SALIENT FEATURES OF CONTRACT ACT AND BASIC ELEMENTS

1. Introduction:Contract is simply an agreement between two or more persons to do something. It is a legal relationship consisting of the rights and duties of the contracting parties; a promise or set of promises constituting an agreement between the parties that gives each a legal duty to the other and also the right to seek a remedy for the breach of those duties. In Pakistan, Contract Act 1872 contains the law relating to contracts. It provides the rules relating to commercial transactions and determines the circumstances in which promises made by the parties to a contract shall be legally binding on them.

2. Meaning and Definition of Contract:Following are some of the important definitions of contract:(1) Salmond:Contract is an agreement creating and defining obligations between the parties.(2) Sir William Anson:A contract is an agreement enforceable at law made between two or more persons, by which rights are acquired by one or more to acts or forbearance on the part of the other or others.(3) Sir Frederick Pollock:Contract means every agreement and promise enforceable at law is a contract.

(4) Chitty:Contract is an agreement giving rise to obligations which are enforced or recognized by law.

(5) Corpus Juris Secundum:While perhaps a complete and final definition of the term contract will never be formulated, a definition, which has been frequently quoted and reiterated, is that a contract is an agreement which creates an obligation.

(6) Blacks Law Dictionary:Contract is an agreement between two or more persons which creates an obligation to do or not to do a particular thing.

(7) Restatement of US Laws:An agreement enforceable at law is a contract.

3. Essentials of a Valid Contract:According to Sec. 10, Every agreement is a contract if it is made by the free consent of parties, competent to contract for a lawful consideration and with lawful object and not hereby expressly declared to be void.An agreement becomes enforceable by law when it fulfills some conditions. These conditions may be called as the essentials of a valid contract. Following are the essentials: (1) Parties:At least two parties, competent to contract, are essential to enter into contract; one making offer and the other accepting it.

(2) Agreement:Another essential of contract is the agreement of parties on the same subject-matter in the same sense.Agreement, in the law of contracts, has a well-defined legal meaning, being the expression by two or more persons of a common intention to affect their legal relations; it consists in their being of the same mind and intention concerning the matter agreed on. It connotes a mutual obligation, the closing of a bargain. Agreement is formed by the merger of two following things:

(a) Offer/Proposal:The word proposal as applied to the law of contracts is the equivalent of the word offer; and a proposal arises when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence. A promise is the declaration by any person of his intention to do, or to forbear from anything at the request, or for the use, of another; and a proposal when accepted becomes a promise.

(b) Acceptance of Offer:According to Section 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 essential to constitute an agreement.

(3) Legal Relationship:There are agreements which do not result into contract within the meaning of that term. The ordinary example is where two parties agree to take a walk together there is no contract because parties do not intend that they should be attended by legal consequences. Intention of parties is known from the terms of agreement and surrounding circumstances.

Illustration:In Balfour vs. Balfour (1919) 2 KB 571, A husband promised to pay his wife, a domestic allowance of 30 per month. Later the parties separated and the husband defaulted the payment. Held, the wife could not recover since there was no intention to create legal relations at the time of entering into the agreement.

(4) Enforceability:Contract is defined by Sec. 2(h) as:An agreement enforceable at law is a contract.Thus to make a contract, there must be;1.An agreement and2.That agreement should be enforceable by law.

Contract = Agreement + Enforceability:Agreement becomes a contract when it is enforceable at law. Agreement is defined as every promise or every set of promises forming the consideration for each other. Sec. 2(e)Sec. 2(b) indicates promise to be an accepted proposal. A proposal when accepted becomes a promise. Therefore an agreement is an accepted proposal. In the ultimate analysis, agreement is made of proposal on one side, and of acceptance by other.Agreement = Proposal + Acceptance.An agreement becomes enforceable when it fulfills the conditions laid down in Sec. 10 which states, all agreements are enforceable by law, if they are made:(1)by the free consent of the parties,(2)competent to contract, (3)for a lawful consideration,(4)with a lawful object, and(5)are not, by this Act, expressly declared to be void.

(5) Free Consent:The term consent has been defined in Section 13 of the Act to mean agreement upon the same thing in the same sense, and the expression free consent has been defined in Section 14 to mean consent not caused by coercion, or undue influence or fraud, or misrepresentation, or mistake if it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.The expression free consent of parties requires that there must be:(a)consent, that is, a consensus ad idem, or mutual assent, and(b)the consent must be free in the sense above described.Where the consent is not free, the contract is enforceable at the option of the party whose consent was so caused, but not at the option of the other. In other words, it is a voidable contract. But where there is no contract, the agreement is void.

(a) Consensus ad Idem:In addition to these, the offer and acceptance must be consensus ad idem. Consensus ad idem means that both the parties agree on the same thing in the same sense. Before a contract comes into being, there is proposal by one or more persons and acceptance by other or others. Offer and acceptance must concur to bring about a valid contract. The term consensus connotes identity of minds. Unless minds of both the sides agree on the same thing in the same sense a valid contract will not be formed.

Illustration:In Bala Devi vs. Majumdar (1918) 41 Mad. 33 an illiterate woman executed a deed of gift under the impression that she was executing the deed to her nephew for managing her lands. The evidence showed that she never intended to execute the gift, nor was the deed ever read or explained to her. Held, there was not consent.

(6) Lawful Consideration:Consideration is something in return. It is the doing of or abstinence from an act. It may be past or present. Usually a promise to give or to do something for nothing in return is not enforceable at law, it need not be in cash or kind.The consideration of an agreement is, under Section 23, unlawful if:It is forbidden by law; orIt is of such a nature that, if permitted, it would defeat the provisions of any law; orIt is fraudulent; orInvolves or implies injury to the person or property of another; orIs opposed to public policy.

Illustrations:A agrees to sell his car to B for Rs. 20,000. Here As promise to sell his car is for Bs consideration to pay Rs. 20,000. Similarly, Bs promise to pay Rs. 20,000 is for As consideration to sell his car to D. Here the consideration is Lawful.A promises to obtain for B employment in the public service and B promises to pay 1,00,000 rupees to A. This consideration is unlawful, therefore, the agreement is void.

(7) Lawful Object:The word object means purpose or design or the end aimed at. The object of an agreement is the ultimate purpose which it subserves. Object of an agreement is neither(a)the motive which prompts a party to enter into an agreement, nor(b)the subject-matter of the agreement.In order to make an agreement, a contract, that is, enforceable at law, its object also must be lawful. The object is unlawful, if it cannot be achieved without(a)violation of some law, or(b)doing something immoral, or opposed to public policy.

