General principles of Contract law

TRANSFORMATION IN TEACHER STUDENT RELATIONSHIP:CHANGE TOWARDS CAPITALIST PRODUCTION NATURE:CONTRACT

• Regulated by legal education service market.• Teacher a legal education service provider: Seller of the legal education process product.• Student a legal education service consumer : Buyer to be the consumer of service to transform himself in to

a seller of legal service in the legal service market.• Purpose of the contract: To create a legal knowledge and

skill-product in the buyer which should be in demand in the legal service market.

• Teaching objective: Creation of a legal knowledge and skill-product in the buyer(student)which satisfy the demand of legal service market.(R&D for Curriculum)

05/03/23 1Contract-i

Legal education process contract between the teacher and the student

Market centric curriculum

Student: BuyerTeacher: Seller


Special about the contract1. The consumer or buyer or student is a

Party to the contract and also becomes the part of Purpose of the subject matter of the contract.

2. Therefore the stakes of the buyer are very high in terms of quality of product than the seller.


Legal education product(Market centric)

1. The student, the buyer, gets the career in legal service market which makes him happy.

2. The teacher, the seller, gets the satisfaction which makes him happy.


INDIAN TEACHER STUDENT RELATIONSHIP:PRIMITIVE SOCIALIST PLUS SOME KIND OF FEUDALISTIC

1. Student (faithful disciple) education seeker.2. The education provision to be made through command

system.3. Teacher (guru) education service provider.4. The faithful students were subject to uniform

command system during the term of education without discrimination.

5. The system survived during the substantial period of feudal production relations in India.

6. The transformation in production relation from feudalism to capitalism transformed the teacher –taught relationship from command to demand supply (market) relationship.


EFFICIENT CONTRACT FORMATION IMPERATIVES

1. Inquisitive, alert, and absolutely honest with reference to legal education market forces.

2. Ego-centricity in the parties is dangerous to the quality of the subject matter of contract between the teacher and the student.

3. How to deal with ego-virus.?4. Ubemarrie fidie contract?


Basic reading material

1. Theory of knowledge. (Bertrand Russell)2. Epistemology.3. Origin of private property, family and state.

(Fredrick Angel)4. Marriage and Morals. (Bertrand Russell)5. Global business regulation. (Johan Braithwaite and

Peter Drahos)


LAW:A REFLECTION OF PRODUTION RELATIONS( ECONOMIC SYSTEM)

1. Primitive tribal communist production ( socialist economic resources only) relations reflected the corresponding laws. (Instinctive mutual co-operation in the tribe was the basis of law)

2. Feudal production (origin of privatization of economic resources) relations. (Feudal administrative laws.)

3. Capitalist production (Public, Privatization of E.R):Contract laws.4. Socialist production (Socialization of E.R):Socialist

administrative laws.Conclusion: Law is the super-structure of the economic system,

and the economic system is infrastructure of law.


ECONOMIC RESOURCES(MEANS OF PRODUCTION)

1. EARTH:ANYTHING IN OR OVER IT2. AIR AND SPACE3. LIFE IN ANY FORM4. KNOWLEDGE:OF ALL KINDS5. LABOUR:OF ANY KIND AND FORM ETC.


ECONOMIC SYSTEMS(METHOD OF RESOURCES ORGANISATION)

1.SOCIALIST ECONOMIC SYSTEM:ADMINISTRATIVE LAW2.CAPITALIST ECONOMIC SYSTEM:CONTRACT LAW3.MIXED ECONOMIC SYSTEM:MIXTURE OF CONTRACT LAW

AND ADMINISTRATIVE LAW…………………………………………………………........................................

The proportions of mixture of economic systems in a society reflects the proportions of the administrative and contract

law applicable


GROWTH OF CAPITALIST MODE OF PRODUCTION: SIGNIFY GROWTH OF CONTRACT LAW

1.Privatisation in the country signify the growth of capitalist mode of production in the country.

2.Globalisation signify :• Globalisation of markets.• Globalisation of all other eco-resources and• Globalisation of market means globalisation contract law.

(WTO)Rich capital-resource countries by and large have become poor

labour-resource countries.3.What needs to be globalised for the normal growth of

capitalist mode of production: Globalisation of capital market and labour market ?


GLOBALISATION IMPERATIVES :LEVEL PLAYING FIELD ?

1. Uneven or non-capitalist mode of development in the different nations creates conflicts of interest amongst the nations: a centripetal force for globalisation.

2. Mutuality of interests in the capitalist mode of production across the nations: a centrifugal force for globalisation.

3. Conflict of interest in the capitalist mode of production: a centripetal force for globalisation.


LAW OF CONTRACT ( METHOD OF ECONOMIC RESOURCES ORGANISATION)

LAW:THE REFLECTION AND REGULATION OF ECONOMIC SYSTEM

CONTRACT LAW:REFLECTION AND REGULATION OF CAPITALIST ECONOMIC SYSTEM


ECONOMIC SYSTEMS(METHOD OF RESOURCES ORGANISATION)

1.SOCIALIST ECONOMIC SYSTEM:ADMINISTRATIVE LAW2.CAPITALIST ECONOMIC SYSTEM:CONTRACT LAW3.MIXED ECONOMIC SYSTEM:MIXTURE OF CONTRACT LAW

AND ADMINISTRATIVE LAW…………………………………………………………..

