Law of Contract: Definition, offer and Acceptance, Consideration, Capacity of parties, Free Consent, Legality of Object, Performance and Discharge of Contract and Remedies for Breach of Contract.

LAW OF CONTRACT

  Meaning:

A contract is a written or expressed agreement between two parties to provide a product or service. There are essentially six elements of a contract that make it a legal and binding document. In order for a contract to be enforceable, it must contain:

1. An offer that specifically details exactly what will be provided
2. Acceptance, which is the agreement by the other party to the offer presented
3. Consideration, money or something of interest being exchanged between the parties
4. Capacity of the parties in terms of age and mental ability
5. The intent of both parties to carry out their promise
6. Legally enforceable terms and conditions, also called object of the contract

In other words, a contract is enforceable when both parties agree to something, back the promise up with money or something of value, both are in sound mind and intend to carry out their promise and what they promise to do is within the law.

A contract is written and signed by the parties. However, there are several other types of contracts that are considered enforceable. There are even some that are not considered enforceable and serve only as a way for a court to determine the obligation on the part of either party.

Types of Contract: 

1. Express Contract

An express contract is the most common contract type. In this type of contract, all elements are specifically stated. This can be written or done orally. Either way, offer, acceptance and consideration must bind the parties together legally. And both parties must clearly understand the terms and conditions each is agreeing to.

An oral contract works the same way.

In an oral contract, like negotiating the price of a new car, the parties agree on a set price, a monthly payment schedule if applicable and any warranties or guaranties included in the offer. Once acceptance is made and consideration is exchanged, the contract for the vehicle is binding and enforceable. As long as both parties uphold their promise, the car cannot be returned at a later date, nor can the salesman request the car back from the new owner.

2. Implied In-Fact Contract

Not every contract is as transparent as an expressed contract. An implied in-fact contract binds parties together through a mutual agreement and intent, but there are no expressed terms of the agreement. The agreement holds mutual intention based on facts and circumstances and a reasonable assumption from the circumstances and relations between the parties. For an implied in-fact contract to be enforceable, there are a few elements that must be present:

1. An unambiguous offer and acceptance
2. Mutuality of both parties to be bound to the contract

 

3. Consideration

The elements can be determined by the behaviors of the parties. For example, when a guest orders a steak at a restaurant, it is assumed that the steak will be cooked and served to the guest’s liking and the guest has every intention of paying for the meal.

 

4. Implied In-Law Contract

An implied in-law contract, also known as a quasi-contract, works differently. In this type of contract, the elements are not specifically written or expressed. In fact, this type of contract is used as a remedy in a situation when one party to the quasi-agreement received unjust enrichment resulting from not paying for a product or service rendered. This sounds confusing but it really boils down to this – if a product or service is rendered to a party without paying, it becomes inequitable for the rendering party.

Contract Act

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law of the land.

 

This definition has two major elements in it i.e. – “agreement” and “enforceable by law”. So in order to understand a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots in the definition of a contract.

 

Agreement

The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”. Now that we know how the Act defines the term “agreement”, there may be some ambiguity in the definition of the term promise.

Examples

1. Mohan and Rishabh decided to go for lunch on Sunday. Mohan did not come for lunch, and this resulted in the waste of Rishabh’s time. Now Rishabh cannot compel Mohan for the damages as the decision to go for the lunch is not a contract but a domestic agreement.
2. Varun promises his younger brother Anuj to pay his debts, and the agreement was in writing as well as registered. This is a valid agreement and can be enforceable.

 

Promise

This ambiguity is removed by the Act itself in its section 2(b) which defines the term “promise” here as: “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a promise”.

In other words, an agreement is an accepted promise, accepted by all the parties involved in the agreement or affected by it. This definition thus introduces a flow chart or a sequence of steps that need to be triggered in order to establish or draft a contract. The steps may be described as under:

The definition requires a person to whom a certain proposal is made.

The person (parties) in step one has to be in a position to fully understand all the aspects of a proposal. “Signifies his assent thereto” – means that the person in point one accepts or agrees with the proposal after having fully understood it. Once the “person” accepts the proposal, the status of the proposal changes to “accepted proposal”.

 

“Accepted proposal” becomes a promise. Note that the proposal is not a promise. For the proposal to become a promise, it has to be accepted first.

Thus, in other words, an agreement is obtained from a proposal once the proposal, made by one or more of the participants affected by the proposal, is accepted by all the parties addressed by the agreement. To sum up, we can represent the above information below:

 

Agreement = Offer + Acceptance.

 

Enforceable By Law

Thus we can say that for an agreement to change into a Contract as per the Act, it must give rise to or lead to legal obligations or in other words must be within the scope of the law. Thus we can summarize it as Contract = Accepted Proposal (Agreement) + Enforceable by law (defined within the law)

Difference between Agreement and Contract

1. Promises and commitments forming consideration for the parties to the same consent are known as an agreement. The agreement, which is legally enforceable, is known as a contract.
2. The agreement is defined in section 2 (e) while a Contract is defined in section 2 (h) of the Indian Contract Act, 1872.
3. The major elements of an agreement are the offer and its acceptance by the same person to whom it is made, for adequate consideration. Conversely, the major elements of an agreement are agreement and its enforceability by law.
4. Every agreement is not a contract, but every contract is an agreement.
5. An agreement needs not to be given in writing, but the contracts are normally written and registered.
6. The agreement does not legally bind any party for the performance. In the Contract, the people are legally bound to perform their part.
7. The scope of the agreement is wider than a contract because it covers all types of agreement as well as contract. On the contrary, the scope of a contract is relatively narrower than an agreement because it covers only that agreement which have legal enforceability.

Types of contracts

1. Legal validity Express – Parties state the terms of the agreement to which they will be found, usually in writing.
2. Implied – Terms of agreement can be reasonably inferred by acts of the parties, even if not expressed in writing or orally.
3. Bilateral – All parties exchange promises to perform.
4. Unilateral – One party makes a promise in anticipation of some act. There is no reciprocal promise.
5. Executed – All parties have completed their promises.
6. Executory – Contract only partially performed or totally unperformed by the parties.

