2022

 

DOCTRINE OF PRIVITY OF CONTRACT

Privity means privacy, which here refers to private between the parties to contract.

Essentials of privity to contract application or claim:

1.      Contract entered into between 2 parties: Most importantly there must be a contract between 2 or more parties

2.      Parties must be competent and there should be a valid consideration: Competency of parties and the existence of consideration are pre-requisites for application of this doctrine

3.      There has been a breach of contract by at least 1 party: Breach of contract by one Party is the essential requirement for the application of the doctrine of privity of contract.

4.      Only parties to contract can sue each other: After the breach, only Parties to a contract are entitled to sue against each other for non-performance of the contract.

 

 

Doctrine of Privity under Indian Contract Act 1972

  Ø  Sec. 73 of the Indian Contract Act provides for compensation to the party, by the party breaching the contract

  Ø  In sec. 73 it appears that compensation arises for actual damages caused due to non performance of the contract and not indirect damages. Here only pecuniary damages are taken into account.

  Ø  In estimating the loss arising from the breach of contract, the means of remedying the inconvenience caused by the non-performance of contract must be considered

  Ø  Sec. 73 states, In estimating the loss arising for breach of contract inconvenience caused by non performance of contract must be considered

Graphical representation of privity of contract


Exceptions to Privity of Contract

There are, certain exceptions to the rule of privity of contract recognized both by the English Law and the Indian Law, under which a person, who is not a party to a contract can sue on it. The exceptions to the rule are:

1. Trust or Charge

Sometimes under contract, a benefit is given to a person who is not a party to the contract. This benefit can be given by creating a Trust or Charge in favour of such person. In such cases, the beneficiary under the trust or charge may enforce the contract even though he is not a party to it.

2. Marriage Settlement, Partition or Other Family Arrangements

In an agreement made in connection with marriage, partition or other family arrangements, a person, for whose benefit the provision is made, can enforce the agreement though he is not a party to it.

3. Acknowledgement of Payment

If a party acknowledges the payment to the third person or constitutes himself as an agent of that third person, then the third person can recover the amount from such a party.

4. Agreements Affecting the Land

If such land is purchased by somebody with the notice of rights and obligations of the owner, then those rights and obligations shall bind the purchaser although he was not a party to the agreement.

5. Agency

A principal, even if concealed, may sue on a contract made by an agent. The third party cannot plead that there was no contract between him and the principal.

6. Assignment

The assignee of a debt or an actionable claim may sue the original debtor if the assignment is a legal one.

7. Holder in Due Course

A holder in due course of a negotiable instrument is one who has obtained the negotiable instrument in good faith and for valuable consideration. He can sue prior parties to the negotiable instrument.

8. Fund in Hands of a Party

Where a fund is created in the hands of one of the contracting parties in favor of a third party, it may be possible to give the latter, a remedy in quasi-contract on the grounds that to allow the contracting party to keep the fund would be to allow unjust enrichment.

As a general rule, both Indian and English law are similar to each other that only parties to contract can sue each other. In a leading English case of Tweddle v. Atkinson, it was held that the plaintiff cannot sue as he was both a stranger to the contract as well stranger to consideration. This concept of privity of contract was again analyzed in the case of Dunlop Pneumatic Tyre Co.Ltd v. Selfridge & Co. Ltd.

 

Infographics on privity of contract


Exceptions to Privity of Contract

    ·         Benefit Aspect of Contract

    ·         Burden Aspect of Contract

    ·         Doctrine of Privity under Law of Agency


Benefit Aspect of Contract

ü  A person stranger to contract cannot enforce the contract except some exceptions defined in court rulings or previous cases.

ü  2 basic court ruled exceptions where a stranger to contract can sue the other party / parties are:

o   Beneficiary/beneficiaries under the contract towards who contract creates trust

o   Beneficiary/beneficiaries under the contract which is a part of family arrangement

           

Burden Aspect of Contract

1.      Burden of contract stands for liability of obligation created by the contract

2.      A contract gives right to a party/parties and assigns duty to other party/ parties

 

Doctrine of Privity under Agency (Exceptions)

1.      The principal-agent relationship is named as ‘agency’. Also, the agent does the agency work by representing the principal toward other parties.

2.      The principal, as well as the agent in their capacity have certain rights and duties towards other parties directly attributable to the acts of his agent or the agency

3.      In most cases specific to agency despite the agents fault it is treated as that of the principal and the principal is liable towards other parties acts and omissions of his agent 


What is the Position of Privity of Consideration in India?

This principle of the doctrine of privity of consideration is not applicable in India. As per the Indian Contract Act, 1872 the definition of consideration in Section 2(d) states, consideration may be furnished by ‘the promisee or any other person’ as long as it is ‘at the desire of promisor’. Thus, the consideration may move from promisee, or some other person, if the promisor has no objection, from any other person. The leading authority, in this case, is the case of Venkata Chinnaya v. VenkataramayaGaru.[1881 Madras HC].

  

Position of Privity of Contract in Indian Law

In India, the apex court has by its decision in MC Chacko vs. State of Travancore (1970SC) in a far reaching attempt of clearing the ambiguities in the application of the Doctrine of Privity held that a person not a party to a contract cannot subject to certain well recognized exceptions, enforce the terms of the contract. The recognized exception mentioned in the quoted judgment is worded widely so as to cover the beneficiaries under the terms of the contract. Views on the rights of third party beneficiaries have been laid down by other courts of India. For instance in:

1.  Bhujendra Nath vs. Sushamoyee Basu ( Calcutta HC in 1936), the division bench of the Calcutta High Court has held that a stranger to a contract which is to his benefit is entitled to enforce the agreement to his benefit. Also, in Pandurang vs. Vishwanath (1939), it has been held the person beneficially entitled under the contract can sue even though not a party to the contract itself.

2. Chinnaya v. Rammya (Madras HC in 1987), a lady granted her daughter some land via registered gift deed one of the terms that she will pay an annual sum to her maternal aunt after her death which she defaulted and denied payment invoking privity of contract i.e. claiming that her aunt was not a party to contract. In this case though the consideration was paid by the mother (vide sec. 2D of Indian Contract Act 1872) and not aunt so the uncle is stranger to consideration, along with stranger to contract. Yet his suit was allowed as he was a beneficiary of the contract under law. As the consideration may be given by the promise or anyone of their behalf, here, the consideration to the daughter was given by her mother on behalf of her aunt.

 

Stranger to Consideration

In context of Indian law, as long as there is consideration for promise, it does not matter who furnishes the consideration. Which means in Indian law doctrine of Privity of Consideration does not apply. It can be clarified by the words given under Section 2(d) of Indian Contract Act, 1862. It states that, when, at the desire of the promisor, the promise or any other person. This concept has been confirmed by the then judicial system in the case of Kedarnath Bhattacharji v Gorie Mohammad (1887)

 

Stranger to Contract

The doctrine of privity of a contract is a common law principle which implies that only parties to a contract are allowed to sue each other to enforce their rights and liabilities and no stranger is allowed to confer obligations upon any person who is not a party to contract even though contract the contract have been entered into for his benefit.

 

Position of Privity of Contract in English law

In a leading English case of Tweddle v. Atkinson[1861], it was held that the plaintiff cannot sue as he was both a stranger to the contract as well stranger to consideration. This concept of privity of contract was again analyzed in the case of Dunlop Pneumatic Tyre Co.Ltd v. Selfridge & Co. Ltd. Where there was an agreement between a Dunlop dealer and a subdealer. Here Dunlop could not sue as it was stranger to contract[1915]


There are, certain exceptions to the rule of privity of contract recognized both by the English Law and the Indian Law, under which a person, who is not a party to a contract can sue on it. Some exceptions to the rule pertaining to some circumstances under the following:

1. Trust or Charge

Sometimes under contract, a benefit is given to a person who is not a party to the contract. This benefit can be given by creating a Trust or Charge in favour of such person. In such cases, the beneficiary under the trust or charge may enforce the contract even though he is not a party to it.

2. Marriage Settlement, Partition or Other Family Arrangements

In an agreement made in connection with marriage, partition or other family arrangements, a person, for whose benefit the provision is made, can enforce the agreement though he is not a party to it.

3. Acknowledgement of Payment

If a party acknowledges the payment to the third person or constitutes himself as an agent of that third person, then the third person can recover the amount from such a party.

4. Agreements Affecting the Land

If such land is purchased by somebody with the notice of rights and obligations of the owner, then those rights and obligations shall bind the purchaser although he was not a party to the agreement.

5. Agency

A principal, even if concealed, may sue on a contract made by an agent. The third party cannot plead that there was no contract between him and the principal.

6. Assignment

The assignee of a debt or an actionable claim may sue the original debtor if the assignment is a legal one.

7. Holder in Due Course

A holder in due course of a negotiable instrument is one who has obtained the negotiable instrument in good faith and for valuable consideration. He can sue prior parties to the negotiable instrument.

8. Fund in Hands of a party

Where a fund is created in the hands of one of the contracting parties in favor of a third party, it may be possible to give the latter, a remedy in quasi-contract on the grounds that to allow the contracting party to keep the fund would be to allow unjust enrichment.

