comes to the knowledge of the proposer.

RULE 3

The communication of a revocation (of an offer or an acceptance) is complete:

(1) as against the person who makes it, when it is put into a course of transmission to the person
to whom it is made, so as to be out of the power of the person who makes it.
(2) as against the person to whom it is made when it comes to his knowledge

RULE 4

Revocation of proposal :Section 5 provides that a proposal may be revoked at any

time before the communication of its acceptance is complete as against the proposer, but not afterwards.

RULE 5
Revocation of acceptance : An acceptance may be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but not afterwards.

CONSIDERATION

Consideration is the price for which the promise of the other is bought and the promise thus given for value is
enforceable.

Consideration is one of the essential requisites to support a contract. It is the sign and symbol of every bargain
SUBJECT TO CERTAIN EXCEPTIONS, an agreement made without consideration is void.

Consideration mean the valuable consideration, i.e., and the price paid for the other party’s promise .

QUID PRO QUO of something.

DEFINATION:

In simplest terms, consideration is what a promisor demands as the price for his promise. Sir Frederick Pollock
defines consideration as “an act or forbearance of one party or the promise thereof is the price for which the
promise of the other is bought and the promise thus given for value is enforceable.”

InCurrie v.Misa (1875) L.R. 10 Ex. 162, consideration was termed as “A valuable consideration in the sense of the
law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered or undertaken by the other.”

In India, the definition of consideration is contained in Section 2 (d) of the Indian Contract Act, 1872. It reads:
“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 promises to abstain from doing some- thing, such act or abstinence or
promise is called a consideration for the promise.”

LEGAL RULES AS TO CONSIDERATION:

(1)Consideration must move at the desire of the promisor: Accordingly, an act done at the desire of a third party is
not a consideration.

Although the promisee must give consideration at the desire of the promisor, it is not nec- essary that the
promisor himself should benefit by the consideration. The promise would be valid even if the benefit accrued to a
third party.

(2)Consideration may move from the promisee or any other person. Although it is necessary that consideration
must move at the desire of the promisor, it may be supplied either by the promisee or any other person.

Stranger to the Contractv. Stranger to Consideration.A stranger to the consideration must, how-

ever, be distinguished from a stranger to a contract. A stranger to a contract cannot sue in England as

well as in India

(3)Consideration need not be adequate. Adequacy of consideration is always the lookout of the promisor. Courts
do not see whether every person making the promise has recovered full return for the promise.
(4)Consideration must be real and competent. Consideration must be real. If it is illusory, e.g., if

a man promises to discover treasure by magic, the transaction is void.

The consideration must also be competent, that is, it must be something to which law attaches some value. Thus,
an agreement to do something which the promisor is already under a duty to do, is void being without competent
consideration

(5)Consideration must be Legal. Illegal consideration renders a contract void.

(6)It may be past present future.

PRIVITY TO CONTRACT. PRIVITY TO CONSIDERATION:

Under the Indian law consideration may move from the “promise or any other person”therefore, it is clear that
under Indian law consideration .Shall move from any person in the same way, a third party cannot enfore a
contract under Indian law.

But with some exception to the general rule a third party can sue in the following ways:

Beneficiaries in the case of trust.

Marriage settlement, partition of other family arrangements.

Acknowledgement or Estoppels.

Contracts entered into throughan agent.

A charge on immorable property.

NO CONSIDERATION NO CONTRACTT

Acc to Sec 2 (h) “An agreement enforceable by law is a contract.”

Sec 2 (g) “An agreement not enforceable by law is void.”

Sec 25-An agreement is declared to be void is supported by consideration.

EXCEPTIONS TO THE RULE “NO CONSIDERATION NO CONTRACT”

The general rule of law is that an agreement without consideration is void. “A bargain without consider-

ation is a contradiction in terms and cannot exist.”15 But there are a few exceptional cases where a con-

tract, even though without consideration, is enforceable. They are as follows:

1. An agreement made without consideration is valid if—
(a) it is expressed in writing and
(b) it is registered (under the law for the time being in force for registration of documents), and
(c) it is made on account of natural love and affection, and
(d) made between parties standing in a near relation to each other.
CAPACITY OF PARTIES:

An essential ingredient of a valid a contract is that the contracting parties must be

¶competent to contract

Acc to Sec 10, An Agreement becomes a contract if it is entered into between the parties who are competent to
contract.

Section 11 lays down that ´ 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 disqualified from contracting by

any law to which he is subject.

T hus the section declares that a person is incompetent to contract under the following:-

1. if he is a minor, according to the law to which he is subject.