 

LEGAL VALADITY

1. Valid and enforceable – All elements of legal and binding contract present.
2. Void – Contract without legal force or effect.
3. Voidable – Contact that can be annulled by either party after signing because it is legally defective or allows one party to rescind the contract.
4. Unenforceable – A contract that cannot be verified for legal enforcement or fails to meet certain requirements.

Intention to Contract

There is no provision in the Indian Contract Act requiring that an offer or its acceptance should be made with the intention of creating a legal relationship. But in English law it is a settled principle that “to create a contract there must be a common intention of the parties to enter into legal obligations.”

 

Case law: Balfour v Balfour

The defendant and his wife were enjoying leave in England. When the defendant was due to return to Ceylon, where he was employed, and his wife was advised, by reason of her health, to remain in England. The defendant agreed to send her an amount of 30 pound a month for the probable expenses of maintenance. He did send the amount for some time, but afterwards differences arose which resulted in their separation and the allowance fell into arrears. The wife’s action to recover the arrears was dismissed.

 

General Offers: Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

 

CASE: Carlil v Carbolic Smoke Ball Co

A company offered by advertisement to pay 100 pound to anyone “who contracts the increasing epidemic influenza, colds or any disease caused by taking cold, after having used the ball according to printed directions.” It was added that 1000 pound is deposited with the Alliance Bank showing our sincerity in the matter”. The plaintiff used the smoke balls according to the directions but she nevertheless subsequently suffered from influenza. She was held entitled to recover the promised reward.

General offer of continuing nature

Where a general offer is of continuing nature, as it was, for example, in the Smoke Ball case, it will be open for acceptance to any number of persons until it is retracted. But where an offer requires some information as to a missing thing, it is closed as soon as the first information comes in.

 

Offer and Invitation to Treat

An offer should be distinguished from an invitation to receive offers. When a man advertises that he has got a stock of books to sell, or houses to let, there is no offer to be bound by any contract. “Such advertisements are offers to negotiate – offers to receive offers – offers to chaffer”.

 

Essential Elements of a Contract

Essential Elements of a Contract as defined in Section 10 of the Indian Contract Act 1872

1. Agreement – Offer and Acceptance
2. Legal purpose
3. Lawful Consideration
4. Capacity to contract
5. Consent to contract
6. Lawful object
7. Certainty
8. Possibility of Performance
9. Not expressly declared void
10. Legal formalities like Writing, Registration etc

 

• Acceptance – Section 2(b)

Introduction of Acceptance – Sec. 2 (b)

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Thus “acceptance” is the assent given to a proposal, and it has the effect of converting the proposal into promise.

 

This is another way of saying that an agreement is an accepted proposal. Every agreement, in its ultimate analysis, is the result of a proposal from one side and its acceptance by the other.

There are three factors in Acceptance:

1. Communication to Offer or
2. Communication to Acceptor
3. When Communication is not necessary

CASE: Brogden v Metropolitan Railway co.

 

B had been supplying coal to a railway company without any formal agreement. B suggested that a formal agreement should be drawn up. The agents of both the parties met and drew up a draft agreement. It had some blanks when it was sent to B for his approval. He filled up the blanks including the name of an arbitrator and then returned it to the company. The agent of the company put the draft in his drawer and it remained there without final approval having been signified. B kept up his supply of coals but on the new terms and also received payment on the new terms. A dispute having arisen B refused to be bound by the agreement.

 

WHEN COMMUNICATION NOT NECESSARY

In certain cases, communication of acceptance is not necessary. The offeror may inform a particular mode of acceptance, then all that the acceptor as to do is to follow that particular mode.

 

Case law: Carlil v Carbolic Smoke Ball

BOWEN LJ observed as: “But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, he may dispense with notice to himself… and there can be no doubt that where the offeror expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding it is only necessary for the other person to follow the indicated method of acceptance; and if the person making the offer expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification”.

 

MODE OF COMMUNICATION

Acceptance should be made in prescribed manner. Acceptance has to be made in the manner prescribed or indicated by the offeror. An acceptance given in any other manner may not be effective. Particularly where the offeror clearly insists that the acceptance shall be made in the prescribed manner. For example, A offered to buy flour from B requesting that acceptance should be sent by the wagon which brought the offer. B sent his acceptance by post, thinking that this would reach the offeror more speedily. But the letter arrived after the time of the wagon. A was held to be not bound by the acceptance.

Absolute and Unqualified

 

Section 7: Acceptance Must Be Absolute

In order to convert a proposal into a promise, the acceptance must — (1) be absolute and unqualified, (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

 

EFFECT OF DEPARTURE FROM PRESCRIBED MANNER

A departure from that manner does not of itself invalidate the acceptance. A duty is cast on the offeror to reject such acceptance within reasonable time. A minor departure from the prescribed mode of communication should not upset the fact of acceptance provided that the communication is made in an equally expeditious way.

 

Where no manner prescribed: reasonable and usual manner

Where no mode of acceptance is prescribed, acceptance must “be expressed in some usual and reasonable manner”. As per Indian Contract Law, post is a reasonable mode.

 

Counter proposals- An acceptance containing additions, limitations, or other modifications shall be rejection of the offer and shall constitute a counter-offer. However, a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance unless the offeror promptly objects to the discrepancy; if he does not object, the terms of the contract shall be the terms of the offer with the modifications contained in the acceptance.

If the proposal prescribes 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 communicated 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.

 

 PARTIAL ACCEPTANCE

Acceptance should be of the whole of the offer. The offeree cannot accept a part of its terms which are favorable to him and reject the rest. Such an acceptance is another kind of counter proposal and does not bind the offeror.

 

INQUIRY INTO TERMS OF PROPOSAL

A mere inquiry into the terms of a proposal is not the same thing as a counter-proposal. On acceptance of the proposal, the contract will be created on the basis of the terms and conditions of the original proposal including arbitration clause.