As a general rule, both Indian and English law are similar to each other that only parties to contract can sue each other. In a leading English case of Tweddle v. Atkinson, it was held that the plaintiff cannot sue as he was both a stranger to the contract as well stranger to consideration. This concept of privity of contract was again analyzed in the case of Dunlop Pneumatic Tyre Co.Ltd v. Selfridge & Co. Ltd.


 

E-CONTRACTS / ELECTRONIC CONTRACTS

Electronic Contract refers to a contract that takes place through e-commerce, often without the parties meeting each other. It refers to commercial activities transacted electronically. E.g. e-auction, online purchase through luckonluck.com site, online credit transfer through bank accounts, payment via payment apps, ATM cash withdrawal, and so on.

Ø  Earlier there were 2 problems with e-transactions and contracts:

              1}            Writing / Recording / Storing the transactions

         2)            Recognizable signatures

Ø  Electronic transactions are:

1)                        Cheaper

2)                        Easier to perform

3)                        Easier to Store

4)                        Easier to Retrieve

 

There are 4 major types of e- contracts:

    1.      Browse wrap contracts

    2.      Shrink wrap contracts

    3.      Click wrap contracts

    4.      e-mail contracts

1. Browse Wrap Contract

                 i.            A browse wrap agreement is intended to be binding on the contracting party by the use of the website.

               ii.            Such contracts are usually used by websites wherein the continued use of a website by a user is deemed to be acceptance of its revised terms of use and other policies.

2. Shrink Wrap Contract

                 i.            A shrink wrap contract is a license agreement where the terms and conditions of the contract are enforced upon the consumer as soon as he opens the package.

               ii.            Such contracts can be generally observed in the case of buying of software products. E.g. The license agreement, indemnity by the user for any copyright or intellectual property rights of the manufacturer violation, arbitration, limitation of liabilities of the manufacturer, etc. as soon as the buyer opens the pack (containing the software product).

3. Click Wrap Contract

                 i.            Click wrap contract or click through agreements require the user to manifest his consent or assent to the terms and conditions governing the licensed usage of the software by clicking "OK" or "I Agree" button on the dialog box.

               ii.            A user may choose to disagree or reject the terms by clicking cancel or closing the window. Such a user will not be able to buy or use the service upon rejection.

             iii.            Unlike the shrink wrap agreements where the terms of the agreement are hidden inside the box, in case of click wrap agreements, all the terms and conditions are accessible prior to acceptance, either in the same window or through a hyperlink.

4. An email contract has 2 categories:

                    i.            The contract draft and its signed up scanned/unscanned copies are exchanged via email OR direct email offer and email acceptance

                  ii.            A link is sent via email to the other party which clicks to verify its acceptance

A Electronic contract infographics

Status of e-contracts in India

1.      Indian Contract Act 1872 does not exactly and explicitly provide for e-contracts

2.      The Information technology Act 2000, commonly known as the IT Act governs e-contracts or their provisions

3.      The IT Amendment Act gives power to the ventral government on ascertaining as to what mode of signatures are considerable as electronic signatures

4.      IT Act Amendment in 2008 provided for the validity of contracts formed through electronic means by bringing in Section 10A stating such contracts cannot become unenforceable merely as they are in electronic form

5.      The IT Act imposes regulations on 3 parties to the electronic process transmission:

                                i.            Originator

                              ii.            Intermediary

                            iii.            Addressee

 

 

Infographics showing features of e-contracts

Evidence vis-à-vis E-contracts

                    i.            Evidence recorded or stored on electronic devices hold the status of evidence

                  ii.            Electronic evidence acceptable as evidence (State of Delhi vs. Mohammad Afzal)

                iii.            Voice records taken with the help of various electronic devices and various modes are treatable as evidence

 

 


Learn Law of Contract, Certificate Course Study

Q. Where can I do a study course on Indian Law of Contract?

Ans. If you are a law student and want to do a certificate course in law of contract you may register on lawjc.com legal fraternity network.


Law of Contract Study Course Introduction

INTRODUCTION

The Indian Contract act 1872 comes under the ambit of mercantile law (Business Law). It came enforced on 1 September 1872. It is private law. Its base is English common law, but it was passed in Imperial Legislative Council in Calcutta (Charter Act of 1853 created Governor General's legislative council with six legislative members. It was later called the Indian (Central) Legislative Council and worked as a mini-Parliament.).

 

It contains XI Chapters, but Chapter VII citing Sale of Goods and Chapter XI citing Partnership was repealed, the Sale of goods was repealed in 1930, and the partnership was in 1932.

 It became an independent act after repealing it from its parent Act, that is Indian Contract Act 1872.

It becomes imperative to study the Contract act, as today in the market sector all the dealings are made through contract.

 

It covers various aspects in a much broader sense such as it describes what is an offer, acceptance, essentials of contract, valid consideration, voidable agreements, quasi-contracts, damages under Indian contract act 1872. Apart from it covers Contract of indemnity, guarantee, bailment, pledge and agency.

 

What is a contract?

Under the Indian Contract Act 1872, the term contract finds its definition under Section 2(H), which states that an agreement that is enforceable by the law is known as Contract. In contract, there must be an intent to create legal relationships, and not purely social, moral or religious.

 

Definitions of ‘Contract’

  • Sir Fredrik Pollock: ‘’Every agreement and promise enforceable by law is a contract’’.
  • Salmond: ‘’A contract is an agreement creating and defining an obligation between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of others’’.
  • Anson: ‘’The law of contract is that branch of law which determines the circumstances in which a promise shall be legally binding on the person making it’’.

 

 

ESSENTIALS OF CONTRACT

Q. What are the essential elements of a valid contract?

Ans. Section 10 of the Indian Contract Act, 1872 cites conditions which makes a contract valid.
Following are some of those conditions:

  1. Offer
  2. Acceptance
  3. Free Consent
  4. Possibility of Execution
  5. Apparent Form of Contract
  6. Intention to Create Legal Relationship
  7. Lawful Object and Lawful Consideration
  8. Contractual Capacity
  9. Legal Formalities fulfillment as applicable under other laws

           10.  Consensus ad idem

 

Infographics showing essential elements of a valid contract

 


1. Offer

Q. What is ‘offer’ under Indian Law of Contract?

Ans. The word offer and proposal are often usable synonymously. Offer is the first step in the formation of an agreement that further leads to contract.

According to section 2 (A) of the Indian Contract Act,1872 “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, he is said to make a proposal’’

The person who makes an offer is called ‘’Offeror’’ or ‘’Promisor’’ and the person to whom the offer has been made is called Offeree or Promisee.

 

Essentials of an Offer:

     1.      Multiple people

     2.      Communication to the Offeree

     3.      Object of making the Offer

     4.      Clearly defined Terms of the Offer

     5.      May contain specified terms and conditions

     6.      Unconditional Offer or deeming acceptance in case of non fulfillment of some specified conditions

 

Illustration: Ms. A owns several machines. She enters into an agreement with Ms. B to sell one of her machines. She tell Ms. B, if she is willing to buy her machine for Rs. 10, 000. This is not a valid offer as Ms. A did not specify the specific machine he is talking about. Here, the offer by Ms. A is ambiguous.

 

 

2. Acceptance

Q. What is ‘acceptance’ under Indian Law of Contract?

Ans. Per the section 2(b) of Indian Contract Act, 1872, when a person to who a proposal has been made, conveys their assent thereto.

 

Following are some conditions of a valid Acceptance:

i. Acceptance must be absolute and unconditional: Acceptance must be absolute. There should not be any conditions attached to acceptance.

Example: A offers to sell his laptop to B at Rs. 20000. B replies that he will buy it for Rs. 15000. This is not a valid acceptance. Here, there is a condition attached to the acceptance. This is as B accepts to buy the machine but for 15000 and not for 20000, so there is no match between the 2.

 

ii. Expression: Acceptance is a clearly understandable expression of the offeree’s consent or agreement to the offer

 

iii. Acceptance must be communicated: Acceptance must be communicated by the offeree to the offerer in the manner prescribed. A mental acceptance to an offer is not a valid acceptance, legally. Acceptance must come to the knowledge of the offeror.

Example: A tells B to communicate his acceptance to him by a communication app message on mobile. But, B sends his acceptance by post. This will be an invalid acceptance unless B informs A that the acceptance is not in accordance with the prescribed manner.

 

iv. Use of Agency: Offer and Acceptance can be made either by the offerer and offeree respectively, or their authorized agents / representatives.

Illustration: If a bank makes or accepts an offer their authorized representatives who are its servants sign and place the bank’s seal. As their duty while their holding such position in the bank entitles them to make or accept such offer, they are valid. Such employee’s offer or acceptance will be treated as the bank’s offer or acceptance, even if such bank or banker were a sole proprietor.

 

v. Acceptance must be communicated within a reasonable time: Acceptance must be communicated within the time prescribed. If no time period is prescribed, then it must be given within justifiable time.

