INDIAN CONTRACT ACT T TO

INDIAN
CONTRACT
ACT

T

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TO:- BY:- SALONI RATRA
AMIT DHALL SIR BA.LLB(H)-1A
ENL. NO.:-A3211118049
ACKNOWLEDGMENT
I would like to express my thanks to the people who have helped me most throughout my project. I am grateful to my teacher MR.AMIT DHALL SIR for nonstop support for the project.

A special thank of mine goes to my colleague who helped me out in completing the project, where they all exchanged their own interesting ideas, thoughts and made this possible to complete my project with all accurate information. I wish to thank my parents for their personal support or attention who inspired me to go my own way.

At last but not the least I want to thank my friends who treasured me for my hard work and encouraged me and finally to God who made all the things possible for me till the end.
SALONI RATRA

INDEX

ABOUT CONTRACT
A contract may be defined simply as a legally binding agreement under Section 2h of Indian Contract Act 1872. Alternatively, it may be defined as a promise or set of promises which the law will enforce.

All contracts are agreements – but not all agreements are contracts.

Contracts may  be classified as either bilateral or unilateral.

1:- A bilateral contract is one where a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable.
2:-A unilateral contract is one where one party promises to do something (usually pay a sum of money) in return for an act of the other party, as opposed to a promise.
A classic example is a reward case where A promises a reward to anyone who will find his lost dog. The essence of a unilateral contract is that only one party, A, is bound to do anything. No one is bound to search for the lost dog, but if B, having seen the offer, finds the dog and returns it, he is entitled to the reward.

The most common way of making a contract is through an agreement.

AGREEMENT
CONTRACT
LAW

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CONSIDERATION
PROMISE
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ACCEPTANCE
OFFER
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AGREEMENT
According to Section 2(e) of Indian Contract Act 1872 “Every promise and every set of promises forming the consideration for each other is an agreement.”
In an agreement there is a promise from both sides.

For example, A promises to deliver his watch to B and in return B promises to pay a sum of Rs. 2,000 to A . There is said to be an agreement between A and B.

A Promise is a result of an offer by one person and its acceptance by the other.

For example, When A makes a proposal to sell his watch to B for Rs. 2,000 and B accepts his proposal ,there results a promise between two persons .

Thus, when there is a proposal from one side and the acceptance of that proposal by the other side, it results in a promise. This promise from the two parties to one another is known as an agreement.

All such agreement which satisfy the conditions mentioned in Section 10 is:-
“All agreements are contracts if they are made by the free consent of parties competent to contract ,for a lawful consideration and with a lawful object and are not herby expressly declared to be void.”
ESSENTIALS OF VALID CONTRACT
When necessary the agreement must satisfy the requirements of law regarding writing attestation or registration.

Essentials of Valid Contract:
1.Offers and Acceptance
2. Legal Relationship
3. Lawful Consideration
4. Capacity of Parties
5. Free Consent
6. Lawful Objects
7. Writting and Registration
8. Certainity
9. Possibility of Performance
10. Not Expressly Declared Void
An agreement becomes enforceable by law when it fulfils essential conditions. These conditions may be called the essentials of a valid contract, which are as follows:
1. Offers and Acceptance
For an agreement there must be a lawful offer by one and lawful acceptance of that offer from the other party. The term lawful means that the offer and acceptance must satisfy the requirements of Contract Act. The offer must be made with the intention of creating legal relations otherwise, there will be no agreement.

Example:A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B accepts this offer, there is an acceptance.

Legal Relationship
The parties to an agreement must create legal relationship. It arises when parties know that if one for the failure of a contract. Agreements of a social or domestic nature do not create legal relations and as such cannot give rise to a contract. It is presumed in commercial agreements that parties intend to create legal relations.

Example:
1. A father promises to pay his son Rs.500 every month as pocket money. Later, he refuses to pay. The son cannot recover as it is a social agreement and does not create legal relations.

2.A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same price, there is a contract as it creates legal-relationship between them.