 

ACCEPTANCE WITH CONDITION SUBSEQUENT

If an acceptance carries a condition subsequent, it may not have the effect of a counter-proposal. Thus, where an acceptance said: “terms accepted, remit cash down Rs.25, 000 by February 5, otherwise acceptance subject to withdrawal, this was not a counter-proposal, but an acceptance with a warning that if the money was not sent the contract would be deemed to have been broken.

 

ACCEPTANCE OF COUNTER PROPOSAL

Even “where the acceptance of a proposal is not absolute and unqualified the proposer may become bound, if, by his subsequent conduct, he indicates that he has accepted the qualifications set up”.

 

Hargopal vs People’s Bank of Northern India-An application for shares was made conditional on an undertaking by the bank that the applicant would be appointed a permanent director of the local branch. The shares were allotted to him without fulfilling the condition. The applicant accepted the position as a shareholder by accepting dividends, filing a suit to recover it and by pledging his shares.It was, therefore, held “that he could not content that the allotment was void on the ground of non-fulfillment of the condition as he had by his conduct waived the conditions.

 

Lapse of Offer

1. Notice of revocation
2. Lapse of Time
3. By failure to accept condition precedent
4. By death or insanity of offerer
5. Revocation of Acceptance

Revocation of proposals and acceptances (Section-5)-A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

 

NOTICE OF REVOCATION

Withdrawal before expiry of fixed period where an offeror gives the offeree an option to accept within a fixed period, he may withdraw it even before the expiry of that period.

 

CASE LAW: Alfred Schonlank v. Muthunayna Chetti

The defendant left an offer to sell a quantity of indigo at the plaintiff’s office allowing him eight days’ time to give his answer. On the 4th day however the defendant revoked his proposal. The plaintiff accepted it on the 5th day. Holding the acceptance was useless.

 

CASE LAW: Mount ford v Scott

Communication of Revocation should be from Offerer Himself. It is necessary that the communication of revocation should be from the offeror or from his duly authorized agent. But it has been held in the case of Dickinson v. Dodds that it is not enough if the offeree knows reliably that the offer has been withdrawn.

Revocation of General Offers-Where an offer of a general nature is published through newspapers, it can be withdrawn by the same media and the revocation will be effective even if a particular person, subsequent to the withdrawal, happened to perform its terms in ignorance of the withdrawal.

 

 

CASE LAW: Skarsm Ramanathan v NTC Ltd

Superseding proposals by Fresh Proposal Where before acceptance a proposal is renewed in some parts of it and not in its entirety as proposed earlier and the letter purports it to supersede the earlier communication, such proposal is no longer available for acceptance.

 

LAPSE OF TIME

An offer lapses on the expiry of the time, if any, fixed for acceptance. Where an offer says that it shall remain open for acceptance up to a certain date, it has to be accepted within that date. For example, where an offer was to last until the end of March and the offeree sent a telegram accepting the offer on 28th March which was received by the offeror on 30th March, it was held that the option was duly exercised.

 

FAILURE TO ACCEPT CONDITION PRECEDENT

Where the offer is subject to a condition precedent, it lapses if it is accepted without fulfilling the condition. Where a salt lake was offered by way of lease on deposit of a sum of money within a specified period, and the intended lessee did not deposit the amount for 3 long years, it was held that this entailed cancellation of the allotment.

 

DEATH OR INSANITY OF OFFEROR

An offer lapses on the death or insanity of the offeror, provided that the fact comes to the knowledge of the offeree before he makes his acceptance. In the case of Dickinson v Dodds, it was held that an offer cannot be accepted after the death of the offeror.

 

SECTION 6: Revocation how made

A proposal is revoked —

1. By the communication of notice of revocation by the proposer to the other party;
2. By the lapse of the time prescribed in such proposal for its acceptance or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
3. By the failure of the acceptor to fulfill a condition precedent to acceptance; or
4. By the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

Revocation of Acceptance: An acceptor may cancel his acceptance by a speedier mode of communication which will reach earlier than the acceptance itself. Section 5 is the relevant provision.

 

NEXT TOPIC:

 

Consideration [SECTION 2 (d) and SECTION 25]

Section 25 of the Indian Contract Act, 1872 starts with a declaration that “an agreement made without consideration is void” Consideration is a price of the promise

 

Definitions

In the words of Pollock, “Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.”

 

Section 2(d) of the Indian Contract Act defines consideration as: When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

 

It means price for which the promise of the other is bought – a valuable considerations a price of the promise – some of value received by the promisee as an inducement of the promise quid pro quo ( something in return) – may be of some benefit to the plaintiff or some detriment to the defendant.

 

Essential Elements of a Valid Consideration

1. It must move at the desire of promisor
2. It may move from promisee or any other person (Privity of consideration)
3. It must be real, not illusory
4. It need not be adequate
5. It may be past, present or future
6. It must not be illegal, immoral or opposed to public policy

PROMISSORY ESTOPPEL-The doctrine of promissory estoppels prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise.

Promissory estoppels require:

1. an unequivocal promise by words or conduct
2. evidence that there is a change in position of the promisee as a result of the promise (reliance but not necessarily to their detriment)
3. inequity if the promisor were to go back on the promise

In general, estoppels is ‘a shield not a sword’ — it cannot be used as the basis of an action on its own. It also does not extinguish rights.

 

ACTS DONE AT REQUEST:

An act done at the promisors desire furnishes a good consideration for his promise even though it is of no personal significance or benefit to him.

 

PROMISES OF CHARITABLE NATURE

 

Doraswami Iyer v Arunachala Ayyar

Facts: The repair of a temple was in progress. As the work proceeded, more money was required and to raise this money subscription were invited and a subscription list raised. The defendant put himself down on the list for Rs. 125 and it was to recover this sum that the suit was filed. The plaint found the consideration for the promise as a reliance on the promise of the subscriber that they have incurred liabilities in repairing the temple.

Judgment: The learned judge held that there was no evidence of any request by the subscriber to the plaintiff to do the temple repairs. Since, the temple repairs were already in progress when the subscriptions were invited. The action was not induced by the promise to subscribe but was rather independent of it. Hence, no recovery was allowed.

