Indian Contract Act: Complete Notes

About this subject

Contract Law I runs from the first question, what a contract is, to the newest one, how contracts are made on the internet. Contracts are made every day: buying a cup of tea, booking a cab or renting a room. Connecting every rule to such everyday transactions is the easiest way to understand and remember it. For each important case, the principle matters most, because that is what is applied in examination answers.

Meaning of Contract

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Not every promise is a contract.

The law of contract tells us which promises the law will enforce, and what happens when they are broken.

Section 2(h)

The Indian Contract Act, 1872 defines a contract in Section 2(h): an agreement enforceable by law is a contract. So there must be (1) an agreement, and (2) it must be enforceable by law.

Definitions by jurists

• Sir Frederick Pollock: every agreement and promise enforceable at law is a contract.
• Anson: a legally binding agreement between two or more parties, by which rights are acquired by one or more of them to acts or forbearances on the part of the others. Forbearance means holding back from doing something.

Nature of Contract

1. Private law made by the parties. The legislature does not tell Prince at what price to sell his motorcycle. The parties decide their own rights and duties, and the law stands behind them.
2. Right in personam. A contract creates rights against a particular person. Farhan can demand the motorcycle only from Prince, not from the whole world.
3. Every contract is an agreement, but every agreement is not a contract. Social promises, many family arrangements and illegal deals are agreements the law does not enforce. As Salmond put it, the law of contract is not the whole law of agreements, nor the whole law of obligations. Some obligations, like the duty not to injure others, come from other branches such as the law of torts.
4. Foundation of commercial life. Sale of goods, partnership, companies, banking and insurance all rest on the general principles of contract.

Historical Background

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Roman and English law

In early societies a promise was mostly a moral or religious matter. Roman law, for a long time, enforced only certain types of agreements, usually those made in a proper form, for example by speaking fixed words. A bare promise without such form was a naked pact, and the Roman maxim said that no action arises from a naked pact.

• English courts at first enforced only a few claims, like a claim for a fixed debt or a promise under seal.
• From the sixteenth century they enforced ordinary promises, but only if something was given in return: the doctrine of consideration.
• In the nineteenth century freedom of contract peaked; people were seen as free and equal individuals who could make any bargain they liked.
• In the twentieth century the law recognised that bargaining power is often unequal and began protecting weaker parties, for example through consumer protection laws.

The Indian story

Before 1872 there was no single contract law for the whole country.

• In the presidency towns of Calcutta, Madras and Bombay, English law was largely applied.
• The Act of Settlement, 1781 provided that in matters of contract, Hindus would be governed by Hindu law and Muslims by Muslim law; where only one party was a Hindu or a Muslim, the law and usage of the defendant applied.
• Outside the presidency towns, courts often decided by justice, equity and good conscience, which in practice frequently meant English law.

To end the confusion, an Indian Law Commission sitting in England prepared a draft. The Indian Contract Act was passed on 25 April 1872 and came into force on 1 September 1872. Sir James Fitzjames Stephen, then Law Member of the Governor General's Council, supervised its final revision and added the definitions in Section 2. The Act originally covered sale of goods and partnership too; those chapters were replaced by the Sale of Goods Act, 1930 and the Indian Partnership Act, 1932.

Sir Henry Maine: from status to contract

Sir Henry Maine, the British legal historian, published Ancient Law in 1861 and served in India as Law Member of the Governor General's Council from 1862 to 1869.

The movement of the progressive societies has hitherto been a movement from status to contract.

• Status is a position in society fixed by birth: family, caste, gender or class. In ancient societies rights and duties were decided mostly by status; in ancient Rome, a son under his father's power could not own property of his own.
• Contract means obligations a person chooses by his own free will.

Progressive societies moved from birth deciding a person's duties to his own agreement deciding them. Hitherto means "until now": Maine described history up to his own time and did not promise the movement would continue forever. He contrasted progressive societies with stationary societies, which changed very little.

Maine's second idea: the positive duty resulting from one man's reliance on the word of another is among the slowest conquests of advancing civilization. Society took very long to accept that relying on another's word creates a legal duty to keep it; early law punished physical wrongs like theft and assault long before it enforced mere promises. A mature law of contract is a sign of an advanced civilization.

Modern law has, in some ways, moved back towards status: a consumer, worker, tenant or minor gets special protection because of his or her position, whatever the contract says.

Key Definitions Under Section 2

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• Clause (a), Proposal: 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. It is the Indian word for the English offer. Prince saying to Farhan, "I will sell you my phone for ₹10,000, do you agree?" is a proposal.
• Clause (b), Acceptance: when the person to whom the proposal is made signifies his assent to it, the proposal is accepted. A proposal, when accepted, becomes a promise.
• Clause (c): the person making the proposal is the promisor; the person accepting it is the promisee.
• Clause (d), Consideration: in simple words, something of value given in return for a promise, at the desire of the promisor. The ₹10,000 is consideration for the promise to give the phone; the phone is consideration for the promise to pay.
• Clause (e), Agreement: every promise and every set of promises, forming the consideration for each other.
• Clause (f), Reciprocal promises: promises which form the consideration, or part of the consideration, for each other.
• Clause (g), Void agreement: an agreement not enforceable by law; it has no legal effect at all.
• Clause (h), Contract: an agreement enforceable by law.
• Clause (i), Voidable contract: an agreement enforceable by law at the option of one or more of the parties, but not at the option of the other or others. It is valid until the party with the choice cancels it. If Prince forces Farhan to sign by threatening him, Farhan may cancel it or keep it.
• Clause (j), Void contract: a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. It was valid when made but became void later, e.g. because performance became impossible.

Void, voidable and valid compared

Concept	Provision	Position
Void agreement	Section 2(g)	Dead from birth.
Void contract	Section 2(j)	Born alive but died later.
Voidable contract	Section 2(i)	Alive, but one party holds the power to end it.
Valid contract	Section 2(h)	Fully alive and binding on both sides.

Essential Elements of a Contract

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Section 10: 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 expressly declared by this Act to be void. It also keeps alive any law requiring a contract to be in writing, or in the presence of witnesses, or relating to registration of documents.

The essential elements:

1. An agreement (proposal and acceptance).
2. Intention to create legal relations.
3. Competent parties.
4. Free consent.
5. Lawful consideration and lawful object.
6. Not expressly declared void by the Act.
7. Certainty of terms.
8. Possibility of performance.
9. Writing or registration where a law requires it.

This list is also the map of the subject: the elements are followed by how contracts end and the remedies, relations resembling contracts, and electronic contracts.

Agreement: Proposal and Its Essentials

Sections 3 to 9 deal with formation of agreement: one person proposes, the other accepts, and their minds meet on the same terms. From Section 2(a), the essentials of a valid proposal are:

1. Willingness to do or to abstain. An offer to sell a phone is willingness to do; a promise not to file a suit is willingness to abstain.
2. With a view to obtaining assent. A mere statement of intention is not a proposal. "I am thinking of selling my car next year" only shares a plan.
3. Definite terms, or terms capable of being made definite. Vague terms give a court nothing to enforce.
4. Communication. A proposal is complete only when it comes to the knowledge of the person to whom it is made.
5. Express or implied (Section 9). A promise is express when made in words, and implied when made otherwise than in words. A bus standing at a stop with its door open is an implied proposal to carry passengers at the fixed fare; boarding it is implied acceptance.
6. Specific or general. A specific proposal is made to a particular person, who alone can accept. A general proposal is made to the public, like a reward notice, and anyone who fulfils its conditions can accept.
7. Silence cannot be prescribed as acceptance (Felthouse v. Bindley, below).

