PART ONE

Contract Law of Bangladesh

Conceived and Prepared by
Prof. S. M. Ikhtiar Alam
Honorable Senior Research Scholar, BILIA

I. Introduction
Everybody as an individual or as a member of an organization makes
various agreements with others everyday. But in many cases we do not know the
legal consequences of these agreements. We make promises and transactions
(buy and sell things for households and organizations). Each time, we need to
know the legal aspects of our activities. Some agreements have no legal validity,
while others do have. Agreements which are legally valid are called contracts.
Thus all contracts are agreements, but all agreements are not contracts.
Therefore, it is necessary for everybody in a civil society to have some basic
knowledge of the Contract Law of the country in which s/he lives. This Makes the
person a more conscious and educated citizen. Many believe that “Law” is the
subject of lawyers only. But this belief has been challenged on the ground that to
build a civil society everybody should have some basic knowledge of “Law”,
particularly the Law of Contract.
As a business executive, an entrepreneur, a customer or a seller, we need
to have adequate knowledge of all the relevant laws that are associated with the
environment of business and economic transactions. However, the laws
governing the various aspects of business and economic transactions are not only
numerously but also difficult to understand for many of us who do not have Law
background.
The Law of Contract contains the basic principles concerning the day to day
business transactions. The Contract Law is divided into a number of areas which
have been made to deal with specific kind of transactions, viz. Formation of a
Contract, Indemnity and Guarantee, Bailment and Pledge, Agency, Sale of Goods,
etc.

II. Objective
The objectives of this chapter is to make the students aware of the legal
consequences of everyday business/economic activities. To achieve this objective,
this chapter of the course will discuss basic principles of the Contract Law of
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Bangladesh. It will focus on the concept of a valid contract and how to create it.
This will include the basic elements and characteristics of a contract, various types
and forms of contract, termination of contract and remedies for breach of
contract. After the end of each topic, a case study will be presented to better
understand the topic. To make the subject easier, legal jargons will be avoided
whenever possible.

III. Contents of the Part

1.0: Introduction
1.1: Contract: Definition
1.2: Difference between Agreement and Contract
2.0: Elements of Contract
2.1: Offer: Definitions of Offer, Proposal, Invitation to Offer and Promise
2.1.1: Rules regarding Offer
2.1.2: Duration and Termination of an Offer
2.2: Acceptance: Definition
2.2.1: Rules regarding Acceptance
2.3: Communication of Offer and Acceptance
2.4: Revocation of Offer and Acceptance
2.5: Consideration: Definition
2.5.1: Essential Characteristics of Consideration in Bangladesh
2.5.2: Sufficiency of Consideration
2.5.3: Types of Consideration
2.5.4: Exceptions to the necessary of Consideration vs. Nudum Pactum
2.5.5: Condition vs. Consideration
3.0: Privity of Contract and Exceptions to Privity Clause
4.0: Qualifications of Contract: Presence of All Essential Elements, Capacity,
Free Consent and Legality of Object and Consideration
5.0: Form of Contract: Simple or Parol Contract and Contract Under Seal
6.0: Types of Contract: Void, Voidable, Contingent and Quasi Contract
7.0: Termination of Contract: How and When a Contract Terminates
8.0: Remedies for Breach of Contract
9.0: Cases
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PART ONE
Contract Law of Bangladesh
Section 01

1.0 INTRODUCTION
This section provides an introduction to the concept of “Contract”. In this
module, we will get a first hand idea about a contract and the difference between
a contract and an agreement. We will start with the definition of contract and
then break down the definition into various parts or aspects. In Section 2, we will
learn the very first element of a contract – offer.
The Law of Contract of Bangladesh is based on the Indian Contract Act,
1872. In Bangladesh, Contract Law is well defined and Codified Law.

1.1 CONTRACT: DEFINITION

A contract is an agreement which is enforceable by law. Therefore, in a
contract, there must be (i) an agreement and (ii) the agreement must be
enforceable by law. An agreement comes into existence whenever one or more
person promise to one or others to do or not to do something. It is a promise or a
set of reciprocal promises. Note that the manner in which contracts are, if
necessary, enforced belongs to civil procedures.

1.2 DIFFERENCE BETWEEN AN AGREEMENT AND CONTRACT

A contract is an agreement to create an obligation or obligations, but there
are other transactions which are based on agreements and which also obligations
but are not called contracts. All contacts are agreements but all agreements are
not contracts. Agreements which are enforceable by law are contracts. An
agreements – which is “enforceable by law” – constitutes a legal binding on
parties involved. If an agreement is not enforceable by law, then it is not a
contract. An agreement becomes a contract only when all necessary legal
requirements are satisfied. At this point, we need to know what those necessary
legal requirements are. Thus, we will now learn, one by one, these legal
requirements.
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CRITICAL THINKING: CASE STUDY # 01

AN AGREEMNET WHICH IS NOT A CONTRACT

Mr. Rashid, father of Salma Parvin, and Mr. Zaman, father of Mr. Mahbub
agree to a proposal for marriage between Salma and Mahbub. Mr. Mahbub has
completed his MSS in Sociology from New York State University. He is now staying
in Dhaka and looking for a job. Mr. Zaman raise the point that after marriage,
Mahbub will not be able to bear the expenses necessary to maintain a family. In
response, Mr. Rashid agrees to give Taka 150,000 to Mr. Mahbub, the groom.
After the marriage, Mr. Rashid, a businessman, fails to pay Mahbub the promised
amount due to an unexpected financial loss in a business contract. Mr. Zaman and
Mahbub threaten Mr. Rashid and Salma to take legal action against Mr. Rashid.
After couple of days, Mahbub contacts a lawyer to realize the money. The lawyer
advises Mahbub that it is not possible to take any legal action in this matter.
Why? Because the promise of Mr. Rashid to pay money amounts to an
agreement of dowry. Thus, this is, though an agreement, not enforceable by law.
Because, dowry is illegal in Bangladesh. So, this is not a contract. Note that, this is
not a contract not because it is a social engagement or family matter, but because
dowry – whether it is voluntary or non-voluntary – is illegal. It is a “void ab initio”
contract.
We will discuss many examples of contracts later.

Contract Law of Bangladesh

Section 02

2.0 ELEMENTS OR QUALIFICATIONS OF A CONTRACT

All contacts are agreements but all agreements are not contracts. To be a
contract, an agreement must have seven elements or characteristics or
qualifications. If an agreement qualifies in all of these seven qualifications, it (the
agreement) becomes a contract. The seven elements of a contract are:
1) Offer, 2) Acceptance of the offer, 3) Considerations, 4) Free Consents of
parties involved, 5) Capacities of parties involved, 6) Legality of Object (Purpose)
and 7) Form
In this section, we will learn the first qualification of contract known as
“Offer”. The other six elements will be discussed later. We will now learn the
concept of an offer including the following aspects of an offer:
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I. Definition of a legally valid offer to create a contract.

II. Difference between a proposal and an offer – all proposals are not offers, but
all offers are proposals.
III. Invitation to offer – that is, invitation of one party to another to make an offer
to the first party so that the first party can make an offer in response to the
invitation to offer.
IV. When an offer becomes a promise.
V. Four important legal requirements or rules of a valid offer.
VI. When and how an offer comes to an end, that is, the duration and
termination of an offer.