 

UNILATERAL PROMISES

A unilateral promise is a promise from one side only and is intended to induce some action by the other party. The promisee is not bound to act, for he gives no promise from his side. But if he carries out the act desired by the promisor, he can hold the promisor to his promise. “An act done at the request of the offeror in response to his promise is consideration, and consideration in its essence is nothing else but response to such a request.”

 

PROMISSORY ESTOPPEL AND GOVERNMENT AGENCIES

In Pournami Oil Mills v State of Kerala, the Government was not permitted to go back on its earlier promise of wider exemption from sales tax in pursuance of which certain industries were set up. A subsequent notification curtailing the exemption was held to be applicable to industries established after the notification. A promise which is against public policy or in violation of a statutory prohibition cannot be the foundation of estoppels.

 

Privity of Contract and of Consideration

“PROMISEE OR ANY OTHER PERSON”

It means that as long as there is a consideration for a promise, it is immaterial who has furnished it. It may move from the promisee, or, if the promisor has no objection, from any other person.

Dutton v Poole

Facts: A person had a daughter to marry and in order to provide her a marriage portion, he intended to sell a wood of which he was possessed at the time. His son (the defendant) promised that if “the father would forbear to sell at his request he would pay the daughter £1000”. The father accordingly forbore but the defendant did not pay. The daughter and her husband sued the defendant for the amount.

Judgment: The court held that if a man should say, ‘Give me a horse, I will give your son £10’, the son may bring the action, because the gift was upon the consideration of a profit to the son, and the father is obliged by natural affection to provide for his children. There was such apparent consideration of affection from the father to his children, for whom nature obliges him to provide, that the consideration and promise to the father may well extend to the children.

 

PRIVITY OF CONSIDERATION

According to Section 2(d), it is not necessary that consideration should be finished by the promisee. A promise is enforceable if there is some consideration for it and it is quite immaterial whether it moves from the promisee or any other person.

Chinnaya v Ramayya

An old lady, by deed of gift, made over certain landed property to the defendant, her daughter. By the terms of the deed, which was registered, it was stipulated that an annuity of Rs.653 should be paid every year to the plaintiff, who was the sister of the old woman. The defendant on the same day executed in plaintiff’s favour an agreement promising to give effect to the stipulation. The annuity was however not paid and the plaintiff sued to recover it.

It was held that the deed of gift and the defendant’s promise to pay the annuity were executed simultaneously and, therefore, they should be regarded as one transaction and there was sufficient consideration for that transaction.

 

EXECUTORY CONSIDERATION

“Such Act, Abstinence or Promise is called Consideration”

CONSIDERATION MUST BE OF SOME VALUE

 

Consideration as defined in the Act means some act, abstinence or promise on the part of the promisee or any other which has been done at the desire of the promisor. E.g., A promises to give his new Rolls-Royce car to B, provided B will fetch it from the garage. The act of fetching the car cannot by any stretch of imagination be called a consideration for the promise. Even though it is the only act, the promisor desired the promisee to do. Such an act no doubt satisfies the words of the definition, but it does not catch its spirit. It is for this reason that English common law insisted that “consideration must be of some value in the eyes of the law.” It must be real and not illusory, whether adequate or not as long as the consideration is not unreal, it is sufficient if it be of slight value only.

 

 

 

VALUE NEED NOT BE ADEQUATE (ADEQUACY OF CONSIDERATION)

It is not necessary that consideration should be adequate to the promise. The courts cannot assume the job of settling what should be the appropriate consideration for a promise. It is up to the parties.

 

INADEQUACY AS EVIDENCE OF IMPOSITION

The act in Explanation 2 to Section 25 states that “inadequacy of consideration may be taken into account by the court in determining the question whether the consent of promisor was freely given. E.g.

A agrees to sell a horse worth Rs.1000 for Rs.10. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the court should take into account in considering whether or not A’s consent was freely given.

 

FORBEARANCE TO SUE

Forbearance to sue has always been regarded as valuable consideration. It means that the plaintiff has a certain right of action against the defendant or any other person and on a promise by the defendant, he refrains from bring the action.

 

COMPROMISE GOOD IRRESPECTIVE OF MERITS

Compromise of a pending suit is a good consideration for the agreement of compromise. But the dispute should be bona fide. A compromise is a good consideration “irrespective of merits of the claim of either side” and even where there is some doubt in the minds of the parties as to their respective rights.

Performance of Existing Duties

 

PERFORMANCE OF LEGAL OBLIGATIONS

Consideration must be something more than what the promisee is already bound to do. Performance of a legal duty is no consideration for a promise.

PERFORMANCE OF CONTRACTUAL OBLIGATIONS

1. Pre-existing Contract with Promisor: Compliance with legal obligation imposed by a contract with the promisor can be no consideration for a promise.

Promise to pay less than amount due: A promise to pay less than what is due under a contract cannot be regarded as a consideration.

 

CONSIDERATION AND MOTIVE

Consideration should be distinguished from motive or a pious desire to fulfil an obligation. “Motive is not the same thing with consideration.”

Thomas v Thomas

Facts: “A testator, on the death of his death, had verbally said in front of witnesses that he was desirous that his wife should enjoy certain premises for her life. The executors, who were also the assignees, “in consideration of such desire and of the premises,” agreed with the widow to convey the premises to her provided she would pay to the executors the sum of 1 pound yearly towards the ground rent and keep the said house in repair.

 

Capacity to Contract

One of the most essential elements of a valid contract is the competence of the parties to make a contract. Section 11 of the Indian Contract Act, 1872, defines the capacity to contract of a person to be dependent on three aspects; attaining the age of majority, being of sound mind, and not disqualified from entering into a contract by any law that he is subject to. In this article, we will look at all aspects in a detailed manner. According to Section 11, “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.”