2. if he is of unsound mind, and

3. if he is disqualified from contracting by any law to which he is subject

MINOR

According to section 3 of the Indian Majority act 1875 ´A person domiciled in India, which is under 18 years of age is a minor.

Accordingly every person who has completed the age of 18 years become a major. But minors of whose person or
property or both a guardian is appointed by a court, and minors of whose property superintendence

has been assumed by a Court of Wards, attain majority at the age of 21 years. Section 11 expressly provides that the age of
majority of a person is to be determined ´according to the law to which he is subject.

Capacity of parties.

Minor¶s Agreement

Minor¶s Agreement

1.An Agreement by a minor is absolutely void and inoperative as against him : Law act as a guardian of minors and protects

their rights because their mental faculties are

not mature enough to judge what is good and
what is bad for them.
 Where a minor is charged with obligations
against minor, the agreement is deemed as void
ab-initio

2.Beneficial agreement are valid contracts. A ny agreement which is beneficial for the minor and

under which he is required to bear no obligation,is

valid
Where a minor had performed his part of the
agreement and delivered the goods he was
held entitled to maintain a suit for the
recovery

3.No ratification on attaining the age of majority. Ratification means the subsequent adoption and

acceptanceof an act or agreement.

 A minor·s agreement being a nullity and void ab-initio
has no existence in the eye of law.
 It cannot be ratified by the minor on attaining the
age of majority.
 A n agreement void ab-initio cannot be made valid by
subsequent ratification
 T hus, if an advance is made to a minor during
his minority, a promise to pay for such amount
after he attains majority would not be
enforceable.( Mohendra vs Kailash)
 Since ratification relates back to the date
when the contract was originally made, it is
necessary for a valid ratification that the
person who purports to ratify must be
competent to contract at the time of the
contract
B ut if services are rendered or an advance is
made to a minor during his minority and the
services are continued or a further advance is
made after he attains majority, a promise to
pay for such services or amount as a whole
would be valid and enforceable

4.The rule of estoppels does not apply to a minor A s per the Section 115 Indian Evidence A ct

µEstoppelsµ is ´where one person has by his

declaration, act or omission, intentionally
caused or permitted other person to believe a
thing to be true and act upon this belief,
neither he or his shall be allowed in any suit
or proceeding between himself and that
person to deny the truth of that thing. T he rule of estoppels does not apply to

a minor i.e. a minor is not estopped from

pleading his infancy in order to avoid
contract even if he has entered into the
contract by falsely representing that he
was of full age.

5 . Minors liability for necessaries. T he case of necessaries supplie to a minor is

governed by Section 98 of the ContractA ct

which provides that ´ if a person is, incapable
of entering into a contract or any one whom
he is legally bound to support is supplied by
another person with necessaries to his
condition in life, the person who has furnished
such supplies is entitled to be reimbursed
from the property of such incapable personµ
T his Section 68 confers a quasi right where
the incapable if supplied by the necessaries
become liable to pay back.
 B ut in case of minor it is his property from
which the person who has supplied will be
compensated in case of no property with
minor he will loose the money.
 T his is applicable only in the case of supply of
the necessaries not the supply of Luxury
items.

6. Specific Performance. Specific performance means the actual

performance of the contract as agreed.B ut

this being a void the court will never direct
performance of the contract.
 B ut if it has been entered on minors behalf
by his Guardians or the manager of his
estate it is binding provided
(a)T he contract is within the authority of the
Guardian or Manager and
(b)It is for the benefit of the minor

7. Minor Partner. A minor being incompetent can not act

as a partner in a partnership firm.

 B ut under Section 30 in case of benefit
to the minor through partnership it can
be carried out by authorized Guardian
on behalf of the minor. Such a minor will only be entitled to share the

profit as agreed upon he can also view any books

of account of the organization.
 The minor can not will not be the part of losses if
arise or any other obligation.
 He will not participate in the management.
 He can accept these obligation if he feel fit to do
so at the age of attaining majority.

8. Minor Agent. Minor can act as a agent. H e shall bind the

principal by his acts done in the course of

such an agency, but cnnot be held
personally liable for any obligation of
breach of contract.
Thus in appointing the minor as an agent the
principal runs a great risk.

9. Minor and insolvency. A minor can not be adjudicated an insolvent

for he is incapable of contracting debts.

Even for the necessaries supplied it is the
property of minor which is liable rather the
himself.