The proportions of mixture of economic systems in a society reflects the proportions of the administrative and contract

law applicable


CAPITALIST ECONOMIC SYSTEM :CONTRACT LAW SYSTEM

CO-RELATION

1. CAPITALISM AND MARKET FORCES.

2. CONTRCT LAW AND MARKET FORCES.

3. CONFLICT BETWEEN ‘STATUTORY CONTRACT LAW’ AND MARKET FORCES.

4. ECONOMIC SYSTEM AS INFRASTRUCTURE AND CONTRACT LAW AS SUPERSTRUTURE OF SOCIETY.


SPECIAL ABOUT CONTRACT LAW

CONTRACT LAWS1. Legal regulation by private

legislation, creating rights and duties.

2. Direct interface with economic system.

3. Method of learning has to be different than general.

4. Contract legal language: Very important.?

OTHER LAWS1. Public law creates rights

and duties.

2. No direct interface with economic system.

3. General method of learning.

4. Important ?


PRINCIPLES OF LAW OF CONTRACT

1.GENERAL PRINCIPLES:CONTRCT-1 (Sections 1 to 75 of Indian Contract Act).

2.SPECIAL PRINCIPLES:CONTRACT-2(Remaining sections of Indian Contract Act and few other Acts

dealing with special contracts).

3.OTHER SPECIAL PRINICIPLES-Other special principles in other special contract courses.


GENERAL PRINCIPLES OF CONTRCT LAW(S.1-75)

1. 1.CONTRACT FORMATION PRINCIPLES

2. 2.CONTRACT DISCHARGE PRINCIPLES

3. 3.SOME OTHER PRINCIPLES


CONTRACT FORMATION PRINCIPLES

(Essentials of a valid contract..S.10)1. Competent parties (S.11).2. Offer(S.2(a),3,4,5,6.).3. Acceptance(2(b),3,4,5,6,7,8.).4. Consent(S.13,14,15,16,17,18,19,20-22).5. Lawful consideration with lawful object

(S.23,24.).


Contract formation process

202020

Promise -iiPromise-i

4. Consent

2. Offer

3.Acceptance

5.Consideration

Agreement Contract

Competent party1.Competent party

Offerer OffereeA B

20Contract-i05/03/23

COMPETENT PARTIES (Section.11)

1. Majority age (Sec.3,Majority Act xi of1875,Family Law Reform Act 1969..english)

2. Sound mind (Sec.12,Economic rational behaviour test)

3. No legal disqualifications.

4. (Burden of proof :one who alleges)


NO MAJORITY AGE: IMPLICATIONS1. Mohoribibi Vs Dharmodasghose(1903)..void agreement2. No estoppels against pleading age disqualification.3. No liability in tort law..Johnson V Pye case4. Doctrine of restitution..not applicable5. Application of restitution u/s 64(voidable contract)6. Application of restitution u/s 65(contract becomes or

discovered to be void) 7. Application of restitution under Specific Relief Act:

Mohoribibi case,Khangul case..distinction8. Beneficial contract?? Voidable contract?9. Ratification 10. Necessaries (sec.68)


PERSONS OF UNSOUND MIND

Indian law1.Definition: section 122.Nature:void (Inder Singh Vs.

P.Singh AIR 1957 Pat.491.

3.Burden of proof: who alleges

English law1.Competent to contract2.(I)Voidable contract: If

knowledge of defendant is proved.

(II)Valid contract if the knowledge defendant is not proved or if it is confirmed by the plaintiff.

3.Burden of proof: who alleges


PROPOSAL S.2(a)

1.Two competent persons.2.Communication(S.3)3.Purpose:to seek the consent of other4.Intention to make contract(Balfour V . Balfour(1919)2 KB

571 :Indian law:(1973)1SCC:yes,(1988)3SCC526: Doubtful ?

Objective theory of intention determination: (Carlill V Carbolic Smoke Ball Company(1893)1QB 256


CATEGORISATION OF OFFER

1.Specific 0ffer2. General offer..Lalman V.Gauridutt (1913) 11,All.L.J.489, and

Carlill case3.Standing offer:Lalman Shukla case.4.Continuing offer: Carlill’s case.5. Standing and continuing offer. Carlill’s case6.Cross offer.7.Counter offer. Hyde V.Wrench(1840)Beav 334.($1000-950

case)


INVITATION TO OFFER

Definition. where a party without expressing his final willingness proposes certain terms on which he is willing to negotiate the contract he is said to make an invitation to offer

Harvey Vs.Facey (1893) AC 552Lowest price for Bumper Hall Pen,$900 caseMcPherson Vs.Appana AIR 1951 SC 184Plaintiff offered to purchase a lodge from the def for Rs.6000.If found reasonable

he is ready to pay more.Def.replied,”would not sell less than Rs.10,000”.Plaintiff accepted it and brought the suit for specific performance. Decide?


Comparison

Invitation to offer1. Not capable of being

accepted.2. Objective is to seek offer.3. May or may not generate

offer.4. If offer is generated the

Offeree has the available options under the law.

Offer1. Capable of being accepted.2. Objective is to seek

acceptance.3. May or may not generate

acceptance.4. If acceptance is generated

the contract formation takes place.