2.1 OFFER, PROPOSAL, INVITATION TO OFFER AND PROMISE

I. Definition of offer
An “offer” is a proposal made by a person/party backed by his/its
willingness to do or to abstain from doing anything (not to do something, e.g. I
will not deduct salary if you cannot work due to illness) in order to obtain the
assent of another person/party to such act or abstinence generally in exchange of
something (which is known as consideration – we will discuss consideration later).
The person who makes the offer is called the offerer and the person to whom the
offer is made is called the offeree. Thus, we find that all offers are proposals, but
all proposals are not offers. The difference between an offer and a proposal lies
in the legal requirements of an offer which are not required for all proposals. For
instance, Mr. Zahid makes a proposal to his business partner Mr. Karim to pay
some money for charity from Karim’s pocket. This proposal is not an offer. Why?
We will discuss this issue – the legal requirements of an offer which are not
required for all proposals – later in this module’s sub-section 2.1.1.

II. Promise
The offer when accepted by the person to whom it was made, becomes a
promise the person who made the offer. The person who makes the promise is
promisor and the person who accepts it is the promisee. That is, when the offer is
accepted by the offeree, the offer becomes a promise of the offerer and the
offerer becomes the promisor and the offeree becomes the promisee.
It is important to note that once an offer is made to an offeree and the
offer is accepted by the offeree, both the offere and offeree (promisor and
promisee) become promisor as well as promisee. There does not remain any
difference between a promisor and promisee, since both parties must make
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promise to each other, finally. The concepts of “offer” and “acceptance” become
a circular concept once the contract is finally formed. The concept of
“acceptance” – another important element of contract – will be discussed in
section 03.

III. An invitation to offer

An invitation to offer by a person or party (let us call the person or the
party the first party) is a mere statement of that first party’s intention or
declaration of its willingness to enter into a contract. It is an invitation by the first
party to others o make an offer (to the first party). The invitation or declaration of
the first party is not an offer which is capable of being turned into an agreement
by acceptance. Thus, a catalogue of goods, quotation of the lowest price, in
answer to sales or purchase inquiry, an advertisement for sale or purchase
tender, or advertisement of an auction are all invitation to offer. In such cases,
when the other party responds to the announcement or declaration of the first
party, that response becomes an offer. The respondent makes the offer and it is
the first party who accepts or rejects the offer. Therefore, invitation comes first,
then offer. Invitation is the background intention to make an offer.
Please, note that an employment notice/advertisement by a company is a
special case. Such a notice is a conditional offer in the sense that if the applicant
qualifies, an employment offer will be made to the successful candidate to
negotiate various terms and conditions of the employment.
Also note, all advertisements are, in general, are offers to the public at
large. (An offer can also be made to a specific person, group of person or a party).

2.1.1 RULES REGARDING OFFER

The rules that must be followed when making an offer are discussed below.

I. Clarity of Completeness of the Offer

A person is said to make an offer when he signifies to another his
willingness to do or to abstain from doing something with a view to obtaining the
assent of the person to whom it is made. But a mere statement is not an offer.

Exercise: Describe a situation from your personal experience in which a company

apparently wants to make an offer but it was not really an offer.
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II. Intention
Mr. Alam says to Mr. Badal in course of conversation that he (Alam) intends
giving Taka 100,000 to anyone who wants to financially help poor patients at the
Dhaka Shishu (Children’s) Hospital. After couple of months Badal starts paying
money to buy medicine and to pay pathological bills to poor patients of the
Shishu Hospital and informs Mr. Alam about it. Alam says Badal many good things
about helping poor children. In response, Mr. Badal asks Mr. Alam to contribute
taka 100,000 as was said by Alam. However, Alam refuges to contribute anything,
except some good words. In this story, no contract was formed between Badal
and Alam, since Alam did not make any offer with the intention to create any
legal obligation. Thus, there is no contract between Badal and Alam, because
Alam’s statement of giving Taka 100,000 to anyone who wants to financially help
poor patients at the Dhaka Shishu (Children’s) Hospital is not an offer but a mere
statement.
Thus, we find that the offer must be made with the intention of creating
legal relations, otherwise there will be no agreement. Let’s discuss an example.
Mr. Zaman, the Managing Director of a company invites the Chairman of another
company Mr. Zafrul to a party which Zafrul accepts. This does not create any
agreement between them since in this case it is not clear whether the parties
(Zaman and Zafrul) obviously intend to create legal relationship and this is why if
Zaman fails to hold the party without notifying Zafrul, then Zafrul has no legal
remedy against Zaman. Or, if Zafrul fails to attend the party, Zaman cannot take
any legal action against him. This may be a pure social interaction and hence, such
social agreements do not create any contracts.

III. Complete Communication of the offer by offerer to the offeree

Every offer must be communicated completely – either by words (in
writing or verbally) or by conduct. An offer is not open to a person who is ignorant
compliance with the terms of an offer means an acceptance of it. Thus, an offer of
reward could not be claimed by a person who was ignorant of it.
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CRITICAL THINKING: CASE STUDY # 02

Offer must be communicated

A reputed pharmaceutical company of the country puts a newspaper

announcement stating that the company will pay Taka 10,000 to anyone who will
provide information to the company or the police about Rafiqul Haque, the
former cashier of the company, who has stolen Taka 500,000 of the company and
has now been hiding. Salam is a loyal former employee of the company knew
about the theft, but does not know about the reward announcement of the
company. After few days, he finds Rafique and hands over to police. Next day,
Salam comes to know about the reward announcement and thus claims Taka
10,000 reward money from company.
The company, however, refuses to pay the money to Salam. Do you think
that Salam should get the money? Why?

IV. Reasonable Period of Time

Every offer must remain open for some reasonable period of time, when
no time is mentioned in the offer. What is a reasonable time is a question of fact
and it varies with different kinds of contract. An offer does not by itself create any
legal right, it ripens into contract by acceptance.
For example, on Sunday, 30 November 1998 at 4:56 p.m. Mr. Afzal offers by
a fax message (signed) to buy a particular audio-video system from Mr. Arman’s
company for Taka 25,000, (which Afzal believes is a reasonable price) adding, “if I
hear no more from you, I shall consider that you have accepted my offer”. Mr.
Arman is the Marketing Manager of a company which sells various foreign-made
brand-name Audio-Video Systems. Afzal and Arman are personally known to each
other for along period of time. However, Arman receives the fax within couple of
minutes but does not give any instant answer to Afzal, for Arman needs some
reasonable time to check the inventory and actual price of that particular audio-
video system and Arman’s office closes at 5:00 p.m. Next day, at 10:00 am Afzal
comes to the Sales & Service Center of Arman’s company to take the delivery of
the product. But, the Sales Personnel refuse to sell the system to Afzal for Taka
25,000. In this case, there is no contract as the offer was not accepted by Arman.
Note that, in this particular case, silence is not the reason to treat the offer being
unaccepted. It was the very limited time to accept (or reject) the offer which
makes it unaccepted.
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V. Conditional Offer
When a specified time is mentioned in the offer during which it must be
accepted, the offer remains open for that specified period of time. In his case the
offer is a conditional offer.

2.1.1 DURATION AND TERMINATION OF AN OFFER

An offer comes to an end, and is no longer open to acceptance under the
following circumstances:

I. By Notice
If the offerer gives notice of revocation to the other party, i.e. expressly
withdraw the offer, then the offer comes to an end. An offer may be revoked any
time before acceptance but not afterwards. Once an offer is accepted, there is a
binding contract. The acceptance of an offer becomes binding on the offerer as
soon as the acceptance is put in course of communication to the offerer so as to
be out of power of the acceptor. The notice of revocation does not take effect
until it comes to the knowledge of the offeree.

II. By Lapse of Predetermined Time

When the offerer prescribes a time within which the offer must be
accepted, the offer lapse as soon as the time expires.

Exercise: Please, give an example in which a seller makes an offer but it lapses
after the prescribed period of time.