10. Contract by minor and adult jointly : Where a minor and an adult jointly enter into

an agreement with another person, the

minor has no liability but the contract as a
whole can be enforced

11. Surety for a minor. Where in a contract of guarantee, an adult stands

surety for a minor, the adult is liable under the

contract all though the minor is not.
(Kashiba vs shripat

12. Position of minor·s parent. The Parents of a minor are not liable for

agreement made by a minor, whether the

agreement is for the purchase of
necessaries or not. The parents can be held
liable only when the child is contracting as
an agent for the parents

13. Minor shareholder. A minor being incompetent can not be the

shareholder of the company. A company can

also refuse to register transfer or
transmission of shares in favor of minor
unless the share are fully paid.
Thus, a minor through his guardian can be a
part of company as a shareholder on taking
fully paid shares

14. Minor·s liability in tort

A ¶tort· is a civil wrong for which the

ordinary remedies is damage. A minor
is liable for his tort, unless the tort
is in reality a breach of contract

PERSONS OF UNSOUND MIND:

One essential requisites of competency of parties to a contract is that they should be of sound mind.

Sec 12 ( part 1 ) supplies this fact rest.

“A person is said to be sound mind for the purpose of making a contract if at the time when they makes it, is capable of
understanding it and of forming a rational judgment as to its effect upon his intrest.”

DISQUALIFIE D BY LAW

The third type of incompetent persons, as per Section11, are those who are ´ disqualified from contracting by any

law to which they are subject.

Alien Enemies:-A n A lien enemies ( citizen of a foreign Country) living in India can enter into contracts with citizens of India
during peace time only and that too subject to any restrictions imposed by the Government in that respect.

Alien Friends can contract but alien enemy can not.

 Foreign Sovereigns and ambassadors:-

One has to be cautious while entering into contracts with foreign sovereigns and ambassadors, because whereas they can sue
others to enforce the contracts entered upon them they cannot be sued without obtaining the prior sanction of the Central
Government

 Convict:-

Convict is one who is found guilty and is imprisoned. During the period of imprisonment, a convict is

incompetent to enter contractand to sue on contracts made before conviction.

 MarriedWomen:-

Married women are competent to contract with respect of their separate properties provided they are major and sound minded.T
hey cannot get into contract for his husband·s property.
FREE CONSENT

Section 10 of India contract Act 1872 stipulates that “all agreements are contracts if they are made by free consent
of the parties’

Section 13 defines consent thus. “Two or more persons are said to consent when they agree upon the same thing
in the same sense.”Consent thus postules unity of minds known as consensus ad item.”

Agreement upon the same thing in same sense in the same time.

FLAW IN CONSENT

 Coercion (Section 15 )
 Undue Influence (Section 16)
 Misrepresentation

a) wilful representation (Section 17) Fraud

b) Innocent representation (Section 18) misrepresentation

 Mistake ( Setion 20, 21, 22 )

Note : The effect in case of a mistake, the contract is void but in the rest of the cases, the contract is only voidable.

COERCION SEC 15

Ingredients:

 By Committing of any act forbidden by Indian Penal Coda ( Ranganayakamma Vs Alvarsethi(dead):

 By threatening to commit any act forbidden by Indian Penal Code.(Lending Money)
 By the unlawful detaining of property(a/c books)
 By threatening to detain any property (Attachment of Property)
 It is immaterial whether IPC is or not in force in the place the coercion is employed.
Further, note that,it is immaterial whether the Indian Penal Code is or is not in force in the place
where the coercion is employed (Explanation to Section 15)

Features:

1) It is not that coercion must proceed from the party to the contract it may proceed from a third party who
is not a party to the contract.
2) It may be employed against any person including a stranger.all acts of coercion must be with an intention
of causing the other to enter into an agreement.
3) It includes fear, physical compulsion and menance of goods.
4) Threat may be against be present or past

Consequences of coercion Section 19 when consent to an agreement is by a contract voidable option of the party
whose consent was so caused.

When consent to an agreement is caused by coercion, the agreement is a contract voidable at the optionof the
party whose consent was so obtained. In other words, the aggrieved party can have the contractset aside or if he
so desires to insist on its performance by the other party.
Liability of person to whom money is paid or thing delivered under Coercion(Section 12). A
person to whom money has been paid, or anything delivered under coercion must repay or return it

UNDUE INFLUENCE Section 16

 In some instances the parties to an agreement are so placed to an agreement are so placed to each other
that one party is in a position to dominate the wil of the other.
 Consequently, the other party is compelled to enter into an agreement the will as the result of
unfair influence. Such an agreement is said to be induced by undue influence.
 Ingredients:
 The relations sustaining between the parties should be such that one of the parties is in a position to
dominate the will to the other.
 The relation s subsiding the parties should be such that one of the parties is in a position to dominate the
will of the other.
 The dominant party obtains an unfair advantage over the other.
 The dominant party uses his dominant position to obtain an unfair advantage

INFLUNCE INTHE FOLLOWIONG CASE THERE IS A PRESUMPTION OF UNDUE INFLUENCE:

1) Relationship of trust
2) Parent and child
3) Guardian and ward
4) Trustee and beneficiary
5) Doctor and patient
6) Solicitor and client etc.,.