3. A husband promised to pay his wife a household allowance of 30 pounds every month. Later, the parties separated and the husband failed to pay. The wife used for allowance. Held that the wife was not entitled for the allowance as the agreement was social and did not create any legal obligations.

3. Lawful Consideration 
The third essential of a valid contract is the presence of consideration. Consideration is “something in return.” It may be some benefit to the party. Consideration has been defined as the price paid by one party for the promise of the other. An agreement is enforceable only when both the parties get something and give something. The something given or obtained is the price of the promise and is called consideration.

Example:-
1. A agrees to sell his house to B for Rs.10 Lac is the consideration for A’s promise to sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay Rs.10 Lac. These are lawful considerations.

2. A promise to obtain for B employment in the public service, and B promise to pay 10,000 rupees to A. the agreement is void, as the consideration for it is unlawful.

4. Capacity of Parties:
An agreement is enforceable only if it is entered into by parties who possess contractual capacity. It means that the parities to an agreement must be competent to contract. According to Section 11, in order to be competent to contract the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject. A contract by a person of unsound mind is void  ab-initio (from the beginning).

If one of the parties to the agreement suffers from minority, madness, drunkenness etc., the agreement is not enforceable at law, except in some cases.

Example:
1. M, a person of unsound mind, enters into an agreement with S to sell his house for Rs.2 lac. It is not a valid contract because M is not competent to contract.

2. A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract because A is competent to contract.

5. FREE CONSENT:
It is another essential of a valid contract. Consent means that the parties must have agreed upon the same thing in the same sense. For a valid contract it is necessary that the consent of parties to the contact must be free.

Example:
1. A compels B to enter into a contract on the point of pistol. It is not a valid contract as the consent of B is not free.

6. Lawful Objects:
It is also necessary that agreement should be made for a lawful object. The object for which the agreement has been entered into must not be fraudulent, illegal, immoral, or opposed to public policy or must not imply injury to the person or property of another. Every agreement of which the object or consideration is unlawful is illegal and the therefore void.

Example:
A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its object is unlawful.

7. Writing and Registration:
According to Contract Act, a contract may be oral or in writing. Although in practice, it is always in the interest of the parties that the contract should be made in writing so that it may be convenient to prove in the court. However, a verbal contract if proved in the court will not be considered invalid merely on the ground that it not in writing. It is essential for the validity of a contact that it must be in writing signed and attested by witness and registered if so required by the law.

Example:
1. A Verbally promises to sell his book to y for Rs.200 it is a valid contract because the law does not require it to be in writing.

2. A verbally promises to sell his house to B it is not a valid contract because the law requires that the contract of immovable property must be in writing.

 
8. Certainity  :
According to Section 29 of the Contract Act, “Agreements the meaning of which are not certain or capable of being made certain are void.” In order to give rise to a valid contract the terms of the agreement, must not be vague or uncertain. For a valid contract, the terms and conditions of an agreement must be clear and certain.

Example:
1. A promised to sell 20 books to B. It is not clear which books A has promised to sell. The agreement is void because the terms are not clear.

2. A agrees to sell B a hundred tons of oil. It is not clear what is the kind of oil. The agreement is void because of it uncertainty.

 3. O agreed to purchase a van from S on hire-purchase terms. The price was to be paid over two years. Held there was no contract as the terms were not certain about rate of interest and mode of payment.

9. Possibilty of Performance:
The valid contract must be capable of performance section 56 lays down that. “An agreement to do an act impossible in itself is void.” If the act is legally or physically impossible to perform, the agreement cannot be enforced at law.

Example:
1. A agrees with B to discover treasure by magic, the agreement is not enforceable.

2. A agrees with B to put life into B’s dead brother. The agreement is void as it is impossible of performance.

10.  Not Expressly Declared Void
An agreement must not be one of those, which have been expressly declared to be void by the Act. Section 24-30 explains certain types of agreement, which have been expressly declared to be void. An agreement in restraint of trade and an agreement by way of wager have been expressly declared void.