III. After Expiry of Reasonable Time

If no time has been prescribed, the offer lapses after the expiry of a
reasonable time. What is a reasonable time will depend on the circumstances of
the case. For example, on 8 June 1997 Mr. Imtiaz makes an application to
purchase 100 shares of a company which is listed with Dhaka Stock Exchange
(DSE), in response to an initial public offering (IPO). Accordingly, he receives a
letter of allotment on 23 November 1998. Mr. Imtiaz refuse to purchase the
shares. Held, Imtiaz is entitled to refuse to purchase the share as the offer has
lapsed by the delay in acceptance.

Exercise: Please, give an example in which a seller makes an offer but it lapses
after the reasonable period of time.
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IV. By failure of a Condition Precedent

An offer lapses by the failure of the acceptor to fulfill a condition precedent to
acceptance, where such a condition has been prescribed. For example, Ms. Parbati says
to her sister Ms. Zakia: “I will sell my house a Khulna to you for Taka 100,000 if you put a
potrait of our paternal grandfather in that house who built the house in memory of our
grandmother.” The offer cannot be accepted until and unless Zakia puts the portrait.

V. By Death or Insanity
An offer lapse by the death or insanity of the offerer or offeree, if the fact of his
death or insanity comes to the knowledge of the other party before acceptance.

VI. Counter Offer

When a counter offer is made, the original (initial) offer lapse. For example, a
reputed institution puts an advertisement in local daily newspaper for a training course
on Sale of Goods Act, the registration fee is Taka 3,500. A pharmaceutical company
writes a letter to the Head of the Research, Publication & Training Division of the
institution stating that the company is nominating 10 participants from its Marketing
Department (the names of the participant are attached). But, instead of paying Taka
3,500 as registration fee per participants, the company encloses a cheque for Taka
15,000 and requests the institution to reduce the registration fee for those 10
participants to taka 1,500 per participant. Next day, early in the morning at about 09:30
a.m. the institution sends back the cheque to the company by a special messenger with
a letter refusing the counter offer of the company. However, on his way to the
company, the special messenger breaks his left arm in a road accident and thus fails to
reach the company. He goes to hospital for treatment where the attending physician
advises him to get admission immediately. The Head of Training Division of the
institution goes to the hospital to see the messenger. Next day, the 10 nominated
participants come to the institution to attend the training. The Head of Training Division
of the institution refuses to accept them. After hearing this news, the company seeks
legal advice from its legal advisor. What will be the advice of the legal advisor?

Exercise: Please, write the possible advice of the legal advisor.

VII. By Refusal
An offer automatically terminates once refused by the offeree and cannot be
revived by its subsequent by the offeree.

VIII. Accidentally Destructed

If the consideration is destroyed accidentally before acceptance, then the offer
comes to an end out of frustration.
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Contract Law of Bangladesh

Section 03

In this section, we will learn the following essential aspects of acceptance of

an offer:

1. Definition and importance of acceptance

2. Four important rules regarding acceptance
3. Rules and modes of communication of offer and acceptance
4. Rules regarding revocation of offer and acceptance

3.0 ACCEPTANCE: DEFINITION

The term “acceptance” refers to the acceptance of an offer by the offeree
to create a contract. An offer must be accepted before there can be a contract. An
offer by itself creates no obligation – to create legal obligation, the offer must be
accepted. An accepted offer is an agreement. A contract may have one or more
obligations. An offer can be accepted only by the person or persons for whom the
offer is intended. There are some rules regarding acceptance of an offer in the
Law of Contract of Bangladesh.

3.1 RULES REGARDING ACCEPTANCE

There are certain rules that must be followed when accepting an offer.
They are discussed below:

I. Every offer must be accepted as it is

Acceptance of an offer with conditions and reservations is no acceptance at
all. Thus, an offer to sell a house for Taka 20,000 is not accepted when the offeree
says that he is ready to buy it for Taka 15,000. It is only a counter offer. Similarly,
if an offer is once refused, it cannot be accepted unless it (the offer) is renewed.

II. Acceptance must be communicated

Acceptance must be communicated properly (either verbally or in writing).
Mental assent is no acceptance. The acceptor must do or say something to
indicate his readiness to accept the offer.
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III. A conditional assent to an offer does not amount to acceptance

A conditional assent to an offer does not amount to acceptance. For
example, where the offeree accepts all the terms of the offerer “subject to some
conditions”, the assent is conditional and hence it does not amount to
acceptance.

IV. Acceptance to an Invitation to Offer does not amount to any acceptance,

since there is no offer at all
Acceptance to an Invitation to Offer does not amount to any acceptance,
since there is no offer at all. In a tender for the purchase or sale of goods or the
supply of services, the person asking for tenders normally makes an invitation to
offer. The offer comes from the person making the tender, the other party can
accept or reject the tender.
In Bangladesh, a valid acceptance must fulfill two conditions: (I) The
acceptance must be absolute and unqualified. (II) The acceptance must be
expressed in some usual and reasonable manner, unless the offer prescribes the
manner in which it is to be accepted. Where the offer prescribes the manner of
acceptance, and the acceptance is not made n such manner, the offerer may after
the communication of acceptance, insist that the offer must be accepted in the
same manner; if he fails to do so he accepts the acceptance.

V. Reasonable period of time

Acceptance must be made within reasonable period of time, unless any
time period is mentioned in the offer.

VI. Acceptance before time limit

Acceptance must be completed before offer lapses due to time limit.

3.2 COMMUNICATION OF OFFER AND ACCEPTANCE

An offer maybe communicated to the offeree or offerees by word of
mouth, in writing or by conduct. A written offer maybe contained in a letter or a
telegram. A circular or advertisement or a notice maybe written in such a
language that it amounts to an offer. A tramway car and a bus going along a
street and picking up passengers are examples of offers by conduct. Our Contract
Law states: “The communication of a proposal [offer] is complete when it comes
to the knowledge of the person to whom it is made.” The acceptance must b
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expressed in some usual or reasonable manner. The offeree may express his
acceptance by word of mouth, telephone, fax or by post.

I. Offer and Acceptance by Post

An offer maybe made by post. An offer may also be accepted by post, if
there is no other mode of acceptance specially prescribed by the offerer. When
an offer is made through the post, the post is by implication the agent of the
offerer. Therefore, a letter of acceptance duly addressed and posted is sufficient
acceptance even though the letter does not actually reach the offerer.

II. Offer and Acceptance by Telephone

Offer an acceptance can be communicated through the telephone. But
there are certain rules regarding oral communication. It has been held that the
offer and acceptance must be audible, heard and understood. If these conditions
are satisfied and the other essential elements of contract exist, the parties are
bound through a telephone conversation.