Illustration:  A wants to sell his mobile phone to B. He says to B, “Will you buy my mobile phone at Rs.12000?” Here A is making an ‘offer’ so he is an offeror and B is an ‘offeree’. If B accepts the offer, it will be deemed as B’s ‘acceptance’.

Illustration: A man called A makes a public offer by a newspaper publication to the mass to sell his new car and states that it must sell to someone with highest buying bid. Also, he asks the respondents to communicate acceptance by the end of 10 July 2022. A woman called B communicates the acceptance that reaches Mr. A on 11 July 2022 mentioning the highest bid. This acceptance by B  will not be valid because the acceptance had to be communicated within the specified time.

 

vi. Acceptance by Post: In case the acceptance is by post then general rule considers tha acceptance to have been made on the date of posting the offer by the offerer, and not of receipt by the offeree.

 

 

3. Free Consent

Q. What is ‘free consent’ under Indian Law of Contract?

The parties must enter into an agreement with free consent.

Ø  When 2 or more people agree upon the same matter and in the same sense, they are said to have consented

Ø  Consent is known to be free if not caused by:

§  Coercion

§  Undue Influence

§  Misinterpretation

§  Fraud

§  Mistake

 

The parties should enter into an agreement with his own wish and will and not by coercion, undue influence, fraud, mistake or misrepresentation. Consent will be deemed to be free only if it does not constitute the following elements:

Coercion:

Coercion is defined under section 13 of Indian Contract Act,1872 as “Coercion” is the committing, or threatening to commit, any act forbidden by the Indian Penal Code under(45,1860), 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.

Illustration: X threatens Z to kill him if he does not transfer all his money to him. Z transfers all his money to X to save his own life. This agreement is not valid as the money was transferred by coercion.

 

Undue Influence:

According to section 16 of the Indian Contract Act, 1872 , A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

Illustration: A sells his land to B, who is his employer at a very low price in order to get promotion. Here, A’s consent was not free and he was under undue influence of his employer.

 

Misrepresentation:

According to section 18 of Indian Contract Act, 1872 misrepresentation means and includes:

 

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;

any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him;

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.

Illustration: A enters into a contract with B to sell his horse. B wants a horse that is ideal for racing as he wants to participate in a horse racing competition. A sells a sick horse to B by misrepresenting it to be an ideal horse for racing. Later on, he finds out that the horse is sick and not capable of running in competition. This amounts to misrepresentation and this contract is void.

 

Fraud:

Section 17 of Indian Contract Act states that, ’’Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:

 

the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

the active concealment of a fact by one having knowledge or belief of the fact;

a promise made without any intention of performing it;

any other act fitted to deceive;

any such act or omission as the law specially declares to be fraudulent.

Illustration: A sells his watch to B, claiming that the watch is original and antique. Later on, B finds out that the watch is not original and antique.

 

Mistake:

According to section 20 of Indian Contract Act, 1872, Mistake is where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement. Mistakes can be both unilateral (one party is under mistake as to matter of fact) and bilateral (both parties to agreement are under mistake as to matter of fact).

Illustration: X enters into an agreement with Y to sell German Shefford. At the time of agreement, the dog was already dead. Both X and Y was not aware of it. This contract is void due to mistake of fact.

 

 

4. Possibility of Execution

Agreement must be possible of execution. If agreement has no possibility of execution, it is void. In order to make an agreement valid, the terms of the agreement must be clear, certain and able to be executed. An agreement to do an impossible act is void.

Illustration: A enters into an agreement with a godman to bring his dead grandfather back to life who is already dead. This agreement is void.

 

 

5. Apparent Form of Contract

According to Indian Contract Act,1872, a contract can be both in

i.                    oral

ii.                  writing

 

§  Contract involving movable property can be verbal

§  Contract involving immovable property must always be in writing

However, it is advisable that the contract must always be in writing because it will be easier to prove in the court if any dispute arises between the parties in future.

 Contract must be signed and attested by witness and registered if required by the law.    

Illustration: A passenger entered into an oral agreement with an auto driver to drop him to a specific airport for a fare of Rs. 100. This is a valid agreement.

 

 

6. Intention to Create Legal Relationship

        i.            The intention of the Parties must be to create a Legal Relationship between them. Agreement of social or domestic nature (agreement between spouses, friends or Children) are not enforceable by law.

      ii.            The parties to the agreement must make it clear while entering into a contract that they want to create a legal relationship.

    iii.            If any party to the contract fails to comply with the terms of the agreement then it will amount to breach of contract and will give rise to legal consequences.

Illustration: A Father promises his son to buy him a bicycle if he scores 75% in his exam. Later on, father refuses to buy his son a bicycle even after scoring 75%. This will not amount to any breach of contract as there was not international to create a legal relationship between a father and his son.

 

7. Lawful Object and Lawful Consideration

Section 2(d) of Indian Contract Act,1872 defines consideration as ‘’When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.’’

Object and consideration of an agreement must be lawful. It must not be illegal, immoral, forbidden by any law or opposed to public policy.

Consideration means something in return of something i.e. give and take procedure.

For a valid contract:

                   i.            There must always be transfer of consideration from all parties to the contract

                   ii.            Consideration must be legal

                 iii.            Consideration must be adequate

                 iv.            Consideration must be real and substantial

                  v.            An entity which has no locus in the contract cannot maintain suit regarding the contract

                vi.            Consideration must be applicable on the desire of the promisor

              vii.            Consideration may more from the promisee to any other party

 

 Both the parties to agreement must receive something of value in return of promise. Consideration is one of the most essential elements of a contract. Consideration must be lawful. There cannot be a contract without consideration.

Any agreement which has unlawful objects or consideration will be void. According to Section 23 of the Indian Contract Act,1872. lays down certain consideration that would make a consideration and object unlawful.

Consideration should Not Forbidden by Law: Consideration should not be of such nature, if permitted, it would defeat the provisions of any law or, is fraudulent.

If consideration involves or implies injury to the person or property of another. The Court regards it as immoral or opposed to public policy.

Illustration A man promises to sell his truck to a woman at Rs.100000, the woman promises to pay Rs. 100000 to the man. This is an example of valid consideration.

A man enters into an agreement with a woman to sell legally forbidden narcotics material in exchange of Rs. 19000/- This is not a valid agreement because the object of agreement is unlawful.

 

8. Competence to Contract

The parties to the contract must be competent. An agreement with a person who is a minor will be void ab initio. Section 11 of Indian Contract Act lays the following condition to specify competency of parties to the contract.

i. Competence to Contract in case of minors

  Ø  Parties to Contract must have attained the age of majority ie.18 years in normal cases and 21 years if guardian is appointed by the Court

  Ø  Minor is not competent to contract

  Ø  Contract by a minor or with them is void

  Ø  A minor is incompetent to become a partner in a business firm

  Ø  A minor can be a promise or a beneficiary

  Ø  An agreement by or with a minor cannot become a contract when they attain the age of majority

  Ø  A minor can act as an agent and bind their principal by their acts without incurring own personal liability 

Illustration: A enters into agreement with B who is a minor to sell his bracelet. This is not a valid contract.

 

ii. Mental Ability of the Parties to Contract

  • Parties must be of sound mind while making an agreement.
  • A person who is usually of unsound mind, but occasionally of a sound mind can make a contract when he is of sound mind.
  • However, if a person is usually of a sound mind but, occasionally of unsound mind cannot make a valid contract when he is of unsound mind.
  • The soundness of mind of the parties depends upon:

                 a.      Their ability to understand terms of the agreement

                 b.      Their ability to make a sound judgment depending upon their interests

 

ii. Competence to Contract through Status

  ü  Alien Enemies

  ü  Foreign Sovereigns

  ü  Insolvent Party

  ü  A company cannot enter into an agreement which is ultra vires per its memorandum

  ü  A statutory company cannot enter into an contract which is outside its object per its Act of legislature

  ü  A municipal corporation cannot enter into a contract which is outside statutory powers

Parties to the agreement must not be disqualified from contracting by any law to which he is subject.

 

9. Legal Formalities fulfillment as applicable under Other Laws

If other laws bind something for performance of the contract then they are entitled to be taken into account.

Illustration: A tourist books a hotel room where in the bill shows a service charge. This would indicate that he agrees to pay the service charge. But as the payment of the service charge is voluntary per the law of land the tourist is entitled to be exempted from the charge.

 

 

10. Consensus ad idem

Offer and acceptance under contract must be ‘consensus ad idem’ meaning that all the parties to contract must agree on the same thing and in the same manner.

 

 

 

REVOCATION OF PROPOSAL AND ACCEPTANCE

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

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

Illustration: A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post.

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

 

A proposal stands revoked:

Ø  By communication of notice to the other party about such revocation

Ø  If the acceptor fails to fulfill the condition preceding acceptance of the offer

Ø  On the lapse of the specified time period as cited in the offer for acceptance by the offeree, or a justifiable time where no acceptance communication has been made by the offeree.