Example:
A promise to close his business against the promise of B to pay him Rs.2 lac is a void agreement because it is restraint of trade.

 

POSITION OF MINOR

1. INTRODUCTION
The term minor is no where defined in the Contract act. But taking into consideration the wordings of Section 11 of Indian Contract Act.

A minor is a person who has not attained the age of 18 years. The age of majority of a person is regulated by Section 3 of the Indian Majority Act, 1857.

Section 3 of the INDIAN MAJORITY ACT, 1875 provides about the age of majority.

It states that :=”A person is deemed to have attained the age of majority when he completes the age of 18 years, except in the following cases a person continues to be a minor until he completes the age of 21 years”.
Exception :=
1. Where a guardian of a minor?s person or property has been appointed under the Guardians and Wards Act, 1890
2 Where the superintendence of a minor?s property is assumed by a Court of Wards.

NOTE:- Section 11 of the act expressly forbids a minor from entering into a contract.
The effect of this express prohibition is that any contract entered into by a minor is void-ab-initio regardless of whether the other party was aware of his minority or not. A person who is of 17 years old and 364 days old, he will be called as a minor in the eyes of law. Minor?s interest is watched by the law. It is not that we are against the minor that he should not enter into the contract; we are trying to give a protection to the minor so that nobody can take advantage of his minority. Because law presumes that minor?s mind is not mature enough to understand what is right, what is wrong, what is true, what is false.

LITERATURE REVIEW
In 1903 Privy Council in its major decisions has declared that contract entered into by the minor is void ab initio. Before 1903, it was not clear that contract enter into by the minor is void or voidable. There was confusion but a landmark judgement came related to the minor?s position in 1903 and that to in a very prominent case known as Mohiri Bibi VS Dharma Das Ghose.In this case the Privy Council in 1903 declared that “If a minor enters into the contract, that contract is a void ab initio”. Now when we say void ab initio, the meaning of the ab initio is that it is void from the very beginning.
One of the condition that party should be competent to contract but minor is not competent to contract because he has not attained the age of 18 and anyone who enters into the contract with the minor that contract will be void ab initio.

But simultaneously we have incorporated a clause in the law and that is that minor can enter into the contract for his benefits..

He can sue the other party to get the benefit for his welfare or for his wellbeing, but we should not lose a site of very prominent thing which is mentioned in the law and that is that if a minor enters into a agreement with anybody, then he is not personally answerable, he can sue the other party to get the benefit for his own advantage.

The other party cannot file a suit on the minor, then if the other party file a suit on the minor, then the minor will not be personally answerable, minor?s property will be answerable to pay the debt. But suppose if the minor has no property then the other party cannot take anything from the minor.

When we say the basic necessaries of the minor, we know it that law says the ultimately minor has to fulfill his basic necessaries and for that he is not personally answerable, his property will be answerable.
The exact status of a minor?s agreement has not been laid down in the act. Section10 of the INDIAN CONTRACT ACT 1872, states, that the agreement, to be valid, must be made by competent persons.

The INDIAN CONTRACT ACT simply says person who Is a major is competent to contract. A clear view that the minor?s agreement is absolutely void was provided in a landmark judgement in 1903 in the case of MOHIRI BIBI V/S DHARMODAS GHOSH.