The three main aspects:

• Attaining the age of majority
• Being of sound mind
• Not disqualified from entering into a contract by any law that he is subject to

1] Attaining the Age of Majority

According to the Indian Majority Act, 1875, the age of majority in India is defined as 18 years. For the purpose of entering into a contract, even a day less than this age disqualifies the person from being a party to the contract. Any person, domiciled in India, who has not attained the age of 18 years, is termed as a minor. Certain laws governing a minor’s agreement:

A Contract made with a Minor is Void

Since any person less than 18 years of age does not have the capacity to contract, any agreement made with a minor is void ab-initio (from the beginning).

CASE STUDY:

Peter is 17 years and 6 months old. He needs some money to go for a vacation with his friends. He approached a moneylender and borrows Rs 25,000. As security, he signs some papers mortgaging his laptop and motorcycle. Six months later, when he attains the age of majority, he files a suit declaring that the mortgage executed by him when he was a minor is void and should be canceled. The Court agrees and relieves Peter of all liability to repay the loan.

Also, if a minor enters into a contract, then he cannot ratify it even after he attains majority since the contract is void ab-initio. And, a void agreement cannot be ratified.

A Minor can be a Beneficiary of a Contract

While a minor cannot enter a contract, he can be the beneficiary of one. Section 30 of the Indian Partnership Act, 1932, also specifies that while a minor cannot become a partner in the partnership firm, the benefits of the firm can be extended to him.

Peter lends some money to his neighbor, John and asks him to mortgage his house as security. John agrees and the mortgage deed is made favoring Peter’s 10-year-old son – Oliver. John fails to repay the loan and Peter, as the natural guardian of Oliver, files a suit against John to recover his money. The Court holds the case since a minor an be a beneficiary of a contract.

A Minor is always given the Benefit of being a Minor

Even if a minor falsely represents himself as a major and takes a loan or enters into a contract, he can plead minority. The rule of estoppels cannot be applied against a minor. He can plea his minority in defense.

Contract by Guardian

Under certain circumstances, a guardian of a minor can enter into a valid contract on behalf of the minor. Such a contract, which the guardian enters into, for the benefit of the minor, can also be enforced by the minor.

However, guardians cannot bind a minor by a contract for buying immovable property. But, a contract entered into by a certified guardian of a minor, appointed by the Court, with an approval from the Court for the sale of a minor’s property can be enforced.

Insolvency

A minor cannot be declared insolvent as he cannot avail debts. Also, if some dues are pending from the properties of the minor and he is not personally liable for the same.

Joint contract by a Minor and an Adult

In case of a joint contract between an adult and a minor, executed by the guardian on behalf of the minor, the liability of the contract falls on the adult.

2] Person of Sound Mind

According to Section 12 of the Indian Contract Act, 1872, for the purpose of entering into a contract, a person is said to be of sound mind if he is capable of understanding the contract and being able to assess its effects upon his interests. It is important to note that a person, who is usually of an unsound mind, but occasionally of a sound mind, can enter a contract when he is of sound mind. No person can enter a contract when he is of unsound mind, even if he is so temporarily. A contract made by a person of an unsound mind is void.

3] Disqualified Persons

Apart from minors and people with unsound minds, there are other people who cannot enter into a contract. i.e. do not have the capacity to contract. The reasons for disqualification can include political status, legal status, etc. Some such persons are foreign sovereigns and ambassadors, alien enemy, convicts, insolvents, etc.

Disqualified Persons are not eligible to enter into a contract: Apart from minors and persons of unsound mind, the following persons are  not  eligible to enter into a contract in certain circumstances:

–        Alien Enemies,

–        Foreign Sovereigns,

–        Insolvents,

–        Body Corporate,

–        Convicts.

 

 Agreements with Disqualified Persons

1. Aliens: Alien means a person of a foreign country.

 

1. Alien friend: Contracts with alien friend (persons of a foreign country which is in peace with India) are valid subject to some restrictions.

 

1. Alien enemy: Contracts with alien enemy (persons of a country which is in war with India) are void subject to following rules:

 

 

1. Contracts made during war period: During war period (i.e., after the war is declared), an alien enemy can neither make a contract with an Indian, nor can sue in an Indian court, unless permitted by Central Government.

 

1. Contracts made before war: Such contracts may be suspended (or dissolved if against public policy or it would benefit the enemy country).
2. Foreign Sovereigns: Diplomatic staff may enter into contract and can sue. They enjoy some special privilege and cannot be sued in Indian court unless they voluntarily submit to the court or when permitted by Central Government to be sued.
3. Insolvents: Insolvent cannot enter into a contract. When a debtor is adjudged insolvent, his property is vested with the official assignee, which only can then enter into contracts relating to the property of the insolvent.
4. Body Corporate: A Company or Body Corporate may enter into contract as permitted by its Memorandum of Association & Articles of Association.
5. Convicts: A convict undergoing imprisonment cannot enter into a contract unless permitted by Central Govt. He can enter into a contract when he is lawfully at large, when he is pardoned or when his period of sentence expires. A contract already entered with a person who undergoes imprisonment cannot be enforced until the conviction is completed, unless permission from Central Government is obtained.

 

Next Topic:

Free Consent

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. So the two people must agree to something in the same sense as well. Let’s say for example A agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is buying his Honda. Here A and B have not agreed upon the same thing in the same sense. Hence there is no consent and subsequently no contract. Free Consent has been defined in Section 14 of the Act. The section says that consent is considered free consent when it is not caused or affected by the following,

• Coercion
• Undue Influence
• Fraud
• Misrepresentation
• Mistake

 

Elements Vitiating Free Consent

 

The following are the essentials of Free Consent:

1] Coercion (Section 15): Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act describes coercion as

• committing or threatening to commit any act forbidden by the law in the IPC
• unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract

For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion. Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable at the option of the party whose consent was not free. So the aggravated party will decide whether to perform the contract or to void the contract. So in the above example, if B still wishes, the contract can go ahead. Also, if any monies have been paid or goods delivered under coercion must be repaid or returned once the contract is void. And the burden of proof proving coercion will be on the party who wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove that his consent was not freely given.