Acceptance: irreversible happening

1. Offer disappears.

2. Consent.

3. Reciprocal promises.

4. Consideration.

5. Agreement.

6. Contract.05/03/23 28Contract-i

ESSENTIAL ELEMENTS OF ACCEPTANCE(Ss.2.b,3,4,5,6,7)

1. Two competent persons: offerer and offeree.2. Acceptance is acceptance when communicated: Means of

communication: General rule and special rule.3. Express or implied.4. Absolute and unqualified.5. Mode: usual and reasonable unless prescribed.6. Mode prescribed: duty of the Offerer7. Time for acceptance: when prescribed and when not

prescribed.8. Acceptance during subsisting offer


COMMUNICATION OF ACCEPTANCE

1.By whom.

2.To whom.

3.When communication is complete: depends on means of communication.

(a) Electronic means. (b) Non electronic means.

4.Postal rules of communication: jurisprudential crisis.5.Jurisdiction


COMMUNICATION OF OFFER AND ACCEPTANCE WHEN

COMPLETE (S.4)

1.Offer : when it comes in the knowledge of offeree.2.Acceptance: (a) as against the offerer..When it is put in the course of

transmission so that it is… (b) as against the acceptor.. When it comes in the knowledge

of the offerer.3.Jurisprudential problem with acceptance communication rules.


REVOCATION OF OFFER AND ACCEPTANCE(S.5): WHEN ?

1.Offer :May be revoked at any time before the communication of acceptance is complete as against the offerer.

2.Acceptance:May be revoked at any time before the communication of acceptance is complete as against the acceptor.


WHEN COMMUNICATION OF ACCEPTANCE IS DISPENCED WITH ?

1. If offer dispenses with communication of acceptance .

2. Performance requirement may dispense with the communication of acceptance .

3. In that case the moment performance is done offer stand accepted.


SOME CASES AS REFERENCE POINT OF DISCUSSION

4.Lalman Vs. Gauri Dutt,(1913) Cal.L.J489

5.Carlill Vs. Carbolic Smoke Ball Co.(1893) 1 QB 256

6.Mir Sarwarjan Vs.Fakhruddin Mohd Chaudhary (1912) 39 Cal.232 :PC 39 IA 1


SOME CASES AS REFENCE POINT FOR DISCUSSION

(INTENTION TO MAKE CONTRACT)

1.Balfour Vs. Balfour (1919)2 KB 571.

2.Banwari Lal Vs.Sukhdarshan Dayal (1973) 1SCC 294.

3.CWT Vs. Abdul Hussain (1988)3SCC562



(INVITATION TO OFFER)

7.Harvey Vs.Facey (1893) AC 552

8.Pharmaceutical Society of Great Britain Vs. Boots Cash Chemists Ltd.(1952) 2 QB 795.

9.McPherson Vs.Appanna AIR SC 184


CONTRACT LAW ON CONSENT (Ss.13 to 19)

Contract law definition of consent:

Section 13: Meeting of minds of two or more competent persons on three points.

1. On the identity of the persons. 2. On the identity of the subject matter. 3. On the identity of the transaction.


CONSENT

Meeting of mindsOn

Three points

1On the identity and

choiceof

Parties

2On the subject matter

ofContract

3On the nature

of Transaction


Some cases

1.Cundy V.Lindsay 1878 (3) AC 459:Respectable company Blenkiron& Co and Blenkarn & Co(cheat). case.

2.Raffles Vs.Wichelhaus(1864):133 RR 853.Ex Peerless from Bombay(October-November)


FREE CONSENT(S.14,19)

Consent is free if it is not caused by;

1.Coercion.(S.15)

2.Undue influence.(S.16)

3.Fraud.(S.17)

4.Mis-representation.(S.18)5.Mistake.? x .x ?.Can there be consensus ad idem if there is

mistake?05/03/23 41Contract-i

COERCION(S.15)

ESSENTIAL ELEMENTS1.Committing or threatening to commit an act forbidden by

Indian Penal Code.

2.Detaining or threatening to detain the property.

3.To the prejudice of any person( not the parties only) whatever.



1.Chikham Amiraju V.Chikham Seshamma (1917)14 Mad 33.Wallis,CJ,Seshagiri,J. Oldfield,J.dissented.

2.Andhra Sugars Ltd.V.State of A.P. A.I.R.1968.S.C.599


COERCION:DURESS

1.Re.essentils.(violence, imminent violence, threat to do something illegal )

2.Re.origin.3.Re.direction.near relation.(parents, wife, child and near

relatives)4.Re.property.

K.Ammal V. K.Pillai (1987)1 Mad.L.J.138.The High Court spelled out the distinction between the two.


UNDUE INFLUENCE(S.16)

16.1:Definition.two parameters. (a) Dominant position. (de-facto or de-jure ) (b) Misuse of the position.16.2:Presumtions of dominant position( de-jure) (a) Real or apparent position, fiduciary relation.(de-jure dominant

position) (b) Affected mental capacity due age,illness, distress mental or

bodily.(de-jure dominated position)16.3:Presumtion of undue influence. 1. (a) Dominant position. (de-facto or de-jure ) (b) Unconscionable transaction. 2. Contract with Pardanashin lady. (through precedent)



1.Mannu Singh Vs. Umadat Pandey (1890) 12 All 532.

2.Raghunath Prasad Vs. Sarju Prasad, AIR 1924 PC 60: exorbitant rate of interest on money borrowed(Rs.10,000 at 24%,1,12,885 after 11 years) to defend a criminal case.(S.16.3).No

3.Ranee Annapurni Vs. Swaminatha (1910) 34 Mad 7 Poor widow, seeking to establish right to maintenance , loan at

100% interest.(Precedent) YesIs this the situation of mental distress?