Illustrations:(a)A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by theft. The agreement is void, as its object is unlawful.(b)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.(c)A, who is Bs Mukhtar, promises to execute his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral.

(8) Capacity of Parties:Section 10 states All agreements are contracts if they are made by the free consent of the parties competent to contract. Thus Section 10 requires the parties to be competent to contract.

Section 11 defines competency as Every person is competent to contract if he is of the age of majority according to the law to which he is subject, is of sound mind and is not disqualified from contracting by any law to which he is subject.Thus, incompetency is caused by:1.Minority2.Unsoundness of mind3.Status

(9) Certainty:Contract must not be uncertain, vague, or indefinite. Where the agreement is vague and its meaning cant be ascertained, it shall be unenforceable. Terms of agreement should be definite.Under Section 29, agreements, the meaning of which is not certain or capable of being made certain, are void.

Illustration:A agrees to sell B a hundred tons of oil. It is not clear what kind of oil is intended. The agreement is void because of its uncertainty.(10) Possibility of Performance:A contract must be capable of performance. Section 56 lays down that an agreement to an act impossible in itself is void. If the act is legally or physically impossible to perform, the agreement cannot be enforced at law. Thus where the goods being the subject-matter of the contract are damaged through fault of nobody the contract cannot be enforced.

Illustration:A agrees with B to discover treasure by magic; the agreement is not enforceable.(11) Not Declared Void:A void agreement is not enforceable by law. It has no legal existence, neither it gives rise to any rights or obligations. Example of void agreements are: agreements in restraint of trade, agreements in restraint of legal proceedings, agreements in restraint of marriage, wagering agreements etc.

Illustration:A promises to close his business against the promise of B to pay him Rs. 2,00,000 is a void agreement.

(12) Legal Formalities:The terms of a contract should always be reduced into writing to exclude speculation as to what was and what was not agreed to, however much the matter might have been raised during the stage of negotiations.

Whether a particular contract is, or is not, required to be put into writing, and to comply with any other formality, depends upon the terms of the particular statute by which it is governed. Where a statute requires an agreement to be in a certain form(i)unless the contrary is clearly expressed, ordinarily, there is a sufficient compliance with the statutes, if the agreement is substantially in that form, and any inconsequential variation is immaterial ;(11)but, when the statute says that a contract, to be effective, should be executed in a particular manner, and certain formalities arc laid down to be pone through before a certain liability can be created, those formalities must be gone through and cannot be dispensed with,

4. Conclusion:In the civil law, the definition of a contract does not differ materially from the common-law definition, and a contract has been defined as an agreement made by the consent of the contracting parties, in reference to a definite object which may be the subject thereof, for such consideration as may be established, to do or refrain from doing an act specified.

In its full and more liberal significance, it comprises every description of agreements, obligations, or legal ties, whereby one party binds himself, or becomes bound, expressly or impliedly, to pay a sum of money, or perform or omit to do a certain act, and so includes records, specialties, and simple or parol contracts, but it is usually employed to designate specialties or simple contracts.

DIFFERENCE BETWEEN AGREEMENT AND CONTRACT?

A contract requires agreement on the terms, consideration (usually but not always money) and an intention by both parties to be legally bound to each perform their respective promises. But an agreement may not be intended to be legally binding on the parties. This is often the case when parties want to formally record their 'agreement' even though they may not have concluded all the details of the entire transaction. Commonly such agreements may be called "Heads of Agreement" or "Memorandum of Understanding" or "letter of intent".

These latter forms are often put together to indicate good faith and ongoing commitment to each other to pursue the negotiations with a view to entering into an enforceable contract at some later stage. But an agreement 'to agree' (at some future point) is not enforceable and the courts have always been reluctant to step into parties' shoes to try and work out what should have been included, but for some reason, was not.

I am often asked whether or not an MOU is binding. It is usually the case that it is not and indeed in many cases parties enter an MOU or a Heads of Agreement because they have not concluded all the matters to be agreed that would enable them to be considered to be bound. But of course the legal system it is not a science and it is often the case that a lawyer, when faced with such questions, will answer "well that depends." On what does it depend?

Some of the critical issues include:By applying an objective test, does it appear that the parties intended to be bound? How did they act? What did they say? Of what they said, how much of it (and what) was recorded formally? What were the commercial circumstances at the time of the parties, the subject matter of the contract, (what was being contracted for)?What were the dynamics of the negotiation process? If a term is later asserted by one party to be essential to the contract but it is not in the document, what does that indicate about what is said that they appear to have agreed as important?

If you do want to put together a 'preliminary agreement', remember these rules as a guideline but always seek the advice of a lawyer to be sure. When you intend to be bound immediately but you also want to record the detail of the agreement later. The terms in the formal agreement will be essentially the same but perhaps explained in more detail but do not change. Where this happens, you are likely to be bound by the terms of the first agreement even though a formal document is not signed.

When you intend to be bound but not until a formal contract is signed. In other words, you have reached agreement and the formal agreement won't vary any terms, but until the formal agreement is in fact signed, neither party will be 'bound'.When you do not intend to be bound unless and until each party executes a formal agreement. This usually (with some significant legal exceptions) means that either party may withdraw at any time if they have not signed the formal agreement.

The greatest danger is in not understanding the effect of using certain words in legal or quasi-legal documents. While in ordinary English use they may have a common understanding and effect, it is not always the case that they have the same 'ordinary' meaning when they are used in legal documents. What is of most significance is to make a clear and unambiguous statement about whether or not the agreement (or memorandum or letter) is intended to bind the parties.

At a practical level this can have other important flow-on effects, like for example, whether costs and commitments and other activities might or should be incurred until the formal agreement is signed, and whether someone else might incur costs thinking that you intend to proceed. Often people will avoid such issues as they don't want to stifle the commercial process or offend the other party. Commercial pragmatism should always be balanced against legal risk and they are not mutually exclusive. It costs less to be sure than to fight it out later.

CONTRACT DISTINGUISHED FROM AGREEMENT

Introduction:As aptly explained by Sir John Salmond, No agreement is a contract unless its effect is to bind the parties to each other by the vinculum juris of a newly created personal right. It commonly takes the form of a promise or set of promises. That is to say, a declaration of the consenting wills of two persons that one of them shall henceforth be under an obligation to the other naturally assumes the form an undertaking by the one with the other to fulfill the obligation so created. Not every promise, however, amounts to a contract. To constitute a contract there must be not merely a promise to do a certain act, but a promise, expresses or implied, to do this act as a legal duty.