Ø  On the demise or lunacy of the offeror, in case the offeree gets to know about such demise or lunacy of the offeror before acceptance

 

 

STATE AMENDMENT

Uttar Pradesh:

Amendment of section 5 of Act (9 of 1872).--In section 5 of Indian contract Act, 1872, hereinafter in this Section referred to as the principal Act, at the end of the first paragraph, the following explanation shall inserted, namely:--

"Explanation: Where an invitation to a proposal contains a condition that any proposal made in response to such invitation shall be kept open for a specified time and a proposal is thereupon made accepting such condition, such proposal may not be revoked within such time."

[Vide Uttar Pradesh Act, 57 of 1976, s. 2]

 

 

 

 

DISCHARGE OF CONTRACT

  Ø  Execution

  Ø  Impossibility

  Ø  Time Bar

  Ø  Consensual Discharge

  Ø  By Applicability of Law

  Ø  By Breach


 

 

TYPES OF CONTRACT

I. Contract on the Basis of Validity

Void Contract

A contract may become void if it ceases to be enforceable by law.

Illustration: A supplier company enters into a contract with a vehicle company to supply diesel for 3 years. Diesel becomes banned in the area by the government after 2 years. Now the contract become void as its implementation becomes impossible.

 

Voidable Contract

A contract that may be repudiated on the will of any of the parties. There may be a clause or provision in the contract itself under which any of the parties may be allowed to terminate the contract. The contract remains valid until repudiated.

Illustration: A startup and an investor enter into contract stating that the startup founders will enhance the equity to the investor after 1 year with a provision that they may do so if they find their interest in the investor with the intent of seeking more investment or whatsoever. After 1 year founders do not find such need and are unwilling to provide more equity so they can void the contract as it is voidable by them. 

Similarly, it may be voidable by the investor also if it contains the provision in favor of investor as well. Under such circumstances, even if the founders want to give more equity to the investor, they may refrain from its acceptance. Thus in this case voidable by the investor.

 

Non-enforceable Contract

This contract type is neither void nor voidable but is unenforceable as it lacks legal or technical requisites, thus, cannot stand in the court of law. E.g.:

    ·         No proof of existence of contract as it was not in writing

    ·         Contract not duly registered, like in case of sale deed of a real estate property

    ·         Due stamp duty not paid

And so on

 

 

II. Contract on the Basis of Formation

Express Contract

Content of this contract are in verbal or written form.

  • Section 9 of Indian Contract Act states if any proposal or acceptance of any promise is made in words, the promise is said to be expressed.
  • Hence, if any offer or acceptance is made in words either verbal or in written, it will be considered as Expressed Contract.


Implied Contract

  Ø  The contract evolves owing to the acts or conduct of the parties or out of the circumstances such created.

  Ø  As implied contract arises out of such act by some party, there must be some action by some party to bind it to the contract. Thus on the event of such act or conduct, the contract evolves

  Ø  There is no explicit agreement but the conduct or actions of the relevant parties itself signifies the intent of the parties to the contract

  Ø  There may be circumstances pertaining to the parties that themselves evolve a contract

 

e-Contract

Contract entered into by the use of electronic medium or mode like a contract via email, online form submission as in the case of user agreement before installing an app, ecommerce contract like booking a product delivery online via app or website.

 

Quasi Contract

When some obligation is imposed on a party without an agreement, like, payment of house tax to a local body / municipality, etc.

 

 

III. Contract on the Basis of Accrual of Implementation

Executed and Executory Contract

Ø  Executed Contract Implemented Fully

Illustration: A contract of sale of a product is done outrightly on full payment for purchase

Ø  Executory Contract clauses or content may need to be performed as and when required

Illustration: Disaster management department may enter into contract with a supplier to purchase goods needed in case of disaster for the next 5 years as and when it emerges.

 

 

IV. Unilateral and Bilateral Contracts

Unilateral Contract: 

This contract type binds only 1 party for performance or commitment of something under contract

Bilateral Contract:  

When 2 or more parties agree to perform something or accept the performance of something by the other party or third parties in reciprocation to each other, it is termed a a bilateral contract.

 

 

V. Contracts Under Seal

  Ø  Some time ago contracts were required to be under seal. However in many jurisdictions this is losing significance

  Ø  Recognition of informal contracts by courts, like informal contracts.

Illustration: Contract between employer and employees including service bonds have lost its significance and courts do not recognize them.

 

 

Unconscionable Contract

  o   This type of contract is unduly in favor of one or few parties

  o   This contract type is such that no fair, just and of sound minded person would accept

 

Adhesion Contract

Adhesion contact is prepared or offered by a party / parties which have greater negotiating power than the other parties to the contract. The other party/ parties may only adhere to it (accept or reject) but do not have their own stance in the content of the agreement.

 

 

Aleatory Contract

    ·         Aleatory contract is such that is implementable on the occurance of some uncertain incident

    ·         Under aleatory contract all parties to the contract assume risk / risks

E.g. In marine insurance the compensation is payable only when the ship sinks which is not sure to happen.

 

 All Agreements are not Contracts but all Contracts are Agreements

Offer + Acceptance = Promise

Promise + Consideration = Agreement

Agreement + Enforceablity = Contract

All Contracts are Agreements because:

 

An Agreement can become a contract only if it is legally enforceable by law or fulfills the conditions laid down under section 10 of Indian Contract Act, 1872. So, all contracts are definitely agreements.

 

All Agreements are not Contracts because:

All Agreements are not Contracts because only those agreements which fulfill the conditions laid down under section 10 of Indian Contract Act, 1872 become contracts. It is not necessary that all the agreements will satisfy the conditions laid down under section 10 of Indian Contract Act, 1872.

 

 

 

STANDARD FORM OF CONTRACT

Some other names for standard form of contracts are:

·         Boilerplate contracts

·         Contracts of Adhesion

·         ‘Take it or leave it’ contracts

 

Ø  The position of both or all the parties to such contract is unequal. One has a superior position pertaining to contract and other has inferior.

Ø  Under this, the superior party does not allow any space to the inferior party but only to accept or leave the contract. E.g. Terms and conditions while creating an email account or while downloading mobile app, etc.

Ø  The terms of the contract are drafted only by the superior party and the inferior party must accept it as it is, else leave fully.

 

Standard Form Contracts are standardized contracts that contain a large number of terms and conditions, mostly in fine print, which restrict and often exclude liability of the superior party under the contract. This gives a unique opportunity to the advantageous party to exploit the weakness of the individual by imposing terms upon tem which appear like private legislation and which may go to the extent of exempting the company from all liabilities under the contract. The battle against such abuse comes to the courts of law. The courts find very difficult to come to the rescue of the weaker party.

 

 

 

Statutory Position on Standard Form of Contract

Ø  Section 16 of the India Contract Act 1872 cites ‘unconscionable contract’ which means disparity in the bargaining power of both or all the parties. Some parties are superior to others, or at advantageous position.

Ø  With reference to ‘contracts’ unconscionable position refers to the position of the inferior party which has no or very low degree of choice and must accept the wish and will of the superior party. This facilitates undue exploitation of the inferior party by the superior as the inferior cannot influence the terms of the contract and must accept whatever is presented.

 

STANDARD FORM OF CONTRACT VS. SPECIAL RELIEF ACT 1963

Ø  Section 20 of the Specific Reliefs Act 1963 deals with court’s discretion on decreeing specific performance

Ø  Decree in favour of the defendant is at court’s discretion and not essential despite it might be lawful to give such respite to the defendant. The court may even abstain from issuing such decree in case of:

§  Unfair Contract

§  Hardship by the defendant or the inferior party

§  Inequitable to enforce specific performance

 

 

SECTION 19 OF THE INDIAN CONTRACTS ACT 1872

Section 19 of the Indian Contract Act 1872 provides for making the contract voidable at the discretion of the party, the consent of which was created by coercion, undue influence, misinterpretation or fraud.

 

 

 

SECTION 23 OF THE INDIAN CONTRACT ACT 1872

This section cites mainly 3 issues:

    1.      Object of the Agreement

    2.      Consideration for the Agreement

    3.      Agreement per se


Sec. 23 conveys that the object or consideration of an agreement is lawful unless:

  Ø  They are forbidden by law

  Ø  Are fraudulent

  Ø  Of such nature that would violate the provisions of any law

  Ø  Cause or aid injury to person or property of others

  Ø  Court considers it immoral or against public policy

 

 

DOCTRINE OF PRIVITY OF CONTRACT






E-CONTRACTS / ELECTRONIC CONTRACTS



INTRODUCTION

The Indian Contract Act 1872 falls under the ambit of mercantile laws (Business Laws). It came enforced on 1 September 1872. It is private law. Its base is English common law.

It contains XI Chapters, but Chapter VII citing Sale of Goods and Chapter XI citing Partnership were repealed, the Sale of goods was repealed in 1930, and the partnership was in 1932.

 These became an independent Acts after getting repealed from their parent Act, that is Indian Contract Act 1872.

It becomes imperative to study the Contract act, as today in the market sector all the dealings are made through contract:

 

It covers various aspects in a much broader sense such as it describes what is an offer, acceptance, essentials of contract, valid consideration, voidable agreements, quasi-contracts, damages under Indian contract act 1872. Apart from it covers Contract of Indemnity, Guarantee, bailment, pledge and agency.

 

What is a contract?