Three special situations

• Counter proposal: a reply that changes the terms. It is a new proposal that rejects the original. If Prince offers his car for ₹5 lakh and Farhan offers ₹4 lakh, and Prince refuses, Farhan cannot go back and accept at ₹5 lakh; the first offer is dead.
• Cross proposals: two people make identical proposals to each other, each unaware of the other's. The accepted view is that there is no contract yet, since neither is an acceptance of the other.
• Standing offer: an offer open for a period, to be accepted again and again, e.g. a supplier's offer to supply bricks to a government department as and when orders are placed during one year. Each order is an acceptance creating a separate contract, so the supplier may withdraw for the future but must supply orders already placed.

Offer and Invitation to Offer

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Offer	Invitation to offer
A final expression of willingness to be bound.	Only an invitation to others to make offers; the inviter does not intend to be bound the moment someone says yes.

Common invitations to offer

• Goods displayed with a price tag. When Prince takes the phone to the counter, he makes the offer and the shopkeeper accepts there. If the display were an offer, the shopkeeper might be bound to sell the same phone to ten people; he must remain free to choose.
• Price lists, catalogues, menu cards and most newspaper advertisements for sale of goods.
• Auctions: the call for bids is an invitation, each bid is an offer, and the fall of the hammer is acceptance; a bidder can withdraw before the hammer falls.
• Tenders: a government notice inviting tenders is an invitation; the contractor's tender is the offer, which the department may accept or reject.

Standard Form Contracts

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A standard form contract is a printed or pre-drafted contract prepared by one party, usually a large company, and offered on a take it or leave it basis: insurance policies, bank loan forms, airline tickets, online terms and conditions. They save time and cost, since a company dealing with lakhs of customers cannot negotiate with each. But the weaker party has no real choice: he cannot bargain, often does not read the terms, and unfair clauses can hide in small print, such as a clause excluding liability even for negligence.

Legal protections

1. Reasonable notice: terms must be brought to the other party's reasonable notice at or before the time of contract. A term printed on a receipt handed over after the contract may not bind.
2. Contra proferentem: an ambiguous term is read against the party who drafted it.
3. Public policy (Section 23): an unfair and unreasonable term in a contract between parties of grossly unequal bargaining power may be struck down.
4. Consumer Protection Act, 2019: Section 2(46) defines an unfair contract, and the State and National Consumer Commissions may declare unfair terms null and void. A gym may thus be unable to rely on small print that fees will never be refunded, even if it shuts down for good.

Acceptance and Its Essentials

Under Section 2(b), acceptance means signifying assent to a proposal. A valid acceptance must be:

1. Absolute and unqualified (Section 7). A new condition makes it a counter proposal.
2. In a usual and reasonable manner, unless the proposal prescribes the manner. If the proposal prescribes a manner and acceptance is made in some other manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist on the prescribed manner; if he does not, he is taken to have accepted the acceptance.
3. Communicated to the proposer by the acceptor or someone authorised by him. A mental decision is not enough.
4. Made by the person to whom the proposal was made.
5. Given while the proposal is alive, before it lapses or is revoked.
6. Possibly by conduct (Section 8): by performing the conditions of a proposal, or accepting any consideration offered with it.
7. Not mere silence, as a rule.

Communication and Revocation

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A proposal, an acceptance and a revocation take effect only when communicated. Section 3: communication may be made by any act or omission of the party by which he intends to communicate it, or which has the effect of communicating it.

Section 4: when communication is complete

Communication of	Complete as against	When
Proposal	The person to whom it is made	When it comes to his knowledge.
Acceptance	The proposer	When put in a course of transmission to him, so as to be out of the acceptor's power.
Acceptance	The acceptor	When it comes to the proposer's knowledge.
Revocation	The person who makes it	When put in a course of transmission.
Revocation	The person to whom it is made	When it comes to his knowledge.

Instantaneous communication

Section 5: time for revocation

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

In the postal example, Prince could revoke only if his revocation reached Farhan before Farhan posted his acceptance on Monday; Farhan could revoke his acceptance until Thursday.

Section 6: how a proposal is revoked

1. By the proposer communicating notice of revocation.
2. By lapse of the prescribed time for acceptance or, if none, a reasonable time. (An offer "open till Friday" lapses if Farhan replies on Saturday.)
3. By the acceptor's failure to fulfil a condition precedent to acceptance.
4. By the death or insanity of the proposer, if it comes to the acceptor's knowledge before acceptance.

Intention to Create Legal Relations

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The Act does not mention this element expressly, but Indian courts have accepted it from English law, and it fits Section 2(h), which speaks of agreements enforceable by law. The law enforces only agreements the parties intended to have legal consequences.

Type of agreement	Presumption
Social and domestic (husband and wife, friends)	No intention to create legal relations.
Commercial	Intention to create legal relations.

Both presumptions can be rebutted by evidence.

Capacity to Contract

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Section 10: what agreements are contracts

Under Section 10, 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 expressly declared by the Act to be void. This topic deals with the words "parties competent to contract".

The law cares about capacity because some people, due to age or mental condition, cannot properly judge their own interests. The law protects them, even if that sometimes causes loss to the other party.

Section 11: who is competent to contract

Every person is competent to contract who:

1. is of the age of majority according to the law to which he is subject;
2. is of sound mind; and
3. is not disqualified from contracting by any law to which he is subject.

Minors

Age of majority

Under the Majority Act, 1875, a person domiciled in India attains majority on completing 18 years. Earlier, a minor under a court-appointed guardian attained majority only at 21. That rule was removed in 1999, but several older cases turned on it.

Effect of a minor's agreement: void or voidable?

The Act only says that a minor is not competent. Courts long differed on whether his agreement was void or merely voidable, until the Privy Council settled the question.

Main rules about minors' agreements

1. Void: a minor's agreement cannot be enforced against the minor, and as a rule not by him either.
2. No ratification: a minor cannot ratify the agreement on attaining majority, because a void agreement has nothing to approve. A promise made after majority to repay a loan taken during minority is void for want of consideration; the parties must make a fresh contract with fresh consideration.
3. No estoppel: a minor who lies about his age is not bound because of that lie. The law of contract protects him from his own immaturity, and estoppel, now in Section 121 of the B.S.A., cannot make a void agreement valid. He may, however, be made to restore what he obtained by his fraud.
4. No disguised tort claim: a minor cannot be made liable in tort where the tort claim is really a disguised way of enforcing the void contract.
5. Promisee or beneficiary: a minor can be a promisee or beneficiary. A minor who has fully performed his side, for example by advancing money on a mortgage, can enforce the mortgage.
6. Agent and partner: under Section 184, a minor may act as an agent so as to bind his principal to third persons, but he is not personally responsible to the principal. Under Section 30 of the Indian Partnership Act, a minor cannot become a partner, but may be admitted to the benefits of a partnership with the consent of all partners.
7. Guardian's contracts: a minor cannot sue on a contract of service made for him by his guardian, because his own promise to serve cannot be consideration. A guardian may, however, bind the minor's property by a contract within his powers and for the minor's benefit.
8. Necessaries: very important, the minor's property is liable for necessaries supplied to him under Section 68.