2] Undue Influence (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence. The section also further describes how the person can abuse his authority in the following two ways,

• When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other person
• He makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent

For example A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) is not freely given, he was under the influence of his teacher. Now undue influence to be evident the dominant party must have the objective to take advantage of the other party. If influence is wielded to benefit the other party it will not be undue influence. But if consent is not free due to undue influence, the contract becomes voidable at the option of the aggravated party. And the burden of proof will be on the dominant party to prove the absence of influence.

3] Fraud (Section 17): Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.

According to Section 17,  a fraud is when a party convinces another to enter into an agreement by making statements that are

• suggesting a fact that is not true, and he does not believe it to be true
• active concealment of facts
• a promise made without any intention of performing it
• any other such act fitted to deceive

Example- A bought a horse from B. B claims the horse can be used on the farm. Turns out the horse are lame and A cannot use him on his farm. Here B knowingly deceived A and this will amount to fraud.

 

One factor to consider is that the aggravated party should suffer from some actual loss due to the fraud. There is no fraud without damages. Also, the false statement must be a fact, not an opinion. In the above example if B had said his horse is better than C’s this would be an opinion, not a fact. And it would not amount to fraud.

4] Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation which is false, inaccurate, incorrect etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. Misrepresentation can be of three types

• A person makes a positive assertion believing it to be true
• Any breach of duty gives the person committing it an advantage by misleading another. But the breach of duty is without any intent to deceive
• When one party causes the other party to make a mistake as to the subject matter of the contract. But this is done innocently and not intentionally.

5] Mistake

When one of the parties has given its consent to the contract under some kind of misunderstanding then the consent is said to be have been given by mistake. If it wasn’t for the misunderstanding the party would not have entered into the agreement.  Under contract law, a mistake can of two kinds:

 

1) Mistake of Law and

2) Mistake of Fact.

 Mistake of Law

When the party has any misunderstanding with regards to the legal provisions, it is called Mistake of Law. Now, the party can be confused regarding the law of the Homeland or law of a foreign land. If it is a mistake regarding the law of the homeland, the contract cannot be avoided. The party cannot take the plea of having no knowledge of laws of his homeland. But if it is a mistake regarding the law of a foreign country, he can be excused.

 

• Mistake of Fact

When the parties have any misunderstanding regarding the subject matter or terms of the contract, it is said to be a Mistake of fact. The misunderstanding can be on the part of one party or both of them.

 

 

Bilateral Mistake – When both the parties are under any misunderstanding/mistake relating to a matter of fact essential to the agreement, the agreement becomes void.

 

Unilateral Mistake – When the misunderstanding/mistake is on the part of one party to the contract, the agreement remains valid.  Only when the party is mistaken about the parties to agreement or nature of the transaction, the agreement becomes void.

 

Conclusion

Free Consent is absolutely essential to make an agreement a valid contract. The importance of free consent cannot be stressed enough.  Consent of the parties to the contract must be free and voluntarily. Consent to the contract has to be given without any kind of pressure or delusions. It is important that the consent given by the parties is free as this can affect the validity of the contract. If the consent to the agreement was obtained or induced by coercion, undue influence, fraud, misrepresentation or mistake, then it has the potential to make the agreement void.

 

 

 

 

Next Topic:

 Legality of Object 

Legality of Object: Section 23 of the Indian Contract Act has specified certain considerations and objects as unlawful. The consideration or objects of an agreement is lawful, unless-it is forbidden by law; is of such a nature that, if permitted, it would defeat the provision of any law; or is fraudulent; or involves injury to the person or property of another; or the court regards it as immoral or opposed to public policy.

 

In each of the above mentioned cases the consideration or object of an agreement is deemed to be unlawful. Every agreement in which the object or consideration is unlawful is void.

 

Some examples

X promises to obtain for Y an employment in the public service, and Y promises to pay X Rs. 1000 for that. This agreement is void as the consideration in this case is unlawful X agrees to let her daughter to hire to Y as a concubine. This agreement is void as it is immoral and as a result opposed to law.

The following agreements are considered to be against public policy:

1. Trade with the enemy:
2. An agreement between the citizens of two countries at war with each other is void and hence inoperative.
3. Agreement in interference with the course of justice:
4. All agreements which interfere with the normal course of law and justice are deemed to be opposed to public policy and hence are void.
5. Agreements which injure the public services are considered to be void.
6. Agreements infringing personal freedom
7. Agreements hindering parental duties.
8. Agreements hindering marital duties

 

LEGALITY OF OBJECT AND CONSIDERATION

One of the essentials of a valid contract is that the consideration and the object should be lawful. Every agreement of which the object or consideration is unlawful is void. Section 23 mentions the circumstances when the consideration or object of an agreement is not lawful.

 

Sec. 23The consideration or object of an agreement is unlawful unless. It is forbidden by law or 2.is of such nature that, if permitted, it would defeat the provisions of law, or 3.is fraudulent4.involves or implies injury to the person or property of another; or 5.the Court regards it as immoral or opposed to public policy.

 

1. Forbidden by Law

When something is forbidden by law, an agreement to do that is unlawful. An agreement to do what has been prohibited by the Indian Penal Code or by some other law cannot be enforced. A Contract to pay some money if a crime or a tort is committed is not enforceable. If  the law prohibits bigamy, a promise by a married man to marry another lady is unlawful. Even if the promise says that a man would marry a woman after his wife’s death, such a promise is not enforceable because such a promise tends to break up marriage, encourages immorality and often leads to commission of crimes. If the agreement does not satisfy the clear and unequivocal requirements of a statute it is void.

 

In Re Mahmoud and Ispahani, (1921) during the war the sale of linseed oil without a license from the Food Controller had been forbidden. The Plaintiff agreed to sell linseed oil to the defendant, on a false assurance from the defendant, that he had such a license. Subsequently, when the oil was supplied the defendant refused to accept the same on the ground that he had such a license. In an action against the defendant for damages for breach of contract it was held that he was not liable as there was no valid contract between the parties.