BEFORE THIS JUDGEMENT- There were two views on the nature of a minor?s agreement, that the agreement was absolutely void or that it was only a voidable contract. The primary judicial objective of protection to minors could be served by both these legal positions. If the agreement was held as absolutely void then it would not give rise to obligation for any of the parties, and if it was viewed as a voidable contract, than, minor would have an option to have second thought on it to decide wheather to cancel it or continue it. In the MOHIRI BIBI CASE, however, sir lord north argued that if the minor?s agreement is taken as a voidable contract, than it would pre-suppose the existence of a contract at least; and, this is not possible as section 10 makes it clear that minor is not capable of making a contract at all. So, it was concluded that an agreement entered into by a minor would be an absolute nullity i.e. an absolutely void agreement, possessing no features of legal existence at all. CASE-MOHORI BIBI V/S DHARMODAS GHOSE, (1903) ILR 30 CAL 539(PC): The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favour of the defendant, Brahmo Dutt, who was a money lender to secure a loan of Rs 20,000. The actual amount of loan given was less than Rs 20,000. At the time of the transaction the attorney, who acted on behalf of the money lender, had the knowledge that the plaintiff is a minor. The plaintiff brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, mortgage was void and in-operative and the same should be cancelled. The defendant contended that the plaintiff had fraudulently misrepresented his age and therefore no relief should be given to him, and that, if mortgage is cancelled as requested by the plaintiff, the plaintiff should be asked to repay the sum of Rs 10,500 advanced to him. It was held that the law of estoppel was not applicable to the present case, where the statement (about age) is made to a person who knows the real facts and is not misled by the untrue statement and hence, the view is (a) The lender was not held entitled to the return of his money because he had given the loan with the full knowledge of the minority of the borrower. (b) The agreement was absolutely void, and; mortgage was void and inoperative and the same should be cancelled. AGGREMENT MAY BE ENFORCED FOR MINOR’S BENEFIT: The fundamental rule, given above, aims to protect the minor. However, if application of this rule could cause loss to the minor in a case, than, the agreement shall be enforced for his benefit. This can happen in cases where minor has done his part of the work or has parted with consideration from his side under the agreement, and the other party has defaulted. E.g. – a minor may have given loan to a person and the borrower may refuse to return money on the ground that the agreement is void. Minor shall be entitled to get back his money. Although the INDIAN CONTRACT ACT is silent about the right of minor for enforcing the contract, the judicial pronouncements have given the benefit to the minor. In majority of cases, where the minor is the beneficiary, the agreements are held to be valid and enforceable. CASE-GENERAL AMERICAN INSURANCE CO V/S MADANLAL SONULAL: In this case, goods were insured on behalf of the minor, and the minor was allowed to recover the insurance money after the loss. CASE-RAGHAVA CHARIAR V/S SRINIVASA (1916): P, a minor, advanced certain sum of money to Q. Q executed a mortgage of his immovable property in favour of P, as a security of money advanced by him. In this case, the mortgage can be enforced by P as the transaction is for his benefit. NO ESTOPPEL AGAINST A MINOR: The rule of estoppel is a general principle of law which lays down that if a person has, by words or conduct, led another to believe in a state of facts as true and induced him to act on that faith, such a person will be stopped by law from denying those facts later even if the facts presented earlier were untrue; thus, he will be required to face the consequences of his false statements as if it was true In number of decided cases, the court is of the