Restitution Against Minors and the Specific Relief Act

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Suppose a minor lies about his age, takes money or property, and then pleads that the agreement is void. Should he keep the benefit? Section 65 cannot help the other party because, as Mohori Bibee held, it presupposes competent parties. The courts turned to equity and the Specific Relief Act, and were divided.

Minor as plaintiff

Minor as defendant: two conflicting Full Benches

Point	Khan Gul v. Lakha Singh (Lahore FB)	Ajudhia Prasad v. Chandan Lal (Allahabad FB)
Restitution against minor defendant	Yes; benefit restored whether plaintiff or defendant	No money decree; relief only when minor is plaintiff
Reasoning	Plaintiff/defendant distinction a mere accident	Money decree would enforce the void agreement in another form
Extent	Benefit obtained by false representation	Only specific property still traceable

Section 33, Specific Relief Act, 1963

The conflict is now largely resolved by Section 33:

• Sub-section (1): when a court cancels an instrument, it may require the party who gets relief to restore any benefit received and pay such compensation as justice requires. So a minor plaintiff can be put on terms.
• Sub-section (2)(b): where a defendant successfully resists a suit on the ground that the agreement is void because he was not competent under Section 11, and he received any benefit from the other party, the court may require him to restore it, to the extent that he or his estate has benefited.

The Law Commission had preferred the view in Khan Gul, and this provision largely follows it.

Necessaries Supplied to a Minor (Section 68)

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If a person incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the supplier is entitled to be reimbursed from the property of the incapable person.

• Applies to minors and persons of unsound mind.
• Covers supplies to dependants he is legally bound to support, like his wife or child.
• Goods must be necessaries suited to his condition in life.
• Reimbursement only from his property; he is not personally liable.
• Rationale: otherwise no one would supply food, clothes or medicine to a minor who needs them.

What are necessaries?

Not only things needed to stay alive, but things suited to the minor's station in life, like clothes, lodging, education and medical treatment. Luxuries are not necessaries, and even useful things are not necessaries if the minor already has enough of them.

Point	English law (Roberts v. Gray)	Indian law (Raj Rani; Section 68)
Executory contract for the minor's benefit	Enforceable, like a contract for necessaries	Void
Liability	Minor personally liable in damages	Only for necessaries actually supplied, and only against the minor's property

Persons of Unsound Mind (Section 12)

A person is of sound mind for the purpose of making a contract if, at the time he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

Usual condition	Occasional condition	Rule
Unsound mind	Sound mind	May contract when of sound mind
Sound mind	Unsound mind	May not contract when of unsound mind

Illustrations: a patient in a mental hospital who is at intervals of sound mind may contract during those intervals. A sane man delirious from fever, or so drunk that he cannot understand the terms or judge their effect, cannot contract while that condition lasts.

Burden of proof: the person alleging unsoundness must prove it. But if a person is usually of unsound mind, whoever relies on the contract must prove it was made in a lucid interval.

Persons Disqualified by Law

The Act does not list them, so other laws must be consulted:

1. Alien enemy: a citizen of a country at war with India, or anyone living and doing business there, cannot contract with Indians during the war without the permission of the Central Government.
2. Foreign sovereigns and ambassadors: can contract, but generally cannot be sued in Indian courts without the consent of the Central Government (Section 86, Code of Civil Procedure).
3. Insolvent: cannot deal with property vested in the official receiver until discharged.
4. Companies and statutory corporations: can act only within the powers given by their constitution or statute. A contract beyond those powers is ultra vires (beyond the powers) and void.

Capacity of a State to contract

Consideration: Meaning and Definition

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The law does not enforce a bare promise, where one person gives everything and gets nothing; it enforces a bargain. Consideration is the price for which the promise is bought, in Latin quid pro quo ("something for something").

• Three time periods: "has done" (past), "does" (present), "promises to do" (future).
• Two kinds of conduct: doing and abstaining, so consideration may be positive or negative.

Section 2(f): promises which form the consideration, or part of it, for each other are reciprocal promises, like the promise to deliver goods and the promise to pay for them.

Essentials of Consideration

1. At the desire of the promisor

An act done at the desire of a third person, or done voluntarily, is not consideration.

2. May move from the promisee or any other person

This is a special feature of Indian law.

3. May be past, present or future

English law generally says past consideration is no consideration. The Indian Act, by the words "has done or abstained from doing", accepts past consideration, provided the past act was done at the desire of the promisor.

4. Must be real and have some value in the eye of the law

It must not be illusory or impossible.

5. Performing an existing legal duty is not consideration

6. The promisee's act can itself be consideration

This is the case in a unilateral contract, as in Carlill.

Adequacy of Consideration

Consideration need not equal the promise in value. Explanation 2 to Section 25: an agreement to which the promisor's consent is freely given is not void merely because the consideration is inadequate, but inadequacy may be taken into account in deciding whether consent was freely given.

Only the parties can judge a thing's value to them. Farhan may sell his old guitar to a friend for 100 rupees because he wants it to go to a good home. But a shockingly low price makes the court look closely for coercion, undue influence or fraud.

Exceptions to Consideration (Section 25)

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An agreement without consideration is void, except in three cases.

Exception 1: Natural love and affection

All these conditions must be met: the agreement is (1) in writing, (2) registered under the law for registration of documents, (3) made on account of natural love and affection, (4) between parties in a near relation to each other.

These two cases are learnt as a pair:

Point	Rajlukhy Dabee	Bhiwa v. Shivaram
What the document showed	Only quarrels	A wish to be reconciled
Result	Not enforceable	Enforced

Exception 2: Compensation for past voluntary services

A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something the promisor was legally compellable to do.

Past consideration (Section 2(d))	Second exception (Section 25)
Past act done at the desire of the promisor	Past act done voluntarily, not at the promisor's desire; the later promise still binds

Exception 3: Promise to pay a time-barred debt

A written promise, signed by the debtor or his authorised agent, to pay wholly or in part a debt barred by the law of limitation.

Other cases where consideration is not needed

• Explanation 1 to Section 25: the section does not affect the validity of a gift actually made.
• Section 185: no consideration is needed to create an agency.
• Section 63: a promisee may accept less than what is due in full satisfaction, without fresh consideration. If Prince accepts 2,000 rupees in full settlement of a 5,000 rupee debt, the whole debt is discharged, unlike the traditional English rule.

Charitable Subscriptions

Whether a promise to donate money for a public cause is enforceable depends on whether the promisee did something on the faith of the promise, at the implied desire of the subscriber.

Unlawful Consideration and Its Effect

• Section 23: an agreement whose consideration or object is unlawful is void.
• Section 24: if the consideration or object is unlawful even in part, the whole agreement is void.
• Generally, a court will not help either party recover money paid under an agreement both knew was illegal.

These rules are studied in detail later, with unlawful agreements.

Doctrine of Privity of Contract

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Privity means the relationship between the parties to a contract. Only a party to a contract can sue on it; a stranger cannot enforce it, even if it was made for his benefit.

Exceptions to privity

1. Trust or charge: a third person in whose favour a contract creates a trust or charge on property can enforce it as beneficiary.
2. Family arrangements and marriage settlements: a family member for whose marriage expenses or maintenance a family settlement or partition provides can enforce it.
3. Acknowledgment or estoppel: if Farhan gives Prince money to pay a shopkeeper, and Prince tells the shopkeeper he holds it for him, the shopkeeper can sue Prince.
4. Agency: a principal can sue and be sued on contracts made through his agent.
5. Assignment: contractual rights, like the right to receive money, can be transferred, and the assignee can enforce them.
6. Covenants running with the land.