When I accept an invitation to dine at another mans house, I make him a promise, but enter into no contract with him. The reason is that our wills, though consenting, are not directed to the creation of any legal right or to any alteration of our legal relations towards each other. Thus, the term agreement and contract, though sometimes synonymously used, bear different connotations under the law. The chief distinctions between then are detailed as under:

AgreementContract1. DefinitionsAccording to Section 2(e), Contract Act 1872, Every promise and set of promises, forming the consideration for each other, is an agreement.According to Section 2(h), An agreement enforceable by law is a contract.

AgreementContract2. Generality of Scope Agreement is in some respects a wider term than contract. Every agreement may not be a contract.Whereas every contract is an agreement. Thus a restricted and limited kinds of agreements merit to be contracts.

AgreementContract3. Legal RelationshipMany agreements do not produce any legal effect on the relations of the parties, such as agreements of social or domestic nature.However, to amount to a contract the agreement must be of a nature to produce a binding result on the mutual relations of the parties.

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AgreementContract4. Essential ElementsA mere agreement is the name of a promise or set of promises which amount to consideration for each other. Thus the only thing essential to reach at an agreement is promise or promises by the parties.While the essentials of a contract include an agreement made between at least two parties giving free consent being competent to contract, for lawful object and a lawful consideration. It follows that to reach a mere agreement non of the above essentials is necessary but for an agreement to become contract these are necessary.

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AgreementContract5. RemediesA mere agreement, if not a valid contract, has no remedy for its breach. As for instance, if A and B agree that the Ideology of Iqbal as to self is true, but subsequently B denies its truthfulness, A has no remedy to compel B to come back to his first version. Similarly, X, Y and Z, directors of a company, agree that the business of taxtile is detrimental to the company. Later on, if Z favours the taxtile business, X and Y have no remedy to go to the Court of Law and thus compel B to believe that the taxtile business is detrimental. Another example is that B agrees, on As invitation, to attend his dinner party. Subsequently, B does not attend the party, A cannot bring an action against him for breach of his promise/agreement.On the other hand, a breach of a contract gives rise to a right of the aggrieved party to go to the Court of Law and seek recession of contract, or get it specifically performed by the offending party by order of court. Apart from it, he can also pray for compensation in the form of special as well as general or punitive damages. Injunction may also be sought to restrain the other party from breaching the contract. Besides, if the contract is put to an end by rescission, the court may order the parties to restore or return benefits to each other, which they may have respectively derived from the contract.

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AgreementContract6. FormalitiesAll the agreements, except those which are contracts, are not required by law to be reduced into writing or registered in a certain manner.Whereas there are some of the kinds of contracts which are required by law to be made in a written form i.e., instrument. Some contracts are also required to be registered before a certain authority, such as sale and exchange of immovable property.

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AgreementContract7. ClassificationsAll agreements may be classified only into two categories: social and legal. Social agreements create no binding legal relationship but legal agreements do; it is why these are called contracts.Whilst contracts, as discussed in the preceding chapter, may be classified into various kinds, such as executory, executed, unilateral, bilateral, void, voidable unenforceable, etc.

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AgreementContract8. Jurisprudential Concept of ObligationAccording to Savigny an obligation is the control over another person, yet not over this person in all respectsbut over single acts of his which must be conceived of subtracted from his free will and subjected to our will. Thus, an agreement, which is not a contract, does not create an obligation as jurisprudentially defined.But a contract is one of the principal sources of obligations as defined by Savigny, Paton and Sir John Salmond. A contract gives the parties control over certain acts of each other. By contract, a party possesses the will of another party. Whereas a mere agreement does not secure such a possession.

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AgreementContract9. Discharge of Contractual ObligationA party may pull himself out of a mere agreement (which is not a contract) at will i.e., whenever he wishes to do so. In other words, a duty created by a mere agreement, if not a contract, can be discharged by a party bound by such duty of his own sweet will and whenever his so desires. No principles, rules or laws govern the termination and discharge of an agreement.The termination and discharge of a contract is regulated by the provisions of Contract Act 1872. The rights and obligations arising out of a valid contract come to an where it is fully performed; or where parties themselves agree to end it; or where its performance has become impossible or illegal; or where one of the parties has died, or become insolvent, or has committed breach of contract.

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AgreementContract10. VoidabilityAn agreement is said to be void where it is defective from the outset of the transaction. For instance, an agreement with minor is void at the time of its entering into.While the adjective void is not ordinarily used for contract. It follows that if a transaction possesses the necessary qualifications of Section 10, it becomes a contract. Therefore, it can never be void at its beginning. It may become void subsequently. As for instance, destruction of subject-matter, subsequent impossibility of performance may render the contract void. But if it is void from the beginning it would be called an agreement and not a contract.Furthermore, mere agreements are not voidable because those have no binding effect on parties and therefore no party can impose his option on the other.Whereas a contract may become voidable, and may depend for its persistence on the option of one party.

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AgreementContract11. Primary and Sanctionary RightsAn agreement ordinarily gives rise neither to a primary nor a sanctionary right. It bestows no right to seek judicial redress.A contract not only creates primary right but also ensures sanctionary/ secondary rights. A party, whose primary right to receive an amount of money under a contract is infringed, can file a suit for recovery of such amount, in exercise of his sanctionary right.

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AgreementContract12. Reducibility to Certain FormA mere agreement require no particular type of words.But, as according to Salmond, the essential form of a contract is not: I promise this to you; but: I agree with you that henceforth you shall have a legal right to demand and receive this from me. Promises that are not reducible to this form are not contracts. Moreover, certain types of contracts, under the Pakistan Law, are not only required compulsorily to be written but also registered in the office of certain authority. Instances are sale of, exchange and leases of immovable property, which require reduction in written from attestation by two witness and registration, under the transfer of property Act. Registration Act and Rented Premises Ordinance.

VOID AGREEMENTS DISTINGUISHED FROM VOID CONTRACTS.

Void AgreementVoid Contract1. Starting Point of VoidabilityA void agreement is null and invalid ab initio i.e., void from the very beginning. That is to say, the whole transaction from beginning to end is inoperative and ineffective.But when we say that a contract is void we mean to say that it was once a valid agreement merited to be called a contract but due to some subsequent happening it turned ineffective and void. In this significance, we can never say, the contract is void but the contract has become void. As rightly remarked by Chitty, the expression void contract is contradictory. But it is still used by lawyers for the sake of conveniance. Moreover, if a transaction, meant for making a contract, suffers from a legal defect at the time of its inception, it must be termed as void agreement because agreement is the first step towards making a contract. If defect is found at the first step i.e., agreement, the adjective void must not be used with the final step i.e., contract.

VOID AGREEMENTS FROM VOID CONTRACTS.