 

Opposed to public policy

If the court regards an agreement as opposed to public policy, the agreement is void. Public Policy is not capable of any precise definition. Public policy means the policy of the law at a stated time. An act which is injurious to the interest of the society is against public policy. If an agreement is prejudicial to social or economic interest of the community, it will be against public policy to enforce such an agreement. On the one hand a person’s right of contractual freedom should be maintained, on the other hand if the contract is against public policy the law must not allow that to be enforced.

The following agreements have been held to be opposed to public policy Agreement to stifle prosecution Agreement of maintenance and champerty trading agreement with an enemy Marriage brokage contract Agreement tending to injure the public service.

 

1. Agreement to stifle prosecution

An agreement to stifle prosecution has been regarded as opposed to public policy. The purpose of criminal law is to punish a guilty person and a compromise with a view to save a guilty person from liability would frustrate this object. Some minor offences have been recognized as compoundable offences which permit of a compromise. Any compromise excluding compoundable cases to frustrate an action against a criminal would be deemed to be unlawful. By acceptance of some consideration to make a compromise in a criminal case, one is deemed to have accepted bribe. With regard to non compoundable offences, however, the position is clear that no court of law can allow a private party to take the administration of law in its own hands and settle the question as to whether a particular offence has been committed or not, for itself .If A promises B to drop a prosecution, which he has instituted against B for robbery, and B promises to restore the value of the things taken, the agreement is void, as its object is unlawful.

1. Agreement of maintenance and champerty

iii. Marriage brokage contract; Marriage brokage contracts means such contracts under which a person agrees to procure a marriage between two persons on some consideration. Such agreements are opposed to public policy and are void. Public policy is that, suitable matrimonial unions should be made by a free and deliberate decision of the parties themselves, and the same may not be possible if the marriage is arranged through intermediaries, who may procure marriages for the sake of themselves gaining some financial advantages. Such an agreement is void even though the agreement is not to introduce any particular person of the opposite sex for marriage, but gives a choice of the number of persons out of whom the selection is to be made.

 

1. Agreement tending to injure the public service.

An agreement to buy, sell or procure a public office is against public policy. When there is a sale of public office, or assignment of the salary of an office, it is unlawful. Such agreements tend to corrupt public life as they are likely to interfere in the selection of properly qualified persons for an office, and are, therefore, void .For example, A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. If a person procures the appointment as a Customs Officer at a port with the help of another, and in return promises to share some benefits of the post with the later, the agreement is void and unenforceable

 

NEXT TOPIC

 

PERFORMANCE AND DISCHARGE OF CONTRACT

 

Introduction

A contract places a legal obligation upon the contracting parties to perform their mutual promises, and it carries on until the discharge or termination of the contract. The most natural and usual mode of discharging a contract is to perform it. A person who performs a contract in accordance with its terms is discharged from any further obligations. As a rule, such performance entitles him to receive the other party’s performance.

 

Exact and complete performance by both the parties puts an end to the contract. In expecting exact performance, the courts mean that, performance must match contractual obligations. In requiring a contract to be complete, the law is merely saying that any work undertaken must be carried out to the end of the obligations.

A contract should be performed at the time specified and at the place agreed upon. When this has been accomplished, the parties are discharged automatically and the contract is discharged eventually. There are, however, many other ways in which a discharge may be brought about. For example, it may result from an excuse for non-performance. In certain cases attempted performance may also operate as a substitute for actual performance, and can result in complete discharge of the contract.

 

The term ‘Performance of contract‘ means that both, the promisors, and the promise have fulfilled their respective obligations, which the contract placed upon them. For instance, A visits a stationery shop to buy a calculator. The shopkeeper delivers the calculator and A pays the price. The contract is said to have been discharged by mutual performance.

 

Section 27 of Indian contract Act says that

The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or any other law.

 

Promises bind the representatives of the promisor in case of the death of the latter before performance, unless a contrary intention appears in the contract. Thus, it is the primary duty of each contracting party to either perform or offer to perform its promise. For performance to be effective, the courts expect it to be exact and complete, i.e., the same must match the contractual obligations. However, where under the provisions of the Contract Act or any other law, the performance can be dispensed with or excused; a party is absolved from such a responsibility.

Example

A promise to deliver goods to B on a certain day on payment of Rs 1,000 A expires before the contracted date. A‘s representatives are bound to deliver the goods to B, and B is bound to pay Rs 1,000 to A‘s representatives.

 

Types of Performance

Performance, as an action of the performing may be actual or attempted.

 

Actual Performance

When a promisor to a contract has fulfilled his obligation in accordance with the terms of the contract, the promise is said to have been actually performed. Actual performance gives a discharge to the contract and the liability of the promisor ceases to exist. For example, A agrees to deliver10 bags of cement at B’s factory and B promises to pay the price on delivery. A delivers the cement on the due date and B makes the payment. This is actual performance. Actual performance can further be subdivided into substantial performance, and partial Performance

 

Substantial Performance

This is where the work agreed upon is almost finished. The court then orders that the money must be paid, but deducts the amount needed to correct minor existing defect. Substantial performance is applicable only if the contract is not an entire contract and is severable. The rationale behind creating the doctrine of substantial performance is to avoid the possibility of one party evading his liabilities by claiming that the contract has not been completely performed. However, what is deemed to be substantial performance is a question of fact to be decided in both the case. It will largely depend on what remains undone and its value in comparison to the contract as a whole.

 

Partial Performance

This is where one of the parties has performed the contract, but not completely, and the other side has shown willingness to accept the part performed. Partial performance may occur where there is shortfall on delivery of goods or where a service is not fully carried out.

There is a thin line of difference between substantial and partial performance. The two following points would help in distinguishing the two types of performance. Partial performance must be accepted by the other party. In other words, the party who is at the receiving end of the partial performance has a genuine choice whether to accept or reject. Substantial performance, on the other hand, is legally enforceable against the other party.