Under the Indian Contract Act 1872, the term contract finds its definition under Section 2(H), which states that an agreement that is enforceable by the law is known as Contract. In contract, there must be an intent to create legal relationships, and not purely social, moral or religious.

 

Definitions of ‘Contract’

  • Sir Fredrik Pollock: ‘’Every agreement and promise enforceable by law is a contract’’.
  • Salmond: ‘’A contract is an agreement creating and defining an obligation between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of others’’.
  • Anson: ‘’The law of contract is that branch of law which determines the circumstances in which a promise shall be legally binding on the person making it’’.

 

 

 

 

 

 

 

 

 

ESSENTIALS OF CONTRACT

Q. What are the essential elements of a valid contract?

Ans. Section 10 of the Indian Contract Act, 1872 cites conditions which makes a contract valid.
Following are some of those conditions:

  1. Offer
  2. Acceptance
  3. Free Consent
  4. Possibility of Execution
  5. Apparent Form of Contract
  6. Intention to Create Legal Relationship
  7. Lawful Object and Lawful Consideration
  8. Contractual Capacity
  9. Legal Formalities fulfillment as applicable under other laws

10.  Consensus ad idem

 

 

1. Offer

Q. What is ‘offer’ under Indian Law of Contract?

Ans. The word offer and proposal are often usable synonymously. Offer is the first step in the formation of an agreement that further leads to contract.

According to section 2 (A) of the Indian Contract Act,1872 “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, he is said to make a proposal’’

The person who makes an offer is called ‘’Offeror’’ or ‘’Promisor’’ and the person to whom the offer has been made is called Offeree or Promisee.

 

Essentials of an Offer:

1.      Multiple people

2.      Communication to the Offeree

3.      Object of making the Offer

4.      Clearly defined Terms of the Offer

5.      May contain specified terms and conditions

6.      Unconditional Offer or deeming acceptance in case of non fulfillment of some specified conditions

 

Illustration: Ms. A owns several machines. She enters into an agreement with Ms. B to sell one of her machines. She tell Ms. B, if she is willing to buy her machine for Rs. 10, 000. This is not a valid offer as Ms. A did not specify the specific machine he is talking about. Here, the offer by Ms. A is ambiguous.

 

 

2. Acceptance

Q. What is ‘acceptance’ under Indian Law of Contract?

Ans. Per the section 2(b) of Indian Contract Act, 1872, when a person to who a proposal has been made, conveys their assent thereto.

 

Following are some conditions of a valid Acceptance:

i. Acceptance must be absolute and unconditional: Acceptance must be absolute. There should not be any conditions attached to acceptance.

Example: A offers to sell his laptop to B at Rs. 20000. B replies that he will buy it for Rs. 15000. This is not a valid acceptance. Here, there is a condition attached to the acceptance. This is as B accepts to buy the machine but for 15000 and not for 20000, so there is no match between the 2.

 

ii. Expression:

Acceptance is a clearly understandable expression of the offeree’s consent or agreement to the offer

 

iii. Acceptance must be communicated:

Acceptance must be communicated by the offeree to the offerer in the manner prescribed. A mental acceptance to an offer is not a valid acceptance, legally. Acceptance must come to the knowledge of the offeror.

Example: A tells B to communicate his acceptance to him by a communication app message on mobile. But, B sends his acceptance by post. This will be an invalid acceptance unless B informs A that the acceptance is not in accordance with the prescribed manner.

 

iv. Use of Agency:

Offer and Acceptance can be made either by the offerer and offeree respectively, or their authorized agents / representatives.

Illustration: If a bank makes or accepts an offer their authorized representatives who are its servants sign and place the bank’s seal. As their duty while their holding such position in the bank entitles them to make or accept such offer, they are valid. Such employee’s offer or acceptance will be treated as the bank’s offer or acceptance, even if such bank or banker were a sole proprietor.

 

v. Acceptance must be communicated within a reasonable time:

Acceptance must be communicated within the time prescribed. If no time period is prescribed, then it must be given within justifiable time.

Illustration:  A wants to sell his mobile phone to B. He says to B, “Will you buy my mobile phone at Rs.12000?” Here A is making an ‘offer’ so he is an offeror and B is an ‘offeree’. If B accepts the offer, it will be deemed as B’s ‘acceptance’.

Illustration: A man called A makes a public offer by a newspaper publication to the mass to sell his new car and states that it must sell to someone with highest buying bid. Also, he asks the respondents to communicate acceptance by the end of 10 July 2022. A woman called B communicates the acceptance that reaches Mr. A on 11 July 2022 mentioning the highest bid. This acceptance by B  will not be valid because the acceptance had to be communicated within the specified time.

 

vi. Acceptance by Post:

In case the acceptance is by post then general rule considers tha acceptance to have been made on the date of posting the offer by the offerer, and not of receipt by the offeree.

 

 

3. Free Consent

Q. What is ‘free consent’ under Indian Law of Contract?

The parties must enter into an agreement with free consent.

Ø  When 2 or more people agree upon the same matter and in the same sense, they are said to have consented

Ø  Consent is known to be free if not caused by:

§  Coercion

§  Undue Influence

§  Misinterpretation

§  Fraud

§  Mistake

 

The parties should enter into an agreement with his own wish and will and not by coercion, undue influence, fraud, mistake or misrepresentation. Consent will be deemed to be free only if it does not constitute the following elements:

Coercion:

Coercion is defined under section 13 of Indian Contract Act,1872 as “Coercion” is the committing, or threatening to commit, any act forbidden by the Indian Penal Code under(45,1860), 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.

Illustration: X threatens Z to kill him if he does not transfer all his money to him. Z transfers all his money to X to save his own life. This agreement is not valid as the money was transferred by coercion.

 

Undue Influence:

According to section 16 of the Indian Contract Act, 1872 , A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

Illustration: A sells his land to B, who is his employer at a very low price in order to get promotion. Here, A’s consent was not free and he was under undue influence of his employer.

 

Misrepresentation:

According to section 18 of Indian Contract Act, 1872 misrepresentation means and includes:

 

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;

any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him;

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.

Illustration: A enters into a contract with B to sell his horse. B wants a horse that is ideal for racing as he wants to participate in a horse racing competition. A sells a sick horse to B by misrepresenting it to be an ideal horse for racing. Later on, he finds out that the horse is sick and not capable of running in competition. This amounts to misrepresentation and this contract is void.

 

Fraud:

Section 17 of Indian Contract Act states that, ’’Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:

 

the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

the active concealment of a fact by one having knowledge or belief of the fact;

a promise made without any intention of performing it;

any other act fitted to deceive;

any such act or omission as the law specially declares to be fraudulent.

Illustration: A sells his watch to B, claiming that the watch is original and antique. Later on, B finds out that the watch is not original and antique.

 

Mistake:

According to section 20 of Indian Contract Act, 1872, Mistake is where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement. Mistakes can be both unilateral (one party is under mistake as to matter of fact) and bilateral (both parties to agreement are under mistake as to matter of fact).

Illustration: X enters into an agreement with Y to sell German Shefford. At the time of agreement, the dog was already dead. Both X and Y was not aware of it. This contract is void due to mistake of fact.

 

 

4. Possibility of Execution

Agreement must be possible of execution. If agreement has no possibility of execution, it is void. In order to make an agreement valid, the terms of the agreement must be clear, certain and able to be executed. An agreement to do an impossible act is void.

Illustration: A enters into an agreement with a godman to bring his dead grandfather back to life who is already dead. This agreement is void.

 

 

5. Apparent Form of Contract

According to Indian Contract Act,1872, a contract can be both in

i.                    oral

ii.                  writing

 

§  Contract involving movable property can be verbal

§  Contract involving immovable property must always be in writing

However, it is advisable that the contract must always be in writing because it will be easier to prove in the court if any dispute arises between the parties in future.

 Contract must be signed and attested by witness and registered if required by the law.    

Illustration: A passenger entered into an oral agreement with an auto driver to drop him to a specific airport for a fare of Rs. 100. This is a valid agreement.

 

 

6. Intention to Create Legal Relationship

        i.            The intention of the Parties must be to create a Legal Relationship between them. Agreement of social or domestic nature (agreement between spouses, friends or Children) are not enforceable by law.

      ii.            The parties to the agreement must make it clear while entering into a contract that they want to create a legal relationship.

    iii.            If any party to the contract fails to comply with the terms of the agreement then it will amount to breach of contract and will give rise to legal consequences.

Illustration: A Father promises his son to buy him a bicycle if he scores 75% in his exam. Later on, father refuses to buy his son a bicycle even after scoring 75%. This will not amount to any breach of contract as there was not international to create a legal relationship between a father and his son.

 

7. Lawful Object and Lawful Consideration

Section 2(d) of Indian Contract Act,1872 defines consideration as ‘’When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.’’

Object and consideration of an agreement must be lawful. It must not be illegal, immoral, forbidden by any law or opposed to public policy.

Consideration means something in return of something i.e. give and take procedure.