3.3 REVOCATION OF OFFER AND ACCEPTANCE

The Contract Law of Bangladesh requires that an offer must be revoked
before acceptance and revocation must be brought to the knowledge of the
offeree before acceptance. An acceptance is not complete as against the
acceptor unless and until the letter of acceptance reaches the offerer, though it is
complete, as against the offerer as soon as it is put in course of transmission to
the offerer so as to be out of power of the acceptor. Thus, A makes an offer to B
on the 1st of January. The offer reaches B on the 3rd January; on the 2nd January
sends a letter of revocation. On the 3rd January, B accepts the offer by posting a
letter of matters little that a letter of revocation is on the way, but the contract or
rather the acceptance is not complete as against B unless and until the letter
reaches A. Hence, after posting the letter of acceptance, B can revoke the
acceptance by a fax, phone message or by a letter of acceptance. But once the
letter of acceptance reaches A, B cannot revoke the acceptance.
The contract Law of Bangladesh provides that an acceptance can be
revoked any time before the acceptance comes to the knowledge of the offerer
but not afterwards. For example, Parvin offers by a letter sent by post to sell her
house to Quashem. Quashem accepts the offer by a letter sent by post. Quashem
may revoke his acceptance any time before the letter communicating it reaches
Parvin – but not afterwards.
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CRITICAL THINKING: CASE STUDY # 03

COMMUNICATION AND REVOCATION OF OFFER AND ACCEPTANCE

Mr. Iqbal works in a local bank in Dhaka city as a credit officer. On Monday,
he places an advertisement in a daily newspaper to sell a slightly used 21” Sony
color TV for Taka 15.000.00.
Later that day, Mr. Shamim comes to Iqbal’s house and, after carefully
testing the TV says, “I’ll take it for Taka 10,000.00”. Iqbal replies, “I cannot accept
less than Taka 12,000.00, but I will not sell it to anyone else before Saturday. Let
me have reply by Friday if you want it”. Shamim says, “That is kind of you”.
On Wednesday, Shamim telephones Iqbal in his office and leaves message
with one of his colleagues. Mr. Kabir, stating, “Iqbal, I accept your offer”.
Unfortunately, Iqbal’s colleague does not give the message to Iqbal. Later that
day, Iqbal sells the TV to Kabir for Taka 15,000.00.
On Thursday, Shamim telephones Iqbal in his office, but he is absent due to
illness and Kabir receives the call. Kabir says to Shamim, “I have already bought
the TV from Iqbal”. Shamim rushes to Iqbal’s house to tell about the message he
left with Kabir yesterday. But Iqbal was not at home at that time. He went to
Shamim’s house to withdraw that offer.
On Thursday night, Shamim hears that Iqbal came to his house to withdraw
the offer. However, Iqbal had to go to the hospital directly from Shamim’s house
for treatment where he was recommended by his doctor to get admission
immediately.

Exercise: Advise Mr. Shamim.

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Contract Law of Bangladesh

Section 04

In this section, we will learn the following issues of consideration – one of

the three basic elements of a valid contract:

1. Definition and concept of consideration

2. Five essential characteristics of a valid consideration
3. How to test the sufficiency of a consideration
4. Various types of consideration
5. Exceptions to the necessity of consideration and the concept of nudum pactum
6. Difference between consideration and condition

4.0 CONSIDERATION: DEFINITION

Consideration is something which is given by one party to another in
exchange of some other thing. The Offerer gives something to the Offeree for
acceptance and at the same time the Offeree gives something in exchange of
what the Offerer gives, “A legally valid consideration for a promise may consist 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”.
Consideration is something to be offered in exchange of the offer of the promisor.
So, consideration is for the exchange of promise given by the promisee. For
example, a bookstore agrees to sell a book on Business Law to Mr. Abbas for Taka
207. For the bookstore’s promise to give the book, the consideration is Taka 207.
Here, the bookstore is the promisor and its (the bookstore’s) consideration is Taka
207. But, if Abbas accepts this offer to purchase the book, the offer of the
bookstore becomes a promise and at the same time acceptance by Abbas also
becomes a promise. For his promise to pay Taka 207, the consideration for him is
the book on Business Law. He is the promisor to pay Taka 207 and a promise to
receive the book. Thus, we see that in a contract, with some exceptions which
we will discuss later in this module, the number of considerations must be equal
to the number of immediate parties to the contract. If there are two immediate
parties, there must be two considerations. Of course, as we have just
mentioned, this rule has some exceptions when the number of considerations
are less than the number of immediate parties to the contract. Please, also note
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that, a consideration for a promise maybe divided into several parts, but all
parts must be consideration together to define the consideration.

Exercise: Give two examples of consideration for two different contracts. Specify
the consideration of each party.

4.2 ESSENTIAL CHARACTERISTICS OF CONSIDERATION IN BANGLADESH

A consideration becomes legally valid when it fulfills certain conditions. The
following are these necessary conditions:

I. It must be at the desire of the promisor

The consideration must be at the desire of the promisor (the person who is
making the offer or counter offer). As we mentioned earlier, the promisor is also a
promisee and vice versa. If there is no desire, there is then no acceptance and no
consideration even if the transaction is done. For example, Mr. Motin has found a
lost item and returned it to the owner. To return it, however, Motin had to incur a
conveyance cost of Taka 100. Now, Motin cannot ask anything in exchange of his
service and Taka 100 from the owner, unless the owner had earlier declared any
reward.

II. Consideration may move either from the promisee or from a third party
Consideration may move either from the promisee or from a third party.
For example, in a case Mr. Wahid granted some properties to his wife Mrs.
Jeshmine directing her at the same time to pay an annual allowance of Taka
60,000 to his brother Rashid. Mrs. Jeshmine also entered into an agreement with
Mr. Rashid promising to pay Taka 60,000 annual allowance. This agreement can
be enforced by Mr. Rashid even though no part of the consideration (property)
received by Jeshmine moved from Rashid. This is thus a contract. A stranger (in
this case Mr. Rashid) to a consideration can sue to enforce the contract, though
a stranger to the contract cannot. We will discuss this issue later in section 05 (in
the containing Privity of Contract and Exceptions to Privity Clause).

III. Consideration need not move to the promisor

Consideration need not move to the promisor (receiver of the thing given in
exchange). Where the consideration provided is the suffering or a detriment to
the promisee, the consideration cannot move to the promisor. For example, Mr.
Islam tells Mr. Khaled, “I will give a loan to you and ask you to repay it with 10%
 17

annual compounded interest rate to my son, Zahir, after my death”. Here,

repayment of loan with interest is the consideration of Islam for his promise to
give a loan. He is the promisor, but the consideration will not be received by him.

IV. Consideration must be sufficient, but need not be adequate

Consideration must be sufficient, but need not be adequate, i.e. must be
reasonable. Consideration’s sufficiency is a short hand for a body of law. Here,
the according to Bangladesh Law, an agreement to which the consent of the
party is freely given, the consideration is reasonable or sufficient and is not void
merely because the consideration is inadequate. But the inadequacy of the
consideration may be taken into account by the court in determining the question
whether the consent of the promisor was freely given. So, a consideration is
reasonable if the consent of the promisor was given freely. The reason behind this
rule is that it is impossible for the court to decide what an “adequate”
consideration is and if consent was freely given, the court will enforce the
agreement. In other words, the court will look to see if the proposed
consideration contains any economic value. If the court sees that there can be
some economic value, then it will not concern itself with the accuracy of the
valuation. This maybe so even where the motive for undervaluation is a corrupt
one. Equity may intervene, but the contract is valid. For example, in a property
sale contract, the court finds that the valuation is much lower than the market
value. The consent of the promisor was freely given. In this case, the objective of
undervaluation was to evade sales tax. This sale contract is still valid but it is a
criminal case for tax evasion.

V. Consideration must not be illegal, immoral or opposed to public policy

Consideration must not be illegal, immoral or opposed to public policy.
Otherwise, it will not be a sufficient consideration. For example, If Mr. Sattar says
his friend, Mr. Kamal to physically assault Sattar’s business rival Mr. Omar in
exchange of some money. Such an act is not a sufficient consideration, since it is
illegal to physically assault somebody. So, the contract is void.
 18

4.3 SUFFICIENCY OF CONSIDERATION

As discussed earlier, consideration’s sufficiency is a short hand for a body of
law. These laws are mentioned below:

I. Consideration must have some economic value and thus it must be something
real
As mentioned above, consideration must have some economic value. By
economic value, we do not only mean something which can command goods and
services in exchange, but also mean that consideration must have some economic
value in the sense that it is something real – illusion, palm reading, ghost, mental
satisfaction, religious satisfaction, impossible/doubtful/illogical things etc. are not
considerations. For instance, we see that many couching centers are giving
guarantee to help student get first division in public examination in exchange of
some couching fee. This guarantee is doubtful and thus is not a sufficient
consideration. Please, find yourself some other common offers which are not
real.