In India, a related idea appears in Section 40 of the Transfer of Property Act: certain contractual obligations attached to land can be enforced against a later owner who takes the land with notice of them, or without paying for it.

In England, the strict rule was reformed by the Contracts (Rights of Third Parties) Act, 1999, which lets a third party enforce a term that expressly gives him that right, or that purports to benefit him, unless the parties intended otherwise. India has no such general statute.

Privity of Contract and Privity of Consideration

• Privity of contract: only a party to the contract can sue.
• Privity of consideration: only a person who gave consideration can sue.

Rule	English common law	Indian law
Privity of contract	Required	Required
Privity of consideration	Required (Tweddle v. Atkinson)	Not required (Venkata Chinnaya Rao), as Section 2(d) says "the promisee or any other person"

Free Consent and Consensus ad Idem

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Section 10 requires an agreement to be made by the free consent of the parties. Two questions arise: what is consent, and when is consent free?

Consent (Section 13)

Two or more persons are said to consent when they agree upon the same thing in the same sense (consensus ad idem). It is not enough that both say yes; they must say yes to the same thing, understood in the same way.

Free consent (Section 14)

Consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake, subject to Sections 20, 21 and 22. Consent is "so caused" when it would not have been given but for the existence of such factor. This is the "but for" test: would the person have agreed but for the pressure or deception? (See Smith v. Chadwick under fraud.)

Coercion (Section 15)

Coercion is:

• committing, or threatening to commit, any act forbidden by the Indian Penal Code; or
• unlawfully detaining, or threatening to detain, any property,

to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. By the Explanation, it is immaterial whether the Indian Penal Code is in force in the place where the coercion is employed.

The Indian Penal Code has been replaced by the B.N.S., 2023, from 1 July 2024. Under the General Clauses Act and a government notification of 2024, references to the old Code in other laws are read as references to the B.N.S. Section 15 therefore now effectively speaks of acts forbidden by the B.N.S.

Features

• It may be directed against any person: a threat to harm Farhan's child is coercion against Farhan.
• It may come from anyone, even a stranger to the contract.
• A threat to file a genuine civil suit is not coercion, because filing a suit is lawful.

Modern position: the B.N.S. has no general offence of attempting suicide, except an attempt made to compel or restrain a public servant from doing his official duty (Section 226). Abetment of suicide is still an offence. Part of the reasoning has therefore weakened and its effect on the case is not yet settled; it is an open question, though the case remains the leading authority.

An agreement to drop a criminal prosecution in return for money may itself be void under Section 23.

Effect (Section 19): when consent is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

Undue Influence (Section 16)

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Coercion is pressure by threat; undue influence is pressure through a relationship.

Both elements are needed; a relationship alone is not enough. A father who buys his son's land at a fair price, with the son's free agreement, does not use undue influence.

Presumed domination: Section 16(2)

A person is deemed to be in a position to dominate the will of another where he:

• holds a real or apparent authority over the other (e.g. parent, employer);
• stands in a fiduciary relation (trust and confidence) to the other (e.g. doctor and patient, lawyer and client, spiritual guru and disciple); or
• contracts with a person whose mental capacity is temporarily or permanently affected by age, illness, or mental or bodily distress.

Burden of proof: Section 16(3)

Where a person in a position to dominate the will of another contracts with him, and the transaction appears, on its face or on the evidence, to be unconscionable (grossly unfair), the dominating party must prove that the contract was not induced by undue influence. A related rule, now in Section 114 of the B.S.A., requires a person in a position of active confidence to prove the good faith of a transaction with the person who trusted him.

Illustrations

• A father misusing his influence to obtain from his son, just come of age, a bond for more than is due: undue influence.
• A medical attendant obtaining an unreasonable fee from an old and sick patient: undue influence.
• A debtor already indebted to his village moneylender takes a fresh loan on apparently unconscionable terms: the moneylender must disprove undue influence.
• A banker lending at an unusually high rate when money is scarce in the market: ordinary business, not undue influence.

Pardanashin women

Courts specially protect a pardanashin woman, one who lives in complete seclusion behind the veil. The Supreme Court has held that whoever relies on a transaction with such a woman must prove that she executed it after clearly understanding its nature, so that it was her mental act and not merely her physical act.

Effect (Section 19A): a contract induced by undue influence is voidable at the option of the party whose consent was so caused. It may be set aside absolutely or, if that party has received any benefit under it, on such terms and conditions as the court thinks just.

Coercion and undue influence compared

Basis	Coercion	Undue influence
Nature	Pressure by threat or a forbidden act, often a crime	Mental pressure; misuse of trust or authority; not a crime
Relationship	None needed	Arises from a relationship in which one can dominate the other
Who exercises it	Anyone, even a stranger, against anyone	The dominating party to the contract
Effect	Voidable (Section 19)	Voidable; court may set aside on just terms (Section 19A)

Fraud (Section 17)

▶ Watch this part of the lecture (1:26:11)

Fraud means and includes any of the following acts committed by a party to the contract, or with his connivance, or by his agent, with intent to deceive another party or his agent, or to induce him to enter into the contract:

1. the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
2. the active concealment of a fact by one having knowledge or belief of the fact;
3. a promise made without any intention of performing it;
4. any other act fitted to deceive;
5. any act or omission which the law specially declares to be fraudulent.

The key idea in fraud is dishonesty.

Silence (Explanation to Section 17)

Mere silence as to facts likely to affect a person's willingness to contract is not fraud, unless the circumstances make it the duty of the silent person to speak, or the silence is in itself equivalent to speech.

Effect of fraud (Section 19)

• The contract is voidable at the option of the deceived party.
• He may instead insist on performance and on being put in the position he would have been in had the representations been true.
• He may also claim damages in the tort of deceit.

Exception: if consent was caused by misrepresentation or fraudulent silence, the contract is not voidable if the party had the means of discovering the truth with ordinary diligence. This does not protect active fraud: a deliberate liar cannot say the victim should have checked.

Misrepresentation (Section 18)

Misrepresentation is a false statement made innocently, without intention to deceive. Its three forms are:

1. positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
2. any breach of duty which, without intent to deceive, gains an advantage to the person committing it by misleading another to his prejudice;
3. causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is its subject.

Fraud and misrepresentation compared

Basis	Fraud	Misrepresentation
Intention	Intends to deceive	Honestly believes the statement
Remedy	Voidable; also damages in tort	Voidable; main remedy is rescission
Ordinary diligence exception	Not available to one guilty of active fraud	Available
Crime	May also be a crime	Not a crime

Mistake of Fact and Law

▶ Watch this part of the lecture (1:32:55)

Mutual mistake of fact (Section 20)

Where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation: an erroneous opinion as to the value of the thing is not a mistake of fact. If both think a painting is worth ten thousand rupees and it is worth one lakh, the contract stands.

Mistake of law (Section 21)

A contract is not voidable for a mistake as to any law in force in India, since everyone is presumed to know the law of the land. A mistake as to a law not in force in India has the same effect as a mistake of fact. Illustration: a contract made on the mistaken belief that a debt is barred by the Indian law of limitation is not voidable.

Unilateral mistake (Section 22)

A contract is not voidable merely because one party was under a mistake as to a matter of fact. If Prince buys a phone thinking it has a better camera than it does, without any misrepresentation by the seller, he is bound. But a mistake as to the identity of the other party, where identity is vital, can prevent a contract altogether.