4. Chand Singh Vs. Ram Kaur (1987)2 Punj. L.J 70: 70 years ,a pardanashin widow,3 Daughters ,gifts land to tenant in possession of land : Held- Possession of land made the position dominant.



5.Hodges Vs. Delhi & London Bank (1901) 27 IA (PC) 168. definition of Pardanashin lady, quasi-Pardanashin.

6.Kalibaksh Singh Vs. Ram Gopal Singh (1913) 41 IA (PC) 23. Pardanashin gifted half of her property to son of her paramour case

7.Andhra Sugars Ltd. Vs. State of AP. AIR 1968 SC 599. Consent under statutory compulsion : Held to be free.

Is Statutory compulsion a mental distress.?


COERCION Vs. UNDUE INFLUENCE

1.Re subsisting relation.2.Re dominant position.3.Re special rules of evidence.4.Re commission or threatened commission of acts forbidden by

IPC.5.Re detention of property.6.Re tort or crime as well.


Fraud and Misrepresentation (Ss.17,18,19)

Derry Vs. Peek (1889)14 A.C 337Elements of fraud:1.Statement of fact not opinion. (a) Statement (communication) (b) Silence if statement. Can silence communicate ?2.Fact in the statement must be false.3.Person making the statement either knows the fact to be false

or do not believe the fact to be true.4.To cause the consent.


Statement of fact not opinion

Opinion statement has two parts. (a) Fact part. (b) Opinion part.1. Fact part is representation of fact of situation.2. Opinion part represent the assessment on the fact part of

the opinion holder which may be true or false.


Statement: if silence is statement

1.Statemen.Express or implied statement. (a)Is silence a statement: It is implied statement. (b)If there is a duty to speak, silence may amount to statement. (c)When there is a duty to speak. (i) Fiduciary relationship. (ii) Uberrima fides contract. Insurance contracts (iii) Context may create duty to speak. (iv) Change of circumstances. (v) Disclosure of half truth obligates to speak the whole truth.3.If the silence makes the false statement. (a) Intentional or (b) Innocent3.Cause consent.4. Fraud or misrepresentation.


FRAUD Vs. MISREPRESETATION

Regarding intention.Regarding tort and crime.Regarding discovering truth with ordinary diligence defense.Regarding rescission and compensation (S.75,and The (English)

misrepresentation Act,1967)Regarding communication or revocation of rescission.(Ss.3,66)Regarding consequences of rescission. (S.64.Restitution

applicable)


Grounds of rescission right loss

Affirmation.( Long V.Lloyd,(1958)2All.ER 402.Lorry in excellent condition case)

Lapse of reasonable period of time.Subsequent sale in good faith.Mode: Notice, if not traceable ,FIR may work as notice of

intention to rescind the contract


MISTAKE

Mistake (M)as to the identity of the parties. Mistake(M) as to the identity of subject matter.Mistake(M) as to the identity of transaction.Mistake(M) as to the law applicable. (no excuse)Mistake(M) as to the law not applicable. (fact: Subject matter)Mistake(M) as to the foreign law. (fact: Subject matter)Unilateral mistake of fact does (no effect on contract

formation)?.


Mistake Vs Misrepresentation

Mistake(no com)1. Miss+ take=Mistake2. Missing the take.3. Unilateral..No effect on

consent.4. Bilateral..No consent5. Affect presence or absence

of consent

Misrepresentation( com)1. Mis-take+Representation

=Misrepresentation.2. False communication.3. Intentional..Fraud4. Innocent..Misrepresen..5. Affect freedom of consent

not existence.


Effect of mistake as to law: Ss 21,22.

1. Mistake as to any law in force in India. (No effect: Ignorance of law no excuse)

2. Mistake as to the law not enforce in India (Effect as a mistake as to the matter of fact)

3. Unilateral mistake as to the matter of fact (No effect on contract formation)



1.Cundy Vs. Lindsay(1878)3AC459. Blenkarn& Co (Blenkiron& Co) Pl.persue developments.

2.Raffles Vs.Wichelhaus(1864):133 RR 853.Ex Peerless from Bombay(October-November)

3.Pratap Vs.Puniya,1977MP108.Old illiterate lady and uterine brother case.



Krishnan Vs.Kurukshetra University, AIR 1976 SC 376

P.Sarojam Vs.LIC AIR1986 201

Long Vs.Lloyd:1958 All ER 402Decent condition car case


CONSIDERATION (Ss.2.d,23,25)

1. Definition :S.2(d)2. Forbidden considerations in contract

formation:S.233. Relevance of consideration in contract

formation:S.25


Consideration:S.2(d)Definition :S.2(d)When,1. at the desire of the promisor,2. the promisee or any other person3. has done or abstained from doing or4. does or abstains from doing, or5. promises to do or to abstain from doing,6. something,7.such act or abstinence or promise is called a

consideration for the promise.05/03/23 60Contract-i

When, at the desire of the promisor

1.Durga Prasad Vs. Baldeo(1880) 3All.E.R 221.The Plaintiff on the order of collector constructed a Ganj,def.

promised to pay commission on items sold in lieu his construction of the shop:

2.Kedar NathVs.Gouri Mohamed 1886 ILR 14Cal 64Commissioners of Howrah sought charitable subscription to

construct Town Hall at Howrah . Charitable subscription Rs.100.Work started. Promissory Estoppel?. Held liable.