II. Knowledge
It maybe the case that a person must know that he is giving economic value
in order to find consideration. For example, a company offers Rony, a fresh
graduate from a university, a full-time job as Marketing Manager of that
company. The appointment letter states that his salary will be determined on the
basis of his performance. Rony joins the company and works very hard. His fellow
classmates who joined other similar companies as Marketing Managers are
getting about Taka 15,000 per month, on average. After one month, Rony
receives his first pay-cheque of only Taka 5,000. Rony immediately nnotifies the
Human Resource Manager of the company about this very low salary. Human
Resource Manager says that Rony does not deserve more than Taka 5,000. This
Taka 5,000 is not a sufficient consideration, because Rony did not know that the
company pays much lower salary than other similar organizations. In another
case, Mr. Jashim sold his new Rado watch to one of his friends only for Taka 300.
He did not know that his father had bought this watch for Taka 24,000 only three
days ago from Dubai. However, the buyer knew it. This consideration (Taka 300) is
not a sufficient consideration because Jashim did not know the values of what he
is getting in exchange of what. If he knew the value of the consideration (the
watch), then it is reasonable and valid. If for some reason, he did not know, then
this consideration is not valid because it is not sufficient.
 19

III. Duties owed to the third party

Where a duty is owed to a third party, its performance can also be the
consideration for a promise by another. For example, Saif owes Taka 500 to
Wasim. Nahid offers Saif to tutor him (Nahid) for month in exchange of paying
Wasim that Taka 500. Here, for Nahid, payment of Taka 500 to Wasim is a valid
consideration.

IV. Duties owed by law and incremental portion/public duty

The above law (third one) is not valid if the third party is the public or
society. For example, Hasan will give Tuhin Taka 500 if he removes the bricks that
he has put in front of Hasan’s house which is causing serious problems for Hasan’s
family members to reach the only street in their locality. Tuhin has removed it but
his service owed to the society. So, it (removal of bricks) is not a sufficient
consideration for Taka 500. But in addition to removal of bricks, Tuhin does
something else, such as cleaning Hasan’s cleaning Hasan’s house, then Tuhin may
claim money for this additional private service.

V. Part performance
Part performance (such as part payment of a loan) by third party –
accepted by creditor, is valid/ sufficient. For example, Bela owes Taka 1,000 to
Zafar. Bela promises to repay Taka 1,000 with 15% annual interest within three
years. After three years Bela pays only Taka 600 and her creditor, Zafar, agreed to
accept. The consideration is sufficient.

VI. Past consideration is a good consideration in Bangladesh

We will discuss this issue next.

VII. Consideration must not be illegal, immoral or opposed to public policy

Consideration must not be illegal, immoral or opposed to public policy.
Otherwise, it will not be a sufficient consideration.
 20

4.3 TYPES OF CONSIDERATION

Consideration maybe classified into following three types on the basis of
time:

I. Past consideration
When the consideration of one party was given before the date of promise,
it is said to be past. For example, Milon does some work for Shumi in the month
of January (without expecting any payment). In February, Shumi promises to pay
him some money. The consideration of Shumi (moving from Milon) is past
consideration. In Bangladesh Law, past consideration is a good consideration and
thus is valid.

II. Present or Executed Consideration

Consideration which moves simultaneously with the promise is called
present or executed consideration. For example, Bina buys an article from a shop
and pays the price immediately. The consideration moving from Bina is present or
executed consideration.

III. Future/Executory Consideration

When the consideration is to move at a future date, it is called future or
executory consideration. In a contract, a consideration maybe executory on both
sides. A promise may support a promise. Thus a promise to pay money at a future
date for goods to be delivered at a future is a valid contract.

4.4 EXCEPTIONS TO THE NECESSARY OF CONSIDERATION VS. NUDUM

PACTUM
A promise without consideration is a gift. A gift is a gratuitous undertaking
and cannot create any legal obligation.

Example: Mr. Akram says to his nephew, a student of Law, that if he gets first
class Mr. Akram will give him a car. This is not a contract, but simply gratuitous
promise subject to a condition. This gratuitous promise is known as Nudum
Pactum. The following are the exceptional cases where consideration is not
required to create a valid contract:
 21

I. Natural love and affection

An agreement made without consideration is valid if (a) the contract is
made by a written document, (b) the contract is registered according to the law
relating to registration, and (c) parties stand in a near relation to each other. For
example, a father, for natural love and affection, promises to give his son Taka
100,000 if he (the son) gets admission into the BBA program at IBA, University of
Dhaka. The father puts his promise to his son in writing and registers it. This is a
valid contract without consideration (directly father is not getting anything in
exchange). In this example, all the three conditions mentioned above have been
fulfilled. Note that conditions (a) and (b) above imply that the agreement must be
a Contract under Seal. We will discuss the Contract under Seal later.

II. Voluntary compensation (conscience money)

Voluntary compensation takes place if the promise is to compensate wholly
or in part, a person who has already voluntarily done something for the promisor,
or something which the promisor was legally compelled to do. The term
“voluntarily” signifies that the act was done otherwise than at the desire of the
promisor. For example, Munna finds Monir’s wallet and gives it to him. Monir
promises to give Munna Taka 100. This is a contract. Returning wallet is a legal
obligation. So, it is not a consideration. But Monir promised to give Munna Taka
100 not because he was legally bound to do so, but because of Monir’s voluntary
promise for Taka 100. This is not a gratuitous gift (nudum pactum), but a
conscience money which amounts to a past consideration. In above case, if
Munna helped Monir to find his wallet, it is a past consideration and valid. By past
consideration, we mean returning the wallet. Therefore, we see that “when there
is a voluntary act by one party and there is a subsequent promise (by the party
benefited) to pay compensation to the former, past consideration is good in the
sense that no consideration is required for such a promise.”

III. Time-barred debt (Conscience Money)

A promise to repay a time-barred debt can be enforced if the debtor makes
written and signed promise to pay it. Such a promise is without consideration.
But, here past consideration is the issue. This is known as Conscience money.
Here conscience money is consideration.

IV. Agency
No consideration is required to create an agency. We will cover the Law of
Agency in this course later.
 22

V. Completed gift
In case of completed gift, consideration is not necessary for such contracts.
For example, if a person gives certain properties (e.g. land for mosque) to another
according to the provisions of the Transfer of Property Act (i.e. by a written or
registered document), he cannot subsequently demand the property back on the
ground that there was no consideration. Such a gift is called Completed Gift.
Note that promise to give some money to a charity is not a valid contract,
but once given, it cannot be asked for return.

4.5 CONDITION VS. CONSIDERATION

Consideration must be distinguished from the fulfilment of a condition. For
example, if Tasneem says to Omar, “I will give you Taka 500 if you can make a
century in the inter-department cricket tournament of Dhaka University this
year.” This nice promise does not have any legal consideration and thus it does
not make any contract. It is simply a gratuitous promise subject to a condition.

Contract Law of Bangladesh

CHAPTER 05

In this chapter, we will discuss the doctrine of privity of a contract and the
situations when this doctrine cannot be enforced.