Basis	Cundy v. Lindsay	Phillips v. Brooks
Dealing	By letters; seller intended to deal only with a particular existing firm	Face to face; seller presumed to intend to deal with the person in front of him
Contract	Void	Voidable
Innocent third party	Gets nothing	Protected if he buys before the contract is avoided

Effect of the Vitiating Factors

• Coercion, fraud and misrepresentation: contract voidable (Section 19).
• Undue influence: voidable, with power to impose just terms (Section 19A).
• Mutual mistake of an essential fact: agreement void (Section 20).
• No consensus at all, as in Raffles v. Wichelhaus: no agreement.

A voidable contract is valid until avoided; the innocent party may affirm or rescind it. On rescission, Section 64 requires him to restore any benefit received, and under Section 66 rescission is communicated like a proposal. The right to rescind is lost if he affirms the contract after knowing the truth or being free of the pressure (Muthiah Chetti), if he delays unreasonably, or if an innocent third party acquires rights first (Phillips v. Brooks).

Unlawful Object and Consideration

▶ Watch this part of the lecture (1:38:50)

Freedom of contract is not unlimited. Contracts cannot be used to commit crimes, cheat others or harm the public, so the law limits this freedom, mainly in Sections 23 to 30. Contingent contracts follow in Sections 31 to 36.

Section 23

The consideration or object of an agreement is lawful unless it:

1. is forbidden by law;
2. is of such a nature that, if permitted, it would defeat the provisions of any law;
3. is fraudulent;
4. involves or implies injury to the person or property of another; or
5. is regarded by the court as immoral or opposed to public policy.

Every agreement of which the object or consideration is unlawful is void. Consideration is what each party gives in return; object is the purpose of the agreement. If Prince lends money to Farhan so that Farhan can buy smuggled goods, the money is lawful consideration but the object is unlawful, so the agreement is void.

The heads explained

• Forbidden by law: e.g. an agreement to sell liquor where the law prohibits it.
• Defeating the provisions of law: not directly forbidden, but designed to get around a law, e.g. a debtor handing his property to a friend so creditors cannot reach it.
• Fraudulent: e.g. an agreement to cheat a third person.
• Injury to person or property: e.g. an agreement to beat up a rival or damage his crops.
• Immoral: confined by courts mainly to sexual immorality; an agreement to let a house knowing it will be used for prostitution is void, and the landlord cannot sue for rent.
• Opposed to public policy: harmful to the interest of the public at large. Illustrations to Section 23: paying money to obtain a job in the public service, and agreeing to drop a prosecution for robbery in return for the value of the stolen goods. Both are void.

Section 24: unlawful in part

If any part of a single consideration for one or more objects, or any one or part of any one of several considerations for a single object, is unlawful, the agreement is void. If Prince agrees, for one single salary, to manage Farhan's business comprising a legal and an illegal trade, the whole agreement is void, as the parts cannot be separated.

Void Agreements

Besides agreements with unlawful object or consideration and agreements without consideration under Section 25 (void except in its three cases), the Act expressly declares the following agreements void.

Restraint of marriage (Section 26)

Every agreement in restraint of the marriage of any person other than a minor is void. Marriage is a basic personal freedom that no one may buy away. An agreement restraining a minor's marriage is not void under this section, which fits the policy against child marriage.

Restraint of trade (Section 27)

▶ Watch this part of the lecture (1:42:48)

Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is, to that extent, void. Reasons: every person has a right to earn a living, and the public benefits from competition. "To that extent" means only the restraining part is void; the rest may survive.

Exception: sale of goodwill

A seller of the goodwill (reputation and customers) of a business may agree with the buyer to refrain from carrying on a similar business within specified local limits, so long as the buyer, or anyone deriving title to the goodwill from him, carries on a like business there, provided the limits appear to the court reasonable having regard to the nature of the business.

English law (Nordenfelt)	Indian law (Section 27, Madhub Chunder)
Restraint valid if reasonable in the interests of the parties and of the public	Every restraint, total or partial, reasonable or unreasonable, is void, except sale of goodwill

Indian position summarised

• Any restraint, total or partial, on lawful trade, profession or business is void, except sale of goodwill.
• A restraint operating during the term of a contract (e.g. not working for a competitor while employed) is generally valid.
• A restraint operating after the contract ends (e.g. never working for a rival after leaving) is void.
• An agreement to keep trade secrets confidential is valid, as it does not stop anyone working.

Restraint of legal proceedings (Section 28)

Void to that extent are agreements which:

• restrict a party absolutely from enforcing his rights under or in respect of any contract by the usual legal proceedings in the ordinary tribunals;
• limit the time within which he may enforce his rights; or
• (after a 1997 amendment) extinguish the rights of, or discharge from liability, any party on the expiry of a specified period, so as to restrict enforcement of rights.

Access to justice is a public right, and limitation is fixed by law, not private agreement. A clause that Prince will never go to court, or that any claim must be filed within one month when the law allows three years, is void.

Exceptions

• Agreements to refer future or existing disputes to arbitration are valid; arbitration only provides a different forum.
• Under an amendment in force from 2013, a bank or financial institution may provide in a guarantee that rights will be extinguished on expiry of a specified period, not less than one year from the specified event.
• Choosing one of several courts already having jurisdiction is valid, but parties cannot confer jurisdiction on a court that has none.

Uncertain agreements (Section 29)

Agreements whose meaning is not certain, or capable of being made certain, are void; a court cannot enforce a promise it cannot identify.

Wagering Agreements (Section 30)

▶ Watch this part of the lecture (1:53:06)

Agreements by way of wager are void. No suit lies to recover anything alleged to be won on a wager, or entrusted to anyone to abide the result of any game or uncertain event on which a wager is made.

Essentials

1. A promise to pay money or money's worth depending on an uncertain event.
2. Each party stands to win or lose.
3. Neither controls the event.
4. Neither has any real interest in the event other than the stake.

If Prince and Farhan bet one thousand rupees on whether it will rain tomorrow, that is a void wager.

Transactions that are not wagers

• Horse race prizes: Section 30 does not render unlawful a subscription or contribution, or agreement to subscribe or contribute, towards a prize of five hundred rupees or more for the winner of a horse race.
• Games of skill: the Supreme Court has held that competitions in which success depends substantially on skill are not gambling.
• Insurance: the insured has an insurable interest and suffers real loss if the event happens; insurance is a contract of indemnity, not a wager.
• Commercial contracts to buy or sell goods or shares at a future date, unless both parties intend never to deliver but only to settle price differences.

Effect: a wager is void but, in most of India, not illegal. As Gherulal Parakh held, collateral transactions, like a partnership to carry on such dealings or a loan to pay off a lost bet, are not necessarily affected.

Wagering agreement	Contingent contract
A kind of contingent agreement	Not always a wager
Each party may win or lose; no interest in the event except the stake	A party has a real interest in the event (e.g. insurance)
Void	Valid

Contingent Contracts (Sections 31 to 36)

Illustration: a contract to pay a person ten thousand rupees if his house is burnt. Insurance and guarantees are common examples.