Void AgreementVoid Contract2. EnforceabilityA void agreement, being void ab initio, can never be enforced.A void contract, being valid in the beginning, can be enforced so long as it remains valid, but not after it becomes void.

VOID AGREEMENTS FROM VOID CONTRACTS.

Void AgreementVoid Contract3. Creation of Legal RelationsA void agreement does not create a binding legal relation between the parties.A void contract, on the other hand, create legal relationship but as long as it continues to be valid.

VOID AGREEMENTS FROM VOID CONTRACTS.

Void AgreementVoid Contract4. GroundsThe grounds which render an agreement void and circumstances under which a contract becomes void are different. Under the Contract Act, an agreement is void where:Both parties are under a mistake as to matter of fact;consideration and object are unlawful;there is no consideration;it is made in restraint of marriage, trade or legal proceedings;it is uncertain;it is made by way of wager; orwhere it is entered into by an incompetent party.Whereas a contract becomes void, inter alia, on the following grounds:Where parties agree to rescind or alter it by a new one;Where its subject-matter is destroyed; orWhere its performance becomes impossible or illegal.

VOID AGREEMENTS FROM VOID CONTRACTS.

Void AgreementVoid Contract5. Remedies / ReliefAvoid agreement is not enforceable by law. It gives to legal remedy to any party to enforce its terms. At most, a party may ask for the restitution of benefits gained under the void agreement by another party. The most appropriate remedy is to get the agreement declared by court as null and void. Cancellation of instrument or deed of agreement may also be sought so that no body can take undue benefit by unlawfully using the same. Injunction may also be granted to prevent a party from using, transferring or delivering any property obtained by that party under the void agreement. All these remedies do not enforce the terms and covenants of the agreement but secure the legal rights of the parties existing independent of the agreement.While a void contract give a right to the parties to enforce its terms though for a limited period i.e., the time during which it remains valid. But after it becomes void the remedies are almost the same as that of a void agreement.

.Conclusion:Section 2 clause (f) defines void contract as a contract which ceases to be enforceable by law. It is to be distinguished from a void agreement which is defined in clause (g) as an agreement not enforceable by law. The distinguishing feature is that, in the case of an agreement not enforceable by law, no contract comes into existence, but in the case of a void contract, a contract does come into existence but subsequently ceases to be enforceable by law, that is, by the substantive law, and not unenforceable by reason of some procedural regulation. Thus, a contract with an alien enemy which is illegal from its inception is void ab initio and is hit by clause (g). The agreement never matures into a contract, but a contract with an alien friend, who later becomes an alien enemy, is not hit by clause (g), but by clause (f) for it was a good contract when it was made, but ceases to be enforceable by law when the alien friend became an alien enemy.

COERCION1. Introduction:Since freedom of will is essential to a valid contract and one may not be considered to exercise freedom of will when under duress, it follows that duress vitiates all contracts induced thereby. However, a contract made under duress is ordinarily voidable and not void, for the consent is present, although not such a free consent as the law requires. Thus, while the contract is subject to being avoided at the instance or election of the oppressed party, until it is avoided there is a contract in existence.

.2. Relevant Provisions:Section 15 of the Contract Act defines coercion, and Section 19 of the same Act declares a contract effected by coercion to be voidable.3. Meaning and Definition of Coercion:(1) Websters College Dictionary:To coerce means to force or compel, as by threats, to do something.(2) Halsburys Laws of England:By coercion and duress is meant the compulsion under which a person acts through fear of personal suffering, as from injury to the body or from confinement, actual or threatened.

.(3) Blacks Law Dictionary:Coercion is compulsion; constraint; compelling by force or arms or threatsIt may be actual, direct, or positive, as where physical force is used to compel act against ones will, or implied, legal, or constructive, as where one party is constrained by subjugation to other to do what his free will would refuse.

.(4) Section 15, Contract Act:Section 15 of the Contract Act, defines coercion as follows:Coercion is the committing or threatening to commit, any act, forbidden by the Pakistan Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.The Explanation to the Section says that It is immaterial whether the Pakistan Penal Code is or is not in force in the place where the coercion is employed.

.4. Essential Elements of Coercion:The definition of coercion under Section 15 contemplates the following essentials thereof:(1) Committing or threatening to commit:Both the committing, or threatening to commit, any act forbidden by the Penal Code whether to the prejudice of the party consenting to the agreement, or to the prejudice of any other person whatever, can amount to coercion if done with the intention of causing him to enter into it.

.The expression shows that, to constitute coercion, it is not essential that the act in question must have been committed. A mere threat to commit the same is sufficient, if the threat:(1)is made with the intention of causing the contracting party to enter into the agreement to the prejudice of any person whatever, and(2)in fact coerces the will.

.Illustrations:In Ranyanayakamma vs Al Warsetti(a)A gentleman died leaving a young widow. The relatives of the deceased threatened the widow to adopt a boy otherwise they would not allow her to remove the dead body of her husband for cremation. The widow adopted the boy and subsequently applied for cancellation of the adoption. It was held that her consent was not free but induced by coercion. The adoption was set aside. [(1849) 13 Mad. 214]

.(b)In Scott v. Sebright, the petitioner, a young woman of twenty-two years of age, entitled to a sum of 26,000 in actual possession and a considerable sum in reversion, had become engaged to the respondent, and shortly after coming of age was induced by him to accept bills to the amount of 3,325. The person who had discounted these bills subsequently issued writs against her, and threatened to make her a bankrupt. The distress caused by these threats seriously affected her health, and reduced her to a state of bodily and mental prostration in which she was incapable of resisting coercion and threats, and being assured by the respondent that the only method of avoiding insolvency proceedings and exposure was to marry him, she reluctantly went through a ceremony of marriage with him a Registrars office. It was held that there was not such a consent on the part of the petitioner as the law requires for a making of a contract of marriage, and that the ceremony before the Registrar must be declared to be null and void.

.(2) Act must be forbidden:An act, to constitute coercion within the first part of the section, must be one forbidden by the Penal Code, expressly or impliedly. And an act would be deemed to have been forbidden by the Penal Code, if it is one, which is made punishable to abet or commit. So, although, there is no provision in the Penal Code which forbids, in terms, the commission of suicide, the intention of the Legislature is to forbid such an act. The expression any act forbidden by the Penal Code is wider than the expression punishable by the Penal Code. Simply because a man escapes punishment, it does not follow that the act is not forbidden by the Penal Code. For example, a lunatic or an infant need not be punished. That does not mean that their criminal acts are not forbidden by the Penal Code.

.Illustrations:(a)If a person holds out a threat of committing suicide to his wife and son if they refuse to execute a release in his favour and in consequence thereof they execute the release, the release would be deemed to have been obtained by coercion within the meaning of Sec. 15.