5.0. PRIVITY OF CONTRACT (THE EFFECTS OF THE CONTRACT ON THE

THIRD PARTY)

The doctrine of "Privity of Contract" states that contractual rights and

duties only affect the parties to a contract. Contractual rights are only binding on
and enforceable by, the immediate parties to the contract. The term "immediate
parties" refers to the parties one of which makes the offer and the other accepts
it to form a contract. But, as we discussed before, a third party which did not form
the contract may become the beneficiary of that contract. That is, besides the
"immediate parties" to a contract, another who did not form a contract may
become a party (not to the contract but) to the consideration of the contract.

Note: There is a difference between a stranger to a contract vs. a stranger to a

consideration. A stranger to a contract (who did not take part in the formation of
 23

the contract) cannot file a suit to enforce it (the contract). But a stranger to the
consideration can sue to enforce it, provided the stranger is a party to the
contract. For example, in a contract between Abul, Salma, and Zaman, whereby
Abul pays Taka 5,000 to Salma for delivery of some specified goods to Zaman.
Here, Zaman did not give anything to anybody (a stranger to the consideration)
But Zaman, though did not promise anything to anybody, can sue Salma for the
delivery of the specified goods. Because Zaman is a party to the contract.
Notice that if only Abul and Salma made the contract (Zaman was not a
party to the contract), then Zaman cannot sue Salma for the delivery of goods
despite the fact that Zaman is a beneficiary of the consideration. However, here
Abul can sue, and Zaman can also sue if it was under a trust. This is an exception
to the privity clause.

5.1. EXCEPTIONS TO THE PRIVITY CLAUSE

There are certain exceptions to the privity clause that a stranger to the
contract cannot sue upon it. These exceptions are discussed below:

I. Beneficiaries in the case of trust

An agreement to create a trust can be enforced by the beneficiary, though
the beneficiary is not a party to the contract (but a party to a consideration).
Example: Mr. Ahmed is the owner of three saree stores in New Market Hawker's
Market. He is about 60 years old and his doctor advises him not to work hard.
Ahmed's only son Abed is studying abroad. As a result, Ahmed makes a contract
with Zaved, his former manager, in which Ahmed transfers these stores to Zaved
to be held by Zaved in trust for the benefit of Abed. Abed may either be a minor
or an adult. In this case, Abed is not a party to the contract. But Abed can enforce
the contract, that is, can sue against Zaved to return the properties and the
benefits accused of the properties as per the contract between Ahmed and Zaved.

II. Provision of Marriage Settlement

Although illegal in Bangladesh, the marriage of minor girls are common in
our country. In such a case, Dilruba Begum gets married to Khwaja Ahmed, the
son of Khwaja Muhammad at the age of only 14 years. During their marriage,
Khwaja Muhammad promises to Dilruba's father that after the marriage, Khwaja
Muhammad will make sure that his son Khwaja Ahmed will not discontinue his
education in the USA for lack of money. After the marriage, Khwaja Muhammad
refuses to pay any tuition and fees and other expenses of his son. As a result,
 24

Khwaja Ahmed returns home without completing his MS degree. After a couple of
days, Dilruba's father dies in a road accident.
In this case, Dilruba is not a party to the contract. But she can enforce the
contract.
Exercise: In the above case, do you find a violation of any rules of a contract?

III. Assignee of a Contract

Under certain circumstances, a party to the contract can transfer his rights
(under the contract) to a third party. In that case, the assignee can enforce the
contract.
It is important to note that there are two types of assignees: Private and
Official. The private assignee is appointed by a party to the contract, whereas, the
Official assignee is appointed by the Court, generally in the case of insolvency of a
party to a contract.
For example, I can authorize you to take delivery of goods from a sales
center. Here, you are a private assignee and you can enforce the delivery.
Traveler's Cheque is a unique example. Can you tell why? We learn more about
private assignee in the Law of Agency.
On the other hand, for example, if a person becomes insolvent, all his/her
properties and rights vest in the Official Assignee who can sue upon contracts
entered into by the insolvent.

Exercise: Can you tell a case where an Official Assignee was appointed for a minor
and the assignee enforced the contracts in which the minor was a beneficiary?

IV. Family Settlement When Written Down in a Document Properly

In the case of family settlement when written down in a document
properly, the doctrine of privity is no longer required. Any member of the family,
who is not a party to the contract relating to a family settlement (such as monthly
allowance for a member, tuition, and fees for education, transfer of property,
etc.), can enforce the contract. Note, by "properly written down" we mean the
contract is a “Contract under Seal” and thus is written down as per requirements
of the law of registration and documentation, e.g., Affidavit.
In the Contract Law of Bangladesh, these are the general exceptions.
Otherwise, a contract cannot confer rights or impose liabilities upon a person who
is not a party to that contract. Please note that there are some other very
twisted, difficult to understand exceptions to the privity clause. However, we will
 25

not discuss them in this course. In the case of such difficult exceptions, we should
consult a lawyer.
Exercise: Please give an example of a contract from your own experience when
privity clause is no longer required to be fulfilled.

Contract Law of Bangladesh

CHAPTER 06

6.0. QUALIFICATIONS OF A CONTRACT

An agreement becomes enforceable by law when it fulfills certain
conditions or legal requirements. These conditions consist of all basic elements of
a contract plus some additional legal requirements which, together, are called the
Qualifications of a Contract, are given below:

I. Lawful Offer
There must be a lawful offer by one party to other party or parties. The
offer must conform to all the rules regarding offer as per the Contract Law of
Bangladesh.

II. Acceptance
There must be a lawful acceptance of the offer by the other party or
parties. The acceptance must conform to all the rules regarding acceptance as per
the Contract Law of Bangladesh.

III. Lawful Consideration

An agreement is legally enforceable only when each of the parties to it
gives something and gets something. The something given or obtained is called
consideration. In a contract, all considerations must be legal. However, there are
some exceptions, when consideration is not required. We have already discussed
these issues.

IV. Capacity of Parties

The parties to a contract must be legally capable of entering into a contract,
otherwise, it cannot be enforced by a court of law. Want of capacity arises from
minority, lunacy, idiocy, drunkenness and similar other factors.
 26

V. Free Consent
In order to be enforceable, an agreement must be based on the free
consent of all the parties. There is the absence of genuine or free consent if the
consent is induced by coercion or duress, undue influence, mistake,
misrepresentation or fraud.
In many cases, an apparent agreement may not, in fact, be a valid contract
between the parties. Therefore, it is essential that every agreement must be a
true expression of the intention of the parties. An agreement does not reflect the
real intention of the parties when it is vitiated by mistake, misrepresentation,
fraud, coercion and undue influence.

A. Coercion or Duress
It is the committing or threatening to commit any acts forbidden by the
Penal Code or the unlawful detaining or threatening to detain any property to the
prejudice of any person whatsoever, with the intention of causing any person to
enter into an agreement.

The meaning of Duress: As traditionally defined, duress is a wrongful threat, by

words or conduct, that induces such fear on the part of the person threatened as
to overcome his/her free will. Contract Law views duress as a wrongful threat that
induces assent on the part of a victim who has no reasonable alternative but to
do what the threatening party demands, such as signing a contract very
unfavorable to the victim. Typically, the threatening party gains money or any
other economic value to which s/he is not entitled. The resulting contract is
voidable by the victim.

Elements of Duress: The traditional elements of duress are: (a) a wrongful threat
and (b) fear that overcomes the victim's free will.