Rules of enforcement

• Section 32 (event happening): cannot be enforced until the uncertain future event has happened; if the event becomes impossible, the contract becomes void. If Prince promises Farhan fifty thousand rupees if Farhan marries Zoya, and Zoya dies unmarried, the contract becomes void.
• Section 33 (event not happening): enforceable when the happening of the event becomes impossible, and not before; e.g. a promise to pay if a ship does not return becomes enforceable when the ship sinks.
• Section 34 (future conduct of a living person): the event is considered impossible when that person does anything making it impossible that he should so act within any definite time, or otherwise than under further contingencies. If Prince agrees to pay Farhan if Farhan marries Zoya, and Zoya marries someone else, the marriage is now considered impossible, although her husband may die and she may later marry Farhan.
• Section 35 (fixed time): a contract contingent on an event happening within a fixed time becomes void if it does not happen within that time or becomes impossible before it expires. A contract contingent on an event not happening within a fixed time may be enforced when the time expires without the event, or earlier if it becomes certain it will not happen.
• Section 36 (impossible events): contingent agreements dependent on an impossible event are void, whether or not the impossibility is known to the parties, e.g. a promise to pay if two straight lines should enclose a space.

Cases

Discharge of Contract

▶ Watch this part of the lecture (2:00:19)

Discharge means that the contract comes to an end and the parties are freed from their obligations under it.

Discharge by Performance

Performance is the most natural mode of discharge: when Prince delivers the phone and Farhan pays the price, the contract is discharged.

Section 37

• The parties must perform, or offer to perform, their promises, unless performance is dispensed with or excused by law.
• Promises bind the representatives of a promisor who dies before performance, unless a contrary intention appears.

Tender: attempted performance (Section 38)

Performance may be actual or attempted. Attempted performance, an offer to perform, is called a tender. If a proper tender is refused, the promisor is not responsible for non-performance and does not lose his rights under the contract. A valid tender must:

• be unconditional;
• be made at the proper time and place;
• give the promisee a reasonable opportunity to see that the promisor is able and willing to do the whole of what he promised;
• where goods are offered, give the promisee a fair chance to check them.

Other provisions on performance

• Sections 40 to 50: who must perform; time and place of performance.
• Sections 51 to 58: reciprocal promises.
• Section 55: time as the essence of the contract.

Time is of the essence	Time is not of the essence
Failure to perform in time makes the contract voidable at the option of the promisee.	The contract does not become voidable, but the promisee can claim compensation for the delay.
A promisee who accepts late performance cannot claim compensation for the delay unless he gives notice of his claim at the time of accepting.	—

Appropriation of Payments and Clayton's Rule

Where a debtor owes several separate debts to the same creditor and pays an amount that does not clear all of them:

Section	Situation	Rule
59	Debtor expressly or impliedly indicates the debt	Payment must be applied to that debt.
60	Debtor gives no indication	Creditor may apply it to any lawful debt due to him, even one barred by limitation.
61	Neither party appropriates	Applied to debts in order of time; if the debts are of equal standing, proportionately. This reflects Clayton's Rule.

Discharge by Agreement or Consent

Section 62: if the parties agree to substitute a new contract, or to rescind or alter it, the original contract need not be performed.

Mode	Meaning	Example
Novation	Substituting a new contract for the old one, between the same or different parties. The new contract must itself be valid.	Farhan owes Prince Rs. 50,000; all three agree that Aadil will pay Prince instead, and Farhan is released.
Rescission	Cancelling the contract by mutual agreement.	Both agree to cancel the sale of a flat and the advance is returned.
Alteration	Changing the terms by consent.	Delivery date moved from May to June.

Section 63: a promisee may dispense with or remit performance wholly or in part, extend the time, or accept any other satisfaction he thinks fit.

Discharge by Lapse of Time and by Operation of Law

Lapse of time: under Article 55 of the Limitation Act, 1963, a suit for compensation for breach of contract must generally be filed within three years of the breach. After that the remedy is barred, but strictly the debt is not extinguished; that is why a written and signed promise to pay a time-barred debt is valid under Section 25.

Operation of law (without any act of the parties):

• death of a party, where the contract is personal;
• insolvency;
• merger of a lower right into a higher one, as when a tenant buys the house he rented;
• unauthorised material alteration of a written contract;
• rights and liabilities becoming vested in the same person.

Discharge by Impossibility: Doctrine of Frustration (Section 56)

▶ Watch this part of the lecture (2:07:37)

Paragraph of Section 56	Rule
First: initial impossibility	An agreement to do an act impossible in itself is void (e.g. to discover treasure by magic).
Second: supervening impossibility (frustration)	A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Third: compensation	A promisor who knew, or with reasonable diligence might have known, and the promisee did not know, that the act was impossible or unlawful must compensate the promisee for loss caused by non-performance.

Rationale: parties contract on the basis that certain things will continue, such as the subject matter or a performer's health. When an unexpected event destroys that basis, holding them to the literal terms would be unjust.

Classic English cases

The leading Indian case

Principles laid down in Satyabrata Ghose:

1. "Impossible" in Section 56 does not mean physical or literal impossibility. Performance that is impracticable and useless from the point of view of the object and purpose of the parties is impossible within the section.
2. In India the doctrine of frustration falls within Section 56, which is exhaustive; English cases are only persuasive.
3. Where the contract itself, expressly or impliedly, provides for discharge on some event, the matter falls under Section 32, not Section 56.
4. On the facts, the requisition was temporary, no time limit was fixed for the roads, and the war was already on when the contract was made, so the contract was not frustrated.

Effect of frustration: the contract becomes void from the moment of the frustrating event. Under Section 65, any person who has received any advantage under it must restore it or pay compensation, so an advance paid under a frustrated contract can generally be recovered.

Force Majeure and the Modern Cases

▶ Watch this part of the lecture (2:16:19)

Force Majeure (French: "superior force"). Many contracts contain a Force Majeure clause listing events such as war, flood, epidemic or government action, and stating what happens if such an event prevents performance.

COVID-19 lockdown cases (2020)

Discharge by Breach

▶ Watch this part of the lecture (2:21:22)

Breach is failure to perform a contractual obligation. A serious breach going to the root of the contract allows the other party to treat himself as discharged; any breach allows him to claim damages.

• Actual breach: on the due date or during performance (goods not delivered on the agreed day, or half delivered and the rest refused).
• Anticipatory breach: before the due date, when a party declares he will not perform or disables himself from performing.

Section 39: when a party has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. The innocent party may accept the repudiation and sue at once, or keep the contract alive and wait.

Actual breach	Anticipatory breach
When performance is due or under way.	Before the date of performance.
The innocent party can sue only after it happens.	He may sue at once if he accepts the repudiation; if he waits, he risks losing his claim through a later event (Avery v. Bowden).

Frustration	Breach
Neither party at fault.	One party at fault.
No damages payable; benefits restored under Section 65.	The party at fault must pay damages.

Remedies for Breach of Contract

A right without a remedy is of little use. The main remedies are: suit for damages, quantum meruit, restitution, specific performance, injunction and rescission. Damages are governed by Sections 73 to 75 of the Contract Act; specific performance, injunction and rescission mainly by the Specific Relief Act, 1963.

Suit for Damages

Damages means money paid as compensation for loss caused by the breach.

Section 73

The party who suffers by the breach is entitled to compensation from the party who broke the contract for loss or damage which (a) naturally arose in the usual course of things from the breach, or (b) the parties knew, when they made the contract, to be likely to result from it. No compensation is given for remote and indirect loss.

Duty to mitigate (Explanation to Section 73): in estimating the loss, the means which existed of remedying the inconvenience caused by non-performance must be taken into account.