opinion that where an infant?s represents fraudulently or otherwise that he is of age, and thereby induces another to enter into a contract with him, then the infant,(in a case against him), is not „estopped? from setting up infancy (as a defense), as held in GADIGEPPA BHIMAPPA METS V/S BALANGOWDA BHIMANGOWDA CASE. If the rule of estoppel is applied against a minor, it would amount to an indirect way of enforcing a void agreement. Therefore, the rule of estoppel does not apply against a minor. NO RATIFICATION ON ATTAINING MAJORITY AGE: „Ratification? means the subsequent approval or adoption of something. If a minor, on attaining the majority age, grants approval to his earlier void agreement, the approval will not make it a valid contract. For example- K, a minor takes a loan of Rs 11,000 and executes a promissory note in favour of the lender. He is not liable under this p/note, neither during minority nor after attaining majority age. If, on attaining majority age, he executes a second p/note in favour of the same person to replace the first one, the second note will also not be binding on him (CASE-SURAJ NARAIN V/S SUKHU AHIR). In the above example, the second promissory note is void as it is without consideration. However, on attaining the age of majority the person can enter a fresh agreement, with fresh consideration and terms of contract, but cannot carry on with the old agreement with some changes here and there (CASE-INDRAN RAMASWAMI V/S ANTHIAPPA CHETTIAR (1906) MLJ 422). If at the desire of a minor, services are rendered to him during minority and continued after he attains majority age, such services will form a good consideration for any promise that the major-turned minor may make later to the person rendering the services (CASE- SINDHA SHRI V/S ABRAHAM)
SERVICE AGREEMENT FOR MINOR IS NOT ENFORCEABLE: An employment agreement for a minor shall be void as it will create a personal obligation upon him to work. CASE-RAJ RANI V/S PREM ADIB: In this case, a film producer agreed with the guardian of a minor girl to give to the girl a role in his film. Later, he gave the role to another girl. In a suit by the girl, it was held that the agreement was not enforceable because the girl?s promise to work was an agreement for rendering personal service and hence a void agreement. LIABILITY FOR MINOR: A) LIABILITY FOR RESTITUTION TO MAJOR PERSONS IN SOME CASES: The rules mentioned so far favors and protect minors. They indicate that if a minor has obtained a benefit from another party in cash or kind, he would not have to provide restitution to that party, because the agreement is absolutely void. Even in the case where a person dealing with a minor has been genuinely misled by a misrepresentation of age by the minor, the non-application of „rule of estoppel? against minor will offer him protection. But, the courts have also looked into the question of placing limits on the privileged position of minor and providing restitution to the other party in case of a fraud of minor. Section 64 and 65 of the contract act, which deal with the question of restitution, are not applicable in the case of a minor?s agreement. Some relief is therefore, sought to be provided to the other party under what is called the “doctrine of equitable restitution” .The courts are empowered to order restitution from minors on equitable i.e. just and fair, ground. However, no unanimous view could emerge for quite some time on how best to protect the other party from the fraud of minor about his age. CASE- JAGER NATH SINGH V/S LALTA PRASAD: It was held that if a minor has sold property to a person by misrepresenting his age, he can recover back the property only after making restitution of the benefit received by him. CASE- CESLIE(R) LTD V/S SHEILL: It was held in this case that if a minor has been guilty of misrepresenting his age, he may be ordered to restore back the goods that he may have received if they are still traceable with him; but money received by the minor may not be traceable in specie (i.e. in the same form) with the minor, so, its restoration cannot be ordered.