For a valid contract:

        i.            There must always be transfer of consideration from all parties to the contract

      ii.            Consideration must be legal

    iii.            Consideration must be adequate

     iv.            Consideration must be real and substantial

       v.            An entity which has no locus in the contract cannot maintain suit regarding the contract

     vi.            Consideration must be applicable on the desire of the promisor

   vii.            Consideration may more from the promisee to any other party

 

 Both the parties to agreement must receive something of value in return of promise. Consideration is one of the most essential elements of a contract. Consideration must be lawful. There cannot be a contract without consideration.

Any agreement which has unlawful objects or consideration will be void. According to Section 23 of the Indian Contract Act,1872. lays down certain consideration that would make a consideration and object unlawful.

Consideration should Not Forbidden by Law: Consideration should not be of such nature, if permitted, it would defeat the provisions of any law or, is fraudulent.

If consideration involves or implies injury to the person or property of another. The Court regards it as immoral or opposed to public policy.

Illustration A man promises to sell his truck to a woman at Rs.100000, the woman promises to pay Rs. 100000 to the man. This is an example of valid consideration.

A man enters into an agreement with a woman to sell legally forbidden narcotics material in exchange of Rs. 19000/- This is not a valid agreement because the object of agreement is unlawful.

 

8. Competence to Contract

The parties to the contract must be competent. An agreement with a person who is a minor will be void ab initio. Section 11 of Indian Contract Act lays the following condition to specify competency of parties to the contract.

i. Competence to Contract in case of minors

Ø  Parties to Contract must have attained the age of majority ie.18 years in normal cases and 21 years if guardian is appointed by the Court

Ø  Minor is not competent to contract

Ø  Contract by a minor or with them is void

Ø  A minor is incompetent to become a partner in a business firm

Ø  A minor can be a promise or a beneficiary

Ø  An agreement by or with a minor cannot become a contract when they attain the age of majority

Ø  A minor can act as an agent and bind their principal by their acts without incurring own personal liability

Illustration: A enters into agreement with B who is a minor to sell his bracelet. This is not a valid contract.

 

ii. Mental Ability of the Parties to Contract

Parties must be of sound mind while making an agreement.

A person who is usually of unsound mind, but occasionally of a sound mind can make a contract when he is of sound mind.

However, if a person is usually of a sound mind but, occasionally of unsound mind cannot make a valid contract when he is of unsound mind.

The soundness of mind of the parties depends upon:

a.      Their ability to understand terms of the agreement

b.      Their ability to make a sound judgment depending upon their interests

 

ii. Competence to Contract through Status

ü  Alien Enemies

ü  Foreign Sovereigns

ü  Insolvent Party

ü  A company cannot enter into an agreement which is ultra vires per its memorandum

ü  A statutory company cannot enter into an contract which is outside its object per its Act of legislature

ü  A municipal corporation cannot enter into a contract which is outside statutory powers

Parties to the agreement must not be disqualified from contracting by any law to which he is subject.

 

9. Legal Formalities fulfillment as applicable under Other Laws

If other laws bind something for performance of the contract then they are entitled to be taken into account.

Illustration: A tourist books a hotel room where in the bill shows a service charge. This would indicate that he agrees to pay the service charge. But as the payment of the service charge is voluntary per the law of land the tourist is entitled to be exempted from the charge.

 

 

10. Consensus ad idem

Offer and acceptance under contract must be ‘consensus ad idem’ meaning that all the parties to contract must agree on the same thing and in the same manner.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVOCATION OF PROPOSAL AND ACCEPTANCE

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

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

Illustration: A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post.

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

 

A proposal stands revoked:

Ø  By communication of notice to the other party about such revocation

Ø  If the acceptor fails to fulfill the condition preceding acceptance of the offer

Ø  On the lapse of the specified time period as cited in the offer for acceptance by the offeree, or a justifiable time where no acceptance communication has been made by the offeree.

Ø  On the demise or lunacy of the offeror, in case the offeree gets to know about such demise or lunacy of the offeror before acceptance

 

 

STATE AMENDMENT

Uttar Pradesh:

Amendment of section 5 of Act (9 of 1872).--In section 5 of Indian contract Act, 1872, hereinafter in this Section referred to as the principal Act, at the end of the first paragraph, the following explanation shall inserted, namely:--

"Explanation: Where an invitation to a proposal contains a condition that any proposal made in response to such invitation shall be kept open for a specified time and a proposal is thereupon made accepting such condition, such proposal may not be revoked within such time."

[Vide Uttar Pradesh Act, 57 of 1976, s. 2]

 

 

 

 

DISCHARGE OF CONTRACT

Ø  Execution

Ø  Impossibility

Ø  Time Bar

Ø  Consensual Discharge

Ø  By Applicability of Law

Ø  By Breach

 

 

 

 

 

 

 

 

 

 

 

TYPES OF CONTRACT

I. Contract on the Basis of Validity

Void Contract

A contract may become void if it ceases to be enforceable by law.

Illustration: A supplier company enters into a contract with a vehicle company to supply diesel for 3 years. Diesel becomes banned in the area by the government after 2 years. Now the contract become void as its implementation becomes impossible.

 

Voidable Contract

A contract that may be repudiated on the will of any of the parties. There may be a clause or provision in the contract itself under which any of the parties may be allowed to terminate the contract. The contract remains valid until repudiated.

Illustration: A startup and an investor enter into contract stating that the startup founders will enhance the equity to the investor after 1 year with a provision that they may do so if they find their interest in the investor with the intent of seeking more investment or whatsoever. After 1 year founders do not find such need and are unwilling to provide more equity so they can void the contract as it is voidable by them. Similarly it may be voidable by the investor also if it contains the provision in favor of investor as well. Under such circumstances, even if the founders want to give more equity to the investor, they may refrain from its acceptance. Thus in this case voidable by the investor.

 

Non-enforceable Contract

This contract type is neither void nor voidable but is unenforceable as it lacks legal or technical requisites, thus, cannot stand in the court of law. E.g.:

·         No proof of existence of contract as it was not in writing

·         Contract not duly registered, like in case of sale deed of a real estate property

·         Due stamp duty not paid

And so on

 

 

II. Contract on the Basis of Formation

Express Contract

Content of this contract are in verbal or written form.

  • Section 9 of Indian Contract Act states if any proposal or acceptance of any promise is made in words, the promise is said to be expressed.
  • Hence, if any offer or acceptance is made in words either verbal or in written, it will be considered as Expressed Contract.

 

 

Implied Contract

Ø  The contract evolves owing to the acts or conduct of the parties or out of the circumstances such created.

Ø  As implied contract arises out of such act by some party, there must be some action by some party to bind it to the contract. Thus on the event of such act or conduct, the contract evolves

Ø  There is no explicit agreement but the conduct or actions of the relevant parties itself signifies the intent of the parties to the contract

Ø  There may be circumstances pertaining to the parties that themselves evolve a contract

 

e-Contract

Contract entered into by the use of electronic medium or mode like a contract via email, online form submission as in the case of user agreement before installing an app, ecommerce contract like booking a product delivery online via app or website.

 

Quasi Contract

When some obligation is imposed on a party without an agreement, like, payment of house tax to a local body / muncipality, etc.

 

 

 

 

III. Contract on the Basis of Accrual of Implementation

Executed and Executory Contract

Ø  Executed Contract Implemented Fully

Illustration: A contract of sale of a product is done outrightly on full payment for purchase

Ø  Executory Contract clauses or content may need to be performed as and when required

Illustration: Disaster management department may enter into contract with a supplier to purchase goods needed in case of disaster for the next 5 years as and when it emerges.

 

 

IV. Unilateral and Bilateral Contracts

Unilateral Contract: This contract type binds only 1 party for performance or commitment of something under contract

Bilateral Contract:  When 2 or more parties agree to perform something or accept the performance of something by the other party or third parties in reciprocation to each other, it is termed a a bilateral contract.

 

 

V. Contracts Under Seal

Ø  Some time ago contracts were required to be under seal. However in many jurisdictions this is losing significance

Ø  Recognition of informal contracts by courts, like informal contracts.

Illustration: Contract between employer and employees including service bonds have lost its significance and courts do not recognize them.

 

 

 

 

Unconscionable Contract

o   This type of contract is unduly in favor of one or few parties

o   This contract type is such that no fair, just and of sound minded person would accept

 

Adhesion Contract

Adhesion contact is prepared or offered by a party / parties which have greater negotiating power than the other parties to the contract. The other party/ parties may only adhere to it (accept or reject) but do not have their own stance in the content of the agreement.

 

 

Aleatory Contract

·         Aleatory contract is such that is implementable on the occurance of some uncertain incident

·         Under aleatory contract all parties to the contract assume risk / risks

E.g. In marine insurance the compensation is payable only when the ship sinks which is not sure to happen.

 

 

All Agreements are not Contracts but all Contracts are Agreements

Offer + Acceptance = Promise

Promise + Consideration = Agreement

Agreement + Enforceablity = Contract

All Contracts are Agreements because:

 

An Agreement can become a contract only if it is legally enforceable by law or fulfills the conditions laid down under section 10 of Indian Contract Act, 1872. So, all contracts are definitely agreements.