3.Abdul Aziz Vs. Masum Ali AIR1914 All 22Charitable subscription Rs.500 for Mosque repair. Repairs not

started as yet. Held not liable.


“THE PROMISEE OR ANY PERSON”

1.The party to the contract need not be party to consideration . “Promisee or any person”.

2.But the contract can be enforceable only by the party to the contract and not party to the consideration.

English law:Dutton Vs. Poole (1677) 83 ER 523If father forebear to sell the wood to give portion to his daughter the son

promised to his father to pay $1000 to his sister. Sister neither party to the consideration nor contract. Brother held liable in a suit to sister?.

Overruled in Tweddle Vs. Atkinson (1861) 123 ER 762 after 200 years.05/03/23 62Contract-i

CASES AS REFERENCE POINT FOR DISCUSSION

Tweddle Vs. Atkinson (1861) 123 ER 762The plaintiff was to be married to the daughter of one G and in

consideration of this intended marriage G and the plaintiff ‘s father entered in to a written agreement by which it was agreed that each would pay the Plaintiff a sum of money. G failed to do so and the plaintiff sued his executors. Whitman J considered it to be an established principle that a person can not take advantage of a contract, who is stranger to the contract.

Basic propositions of English law:1. Consideration must move from promisee only.2. Stranger to contract can not enforce the contract.? Law

revision committee 1937.(Benefit to third party)05/03/23 63Contract-i

Continued

Tweddle rule stranger to the contract have no cause action is applicable in India.

Indian exceptions:2 kinds1. Statutory :Negotiable Instrument Act, Contract of

Agency ,TPA, Bill of lading, Railway receipt, trust beneficiary etc.

2.Judicial:marriage,partition or other family arrangements, estoppel,covenents running with land.


.”Has done or abstained from doing":

(On request of the promisor the consideration is furnished first and thereafter the promise is made)

Executed and consideration: There can be two situations. (a) has done or abstained from doing on the request of promisor (b) has done or abstained from doing without the request of

promisor.Promise is without consideration but enforceable u/s 25(2)


PRESENT CONSIDERATION

“Does or abstains from doing” The point of time of furnishing the consideration is the same as

that of making the promise by the promisor for the consideration.


FUTURE OR EXECUTORY CONSIDERATION

“Promises to do or to abstain from doing”The consideration for the promise is in the form of promise. The obligations are due from both the sides of the contracting

parties. The reciprocal promises forming consideration for each other.


SOMETHING: SOME VALUE IN THE EYE OF LAW

1. Some (economic)value in the eye of law and value need not adequate. Doctrine of Laesio enormous ( less but enough) in civil legal system.

2. Promise to forbear or forbearance to sue.3. Promise to compromise or compromising of dispute

irrespective of its merits.4. Promise to perform or the performance of pre-existing of

legal duty.? i. Contractual legal duty. ii. Non-contractual legal duty.


Pre-existing contractual duty. English law

1.Promise to pay amount less than due. No considerationEnglish (Pinnell) rule (1602) 5 Co Rep 117a.2.Exceptions: (a) Part payment by third party. (b) Payment before due time. (c) Payment at different place or different mode (c) Promissory Estoppel.


Continued…

Indian law, Section 63“Every promisee may(i) dispense with or remit,(ii) wholly or in part, (iii) the performance of the promise made to him, or(iv) may extend the time for such performance ,or(v) may accept instead of it any satisfaction which he thinks fit”

Such promise is valid even without consideration.


Exceptions to the consideration requirements

1.English law. (a) Contracts under seal. (b) Simple contract.


Indian law: Section 25

Section 25,read with Section 2.e)1.Promise is in writing and registered.2.Promise to compensate for something done.3.Promise to pay debt barred by limitation law.


Promise expressed in writing..love and affectionSection 25(1)

1.It is expressed in writing and2.registered under the law for the time being in force for the

time being and3.is made on account of natural love and affection4.between parties standing in near relation;


CASES AS REFERENCE POINT FOR DISCUSSION

1.Rajlukhy Dabee V. Bhootnath Mookerjee (1900)4 Cal.WN 488 :husband wife case.

2.Bhiwa V.Shivaram (1899)1 Bom.LR 495: two brothers property sharing case.


Promise to compensate for something doneSection. 25(3)

1.It is a promise to compensate, wholly or in part,2.a person who has already voluntarily done something for the

promisor, or3.something which the promisor was legally compellable to do;


Is a promise to pay a debt barred by limitation ( Section 25.3)

1. It is promise, made in writing and signed by the person to be charged therewith,

2. or by his agent generally or specially authorised in that behalf,

3. to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for limitation of suits.

In any of these cases, such an agreement is a contract.


Promise to pay time barred debt and acknowledgement to pay

1.Section 25.3 is applicable in case of promise to time barred debt.

2.It is not applicable in case acknowledgement. Limitation of period takes place under the Indian Limitation Act.



Which promisor is bound u/s 25.3Bombay High Court. original time barred debtor only,P.M.Mody V.Bai Meherbai(1928) 30Bom.L.R1407

Madras High Court. Any person who promise to pay the time barred debt

P.G.Nair V. P.A.Nair AIR 1940 Mad.678??


What considerations and objects are lawful, and what not ( Section 23)

The consideration or object of an agreement is lawful, unless-1.It is forbidden by law; or2.Is of such a nature that ,if permitted, it would defeat the

provisions of any law; or3.Is fraudulent; or4. Involves and implies injury to the person or property of

another; or5.The court regards it as immoral, or opposed to public policy.In each of these cases, the consideration or object of an

agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.