.(b)In Purabi Banerjee v. Basudeb Mukharjee B started coaching Pthen a B.A. student. Some six months after B had started coaching her, he gave P to understand that marry him she must, else he would put an end to his life and hers too. It was held that to put an end to Ps life is to kill P outright. That is certainly an act punishable and forbidden too by the Penal Code. Suicide as such is no crime, as indeed, it cannot be. But its attempt is its abetment too. So it may very well be said that the Penal Code does forbid suicide. Thus, the two threats P attributes to B will amount to coercion at law. [AIR 1969 Cal. 293]

.(3) Unlawfully detaining or threatening to detain:Coercion by unlawfully detaining, or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement, renders the consent not free, since it may and frequently does operate as a coercion of the will.

.Illustrations:(a)In Muttiah Chetti vs. Karupan Chettier An agent refused to hand over the account books of the business to the new agent unless the Principal released him from all liabilities. The principal had to give a release deed as demanded. It was held that the release deed was given under coercion and voidable at the option of the Principal. [AIR 1927 Mad. 852]

.(b)In Bansraj vs the Secy. of State. The government gave a threat of attachment against the property of A, for the recovery of a fine due from B, the son of A. A., paid the fine. It was held that the contract was induced by coercion. [(1939) A WR 247]

.(4) Act must be to the prejudice of any person:The word prejudice does not mean mere sentimental prejudice. It means some legal injury which results in some loss, detriment or inconvenience to the person coerced, or any other person, or some unlawful gain to the person exercising coercion at the cost of the person coerced, or at the cost of any other person.

.(5) Threat or prejudice may be caused to third party:The threats may be directed against third persons who are near relatives of the person making the contract. Thus, a threat to injure ones parents, child, husband, wife, brother, friend, aunt, grandchild or son-in-law may be coercion.It should be noted that coercion need not be exercised only by the contracting party. It can be exercised by any person.

.Illustrations:(a)A, threatens to kidnap Bs son if he does not give Rs. 2 lakh to him. B agrees. The agreement has been brought about by coercion.(b)A threatens to shoot B if he does not let out his house to C. B agrees to let out his house to C. Bs consent has been caused by coercion.

.(6) Intention must be to cause any person to enter into agreement:These words denote that an essential ingredient of coercion is that an act must have been done, or threatened, with the intention of causing any person whatever to enter into an agreement.

.5. Effect of Coercion:A contract entered into under coercion is voidable at the option of the party whose consent was so caused. (Sec 19) It means that if the aggrieved party feels it profitable may, either compel the other party for specific performance of the contract or he may set aside the contract. According to Section 64 if the aggrieved party decides to set aside the contract, he must restore any benefit received by him under contract to the other party from whom the benefit was received.

.6. Conclusion:In general, mere pressure, which does not amount to coercion, or undue influence, does not invalidate a contract. All pressure is not wrongful. But, means, in themselves lawful, must not be so oppressively used as to amount to an abuse. And a person may not be constrained to enter into a transaction by vexation or annoyance, or by force of circumstances known to a party who takes advantage of them. Every wrongful act, which is, in fact, coercive, amounts to coercion in its widest sense, or such pressure, which avoids the transaction.

FRAUD1. Introduction:Fraud means to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick, cunning, dissembling, any unfair way by which another is cheated. Fraud vitiates all types of transactions and proceedings. Parties can never be said to have consented freely where fraud have been practiced to obtain the same.

.2. Meaning and Definition of Fraud:Following are some of the most important definitions of fraud:(1) Black's Law Dictionary:Fraud is An intentional perversion of truth for the purpose of inducing another in reliance upon it to part within some valuable thing belonging to him or to surrender a legal right.

.(2) Section 17, Contract Act:Fraud means and includes any of the following acts committed by a party to a contract or with his connivance or by his agent, with intent to deceive or to induce another party thereto or his agent, to enter into the contract:1.The suggestion as to a matter of fact of that which is not true by one who does not believe it to be true;2.the active concealment of a fact by one having knowledge or belief of the fact;3.a promise made without an intention of performing it;4.any other act fitted to deceive;5.any such act or omission as the law specially declares to be fraudulent.

.Illustrations:(a)A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horses unsoundness. This is not fraud in A. (b)B says to A, If you do not deny it, I shall assume that the horse is sound. A says nothing. Here As silence is equivalent to speech.(c)A sells a horse by auction to B, his daughter who has just come of age. Here the relations between the two parties would make it As duty to tell B if the horse is unsound. If A does not disclose this, it would amount to fraud.(d)A and B, being traders, enter upon a contract. A has private information of a change in price which would affect Bs willingness to proceed with the contract. A is not bound to inform B.

.3. Acts which amount to Fraud:Following Acts, under Section 17, amount to fraud:(1) Suggestion Regarding Facts:When a party to the contract makes a false statement intentionally, he would be liable for fraud. But if a person honestly believes his statement to be true, he cannot be held liable for fraud.Illustrations:(a)A tells B knowing to be false that his factory produces 500 pounds of butter per day. On this suggestion, B agrees to buy the factory. A is guilty of fraud.(b)A knows that his watch is made in Pakistan. In order to sell his watch he tells B that it is made in Japan. B buys the watch. A is guilty of fraud.

.(2) Active Concealment of Fact:When the party to the contract conceals material facts, essential to the contract which he is under an obligation to disclose to the other party before entering into a contract, he is guilty of fraud.According to section 16(A) of sale of goods act, the seller is bound to disclose to the buyer about the faults in the goods he is selling.

.Illustration:A sells a horse to B. The horse has a cracked hoof. A fills it up to conceal the defect. B cannot find the defect. A is guilty of fraud.(3) Promise without Intention of Performance:If a man while entering into a contract has no intention to perform his promise, there is a fraud on his part.

.Illustrations:(a)X purchases certain goods from Y on credit without any intention of paying for them as he was under insolvent circumstances. X is guilty of fraud.(b)A knowing that he has no money, takes a dinner in a hotel with an intention of slipping away. A is guilty of fraud.

.(4) Any Act with Intention to Deceive:A person can adopt different methods to cheat the other party. It is, therefore, difficult to explain all the methods under the definition of fraud. However, according to this sub-section all the unfair ways which a man can adopt to deceive the other party will be considered fraud.

.(5) Any Act or Omission declared to be Fraudulent:According to this sub-section it is obligatory to disclose relevant facts to the other party in certain cases. Under Section 55 of the Transfer of Property Act, the seller is bound to disclose to the buyer all material defects about the property i.e. property is mortgaged, etc. If some one omits to disclose facts he would be guilty of fraud.