 

Payment is made on a different basis from that for substantial performance. It is made on quantum meruit, which literally means as much as is deserved. So, for example, if half of the work has been completed, half of the negotiated money would be payable. In case of substantial performance, the party that has performed can recover the amount appropriate to what has been done under the contract, provided that the contract is not an entire contract. The price is thus, often payable in such circumstances, and the sum deducted represents the cost of repairing defective workmanship.

 

Attempted Performance

When the performance has become due, it is sometimes sufficient if the promisor offers to perform his obligation under the contract. This offer is known as attempted performance or more commonly as tender. Thus, tender is an offer of performance, which of course, complies with the terms of the contract. If goods are tendered by the seller but refused by the buyer, the seller is discharged from further liability, given that the goods are in accordance with the contract as to quantity and quality, and he may sue the buyer for. Breach of contract if he so desires. The rationale being that when a person offers to perform, he is ready, willing and capable to perform. Accordingly, a tender of performance may operate as a substitute for actual performance, and can affect a complete discharge.

 

In this regard, Section 38 of Indian Contract Act says:

‘Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, or does he thereby lose his rights under the contract. For example, A contracts to deliver to B, 100 tons of basmati rice at his warehouse, on 6 December 2015. A takes the goods to B‘s place on the due date during business hours, but B, without assigning any good reason, refuses to take the delivery. Here, A has performed what he was required to perform under the contract. It is a case of attempted performance and A is not responsible for non-performance of B, nor does he thereby lose his rights under the contract.’

 

 

 

Next Topic:

 

Discharge of Contract by Performance

When the parties to a contract perform their respective promises, the contract is said to have been performed. This is the normal and natural mode of discharging a contract. When performance is proper and complete on either side, the parties become free from any further liability. If only one party performs what he promised, he alone gets a valid discharge, and he acquires a right of action against the other for non-performance.

Discharge of Contract – Discharge of Contract – Discharge by performance

Performance may be.

Actual performance, or

Offer to perform or tender.

1. Actual Performance: The contract is said to have been performed, if both the parties to the contract have performed their respective promises.

 

2. Offer to Perform or Tender: Tender is an offer to perform the obligation under the contract. When one party offers to perform its part of the promise and the other party refuses to accept the performance, the first party is discharged from its obligation provided the offer or tender to perform the contract was valid.

 

Discharge of Contract by Mutual Agreement

Discharge of Contract – Discharge by Mutual Agreement: Discharge of Contract – Discharge by Mutual Agreement

 

If both the parties to the contract, expressly or impliedly, agree to terminate the contract, the contract is said to have been discharged by mutual consent. Example: A buys a scooter from B with the condition that if it’s working is not found satisfactory, he will return it within 10 days. A is not satisfied with the performance of the scooter and returns it to B within 10 days. The contract is discharged by mutual consent.

 

Ways Mutual discharge of contract takes place

Mutual discharge of a contract may take place in any of the following ways:

1. Novation: Novation means substitution of a new contract in place of the old one. It creates a new contract in exchange of the old contract. It discharges the old i.e., the original contract. New contract here may be either between the same parties or between different parties, the consideration being mutually the discharge of the old contract.
2. Alteration: Alteration of a contract means change in one or more of the terms of a contract. Alteration is valid, if it is done with the consent of all the parties to the contract. In such a case, the old contract is discharged.
3. Remission: Remission means the acceptance of less than what was contracted for.
4. Rescission: Rescission means cancellation of all or some of the terms of a contract. It may occur under various circumstances such as

• By mutual consent of the parties, or
• Where a party to a contract fails to perform his obligations, the other party can rescind the contract without prejudice to his rights to receive compensation for breach of contract.

In case of a voidable contract, one of the parties has the option to rescind it.

5. Waiver: Waiver means “Abandoning” the rights. When a party to the contract abandons or waives his rights, the contract is discharged. Here, both the parties mutually agree that they shall no longer be bound by the contract. It amounts to a release of parties from their contractual obligations.

 

6. Merger: Merger denotes coinciding and meeting of an inferior and superior right in one and the same person. In such a case, inferior right available to a party under an agreement will vanish automatically.

 

Next Topic:

 

Remedies for Breach of Contract

When a promise or agreement is broken by any of the parties we call it a breach of contract. So when either of the parties does not keep their end of the agreement or does not fulfill their obligation as per the terms of the contract, it is a breach of contract.

 

 

Rescission of the Contract

When one party to the contract breaches the contract, the other party need not perform his part of the obligations. The aggrieved party may rescind the contract. In such cases, the injured / aggrieved party can either rescind the contract of file a suit for damages. In general, rescission of the contract is accompanied by a suit for damages.

 

Suit for damages

The aggrieved party of the contract is entitled for monetary compensation when the contract is breached. The objective of Suit for damages is to put the aggrieved / injured party in a position in which he would have been had there been performance and not breach. The aggrieved / injured party must be able to prove the actual loss or no damages will be awarded. Damages can be of four kinds.

1. Ordinary or General Damages
2. Special Damages
3. Exemplary or Punitive Damages
4. Nominal Damages

Suit for Quantum Merit

The term “Quantum Merit” is derived from Latin which means “what one has earned”. The injured party can file a suit upon quantum merit and may claim payment in proportion to work done or goods supplied. Sections 65 to 70 deal with the provisions relating to suit for Quantum Merit.

 

Suit for Specific Performance

The suit for Specific Performance is regulated by the Specific Relief Act, 1963. Specific Performance means the actual carrying out of the contract as agreed. The Court may grant for specific performance where it is just and equitable to do. Specific Performance may be granted under the following grounds.

• Lack of standard for ascertaining the damages
• Where compensation is not adequate relief
• Substantial work done by the plaintiff.

The Court cannot grant the remedy of specific performance in the following situations.

• Where monetary compensation is an adequate relief
• Where the Court cannot supervise the actual execution of the work
• Where the Contract is for personal services
• Where the Contract is not enforceable by either party against the other.

 

 

Suit for Injunctions

Injunction is an order of the Court restraining a person from doing a particular act. Where the defendant is doing something which he is promised not to do, then the injured party will get a right to file a suit for injunction.