Remoteness of damages

Types of damages

Type	Meaning
Ordinary / general	Losses arising naturally, e.g. difference between contract price and market price when a seller fails to deliver.
Special	Losses from special circumstances; recoverable only if those circumstances were known (Simpson).
Nominal	A token sum where a right is violated but no real loss is proved.
Exemplary / punitive	Meant to punish; generally not given for breach of contract.
Liquidated	Fixed in advance by the contract itself.

Liquidated damages and penalty: Section 74

▶ Watch this part of the lecture (2:31:16)

Where a contract names a sum payable on breach, or contains any other stipulation by way of penalty, the party complaining of breach is entitled to reasonable compensation not exceeding the sum named or the penalty stipulated, whether or not actual damage or loss is proved.

English law	Indian law
Liquidated damages (a genuine pre-estimate of loss) are enforced; a penalty (meant to frighten the other party) is not.	Section 74 cuts across this distinction (Fateh Chand, Supreme Court): in both cases only reasonable compensation is awarded, with the named sum as the upper limit.

In Kailash Nath Associates, the Supreme Court held that where loss can be proved it must be proved; the named sum is awarded as such only where it is a genuine pre-estimate and the loss is difficult to prove.

Ascertainment of damages

• Goods: usually the difference between contract price and market price on the date of breach.
• Loss of profits: must be proved with reasonable certainty; no damages on speculation.

Section 75: a person who rightfully rescinds a contract is entitled to compensation for damage sustained through its non-fulfilment, so ending the contract for the other side's breach does not cost him his damages.

The Doctrine of Quantum Meruit

Quantum meruit (Latin: "as much as he has earned") allows reasonable payment for work done or goods supplied where the claimant cannot sue on the contract itself. It applies when:

• one party has partly performed and the other breaks the contract and prevents completion;
• work is done under a contract later found to be void;
• a divisible part of a contract is completed;
• work is done at request with no price fixed.

But a party who himself fails to complete an entire contract cannot claim.

Prickett v. Badger	Cutter v. Powell
Claimant prevented from completing by the other side.	The contract itself made full performance the condition of payment.
Reasonable pay recoverable.	Nothing payable.

The Doctrine of Restitution

Restitution means restoring to a person what belongs to him so that the other party is not unjustly enriched. It arises mainly when a contract fails, is rescinded or is found void.

• Section 64: a party rescinding a voidable contract must restore the benefit received.
• Section 65: a person who received an advantage under an agreement discovered to be void, or a contract that becomes void, must restore it or make compensation.
• Sections 68 to 72 apply the same idea where there is no contract at all.
• The Specific Relief Act lets a court rescinding a contract or cancelling an instrument require the successful party to restore what he received.

Quantum meruit	Restitution
A claim for reasonable payment for work done or goods supplied.	The wider idea of giving back any benefit received, so no one is unjustly enriched.
Often a way of achieving restitution where the benefit is work, which cannot be physically returned, so its value is paid.	—

Suit for Specific Performance

▶ Watch this part of the lecture (2:37:43)

Specific performance is a court order directing the party in breach to actually perform, e.g. directing Prince to execute the sale deed of the flat he agreed to sell to Farhan. Under the original Specific Relief Act it was discretionary, granted mainly where damages were inadequate. The Specific Relief (Amendment) Act, 2018, in force from 1 October 2018, changed this.

• Section 10: specific performance shall be enforced by the court, subject to Section 11(2), Section 14 and Section 16. It is now the normal rule; the old general discretion is gone.
• Annamalai v. Vasanthi (2025): the Supreme Court held these changes are not retrospective and do not apply to suits or transactions that arose before the amendment.
• Section 9: the defendant may raise any defence available under the law of contract.

Section 14: contracts not specifically enforceable

1. where a party has obtained substituted performance under Section 20;
2. a contract involving a continuous duty the court cannot supervise;
3. a contract so dependent on the personal qualifications of the parties that the court cannot enforce its material terms;
4. a contract in its nature determinable (which a party can end at will).

Section 16: personal bars

Relief cannot be given to a person who has obtained substituted performance; who has become incapable of performing or has violated an essential term; or who fails to prove that he has performed, or has always been ready and willing to perform, the essential terms on his part.

Substituted performance and related provisions

• Section 20: on breach, the innocent party may, after at least 30 days' written notice, get the contract performed through a third party or his own agency and recover the costs from the party in breach; he then cannot also claim specific performance.
• Sections 20A to 20C: special rules for infrastructure projects and special courts; suits under the Act to be decided within 12 months from service of summons, extendable by up to six months.
• Section 21: compensation may be claimed in addition to specific performance; if specific performance is refused but breach is proved, compensation is awarded.
• Section 22: reliefs such as possession, partition or refund of earnest money must be specifically claimed.
• Section 23: a sum named for breach does not bar specific performance if meant only to secure performance.
• Section 24: if a suit for specific performance is dismissed, the plaintiff cannot later sue for compensation for the same breach.

Damages	Specific performance
Money remedy compensating for loss.	Order to do what was promised.
Suits cases where money can make good the loss (ordinary goods).	Sought mostly for unique subject matter (land, a rare painting). Since 2018 the normal rule, but refused in cases listed in the Act; the plaintiff must prove readiness and willingness.

Suit for Injunction

Under the Specific Relief Act, an injunction is a court order directing a person to do, or more often not to do, a particular act.

Section	Provision
37	Temporary injunction: lasts until a specified time or further order; may be granted at any stage of a suit under the Code of Civil Procedure. Perpetual injunction: granted only by the final decree after a hearing on merits; permanently restrains the defendant.
38	Perpetual injunction to prevent breach of an obligation existing in favour of the plaintiff.
39	Mandatory injunction: compels the defendant to do certain acts to prevent a breach, e.g. remove a wall built in breach of an agreement.
40	Damages in addition to, or in substitution for, an injunction.

Section 41: injunction refused

• to prevent breach of a contract which would not be specifically enforced;
• to prevent an alleged nuisance unless it is reasonably clear that it will be a nuisance;
• where equally efficacious relief can certainly be obtained by any other usual mode of proceeding;
• where the plaintiff's conduct disentitles him to the court's help;
• where the plaintiff has no personal interest in the matter;
• since 2018, where it would impede or delay an infrastructure project.

Section 42: negative agreements

Where a contract contains an affirmative promise together with a negative promise, the court may enforce the negative promise by injunction even though it cannot compel performance of the affirmative one, provided the plaintiff has performed his own part.

Suit for Rescission

Rescission means cancelling a contract so that the parties are put back in their original position.

Section 27 of the Specific Relief Act: any person interested in a contract may sue for rescission where the contract is voidable or terminable by the plaintiff, or where it is unlawful for causes not apparent on its face and the defendant is more to blame. The court may refuse rescission where:

• the plaintiff has ratified the contract;
• changed circumstances make it impossible to restore the parties substantially to their original position;
• third parties have acquired rights in good faith, without notice and for value.

Section 31: a written instrument that is void or voidable may be cancelled if leaving it outstanding may cause serious injury.

Quasi Contracts

▶ Watch this part of the lecture (2:50:28)

Meaning of quasi contract

Quasi means "as if" or "almost". A quasi contract is not a real contract, because there is no agreement between the parties. But the law imposes an obligation on one person to pay or return something to another, as if there were a contract. The Act deals with these situations in Sections 68 to 72, under the heading "Of certain relations resembling those created by contract".

Doctrine of unjust enrichment

No person should be allowed to enrich himself unjustly at the expense of another. Lord Mansfield, the English judge, explained in the eighteenth century that where a person has received money which in justice and equity belongs to another, the law implies a duty to pay it back. A quasi contract rests on three ideas:

1. the defendant has received a benefit;
2. at the expense of the plaintiff; and
3. it would be unjust for him to keep it.