Illegality of consideration or illegality of object of consideration

The “object” and “consideration” may in some cases be the same thing but usually they are different.

Chandra Sreenivasa Rao V. Kovapatti Raja Rama Mohana Rao AIR1952 Mad 579

Money is borrowed to celebrate the child marriage.

Child marriage Restraint Act 1929; to celebrate the marriage of child is offence.

Here debt-consideration itself is not illegal but the object of debt is illegal


1.Forbidden` by law

Law includes: Statutes, Customary law , Precedent, rules and regulations, etc.

Nandlal V.Thomas J.William,171 IC 948

The plaintiff was licensed under an Excise Act which forbids its sale, sub-lease, but he took the defendant in partnership. Partnership held void


2.Is of such a nature that ,if permitted, it would defeat the provisions of any law;

Fateh Singh V. Sanwal Singh (1878)1 All. 751The accused is required under Cr.P.C to surety bond for Rs.5000

for good behavior for certain period, he deposits the sum with the defendant when period is over refused to pay. Held not recoverable.


3.Is fraudulent;


4.The court regards it immoral

Parameters of immorality:

1. Immorality is a relative term in relation to values of the society at particular time and space.

2. The arbiter of the standard is the court.

3. The survey of the judicial decision reflects that immorality is limited to sexual immorality as of now.


IN THE OPINION OF COURT IT IS IMMORAL: Immorality is limited to sex outside marriage

Gherulal V. M.Maiya (1959) 2SCA 342Subba Rao J (after CJ)The case law in England and in India confines the doctrine to

sexual immoralityD.Nagartnamba v Kunuku Ramayya AIR 1968235:1 SCR 43.

BACHAWAT J Certain properties were gifted my a male of joint Hindu family

for past cohabitation case failed for incompetency but BACHAWAT J recognised “the past cohabitation as good consideration.”


Instances of sexual immorality

1. Interference with matrimonial relations. Bai vijli V. Nansa Nagar (1885) 10 Bombay 152 :Money lended to seek divorce, not recoverable.

2. Dealing with prostitutes :Pearce V. Brookes( 1866)LR 1EX 213.Thing sold and hired for prostitution.

3. Illegal cohabitation: Past,present,future.?


COHABITATION AS CONSIDERATION

PAST COHABITATION.1. English law under seal valid otherwise it is past consideration.

2. Indian law .1.adulterous or.2. non-adulterous cohabitation.Dhiraj Kuer V.Bikramji Singh (1831)3All 787 :Past cohabitation held good

consideration.Pyare Mohan V. Narayani AIR 1982 Raj.43 :Logic different-gift needs no

consideration logic.Husseinali Casan V.DinbaiAIR1924 Bom.135:Past cohabitation is illegal

consideration.D.Nagartnamba v Kunuku Ramayya AIR 1968235:1 SCR 43. Certain properties were gifted my a male of joint Hindu family for past

cohabitation case failed for incompetency but BACHAWAT J recognised “the past cohabitation as good consideration.”


In the opinion of the court opposed to public policy

ENGLISH LAW 1.Public policy 2.Judicial observations on “public policy”Lord Halsbury in Egertone V.Brownlow (1953)4HLC 123“I deny that any court can invent new head of public policy.”

Lord Atkin in Fender V.Johan Mildmay (1938) AC.1

“ The doctrine should be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inference of a few judicial minds”


Public policy: Indian Law

Subba Rao J( after wards CJI) in Gherulal V.Mahadeodas AIR1959 SC781Justice Subba Rao blended Halsbury and Atkin to articulate the Indian

position.“the primary duty of the court is to enforce the promise which the parties

have made and to uphold the sanctity of the contract which forms the basis of the society : but in certain cases ,the court may relieve them of their duty on the rule founded on what is called the public policy; for want of better words Lord ATKIN describes that something done contrary to public policy is a harmful thing; but the doctrine is extended to harmful cases but also to harmful tendencies; the doctrine of public policy is a branch of common law and just like any other branch of common law, it is governed the precedents; the principles have been crystallized under different heads and though it is permissible for the courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public.


4. Involves and implies injury to the person or property of another

1. Ram Swarup V. Bansi Mandar (1915) 42 cal,742:Borrowed Rs.100 with exorbitant interest and executed a bond or to work for 2 years without salary. Slavery?

2. Beresford V. Royal Insurance Company Ltd. (1917) 2 All.E.R.243: Suicide to help representative to get money. The representative not allowed to get money.


HEADS OF PUBLIC POLICY

1.Trading with enemy.2.Traffiking in public offices.3.Marriage brokerage agreement.4.Interference with administration of justice. (a) Interference with the course of justice. (b) Stifling prosecution. (c) Maintenance and champerty.5.Unfair deal; Central Inland Water transport corporation Vs. N

Ganguly AIR 1986 SC 1571 Termination of service3months notice without reason .


VOID AGREEMENTS

1.Illegal agreements.242.With out consideration.253.Restraint of marriage.264.Restraint of trade .275.Restraint of legal proceedings.286.Uncertain agreements.297.Wagering agreements.308.Impossible agreements.56


Agreement in restraint of trade is void(S.27)

27.Agreement in restraint of trade void-Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Exceptions;1.Statutory. (a). Sale of goodwill, limits specified, which is reasonable. (b). Under Indian Partnership Act.2.Judicial.