.A mere expression of opinion or commendatory expression is not fraud. For example if some one says that land is very fertile or our products are best in the market,

.4. Essential Elements of Fraud:Almost every above listed act amounting to fraud is made up of the following elements:(1) There must be a false representation:Without representation there can be no fraud, except in cases where silence may itself amount to fraud or where there is no active concealment of fact.(2) The representation must relate to a Fact:For example A tells B, My horses are as good as Xs. This is a statement of opinion and not of fact.

.(3) Representation must have been made:Before the conclusion of the contract with the intention of causing the other party to enter into a contract.(4)Representation must have been made with the knowledge of its falsity or without believing it to be true or recklessly.

.(5) The other party must have been induced to act on such representation:In Smith vs. Chadwick (1869) L.R. 4 H.L. 64, A bought shares in a company on the faith of prospectus which contained a false statement that one B was a director of the company. A never heard of B earlier and the statement was held to be immaterial from his point of view. A cant claim damages as he was not induced to buy shares on the faith of false statement.

.(6) The other party must have been deceived:If the representation doesnt come to the notice of the party, it cannot be said to have misled the party.In Horsefall vs. Thomas (1862) 1 H & C. 69, A bought a pistol from B. The pistol had a hole in it which was plugged by B. A did not examine the pistol but when he used it, it burst. Held, B did not deceive it.(7)The other party acting on the representation must have suffered a loss. Rule of common law is that there can be no damage without an injury.

.5. Effect of Fraud on Contract:A contract tainted by fraud is not void, but only voidable at the option of the party defrauded. Until it is avoided, the transaction is valid.6. Remedies available against Fraud:Following remedies are available in case of fraud:1.The injured can rescind the contract, but it must be done within a reasonable time. If in the meanwhile other parties have acquired interest in the property for value, the remedy is lost.2.Suit for damages can be filed.3.He can insist on specific performance of the contract so that parties are put in a position in which they would have been if the fraud were not committed.

.7. Silence whether Fraud?According to the explanation attached in Section 17 Mere silence as to facts likely to effect the willingness of a person to enter into a contract is not fraud, unless:(a)the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or(b)silence is, in itself, equivalent to speech.It, therefore, follows that:(1)As a rule mere silence is not fraud because the law does not impose any duty in the party to a contract to disclose the material facts known to him, to the other party.

.Illustration:A and B being traders, enter into a contract. A has a private information of a change in prices which may effect Bs willingness to enter into a contract. A is not bound to inform B.(2)Silence is fraudulent, if the circumstances of the case are such that it is the duty of the person keeping silence to speak.In other words, silence is fraudulent in contract of utmost good faith. These are the contracts in which the law imposes a duty of disclosure on one of the parties due to relationship and other reasons.(3)Silence is fraudulent where the circumstances are such that silence is in itself, equivalent to speech.

.Illustration:B says to A, if you do not deny it, I shall assume that horse is sound. A says nothing, Here As silence is equivalent to speech. If the horse is unsound As silence is fraudulent.8. Conclusion:Fraud is a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. Elements for a cause of action for fraud include false representation of a present or past fact made by defendant, action in reliance thereupon by plaintiff, and damage resulting to plaintiff for such representation.

MISREPRESENTATION1. Introduction:Misrepresentation means a misstatement of a fact material to the contract. It is a false but unintentional statement respecting a matter of fact. If the statement is made wrongly and unintentionally, it is said to be fraud. If the consent of a party to a contract is obtained by practicing misrepresentation, the contract is voidable at the option of the party whose consent has been so obtained.

.2. Meaning and Definition of "Misrepresentation":Following definitions are helpful in comprehending the concept of misrepresentation in the context of the law of contract:(1) Webster's College Dictionary:To misrepresent means to represent falsely; give an untrue or misleading idea of something.

.(2) Black's Law Dictionary:Misrepresentation means Any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts.(3) Section 18, Contract Act:According to Sec. 18. Misrepresentation means and includes:1.The positive assertion in a manner not warranted by the information of the person making it, of that which is not true though he believes it to be true.2.Any breach of duty which, without an intent to deceive, obtains an advantage to the person committing it or any one claiming under him, by misleading another to his prejudice or any other person claiming under him.3.Causing however innocently a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

.3. Acts amounting to "misrepresentation":Misrepresentation occurs in the following cases:(1) Positive Statement of Facts:When a person positively asserts a fact as true when his information doesnt warrant it to be so though he believes it to be true.Illustration:A says to B that his horse can run 10 kms. at a stretch and induces B to buy his horse. It turns out that the horse is only able to run 3 kms. A is guilty of misrepresentation

.(2) Unjustified Statement:When a person makes a clear statement of facts, about the contract, without any reasonable justification believing it to be true, though it is not true, there is misrepresentation.Misrepresentation should be of facts essential to the contract. A mere expression of opinion cannot be called misrepresentation.

.Illustrations:(a)A says to B who wants to purchase his land, My land produces 40 maunds of wheat per acre. A believes the statement to be true, although he did not have sufficient grounds for the belief. Later on, it appears that the land produces only 10 maunds of wheat per acre. This is a misrepresentation.(b)In Sheffield Nickel Co. vs Unvin, A the owner of a gold mine sold the mine to M. During the preliminary discussion A had made certain statements about the mine which were incorrect, though A honestly believed to be true. After having worked for 6 months M discovered the true position. There is a misrepresentation.

.(3) Breach of Duty:Any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice.Clause (2), Section 18 covers those cases where a statement when made was true but subsequently before it was acted upon, it becomes false to the knowledge of person making it. In such a case, the person who makes such statements must inform to the other party about the change, otherwise he will be guilty of misrepresentation.

.Illustrations:(a)In an insurance proposal form, A states his age as 27 years believing it to be true. The actual age is 29 years. The L.I.C. issues a policy and charges a lower rate of premium that it would have charged at an actual age. There is misrepresentation.(b)A, before signing a contract with B for the sale of business, correctly states that the monthly sales are Rs. 50,000. Negotiations lasted for five months, when the contract of sale was signed. During this period the sales decreased to Rs. 5000 a month. A, unintentionally keeps quiet. It was held that there was misrepresentation and B was entitled to avoid the contract.

.(4) Mistake about subject-matter:The parties to the contract expect that the subject-matter of agreement possess certain value or quality. If one of the parties induces the other, though innocently, to commit a mistake about nature and quality of the subject-matter, there is misrepresentation.