(a) Wrongful Threat: Much business conduct involves express or implied threats
that are not wrongful. Threatening to deal with someone else if a supplier will not
give one a better price is the essence of healthy competition, and in the absence
of extraordinary circumstances certainly is not wrongful. But many kinds of
threats are wrongful and can lead to duress. They include threats to the person,
threats to the property, and threats to one's business or means of earning a living.
 27

(b) Overcoming of Free Will: To constitute duress, the threat must produce fear
sufficient to overcome a party's free will. The criterion for a test of sufficiency in
most cases is the reaction of the particular individual threatened. Courts consider
a party's age, gender, mental capacity, and other relevant circumstances. Note
that the particular individual need not be as brave as the "ordinary reasonable
person." The law protects the unusually timid.

(c) Psychological Distress: Psychological distress can also overcome a party’s free
will.

Special Note on Economic Duress or Business Compulsion: Economic duress,

often termed "business compulsion," is a species of duress. The defense of
economic duress, or business compulsion, arises where one individual, acting
upon another's fear of impending financial injury, unlawfully coerces the latter to
perform an act (or enter into a contract) under circumstances which prevent his
exercise of free will.

B. Undue Influence
A contract is said to be induced by undue influence, where the relations
subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair
advantage over the other. Thus, it is presumed that persons holding
real/apparent authority, such as money lender, guardians and their wards,
teachers and the pupils. Persons in a fiduciary relationship, such as husband and
wife, guru and his follower, legal advisers and their clients, etc. and persons
affected by mental incapacities, such as patients.
In brief, undue influence occurs when one party overcomes the free will of
the other party by unfair persuasion. Unfair persuasion is most likely to occur in
either of the following two situations:
1. A person is under the domination of another person.
2. There is such a relationship of trust and confidence (called a "fiduciary
relationship") between two persons that one of them is justified in assuming
that his/her best interest will be protected by the other.

Please note: A pardanashin lady is one who observes complete seclusion. They
are regarded by law as a class of persons having imperfect knowledge of the
world and especially imposed to undue influence. Therefore, when a contract is
 28

made with a pardanashin woman, it is not enough that its terms have been
explained to her and she misunderstands them and their effect upon her
interests.

C. Fraud
Fraud is a false representation of fact, made with a knowledge of its
falsehood or recklessly without belief in its truth, with the intention that it would
be acted upon by the other party and inducing him to act upon it. Is silence
amounts to fraud? Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud; but silence amounts to fraud in the
following cases: (a) When the circumstances of the case are such that it is the
duty of the person keeping silence to speak, (b) When silence is in itself
equivalent to speech. For example, A sells by auction to B, a horse which A knows
to be unsound. A says nothing to B about the horse's unsoundness. This is not
fraud in A. But if B says to A: "If you do not deny it, I shall assume that the horse is
sound". A says nothing here. In this case, A's silence is equivalent to speech.

D. Mistake
A mistake may be one of fact or of law. When both parties to an agreement
are under a mistake as to a matter of fact essential to the agreement or about a
law not in force in Bangladesh, the consent is not free and the agreement is void.
But, if only one party is laboring under a mistake, or if both parties are mistaken
as to a law in force in Bangladesh, then the contract is not void.

E. Misrepresentation
Under Free Consent, we have discussed Coercion/Duress, Undue
influence, Fraud, and Mistake. In addition to these four vitiating elements,
another important element of free consent is MISREPRESENTATION.
Contracts induced by misrepresentation, fraud, duress/coercion, mistake,
and undue influence are generally considered unlawful or voidable. The reality of
free consent requires that all these vitiating elements are absent. The recent
developments on the issue of free consent in the UK and USA are significant and
very complicated. Misrepresentation has roots both in the contract and in tort,
and it is impossible to give a coherent account of the subject without discussing
both contract and tort together. In this attachment, we discuss some basic issues
of misrepresentation very briefly in simple language within the scope of the
Contract law of Bangladesh.
 29

Definition or Nature of Misrepresentation: A Representation is a statement or

assertion, made by one party to the other, before or at the time of the contract,
regarding some fact relating to it. A Misrepresentation is an assertion that is not
in accord with the truth. When a person enters into a contract because of his/her
justifiable reliance on a misinterpretation about some important fact, the contract
is voidable.
The basic problem in misrepresentation is the effect of pre-contractual
statements. For example, Suppose Mr. Gani agrees to sell a second-hand
computer to Ms. Seema for Tk 20,000 and in the course of the pre-contractual
negotiations Mr. Gani states that the computer has a new motherboard. After
Seema has bought the computer, she discovers that the motherboard is not new
(note, it is very difficult for an ordinary person to find the truth about the
condition of the motherboard). This is a simple case of misrepresentation.
However, its remedy is not so simple. We need to understand some other basic
issues too.
It is not necessary that the misrepresentation is intentionally deceptive.
Misrepresentation can be of two types: Innocent misrepresentation which is not
intentionally deceptive, and fraudulent misrepresentation which is made with
knowledge of falsity and intent to deceive. A contract may be voidable even if the
person making the misrepresentation believes in good faith that what s/he says is
true. Either innocent misrepresentation or fraudulent misrepresentation gives the
complaining party the right to rescind a contract.
A person seeking to rescind a contract on the ground of innocent or
fraudulent misrepresentation must be able to establish each of the following four
elements:
1. An untrue assertion of fact was made.
2. The fact asserted was material or the assertion was fraudulent.
3. The complaining party entered into the contract because of his/her reliance
on the assertion.
4. The reliance of the complaining party was reasonable.

Please note, to have misrepresentation, one of the parties must have made
an untrue assertion of fact or engaged in some conduct that is the equivalent of
an untrue assertion of fact. The fact asserted must be the past or existing fact, as
distinguished from a promise or prediction about some future happening. The
concealment of a fact through some active conduct intended to prevent the other
party from discovering the fact is considered to be the equivalent of an assertion.
 30

Under some circumstances, non-disclosure also can be the equivalent of an

assertion of fact. Nondisclosure differs from concealment in that concealment
involves the active hiding of a fact, while nondisclosure is the failure to offer
information. However, like a false statement of fact, concealment and, in some
cases, non-disclosure can be the basis for a claim of misrepresentation or fraud.
Also, note that a misrepresentation of law and a misrepresentation of facts
are two different things. It is also important to remember that a promise is not, in
itself, a misrepresentation. Indeed, in one sense there can be no question of a
promise being true or false at all.
Finally, we need to know that in addition to the circumstances in which the
statutes would require a contracting party to disclose facts, there are
circumstances in which most courts require disclosure. In these situations, the
person's failure to disclose a fact would be the equivalent of an assertion that the
fact did not exist. These situations are:
1. Fiduciary relationship.
2. Correcting "half-truths".
3. Correcting statements made false by later events.
Good faith and fair dealing require disclosure (in this case, the Doctrine of
Caveat Emptor – "Buyer beware of the goods before you buy about quality and
fitness" — does not violate).

VI. Legality of Object

The object for which the contract has been entered into must not be illegal,
or immoral or opposed to public policy. For example, the agreement to kill
someone is not a contract. Note that, the legality of the object of a contract is
different from the legality of consideration of a contract. "Object" is the
underlying reason(s) for creating a contract; whereas consideration is something
with an economic value which is given by a party to another for the promise of
the latter (we have already understood the concept "consideration").