CASE- KHAN GUL V/S LAKHA SINGH; Court ordered a minor to refund Rs 17,500 which he had taken as advance payment for sale of land and had later refused to complete the contract. So in this case the scope of the doctrine of equitable restitution was extended to cover cash also. In this judicial debate; THE KHAN GUL JUDGEMENT has finally prevailed and it found expression in the provisions of the specific relief act, 1963 to provide some protection to other persons. RULES FOR RESTITUTION: The following can be described as the prevailing position of law regarding restitution in favour of a person dealing with a minor A) Where the person dealing with a minor is aware of or has reason to be aware of the minority age of the opposite party, no restitution, whatsoever, shall be granted to that person. B) Where minor mislead the other person into believing him to be of majority age, restitution shall be available to the deceived party under section 33 of the specific relief act, 1963 which brings out as follows 1) where minor is the plaintiff and has requested the courts to cancel his agreement under an instrument to get his money or property restored from the other party, the court will first demand from the minor either the restoration back of what he himself obtained from the other party, or if this was not possible, to compensate him suitably. This rule is based on the principle „one who seeks equity must do equity himself too? (harder attitude towards minor). 2) where the minor is a defendant because the other party has filed a case against him for the enforcement of the agreement, the court will order the minor only to restore back that part of the property or money received from the other party which has benefitted him or his estate or which is still traceable with him in whatever form (Softer attitude towards minor)
3) Where the court has no reason to believe that restitution is necessary in the interest of justice or where the other party himself is unscrupulous towards the minor, or is not influenced by the false representation by minor, the minor may not be asked to restore back anything. B) APPRENTICESHIP AGREEMENT ARE ENFORCEABLE: Apprenticeship agreements are made for the minor?s benefit, to enable him to acquire skills under a trained person at an early age. Such agreements have been held to be enforceable. But, the requirement for this is that the apprenticeship agreement should have been made in accordance with the provisions of the apprentices act, 1961. The act lays down the following requirement for the validity of the contract a) The apprentice should not be below 14 years of age. b) He should satisfy such standard of education and physical fitness as may be prescribed. c) In case the apprentice is a minor, the contract should have been made by the guardian on behalf of the minor. C) SPECIFIC PERFORMANCE OF AGREEMENT MADE BY MINOR’S GUARDIAN: „Specific Performance? means the performance of the contract in the manner as intended by the parties. Where the guardian of a minor makes an agreement on minor?s behalf, the agreement may be enforced and its „specific performance? ordered under certain circumstances. Conditions required The courts May, in the interest of justice, order a specific performance of a minor?s agreement, if the following conditions are satisfied 1) It is made by the guardian on minor?s behalf 2) The guardian is competent to make that agreement 3) The agreement is for the benefit of the minor Guardians are not competent to make certain kinds of agreement, e.g. an agreement of service by minor or an agreement to create a personal liability for the minor. The judicial view on the above matter was not always the same
CASE- MIR SARWARJAN V/S FAKHRUDDIN M. CHAUDHURY: In this case, an agreement was made to purchase immovable property by a guardian on behalf of a minor. The minor filed a case to seek a decree of specific performance against the other party to recover possession of the property. The court rejected the case on the ground that it was not within the competence of the guardian of a minor to bind his ward in a contract to purchase immovable property; so, the agreement was void. With the passage of time, it was felt that minors were becoming active players in their family businesses or in their personal pursuits. As a result, THE MIR SARWARJAN CASE could not continue to apply on minors in their worldly dealings. Therefore, the courts have adopted a slightly more flexible approach on minor?s agreement and they order specific performance when demanded by one or the other party, if the conditions mentioned above were fulfilled. D) MINOR’S PROPERTY LIABLE FOR NECESSARIES: If a minor or any other incompetent person or anyone whom he is legally bound to support, is supplied by another person with necessaries, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person (section 68).It may be emphasized that this rule makes only the property of minor liable and not the minor personally. „Necessaries? would include such items as food, clothing, accommodation, expenses on education, professional training, training in a sport, medical treatment, marriage of a dependent of the minor or pursuing a court case etc. and not items of comfort or luxury. However, this is a very flexible term and could include many things depending upon the socio-cultural status of the minor and the immediate circumstances faced by him. Expensive clothing may not be necessaries for a middle class minor as a routine but may become necessaries on the occasion of marriage in the family or for the minor of a princely family
CASE- MIR SARWARJAN V/S FAKHRUDDIN M. CHAUDHURY: In this case, an agreement was made to purchase immovable property by a guardian on behalf of a minor. The minor filed a case to seek a decree of specific performance against the other party to recover possession of the property. The court rejected the case on the ground that it was not within the competence of the guardian of a minor to bind his ward in a contract to purchase immovable property; so, the agreement was void. With the passage of time, it was felt that minors were becoming active players in their family businesses or in their personal pursuits. As a result, THE MIR SARWARJAN CASE could not continue to apply on minors in their worldly dealings. Therefore, the courts have adopted a slightly more flexible approach on minor?s agreement and they order specific performance when demanded by one or the other party, if the conditions mentioned above were fulfilled. D) MINOR’S PROPERTY LIABLE FOR NECESSARIES: If a minor or any other incompetent person or anyone whom he is legally bound to support, is supplied by another person with necessaries, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person (section 68).It may be emphasized that this rule makes only the property of minor liable and not the minor personally. „Necessaries? would include such items as food, clothing, accommodation, expenses on education, professional training, training in a sport, medical treatment, marriage of a dependent of the minor or pursuing a court case etc. and not items of comfort or luxury. However, this is a very flexible term and could include many things depending upon the socio-cultural status of the minor and the immediate circumstances faced by him. Expensive clothing may not be necessaries for a middle class minor as a routine but may become necessaries on the occasion of marriage in the family or for the minor of a princely family