.Illustrations:(a)In the Oceanic Steam Navigation Co. vs. S. Dharamsey, S chartered a ship as being of not more than 2800 registered tonnage. It turned out that the registered tonnage was 3045 tonnes. It was held that S was entitled to avoid the contract, as the erroneous statement regarding the tonnage was a misrepresentation. There was a mistake as to the substance of the agreement. [(1890) 14 Bom. 291](b)In a contract of sale of motorcycle the seller made a representation that it is free from defects. But in fact there was an inherent defect in the motorcycle. The buyer due to mistake purchased the motorcycle. There is a misrepresentation.

.4. Essential Elements of "Misrepresentation":Following elements must be proved in order to establish the plea of misrepresentation.(1) Innocence:The representation or statement must be made innocently and believing it to be true.

.(2) Relation to Material Facts:Misrepresentation should be of facts material to the contract. Mere, puffing expression such as men of business usually make about their goods are not sufficient to avoid the contract. For example, My goods are as good as that of Bs is a commendatory statement providing no chance to the purchaser to avoid the contract.Illustration:In Mohanlal vs. S.G. Cotton Mills Co., A told B that one C could be the director of a company. A obtained this information not from C directly, but from another person D. Acting on As information, B subscribed for shares in the company C did not become the director. Held, there was misrepresentation.

.(3) Inducement:Again, misrepresentation must be the cause of the consent otherwise the consenting party cannot avoid the contract.(4) Intention that It shall be acted upon:The representation must be made with the intention that it shall be acted upon by the other party. A party cannot complain of misrepresentation if, he had the means of discovering the truth with ordinary prudence.

.5. Effects of Misrepresentation:An aggrieved party can:(a)Avoid or rescind the contract. (b)Accept the contract but insist that he shall be placed in a position in which he would have been if the representation made were true.

.6. Difference between Fraud and Misrepresentation:1.Intention. Misrepresentation is innocent or intentional. Fraud is willful and intentional misrepresentation.2.Rescission and damage. In misrepresentation, aggrieved party can rescind the contract or sue for restitution. In fraud, remedy available is not only rescission but claims for damages too.3.Where truth can be discovered with ordinary diligence. In misrepresentation aggrieved party cant avoid it if it should discover the truth by ordinary diligence.

.But in case of fraud, the contract is voidable at the option of the aggrieved party even though it had the means of discovering the truth by ordinary diligence.4.Knowledge. If there is lack of knowledge about the defects or one party has no knowledge about the main defects there we can say is misrepresentation. But if some one has knowledge of facts there is a fraud.

MISTAKE1. Introduction:Mistake, in the context of the law of contract, is a situation in which the parties to a contract did not mean the same thingor when one or both, while meaning the same thing, formed untrue conclusions about the subject-matter of the contractas a result of which the contract may be rendered void. Sections 20, 21 and 22 of the Contract Act, 1872, are relevant in this connection.

.2. Kinds of Mistake:Broadly divided, mistakes are of two kinds (1) Mistake of fact, and (2) Mistake of law. The detail is as under.

.3. Mistake of Fact:Mistake of fact consists in (1) an unconscious ignorance or forgetfulness of a fact, material to the contract; or (2) belief in the present existence of a thing material to the contract which does not exist, or in the past existence of such a thing which has not existed. Mistake of fact may be of three kinds, namely, unilateral mistake, mutual mistake and common mistake. In case of unilateral mistake only one of the contracting parties is mistaken and the other knows of his mistake. Its consequence is that the contract is void. In a case of mutual mistake, the contracting parties misunderstand each other and there is no real correspondence of offer and acceptance. The parties are really not consensus A.D. idem and there is in fact no agreement at all. In this case also the contract is void. In a case of common mistake both the contracting parties make the same mistake. The minds of the contracting parties are A.D. idem and there comes into being an agreement, but it is devoid of force and efficacy.

.(1) Unilateral Mistake:Under Section 22 of the Act, A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. Unilateral mistake is mistake of one party and does not render the contract voidable.If the mistake is unilateral, the contract can only be avoided if it can be proved that the mistake was caused by fraud or misrepresentation on the part of other party.

.Illustrations:(a)A intends to sell his house for Rs. 10,000. B intending to purchase it for Rs. 8,000 gives by mistake an offer of Rs. 12,000. A accepts the offer. The contract cannot be avoided by B on ground of mistake.(b)In Said vs. Butt (1920) 3 K.B. 497, one S, knowing that B would not allow him to buy a ticket for his theatre, asked one of his friends to buy a ticket for him. He was, however, refused admission by the manager of the theatre. Held, there was no contract as the theatre never intended to contract with S.

.(c)In Ingram vs. Little (1961) 1 Q.B. 31, I advertised his care for sale. One rogue called himself Hutchinson agreed to buy the car, but when he offered to pay the cheque, I refused to accept and said he would sell only for cash. The Rogue gave an address which I checked from the Telephone directory and found it correct. I thereupon agreed to deliver the car for the cheque which was subsequently dishonoured. The car was sold to L who bought it in good faith. Held, there was no contract between I and Rogue, as I intended to enter into contract only with Hutchinson, and as such had no title to the car.

. Effects of Unilateral Mistake:The effect of unilateral mistake on different types of contract is not the same; as discussed below:(i) Valid Contract:If a person due to his own negligence or carelessness makes a wrong contract, he must blame himself and cannot avoid the contract. A unilateral mistake has no effect on the contract and the contract remains valid.

.Illustrations:(a)X buys rice from Y, thinking that the rice is old. The rice is, however, new. X cannot avoid the contract.(b)Where the government sold by auction the right of fishery and the plaintiff offered the highest bid thinking that the right was sold for three years, but in fact it was for one year only, he could not avoid the contract. (A. A. Singh vs Union of India) [AIR 1970 Mani 16]

.(ii) Voidable Contract:If the unilateral mistake is caused by fraud or misrepresentation etc., on the part of the other party, the contract is voidable and can be avoided by the injured party.

.Illustration:A, sold a horse to B. The horse had cracked hoof. A filed it up to conceal the defect. B found the defect. A is guilty of fraud. B can avoid the contract.(iii) Void Contract:In the following two cases, no contract will arise even though there is a unilateral mistake.