 

All Agreements are not Contracts because:

All Agreements are not Contracts because only those agreements which fulfill the conditions laid down under section 10 of Indian Contract Act, 1872 become contracts. It is not necessary that all the agreements will satisfy the conditions laid down under section 10 of Indian Contract Act, 1872.

 

 

 

STANDARD FORM OF CONTRACT

Some other names for standard form of contracts are:

·         Boilerplate contracts

·         Contracts of Adhesion

·         ‘Take it or leave it’ contracts

 

Ø  The position of both or all the parties to such contract is unequal. One has a superior position pertaining to contract and other has inferior.

Ø  Under this, the superior party does not allow any space to the inferior party but only to accept or leave the contract. E.g. Terms and conditions while creating an email account or while downloading mobile app, etc.

Ø  The terms of the contract are drafted only by the superior party and the inferior party must accept it as it is, else leave fully.

 

Standard Form Contracts are standardized contracts that contain a large number of terms and conditions, mostly in fine print, which restrict and often exclude liability of the superior party under the contract. This gives a unique opportunity to the advantageous party to exploit the weakness of the individual by imposing terms upon tem which appear like private legislation and which may go to the extent of exempting the company from all liabilities under the contract. The battle against such abuse comes to the courts of law. The courts find very difficult to come to the rescue of the weaker party.

 

 

 

Statutory Position on Standard Form of Contract

Ø  Section 16 of the India Contract Act 1872 cites ‘unconscionable contract’ which means disparity in the bargaining power of both or all the parties. Some parties are superior to others, or at advantageous position.

Ø  With reference to ‘contracts’ unconscionable position refers to the position of the inferior party which has no or very low degree of choice and must accept the wish and will of the superior party. This facilitates undue exploitation of the inferior party by the superior as the inferior cannot influence the terms of the contract and must accept whatever is presented.

 

STANDARD FORM OF CONTRACT VS. SPECIAL RELIEF ACT 1963

Ø  Section 20 of the Specific Reliefs Act 1963 deals with court’s discretion on decreeing specific performance

Ø  Decree in favour of the defendant is at court’s discretion and not essential despite it might be lawful to give such respite to the defendant. The court may even abstain from issuing such decree in case of:

§  Unfair Contract

§  Hardship by the defendant or the inferior party

§  Inequitable to enforce specific performance

 

 

SECTION 19 OF THE INDIAN CONTRACTS ACT 1872

Section 19 of the Indian Contract Act 1872 provides for making the contract voidable at the discretion of the party, the consent of which was created by coercion, undue influence, misinterpretation or fraud.

 

 

 

SECTION 23 OF THE INDIAN CONTRACT ACT 1872

This section cites mainly 3 issues:

1.      Object of the Agreement

2.      Consideration for the Agreement

3.      Agreement per se

This section conveys that the object or consideration of an agreement is lawful unless:

Ø  They are forbidden by law

Ø  Are fraudulent

Ø  Of such nature that would violate the provisions of any law

Ø  Cause or aid injury to person or property of others

Ø  Court considers it immoral or against public policy

 

 

E-CONTRACTS / ELECTRONIC CONTRACTS

Electronic Contract refers to a contract that takes place through e-commerce, often without the parties meeting each other. It refers to commercial activities transacted electronically. E.g. e-auction, online purchase through luckonluck.com site, online credit transfer through bank accounts, payment via payment apps, ATM cash withdrawal, and so on.

Ø  Earlier there were 2 problems with e-transactions and contracts:

              1}            Writing / Recording / Storing the transactions

         2)            Recognizable signatures

Ø  Electronic transactions are:

1)                        Cheaper

2)                        Easier to perform

3)                        Easier to Store

4)                        Easier to Retrieve

 

There are 4 major types of e- contracts:

    1.      Browse wrap contracts

    2.      Shrink wrap contracts

    3.      Click wrap contracts

    4.      e-mail contracts

1. Browse Wrap Contract

                 i.            A browse wrap agreement is intended to be binding on the contracting party by the use of the website.

               ii.            Such contracts are usually used by websites wherein the continued use of a website by a user is deemed to be acceptance of its revised terms of use and other policies.

2. Shrink Wrap Contract

                 i.            A shrink wrap contract is a license agreement where the terms and conditions of the contract are enforced upon the consumer as soon as he opens the package.

               ii.            Such contracts can be generally observed in the case of buying of software products. E.g. The license agreement, indemnity by the user for any copyright or intellectual property rights of the manufacturer violation, arbitration, limitation of liabilities of the manufacturer, etc. as soon as the buyer opens the pack (containing the software product).

3. Click Wrap Contract

                 i.            Click wrap contract or click through agreements require the user to manifest his consent or assent to the terms and conditions governing the licensed usage of the software by clicking "OK" or "I Agree" button on the dialog box.

               ii.            A user may choose to disagree or reject the terms by clicking cancel or closing the window. Such a user will not be able to buy or use the service upon rejection.

             iii.            Unlike the shrink wrap agreements where the terms of the agreement are hidden inside the box, in case of click wrap agreements, all the terms and conditions are accessible prior to acceptance, either in the same window or through a hyperlink.

4. An email contract has 2 categories:

                    I.            The contract draft and its signed up scanned/unscanned copies are exchanged via email OR direct email offer and email acceptance

                  II.            A link is sent via email to the other party which clicks to verify its acceptance

 

Status of e-contracts in India

1.      Indian Contract Act 1872 does not exactly and explicitly provide for e-contracts

2.      The Information technology Act 2000, commonly known as the IT Act governs e-contracts or their provisions

3.      The IT Amendment Act gives power to the ventral government on ascertaining as to what mode of signatures are considerable as electronic signatures

4.      IT Act Amendment in 2008 provided for the validity of contracts formed through electronic means by bringing in Section 10A stating such contracts cannot become unenforceable merely as they are in electronic form

5.      The IT Act imposes regulations on 3 parties to the electronic process transmission:

                                i.            Originator

                              ii.            Intermediary

                            iii.            Addressee

 

 

Evidence vis-à-vis E-contracts

        i.            Evidence recorded or stored on electronic devices hold the status of evidence

      ii.            Electronic evidence acceptable as evidence (State of Delhi vs. Mohammad Afzal)

    iii.            Voice records taken with the help of various electronic devices and various modes are treatable as evidence

 

DOCTRINE OF PRIVITY

Privity means privacy, which here refers to private between the parties to contract.

Essentials of privity to contract application or claim:

1.      Contract entered into between 2 parties: Most importantly there must be a contract between 2 or more parties

2.      Parties must be competent and there should be a valid consideration: Competency of parties and the existence of consideration are pre-requisites for application of this doctrine

3.      There has been a breach of contract by at least 1 party: Breach of contract by one Party is the essential requirement for the application of the doctrine of privity of contract.

4.      Only parties to contract can sue each other: After the breach, only Parties to a contract are entitled to sue against each other for non-performance of the contract.

 

 

Doctrine of Privity under Indian Contract Act 19872

Ø  Sec. 73 of the Indian Contract Act provides for compensation to the party, by the party breaching the contract

Ø  In sec. 73 it appears that compensation arises for actual damages caused due to non performance of the contract and not indirect damages. Here only pecuniary damages are taken into account.

Ø  In estimating the loss arising from the breach of contract, the means of remedying the inconvenience caused by the non-performance of contract must be considered

Ø  Sec. 73 states, In estimating the loss arising for breach of contract inconvenience caused by non performance of contract must be considered

 

Exceptions to Privity of Contract

·         Benefit Aspect of Contract

·         Burden Aspect of Contract

·         Doctrine of Privity under Law of Agency

 

Benefit Aspect of Contract

  ü  A person stranger to contract cannot enforce the contract except some exceptions defined in court rulings or previous cases.

  ü  2 basic court ruled exceptions where a stranger to contract can sue the other party / parties are:

o   Beneficiary/beneficiaries under the contract towards who contract creates trust

o   Beneficiary/beneficiaries under the contract which is a part of family arrangement

           

Burden Aspect of Contract

1.      Burden of contract stands for liability of obligation created by the contract

2.      A contract gives right to a party/parties and assigns duty to other party/ parties

 

Doctrine of Privity under Agency (Exceptions)

    1.      The principal-agent relationship is named as ‘agency’. Also, the agent does the agency work by representing the principal toward other parties.

    2.      The principal, as well as the agent in their capacity have certain rights and duties towards other parties directly attributable to the acts of his agent or the agency

    3.      In most cases specific to agency despite the agents fault it is treated as that of the principal and the principal is liable towards other parties acts and omissions of his agent

 

 

There are, certain exceptions to the rule of privity of contract recognized both by the English Law and the Indian Law, under which a person, who is not a party to a contract can sue on it. Some exceptions to the rule pertaining to some circumstances under the following:

1. Trust or Charge

Sometimes under contract, a benefit is given to a person who is not a party to the contract. This benefit can be given by creating a Trust or Charge in favour of such person. In such cases, the beneficiary under the trust or charge may enforce the contract even though he is not a party to it.


2. Marriage Settlement, Partition or Other Family Arrangements

In an agreement made in connection with marriage, partition or other family arrangements, a person, for whose benefit the provision is made, can enforce the agreement though he is not a party to it.