Lawful profession trade or business

One is restrained from exercising lawful

1.Profession2.Trade or3.Business4.Occupation amounting to business5.Occupation is not covered


English law: RestraintNordenfelt V.Maxim Nordenfelt Guns and Ammunition Co Ltd

(1894) AC 5351.Not to practice the same trade for 25 years (Reasonable)2.Not to engage in any business for the time being carried on

by the company.( unreasonable)3.He afterwards enters into agreement with another

manufacturer of guns and an action for restrain was filed.4.New law laid down (a) In the interest of parties. (b) In the

interest of society as well.


Restraint in terms of time and space before 1894

1.Lt LsReasonable

2.Ut Us 3.Lt Us 4.Ut Ls


English law: Reasonable restraint permissible

Two parameters:1.Reasonable with reference to the interest of parties.2.Reasonable with reference to the public interest.The restriction should be framed and guarded as to

afford adequate protection the party in whose favor it is imposed while at the same time it is no way injurious to the public interest


Indian law: All restraints covered

Madhub Chander V.Raj Coomar (1874)14 Bengal Law Reporter 76. Two rival shopkeepers in a locality case.

COUCH J held;

“ The words ‘restraint from exercising a lawful profession, trade or business’, do not mean an absolute restriction, and are intended to apply to a partial restriction limited to some place.”


Profession, trade or business

1.Rewashanker Samji V. Vedji AIR 1951 Kutch 56: agreement to monopolize the work to perform the religious services: held void? Religious services if trade, business or profession ?

2.Pothi Ram V.Islam Fatima AIR 1915 All.94Two landlord in the neighbourhood,in order to avoid

competition agreed to hold cattle mela on different dates in the same neighborhood . Held binding.? If occupation?


Statutory exceptions

A. Under section 27.1.Sale of goodwill.Definition of ‘goodwill’: Lord Eldon (Cruttwell V.Lye Ves.335)“The goodwill which has been the subject of sale is nothing more

than the probability that the old customer will resort to old place" (old name of business)

Local limits are prescribed.Limit appear to be reasonable, regards being had to the nature

of business.


Continued….

(B).Under Indian Partnership Act. 1. Section 11:During the continuance… 2.Section 36 : Out going partner…. 3.Section 54: In anticipation of dissolution…For sections 36 and 54,local limits or period be specified ,which

should be reasonable.


Judicial exceptions

1.Trade combinations.S.B.Fraser and Co.V. Bombay Ice Mfg.Co. (1904)29 ILR Bom.107

(Regulation not restrain)2.Solus or exclusive dealing agreements.Carliles Nephews and Co.V.Ricknauth Buttermull ILR (1882) 8 Cal

809Agreement to sell 1,36,000 dhotis of certain description to the

defendant only for certain period of time. (Assuring market not restraint)


Continued….

3.Service agreements with restraint on employees: (a) Restraint during employment.Charlesworth V. MacDonald (b) Restraint beyond employment period.Niranjan Shanker V.Century Spinning and Manufacturing (1967)

SC 1098The appellant torn the agreement to pieces only because he has

been offered higher salary by the other company.


Agreement by way of wager is void. (Section 30)

Definition: Justice HAWKINS in Carlill V. Carbolic Smoke Ball Co.(1892)2QB484

“A wagering contract is one by which two persons professing to hold opposite views touching the issue of a future uncertain event , mutually agree that, dependent on the determination of that event, one shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will win or loose, there being no other real consideration for the making of such contract by either of the parties. It is essential to wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and,therefore,remaining uncertain until that issue is known. If either of the parties may win but cannot lose, it is not a wagering contract”


ESSENTIAL ELEMENTS OF WAGER

1. The parties holding opposite views.2. About a (future) uncertain event.3. Mutually agree to pay a certain sum of money or other

stake.4. On the determination of the uncertain event.5. The parties are interested in money or stake only and not in

the event otherwise.6. Mutual chances of gain or loss of certain sum of money or

stake.


Exception u/s 30

1.Horse racing with Rs.500 and above.Note-Nothing in this section shall be deemed to legalize any

transaction where section 294-A is applicable.


Examples

1.Lottory in Subhash Kumar Manwani V. State of M.P. AIR 2000 MP 109.

2.Life Insurance contractIf the insurer does not have ‘insurable interest” it is a wagering

agreement.


Discharge of Contract

A contract may be discharged through the following methods:

1.Performance (Ss.31-67)2.Impossibility of performance.3.Agreement.4.Breach.


Impossibility of performance,S.56

Section 561.Existing impossibility: void agreement.

2.Supernuing impossibility: void contract.

3.Compensation for loss through non performance of act known to the party to be impossible.


SOME CASES AS REFERENCE POINT OF DISCUSSION: Meaning of impossibility

1.Satyabrata V.Mugneeram AIR 1954 SC 44:1954 SCR 310(a) This much is clear that the word “impossible” has not used

here in the sense of physical or literal impossibility.(b) It should be impracticable and useless from the point of

view of the object and purpose of the contract.


English law: The doctrine of frustration: theories

1. The of implied term. Lord Loreburn in F.A.Tamplin Steamship company .

2. Theory of just and reasonable solution.Denning LJ British Movies News Ltd V.London and District Cinemas Ltd.(1951) 1KB 190

Effects of frustration1. Frustration should not be self-induced.2. Frustration operates automatically.The frustration is not applicable in India ?