.a. Mistake regarding identity of subject-matter: Where the identity of the contracting party is essential to the contract, the mistake about the identity of the contracting party makes the agreement void.Illustration:B, the managing director of a theater, gave instructions that no ticket was to be sold to S who was very bad critic of all the plays. S, knowing this, asked a friend to buy a ticket for him. With this ticket S went to the theater but was refused admission. S filed a suit for damages for breach of contract. It was held that there was no contract because the theater company never intended to contract with S. (Said vs Butt) [(1920) 3 KB 497]

.b. Mistake regarding nature of subject-matter: Where one of the parties to a contract, without any fault of his own, is made to commit a mistake as to the nature of contract the agreement would be void.Illustrations:(a)M, an old man of poor sight, endorsed a bill of exchange for 3000, thinking that it was a guarantee. It was held that he was not liable. (Foster vs Mackinnon) [(1869) LR 4 CP 704](b)A blind man signed what he thought was a compromise petition, but was in fact a release, on the fraudulent representation of another, the document was held to be void. (Hem Singh vs Bhagwat) [(1925) Pat. 140]

.(2) Mutual/Bilateral Mistake:Under Section 20 of the Act, where both the parties to an agreement are under a mistake as a matter of fact essential to the agreement, the agreement is void. But an erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.

.Illustrations:(a)A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.(b)A agree to buy from B a certain horse. It turns out that the horse was dead at the time of bargain. Neither party was aware of this fact. The agreement is void.

.(c)A being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement but both parties were ignorant of the fact. The agreement is void.A bilateral mistake of fact may be (i) as to subject-matter or (ii) as to possibility of performance.

.(A) Bilateral Mistake as to subject-matter:A bilateral mistake relating to subject-matter may be of the following kinds:(i) Mistake as to existence of subject-matter:If both the parties believe the subject-matter of the contract to be in existence at the time of contract, but in fact it is not in existence, there is no contract:

.Illustrations:(a)A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of bargain, neither party was aware of this fact. The agreement is void.(b)The defendant was employed to sell the plaintiffs cargo which was on voyage. After the defendant had sold the cargo to a third-person, it was discovered that the cargo, having been damaged by had weather, had been sold at an intermediate port. The buyer rejected the contract and the defendant, being agent was sued for price. But he was held not liable (Couturier vs Hastie) [(1856) 5 HLC 673]

.(ii) Mistake as to identity of subject-matte:It arises when there is a mutual mistake as to the identity of the subject-matter of the contract. In other words one party intends to deal in one thing while the other intends to deal in another thing.

.Illustrations:(a)A agrees to buy from B an electrical transformer, but A is thinking of a one phase transformer and B of a three phase transformer, there is no contract.

.(b)The W agreed to buy from R a cargo of cotton to arrive ex Peerless from Bombay. There were two ships of that name sailing from Bombay, one is October, and the other in December. W meant the former ship but R meant the latter. It was held that there was bilateral mistake and there was no binding contract. (Raffles vs Wichelhaus) [(1864) 2h & C 906]

.(iii) Mistake as to ownership of subject-matter:If a person agree to purchase the property which already belongs to him but both the parties are not aware of this fact, the agreement is void.Illustrations:A agreed to take a fishery from B on lease. Both the parties believed that B was the owner. But later on it was discovered that fishery in fact belonged to A. It was held that the agreement was void. (Cooper vs Pahibbs) [(1867) LR 2 ML 149]

.(iv) Mistake as to quantity of subject-matter:If both the parties are working under a mistake as to the quantity of the subject-matter, the agreement is void.

.Illustrations:P, examined 50 rifles in a shop. Later on, he sent an order telegraphically. The telegraph department by mistake transcribed the message as Send the rifles. He sent 50 rifles. P accepted only three and returned 47. H filed a suit for damages. It was held that there was no contract. (Hankel vs Pope) [(1870) LR 6 Ex 7]

.(v) Mistake as to quality of subject-matter:When both the parties are under a mistake regarding the quality of subject-matter, the agreement is void.Illustrations:A, contracts to sell B a particular horse, which is believed by both the parties to be a race horse. But later on, it turns out to be a cart horse. The agreement is void.

.(vi) Mistake as to facts essential to the agreement:Where both the parties are under a mistake regarding a fact essential to the agreement is void.

.Illustrations:A and B believing themselves to be married, made a separation agreement in which A agreed to pay B 1 pound a week. It was later discovered that they were not validly married. B claimed the promised payment. It was held that the agreement was void. (Galloway vs Galloway) [(1914) 30 TLR 531]

.(vii) Mistake regarding price of subject-matter:In Webster v. Cecil (1861) 30 BEAV. 62, a seller, to the knowledge of the buyer, mistakenly wrote the figure as 1250 instead of 2250, being the price of a property Held, the agreement was void.

.(B) Bilateral Mistake as to the Possibility of Performance:If the existence of certain circumstances is necessary for the performance of the contract and it is not capable of performance in their absence, the contract will be void if both the parties were ignorant about the non-existence of such circumstances at the time of agreement.

.Illustration:In Griffith vs. Brymer (1903) 19 T.L.R. 434. A contract for the hire of a room for witnessing the coronation procession of Edward VIII was held to be void because, to the ignorance of the parties, the coronation procession had already been cancelled.

.(3) Common Mistake:In a case of common mistake both the contracting parties make the same mistake. The minds of the contracting parties are ad idem and there comes into being an agreement, but it is devoid of force and efficacy until and unless it is rectified or reformed by the parties so as to clarify the mistake with full exactitude.

.4. Mistake of Law:A mistake of law may be classified into the following kinds:(1) Mistake of Pakistan Law:If there is a mistake of law of the country, the contract is binding because every one is supposed to know the law of his country. Therefore, the mistake of Pakistani Law does not affect the validity of the contract.Under Section 21 of the Act, A contract is not voidable because it was caused by a mistake as to any law in force in Pakistan.

.Illustrations:(a)A and B make a contract which is based on the erroneous belief that a particular debt is barred by the Pakistan Law of Limitation, the contract is not voidable (i.e., the contract is valid).(b)If somebody is caught while travelling without ticket in PTDC bus but he cannot be excused on the ground that he was not aware that ticket must for the journey in a bus.

.(2) Mistake of Foreign:Under Section 21 of the Act, a mistake as to a law not in force in Pakistan (a foreign law) has the same effect as the mistake of fact. The law of foreign country requires to be proved in Pakistani courts as ordinary facts and so such mistake makes the contract void.

.Illustration:A, a Pakistani agrees to sell to B of foreign National, 100 bottles of a certain mixture containing 25% sulphuric acid. The Law of that country has banned the sale and purchase of any mixture containing more than 10% sulphuric acid. This is a mistake as to the law of foreign country and the agreement would be void.

.(3) Mistake of Private:A mistake of private rights is treated as mistake of fact and is excusable. If a contract is made in ignorance of private rights, it would be void.Illustration:C in ignorance of his own rights took a lease of fishery belonging to him from P. Held the ignorance of private rights has the same effect as the ignorance of and therefore the agreement is void. (Cooper vs Phibbs) (1867) LR 2 HL 149

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