Effect of UNDUE INFLUENCE

  When consent to an agreement is caused by undue influence the agreement is a contract voidable at the
option of the party whose consent was so caused.
 Any such contract may be et aside either absolutely or of the party who was entitled to void it has
received benefit there upon such.

FRAUD SECTION 10

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 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 fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.

From the analysis of the above, it follows that for fraud to exist there must be

(A) A representation or assertion, and it must be false.To constitute fraud there must be an assertion
of something false within the knowledge of the party asserting it.Mere silence as to facts likely to affect
the willingness of a person to enter into a contract is not fraud
Thus, we may say that to constitute fraud, ordinarily, there must be active misstatement of fact or such a partial
and fragmentary statement of fact as that the witholding of that which is not stated makes that which is stated
absolutely false. InPeek v.Gurney (1873) 6 H.L. 377, the prospectus issued by a company did not refer to the
existence of a document disclosing liabilities. The impression thereby created was that the company was a
prosperous one, which actually was not the case.Held the suppression of truth amounted to fraud

(B) The representation or assertion must be of a fact.The representation or assertion alleged to be

false must be of a fact. A mere expression of opinion, puffery or flourishing description does not constitute fraud
(D) The representation must have been made with the intention of inducing the other party to act
upon it.For fraud to exist, the intention of misstating the facts must be to cause the other party to enter
into an agreement.
(E) The representation must in fact deceive.It has been said that deceit which does not deceive is not fraud. A fraud
or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised
or to whom such misrepresentation was made does not render a contract void- able.12
(F) The Party subjected to fraud must have suffered some loss.It is a common rule of law that “there
is no fraud without damages”. As such, fraud without damage does not give rise to an action of deceit
Consequences of Fraud SECTION 19 (Remedies to the aggrieved party)

1) He can reject the contract but he must do so written the reasonable time.
2) He may ask for damages suffered because of non fulfilment of the contract.
3) He may ask for the restitution.
4) He may insists for the performance of a contract and may ask the other party to put him in that position in
which he would have been true.

MISREPRESENTATION SECTION 18

A representation is statement or assertion made by the party to the other, before or at the time of the contract, of
some matter of circumstances relating to it, if the assertion is untrue and the person making it believe it to be true,
it is known as innocent misrepresentation.

Requirements of MR

1) The misstatement was of material fact and not of law.

2) It was made before the finalisation of the other party to enter in to hte contract
3) It must actually have been acted upon by the other party .
4) It must have been made by the party himself sort to be changed or by his duly authorized agent.

Consequences of MR:

In cases of MR the aggrieved party can

1) Avoid the contract of

2) Accept the contract but insist that he shall be put in that position to which he would have been if the
representation made have been true.

But in the following instances, however the party whose contract was obtained by MR shall have no right to avoid
the contract.

1) if the party whose consent was caused by M.R had the means of discovering the truth with ordinary
diligence, he has no remedy.
2) Where the representation has not been instrumental in inducing the other party to enter into a contract.
3) Where the party to the contract after having known the M.R expressly affirms the contract or acts in such
a way as to have impliedly accepted the same.

Misrepresentation and Fraud Distinguished

 The following are the points of difference between the two:

1. In case of fraud, the party making a false or untrue representation makes it with the intention to deceive the other
party to enter into a contract. Misrepresentation on the other hand, is inno- cent, i.e. without any intention to
deceive or to gain an advantage.

2. Both misrepresentation and fraud make a contract voidable at the option of the party wronged. But in case of fraud,
the party defrauded, gets the additional remedy of suing for damages caused by such fraud. In case of
misrepresentation, except in certain cases13, the only remedies are rescission and restitution.

3. Although in both the cases, the contract can be avoided; in case of misrepresentation the con- tract cannot be
avoided if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

MISTAKE SECTION 20 21 22

Mistake may be defined as an erroneous belief about something. Comment cannot be said to be free when a
agreement is entered into the

1) Mistake of law
2) Mistake of fact-unilateral mistake

Bilateral mistake.

Bilateral Mistake

When both the parties to the agreement are under a mistake of fact essential to the agreement, the mis-take is
called a bilateral mistake of fact and the agreement is void

Following are the instances of mistakes:

1) Mistake as to identity of the person contracting with where such identity is essential to the contract.
2) Mutual mistake as the exixtence of an artical.
3) Mutual mistakes about the identity of quality
4) Mutual mistake transactions mistake regarding title of the subject matter.
5) Mistake price of substances.