3. Acknowledgement of Payment

If a party acknowledges the payment to the third person or constitutes himself as an agent of that third person, then the third person can recover the amount from such a party.


4. Agreements Affecting the Land

If such land is purchased by somebody with the notice of rights and obligations of the owner, then those rights and obligations shall bind the purchaser although he was not a party to the agreement.


5. Agency

A principal, even if concealed, may sue on a contract made by an agent. The third party cannot plead that there was no contract between him and the principal.


6. Assignment

The assignee of a debt or an actionable claim may sue the original debtor if the assignment is a legal one.


7. Holder in Due Course

A holder in due course of a negotiable instrument is one who has obtained the negotiable instrument in good faith and for valuable consideration. He can sue prior parties to the negotiable instrument.


8. Fund in Hands of a party

Where a fund is created in the hands of one of the contracting parties in favor of a third party, it may be possible to give the latter, a remedy in quasi-contract on the grounds that to allow the contracting party to keep the fund would be to allow unjust enrichment.

As a general rule, both Indian and English law are similar to each other that only parties to contract can sue each other. In a leading English case of Tweddle v. Atkinson, it was held that the plaintiff cannot sue as he was both a stranger to the contract as well stranger to consideration. This concept of privity of contract was again analyzed in the case of Dunlop Pneumatic Tyre Co.Ltd v. Selfridge & Co. Ltd.

 

 

Position of Privity of Consideration in India

This principle of the doctrine of privity of consideration is not applicable in India. As per the Indian Contract Act, 1872 the definition of consideration in Section 2(d) states, consideration may be furnished by ‘the promisee or any other person’ as long as it is ‘at the desire of promisor’. Thus, the consideration may move from promisee, or some other person, if the promisor has no objection, from any other person. The leading authority, in this case, is the case of Venkata Chinnaya v. VenkataramayaGaru.[1881 Madras HC].

 

Privity of Contract (Stranger to Contract)

The doctrine of privity of a contract is a common law principle which implies that only parties to a contract are allowed to sue each other to enforce their rights and liabilities and no stranger is allowed to confer obligations upon any person who is not a party to contract even though contract the contract have been entered into for his benefit.

 

Position of Privity of Contract in English law

In a leading English case of Tweddle v. Atkinson[1861], it was held that the plaintiff cannot sue as he was both a stranger to the contract as well stranger to consideration. This concept of privity of contract was again analyzed in the case of Dunlop Pneumatic Tyre Co.Ltd v. Selfridge & Co. Ltd. Where there was an agreement between a Dunlop dealer and a subdealer. Here Dunlop could not sue as it was stranger to contract[1915]

 

Position of Privity of Contract in Indian law

In India, the apex court has by its decision in MC Chacko vs. State of Travancore (1970SC) in a far reaching attempt of clearing the ambiguities in the application of the Doctrine of Privity held that a person not a party to a contract cannot subject to certain well recognized exceptions, enforce the terms of the contract. The recognized exception mentioned in the quoted judgment is worded widely so as to cover the beneficiaries under the terms of the contract. Views on the rights of third party beneficiaries have been laid down by other courts of India. For instance in:

1.  Bhujendra Nath vs. Sushamoyee Basu ( Calcutta HC in 1936), the division bench of the Calcutta High Court has held that a stranger to a contract which is to his benefit is entitled to enforce the agreement to his benefit. Also, in Pandurang vs. Vishwanath (1939), it has been held the person beneficially entitled under the contract can sue even though not a party to the contract itself.

2. Chinnaya v. Rammya (Madras HC in 1987), a lady granted her daughter some land via registered gift deed one of the terms that she will pay an annual sum to her maternal aunt after her death which she defaulted and denied payment invoking privity of contract i.e. claiming that her aunt was not a party to contract. In this case though the consideration was paid by the mother (vide sec. 2D of Indian Contract Act 1872) and not aunt so the uncle is stranger to consideration, along with stranger to contract. Yet his suit was allowed as he was a beneficiary of the contract under law. As the consideration may be given by the promise or anyone of their behalf, here, the consideration to the daughter was given by her mother on behalf of her aunt.

 

 

Stranger to Consideration

In context of Indian law, as long as there is consideration for promise, it does not matter who furnishes the consideration. Which means in Indian law doctrine of Privity of Consideration does not apply. It can be clarified by the words given under Section 2(d) of Indian Contract Act, 1872. It states that, when, at the desire of the promisor, the promise or any other person. This concept has been confirmed by the then judicial system in the case of Kedarnath Bhattacharji v Gorie Mohammad (1887)

 

 

 

 

 

 

 

 

 

Landmark Judgments of Law of Contract

Chinnaya v. Ramayya

In this case, a lady transfers a certain portion of land to her sister. After sometime the lady gives her land as a gift to her daughter on the condition that she will pay Rs. 653/- as an annuity to her sister.

The daughter receives the gift and accepts to give her sister an annuity of Rs. 650/- Later on,she refuses to give the annuity. The sister files a case to claim the amount. The court held that the estate received as a gift and the agreement to pay annuity is a simultaneous agreement and will be considered as one transaction.Hence, the sister was entitled to receive the consideration.

 

Lalman Shukla v. Gauri Datt

Lalman Shukla (plaintiff) was Gauri Datt’s servant (defendant).Gauri Datt’s nephew went missing and the plaintiff was sent out in search of the child. After the plaintiff leaves in search of the child, Defendant offers to give a reward of Rs 501/- to anyone who finds his nephew. The plaintiff finds the boy and brings him back home. Lalman Shukla discovers the reward and claims the reward. Lalman Shulka filed a case to claim the reward amount.

The court held that Llaman Shukla was entitled to the reward amount as there was no contract between them and it was his duty as a servant to find the missing child. Lalman Shukla had no knowledge of the offer or contract. There cannot be an acceptance or contract without knowledge of an offer or contract.

 

Balfour v. Balfour

M.r and Mrs. Balfour were enjoying vacation in England. When they were about to leave, Mrs became ill and was advised to stay back. Mr. Balfour promised to pay her allowance every month for maintenance. After sometime, differences arose between them and Mr. Balfour stopped paying allowance. Mrs. Balfour brought action against Mr. Balfour. The court held that agreement between husband and wife was purely social and domestic in nature. There was no intention to create legal relationship. Hence, the contract was not enforceable.

 

Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd.

In this case, the court held that goods displayed along with a price tag is an invitation to offer. If the buyer is willing to purchase the goods, he can make an offer to buy the goods. The seller is not under liability to sell it. He has the right to accept or reject the offer.

 

Carlill v. Carbolic Smoke Ball

The Carbolic Smoke Ball Co. made a product called ‘’Smoke Ball’’and claimed it to cure influenza and a number of other diseases. The company published an advertisement claiming that it would pay 100 pounds to anyone who got sick with influenza after having its product according to the instructions provided in it. Mrs.Carlill caught influenza even after taking smoke balls according to the instructions.

Mrs. Carlill filed a case to claim the reward amount. The court held that when a person fulfills the conditions of an offer, it will amount to acceptance and there is no need to communicate the acceptance in contract of general nature. The acceptance of the general offer is given by conduct. Hence, the court held that Carlill accepted the offer by consuming the smoke ball as prescribed and so she was entitled to receive the reward.

 

Felthouse v. Bindley

In this case, Mr. Felthouse offered to buy a horse. He wrote a letter to Bindley stating that he wants to buy his horse at certain price and that if he does not reply, he will assume that Mr. Felthousehas accepted the offer. Benley could not reply to the letter because he was busy. Later on, Mr. Bindley refused to sell the horse. Mr. Felthouse filed a case to claim the horse. The court held that silence cannot be considered as acceptance. Acceptance has to be expressed or implied.

 

Harvey v. Facey

In this case, Harvey communicated with the defendant about a Hall Pen through Telegram.

He said, ‘’Will you sell us Bumper Hall Pen? Telegraph lowest price’’Fasey responded to this telegraph stating that the price of the Pen to be 900 pounds. Harvey replied to this, stating that they are willing to buy the Pen at the said amount. The defendant refuses to sell the Pen.He contended that he never said ‘’Yes’’ to selling. He just quoted the price. This will amount to an invitation to offer.

 

Boulton v. Jones

Jones (defendant) sent a written order for goods to a shop owned by Brocklehurst. The same day Broklehurst sold his shop to Boulton. Boulton delivered the goods to Jones without informing him that he had bought the shop. Defendant refused to make payment of the goods.

The court held that the defendant is not liable to make payment because there was no contract between them. The offer was between Jones and Brocklehurst. It was held that an offer can be accepted only by the person to whom it was made.

 

 

 

Sample Test Questions on Law of Contract

I. State whether true or false:

1. An agreement without consideration is void

        a.    Yes

         b.   No

 

 

II. Choose the right option

1. In India consideration must flow from:

        a.    Promisee Only

        b.   A party to contract only     

        c.    Only the party which receives consideration as reciprocation

        d.   Any party including non-promisee 3rd party

        e.    Any of the above

        f.      All of the above

 

 

 

 

 

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