VII. Form: Verbal vs. Written

A contract may be made verbally or in writing, depending on the nature of
the contract. We will discuss this issue next.
 31

6.1. FORM OF CONTRACT

The Contract Law of Bangladesh requires either of the two forms for a
contract to be valid — Simple or Parol Contract and Contract under Seal. A Parol
contract is not made in formal writing. It can be created verbally, in the form of
informal writing. But a Contract under Seal requires to be properly written down,
registered, and sealed as per rule of registration. An example of a Contract under
Seal is a marriage contract, Real Estate Sale Contract, etc. Therefore, when a
contract is needed to be written, registered and sealed, it becomes invalid if it is
not so.
Note that a contract under seal derives its validity neither from the fact of
agreement, nor from the consideration which may exist for the promise of either
party, but solely from the FORM in which it is expressed.
The most common illustration of a contract under seal is that of a deed. A
deed must be in writing or printed, sealed and registered as per law of
registration.
Note that there may be a condition indeed. A deed may be delivered
subject to a condition. In that case, the deed does not take effect until the
condition is performed.
Statute sometimes makes it necessary for the validity of an instrument to
employ the form of a deed. In addition, common law requires a seal only in the
case of a gratuitous promise or contract in which there is no consideration for the
promise made on one side and accepted on the other side.
Finally, note that in Bangladesh on some Parol or Simple contracts, the law
imposes, in addition to the requirements of consideration, the necessity of some
kind of FORM, either as a condition of their existence or as a requisite of proof.

6.2. TYPES OF CONTRACT

The study of contract often involves reference to particular kinds of
contracts. Some common types of contracts and some of their characteristics are
mentioned below. A given contract may fit into more than one category.

I. Express and Implied Contracts

An express contract is one in which the terms of the contract are stated in
words. An implied contract is one in which the terms of the contract are wholly or
partly inferred from conduct or from surrounding circumstances. When Jane, on
passing a market where she has an account, picks up a bag of oranges marked
"Taka 30", holds up the bag, and waits until the clerk nods, the promise to pay
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Taka 30 (and in fact, the whole contract) is implied by the conduct of the parties.
In legal effect, there is no difference between an express contract and an implied
contract. They differ merely in the manner in which assent is manifested.

II. Unilateral and Bilateral Contracts

A unilateral contract is one in which only one party makes a promise.
Sumon tells Karim, "I will pay you Taka 10 to mow my lawn". This is an offer for a
unilateral contract because Sumon (the promisor) expects Karim (the promisee)
to accept his offer by performing the requested act (mowing). In contrast, a
bilateral contract is one in which both parties make promises. Sumon says to
Karim, "I will pay you Taka 10 to mow my lawn. Will you mow it on Friday for that
price?" Sumon has made an offer for a bilateral contract because Karim is to
indicate his acceptance by making a verbal response that either states or implies a
promise to mow the lawn on Friday ("Yes" or "Yes, I will mow your lawn on Friday
for Taka 10"

III. Executory and Executed Contracts

An executory contract is one that is, yet to be performed. Sumon says to
Karim, "I will pay you Taka 10 to mow my lawn. Will you mow it tomorrow?" and
Karim says, "Yes". Sumon and Karim have entered into an executory bilateral
contract. It is executory because neither party to it has rendered the promised
performance. An executed contract is one that has been performed. If Karim
mows the lawn and Sumon pays him Taka 10, the contract is fully executed
(performed). If Karim mows the lawn but Sumon fails to pay, the contract is
partially executed. It could also be said to be partially executory since Karim has
performed but Sumon has not.

IV. Enforceable, Unenforceable, Voidable and Void Contracts

An enforceable contract is for the breach of which the law gives a remedy.
The usual remedy is a judgment for monetary damages. An unenforceable
contract is one meeting the basic requirements of mutual assent, consideration,
legal object and parties with the capacity to contract, but which the law will not
enforce because of the parties' failure to comply with some other legal
requirement. For example, contracts for the sale of lands must be in writing to be
enforceable. An oral contract for the sale of land ordinarily is unenforceable. A
voidable contract is one which a party may either enforce or get out of (avoid) as
that person chooses. For example, a person who was induced to enter into a
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contract by the other party's fraud may avoid (cancel) the contract or may
enforce it and have damages for any loss caused by the fraud. A void contract is
nothing more than an attempt to contracting that never produced a contract
because some essential contractual element (mutual assent, consideration, legal
object, or capacity of the parties) was missing. A person who has been declared
insane by the court lacks contractual capacity. That person's alleged contract is
void.

Agreements expressly declared void under the Law

(a) Agreements in restraint of marriage: Every agreement in restraint of marriage

of any person, other than a minor, is void because they are injurious to the moral
welfare of the people.

(b) Agreements in restraint of trade: An agreement, the object of which is to

deprive a person of his right to exercise a lawful profession, occupation, trade or
business of any kind, is to that extent void.

(c) Agreements in restraint of legal proceedings: Every agreement, by which any

party thereto is restrained absolutely from enforcing his rights under or in respect
of any contract, which limits the time within which he may thus enforce his rights
is void to that extent.

(d) Agreements involving uncertainty: Agreements, the meaning of which is not

certain, or capable of being made certain, are void.

(e) Agreements to do impossible acts: An agreement to do an act, which is

impossible in itself at its very inspection, is void.

(f) Agreement to restrain marriage of a minor

(g) Agreements not in writing or registered: It is essential for the validity of a

contract that it must be in writing, attested by the witness and registered, if so
required by any other law in force in Bangladesh. Thus under provisions of
Transfer of Properties Act, contract for sale, mortgage, lease or gift of immovable
properties are required to be in writing and registered under the law of the land,
otherwise the same will be void.

(h) Agreement to restrain the marriage of a minor is void ab initio

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V. Formal and Informal Contracts

A formal contract is one to which the law gives special effect because of
the form or special language used in creating it. The most common formal
contracts are negotiable instruments (commercial paper) such as checks. To
create a negotiable instrument, a person must use a particular form or style of
language. A negotiable instrument has legal characteristics that differ from those
of ordinary contracts. Informal contracts are those for which the law does not
require a particular set of formalities or special language. The usual requirements
for a contract must be met, but the parties to an informal contract may use any
style of language they please.

6.3. TERMINATION OF CONTRACT

When the obligation created by a contract comes to an end, the contract is
said to be discharged or terminated. A contract may be discharged or terminated
in any of the following ways:

I. By performance of the promise or by tender

The obligations of a party to a contract come to end when he performs his
promise. Performance by all the parties, of the respective obligations, puts an end
to the contract completely. This is the normal and natural mode of discharging a
contract.

II. By mutual agreement

By agreement of all parties, a contract may be canceled or its terms altered
or a new agreement substituted for it. Whenever any of these things happen, the
old contract is terminated.

III. By frustration
A contract may also be dissolved by frustration. By frustration, we mean
the impossibility in the fulfillment of the purpose of the parties in entering into a
contract.

IV. By operation of law

A contract terminates by the operation of law in the case of (a) Death or
incapacity: In contracts involving personal skills or ability, death terminates the
contract. In other cases, the rights and liabilities pass on to the legal
representative of the dead man; (b) Insolvency: Upon insolvency, the rights and
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liabilities of the insolvent are, with certain exceptions, transferred to an officer of

the court, known as the Official Assignee; (c) Merger: It means the sinking or
drowning of a less estate in a greater, by reason that they both coincide and meet
in one and the same person.

V. By lapse of time
Contracts may be terminated by lapse of time. In civil suits, the obligations
and liabilities in contracts are barred by a time limitation. The provisions of the
law are stated in the Limitations Acts.

VI. By material alteration

If the document containing the terms of a contract is materially altered by a
party to the contract, without the consent of the other parties, the contract is
discharged and cannot be enforced anymore. Examples are: a change in the
amount of money to be paid, the time of payments, the place of payments, the
name of the parties, etc.

VII. By breach of contract

When a contract is broken by one party, the other party is freed from the
obligation of performing the contract. They can also take the remedial measures
to which they are entitled.

VIII. Destruction of Consideration

If any of the considerations is destroyed accidentally and which cannot be
recreated, the parities to contract may rescind the contract and thus the contract
comes to an end.