Section 73 adds that a person injured by the failure to discharge an obligation resembling those created by contract is entitled to the same compensation as if there had been a contract and it had been broken.

Types of quasi contracts

The Act recognises five types:

1. Supply of necessaries to a person incapable of contracting (Section 68)
2. Payment by an interested person (Section 69)
3. Liability to pay for a non-gratuitous act (Section 70)
4. Responsibility of the finder of goods (Section 71)
5. Money paid or thing delivered under mistake or coercion (Section 72)

1. Supply of necessaries (Section 68)

The supplier is reimbursed from the property of the incapable person, but that person is not personally liable.

2. Payment by an interested person (Section 69)

A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

3. Liability to pay for a non-gratuitous act (Section 70)

Where a person lawfully does anything for another, or delivers anything to him, not intending to do so gratuitously, and the other enjoys the benefit, the latter must make compensation or restore the thing. Three conditions:

1. the act must be lawful;
2. it must not be intended to be free of charge; and
3. the other person must enjoy the benefit.

4. Responsibility of the finder of goods (Section 71)

A person who finds goods belonging to another and takes them into his custody has the same responsibility as a bailee (a person to whom goods are entrusted). He must take as much care of them as a person of ordinary prudence would take of his own goods, try to find the owner, and return them.

Rights of the finder:

• Section 168: he cannot sue for his voluntary trouble and expenses, but may keep the goods until compensated, and may sue for any specific reward offered by the owner.
• Section 169: if the owner cannot be found or refuses to pay the lawful charges, he may sell the goods, but only if they are in danger of perishing or of losing most of their value, or if the lawful charges amount to two-thirds of their value.

5. Money paid or thing delivered under mistake or coercion (Section 72)

The person who receives money or a thing by mistake or under coercion must repay or return it.

• Mistake includes mistake of law: the Supreme Court has held that "mistake" in Section 72 covers mistake of law as well as fact. But for tax refunds, the Court later held that the claimant must generally follow the refund procedure in the tax law and show that he has not passed the burden of the tax on to his customers; otherwise the refund would itself be an unjust enrichment.
• Coercion in its ordinary sense: "coercion" in Section 72 is not limited to the narrow definition in Section 15. An illegal demand by an authority that compels a payment is enough.

E-Contracts

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Meaning of an e-contract

An e-contract (electronic contract) is a contract formed through electronic means, such as e-mail, a website, a mobile application, or the exchange of data between computers. Buying clothes, booking tickets, ordering food and signing business deals online are all contracts.

Definitions under the IT Act

• Electronic record: data, a record, or an image or sound, stored, received or sent in electronic form.
• Originator: the person who sends or generates an electronic message.
• Addressee: the person whom the originator intends to receive it.
• Intermediary: one, like an internet service provider or online marketplace, who only receives, stores or transmits records on behalf of others; neither originator nor addressee.
• Electronic signature: authentication of an electronic record by an electronic technique recognised by the Act, including a digital signature.

Formation of an e-contract

Contracts can also be formed by an exchange of e-mails. The absence of a signed paper document does not prevent a binding contract if the essential terms have been agreed.

Time and place: Section 13 of the IT Act

Besides Section 4 of the Contract Act, Section 13 of the IT Act applies. Unless the parties agree otherwise:

• Despatch: when the record enters a computer resource outside the control of the originator.
• Receipt where a resource is designated (for example, a particular e-mail address): when the record enters it; if the record is sent to some other resource of the addressee, when he retrieves it.
• Receipt (no resource designated): when the record enters any computer resource of the addressee.
• Place: despatched where the originator has his place of business, and received where the addressee has his place of business, wherever the computer may be.

Importance and challenges

Importance	Challenges
Speed: a deal is concluded in seconds across the world	Hard to verify the identity and age of the other party; a minor may easily click "I agree"
Low cost	Jurisdiction is difficult when the parties are in different places
Make e-commerce possible, bringing goods and services to small towns	Risks of hacking and fraud
Automatic record of the transaction; kept business alive during the coronavirus pandemic	Consumers accept long terms without reading them

The Consumer Protection (E-Commerce) Rules, 2020 give some protection: e-commerce platforms must have a grievance officer, and a consumer's consent to a purchase must be recorded through an explicit and affirmative action, not a pre-ticked box.

Section 10A of the IT Act

Inserted by the Information Technology (Amendment) Act, 2008, in force from 27 October 2009, under the title "Validity of contracts formed through electronic means":

Where, in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.

E-contracts and traditional contracts compared

Point	Traditional contract	E-contract
Formation	Offer and acceptance	Offer and acceptance communicated electronically, often by a click
Time and place	Section 4, Contract Act	Section 4, plus specific rules in Section 13 of the IT Act
Signature	Handwritten	Electronic signatures, recognised by Section 5 of the IT Act (many contracts need no signature at all)
Evidence	—	Section 63 of the B.S.A., which replaced Section 65B of the old Evidence Act from 1 July 2024; generally requires a certificate
Bargaining position	—	Mostly standard form contracts drafted by the company, so the protections for standard form contracts matter greatly

Scope: under Section 1(4) and the First Schedule, the IT Act does not apply to certain documents. After an amendment in 2022, these are negotiable instruments (other than cheques and certain notes and bills involving regulated financial institutions), powers of attorney (with a similar exception), trusts and wills. The entry for contracts for the sale of immovable property was removed in 2022; a sale of land must still be registered under the Registration Act.

Click-Wrap, Browse-Wrap and Case Law

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Kinds of online standard terms

• Click-wrap: the user must click a button like "I agree", after being shown the terms, before he can proceed (creating an account, installing an app, buying a ticket online). Because the user takes a positive step to show assent, the terms are generally enforceable, like a signed printed form, even if unread, so long as he had a fair opportunity to read them.
• Browse-wrap: the terms are available through a link, usually at the bottom of a website, saying that by using the site the user agrees to them. They are harder to enforce, as the user may never have seen them; courts generally enforce them only where the user had actual or reasonable notice and his conduct shows assent.
• Shrink-wrap: software comes in a packet with the terms inside, and opening or using it is treated as acceptance.

Point	Click-wrap	Browse-wrap
Assent	Express, by a click	Implied from mere use
Terms	Shown before the user proceeds	Sit behind a link
Enforceability	Generally enforceable	Binds only with reasonable notice

Case law

Quick revision

• A quasi contract rests on an obligation imposed by law, not on agreement; its basis is unjust enrichment. The five types are in Sections 68 to 72, and Section 73 gives the same compensation as for breach of contract.
• Section 70 needs a lawful act, not intended to be gratuitous, the benefit of which is enjoyed by the other (State of West Bengal v. B. K. Mondal and Sons).
• An e-contract is an ordinary contract made electronically; Section 10A of the IT Act only removes the objection that electronic form was used, and Section 13 fixes the time and place of despatch and receipt.
• Click-wrap terms are generally enforceable; browse-wrap terms bind only with reasonable notice. An online contract is concluded where the acceptance is received.
• Contract Law I runs from the meaning of contract and Henry Maine's idea of "status to contract" to contracts made online.
• In every problem, walk through the essentials of a valid contract one by one.
• Always name the section and support it with the leading case.
• Whenever two concepts look similar, such as void and voidable, or damages and specific performance, write their differences clearly, with an example.