Specific grounds of impossibility

1. Destruction of subject matter.2. Change of circumstances.3. Non occurrence of contemplated event.4. Death or incapacity of party.5. Governmental administration.6. Intervention of war.


Discharge by breach of contract

Definition of breach of contract: When a party to the contract either refuses to perform or fails

to perform or incapacitates himself to perform his part of the contract obligation he beaches the contract.

Kinds of contract breach:The breach of contract is two kinds:1. Anticipatory breach of contract.2. Breach


Anticipatory breach of contract

Definition:It is the breach of the contract by the party to contract in

anticipation of the date of the performance of the contract.Effects:1. The innocent party is excused of the performance of contract.2. The choice of action of the aggrieved party.• Right of Immediate action. Hochester V.De La Tour (1853) 95

RR 747. Courier hiring case.• Anticipatory breach of contingent contract. Frost V.Knight

(1872) L.R.7 Exch.111. Engagement promising to marry on father’s death but refused to marry before father’s death, immediate action is maintainable.


Continued…

• Right of action on due date of performance.

Consequences:

• The anticipatory breacher may opt to perform the contract on due date.

• Damages shall be calculated on the current market rate if market principle is applicable.

• Discharge by any other event may benefit the parties


Breach of contract Section73

• When a contract has been broken, a party who suffers by such breach is entitled to receive, from the party who has broken the contract,

a. Compensation for any loss or damage caused to him thereby ,which naturally arose in the usual course of things from such breach, (general damages)

b. Or which the parties knew, when they made the contract, to be likely to result from the breach of it.( special damages )

Hadley V. Baxendale (1854)9 Ex 341 Alderson B


Two steps in compensation determination

1. Identification of the loss or losses for which the compensation is awardable to the aggrieved.

2. Conversion of loss in to money compensation.


Identification of loss or the losses to be compensated in case of breach

Section 73 provides two rules for the identification of the loss or losses to be compensated.

(1) Any loss or damage caused to him thereby ,which naturally arose in the usual course of things from such breach.

(2) Any loss which the parties knew at the time of contract making as likely to result from the breach.


Conversion principles of damage in to damages

There are two important principles for converting the damage in to damages.

1.Market principle if applicable.Market forces will play a decisive role.2.Evaluation principle if market principle if market principle is

not applicable.The opinion of the experts will be important for the judge to

make the judgment.


Certain relations resembling those created by contract(Ss.68-72)

Rationale: English law1.Theory of unjust enrichment.Lord Mansfield in Moses V.Macferlan (1760) All.E.R 581

2.Theory of “Implied-in-fact” contractLord Mansfield in Sinclair V. Brougham (1914) AC 398


S.68:Claim for necessaries

• Meaning of necessaries: Alderson B in Chappel V.Cooper (1844)13 LJ(Ex)268 “Things necessary are those with out which an individual cannot reasonably exist.

In the first place, food, raiment, lodging and the like. About these there is no doubt. Again, as the proper cultivation of the mind is as expedient as the support of the body ,instruction in art or trade, or intellectual ,moral and religious education may be necessary also . . . Then the classes being established, the subject and extent of the contract may vary according to the state and condition of the infant himself. His clothes may be fine or coarse according to his rank; his education may vary according to the station he is to fill; and the medicines will depend on the illness with which he is afflicted, and the extent of his probable means when of full age. . . But in all these cases it must first be made out that the class itself is one in which the things furnished are essential to the existence and of reasonable advantage and comfort of the infant contractor. Thus articles of mere luxury are always excluded, though luxurious articles of utility are in some cases allowed.”


Continued.

Nature of liability :Indian law1.Not personal.2.To the extent of property.English law


Nature of Liability

1. Not personal2. To the extent of property3. English Law Nash vs Inman (1908 (2) KB 1)


Section 69Reimbursement of a person paying money due by another, in

the payment of which he is interested.

1. The person must be interested in the payment2. Another person must be bound to pay by law3. Person paying is entitled for reimbursement

Govindram Gordhandas Seksaria V.State of Gondal AIR 1950 PC 99

Maharaja having sold certain mills without paying overdue municipal taxes, was sued by the buyer who has to pay to save the property from being sold.


Section 70:Obligation of a person enjoying benefit of non-gratuitous act

1. The service or act must be non-gratuitous 2. The other person must enjoy the benefit3. The person enjoying the benefits needs to pay

compensation for the sameState of West Bengal V.B.K.Mondal & sons AIR 1962 SC 779The plaintiff on the request of the officer of the State of West

Bengal constructed a Kutch road,guard room, office, ,kitchen, room for clerks and storage sheds for the use of the civil supply department of the Government.


Section 71 :Responsibility of finder of the goods

1. A person is a finder of the goods2. The finder takes the goods in his custody3. Finders responsibility is that of bailee Section 168 :Right of the finder of goods.Section 169: When finder of thing commonly on sale may sell it.(a) When the thing is perishable(b) When the lawful charges of finder, in respect of the thing

found, amount to two third of its value


Section 72

Liability of a person to whom money is paid or thing delivered by mistake or under coercion

1. Mistake of fact or law.2. Coercion.Sales Tax Officer, Banas V. Kanhaiya Lal Mukund Lal Saraf AIR

1959 SC 135Tax was paid on its forward transactions which was held ultra-

vires


General principles of Contract law

Law

Transcript of General principles of Contract law