Unit 1
The Indian Contract Act, 1872
INTRODUCTION
The Indian Contract Act, 1872 prescribes the law regarding contracts in India and is that the key act regulating Indian law.
The Act relies on the principles of English Common Law. It’s applicable to all or any the states of India. It determines the circumstances during which promises made by the parties to a contract shall be legally binding.
Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law.
OBJECTIVE OF THE ACT
The purpose of the Contract Act is to make sure that the rights and obligations arising out of a contract are honored which legal remedies are made available to an aggrieved party against the party failing to honor his a part of agreement. The Indian Contract Act makes it obligatory that this is often done and compels the defaulters to honor their commitments.
EXTENT AND COMMENCEMENT
DEVELOPMENT
The Act as enacted originally had 266 Sections, it had wide scope
At present the Indian Contract Act could also be divided into two parts:
CONTRACT DEFINATION
An agreement enforceable by law may be a contract.
STEPS INVOLVED WITHIN THE CONTRACT
1. Proposal and its communication
2. Acceptance of proposal and its communication
3. Agreement by mutual promises
4. Contract
5. Performance of Contract
ESSENTIAL REQUIREMENTS OF A LEGITIMATE CONTRACT
TYPES/KINDS OF CONTRACT
1. On the idea of validity
Valid contract: An agreement which has all the essential elements of a contract is named a legitimate contract. a legitimate contract are often enforced by law.
Void contract [Section 2(g)]: A void contract may be a contract which ceases to be enforceable by law. A contract when originally entered into could also be valid and binding on the parties. it's going to subsequently become void. -- There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is against "Public Policy" under any contract— than that contract itself can't be enforced under the law-
Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of 1 or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it's repudiated by the aggrieved party.
Illegal contract: A contract is against the law if it's forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to an individual or property of another, or court regards it as immoral or against public policy. These agreements are punishable by law. These are void-ab-initio.
“All illegal agreements are void agreements but all void agreements aren't illegal.
Unenforceable contract: Where a contract is good in substance but due to some technical defect can't be enforced by law is termed unenforceable contract. These contracts are neither void nor voidable.
2. On the idea of formation
Express contract: Where the terms of the contract are expressly prescribed in words (written or spoken) at the time of formation, the contract is claimed to be express contract
Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is formed otherwise than in words, promise is claimed to be implied.•
Quasi contract: A contract is made by law. Thus, quasi contracts are strictly not contracts as there's no intention of parties to enter into a contract. it's legal obligation which is imposed on a celebration who is required to perform it. A contract is predicated on the principle that an individual shall not be allowed to complement himself at the expense of another.
3.On the idea of Performance
Executed contract: An executed contract is one during which both the parties have performed their respective obligation.
Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.
Unilateral contract: A agreement is one during which just one party has got to perform his obligation at the time of the formation of the contract, the opposite party having fulfilled his obligation at the time of the contract or before the contract comes into existence.
Bilateral contract: A contract is one during which the requirement on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts also are referred to as contracts with executory consideration.
1. OFFER SECTION 2(A):
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.
TERMINATION OF OFFER
2. ACCEPTANCE SECTION 2(B):
When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted.
ESSENTIALS OF A VALID ACCEPTANCE
The parties who enter into a contract must have the capacity to do the contract.
“Capacity “here means competence of the parties to enter into a legitimate contract. According Sec 10, an agreement becomes a contract if it's entered into between the parties who are competent to contract.
According Sec .11, every person is competent to contract who
Thus Sec. 11 declares following persons to be incompetent to contract:
1. Minors
2. Persons of unsound mind
3. Persons disqualified by any law to which they're subject.
1. Minors
According to Sec 3 of the Indian Majority Act, 1875, a minor is a person who has not completed eighteen years of age.
In following cases he attains majority after 21 years aged
The position of minor as regards his agreements could also be summed up as under:
2. PERSONS OF UNSOUND MIND
One of the essential conditions of competency of parties to a contract is that they ought to be of sound mind.
Sec 12 lays down the soundness of mind “A person is said to be of sound mind for the purpose of making the contract if, at the time when he makes it, he's capable of understanding it and of forming a rational judgment as to its effect upon his interests.
A person, who is usually of unsound mind but occasionally of sound mind, may make a contract when he's of sound mind.
A person, who is typically of sound mind but occasionally of unsound mind, might not make a contract when he's of unsound mind
Eg: an individual may be a lunatic, who is at intervals of sound mind, may contract during those intervals.
Soundness of minds depends on two facts:
CONTRACTS OF PERSONS OF UNSOUND MIND
3. PERSONS DISQUALIFIED BY ANY LAW TO WHICH THEY'RE SUBJECT
There need to be two parties to a contract, who willingly and knowingly enter into an agreement. But how does the law determine if the parties are both these things? this is often where the concept of free consent comes in. allow us to learn more about free consent and therefore the elements vitiating free consent.
DEFINITION:
In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. therefore the two people must comply with something within the same sense also .
Example: A agrees to sell his car to B. A owns three cars and needs to sell the Maruti. B thinks he's buying his Honda. Here A and B haven't prescribed an equivalent thing within the same sense. Hence there's no consent and subsequently no contract.
Now Free Consent has been defined in Section 14 of the Act. The section says that consent is taken into account free consent when it's not caused or suffering from the subsequent,
Let us take a glance at these elements individually that impair the free consent of either party.
1. Coercion (Section 15)
Coercion means using force to compel an individual to enter into a contract. So force or threats are wont to obtain the consent of the party under coercion, i.e it's not free consent. Section 15 of the Act describes coercion as committing or threatening to commit any act forbidden by the law within the IPC unlawfully detaining or threatening to detain any property with the intention of causing a person to enter into a contract
Example: A threatens to harm B if he doesn't sell his house to A for five lakh rupees. Here albeit B sells the house to A, it'll not be a legitimate contract since B’s consent was obtained by coercion.
Now the effect of coercion is that it makes the contract voidable. this suggests the contract is voidable at the choice of the party whose consent wasn't free. therefore the aggravated party will decide whether to perform the contract or to void the contract. So within the above example, if B still wishes, the contract can plow ahead .
Also, if any monies are paid or goods delivered under coercion must be repaid or returned once the contract is void. and therefore the burden of proof proving coercion are going to be on the party who wants to avoid the contract. therefore the aggravated party will need to prove the coercion, i.e. prove that his consent wasn't freely given.
2. Undue Influences (Section 16)
Section 16 of the Act contains the definition of undue influence. It states that when the relations between the 2 parties are such one party is during a position to dominate the opposite party, and uses such influence to get an unfair advantage of the opposite party it'll be undue influence.
The section also further describes how the person can abuse his authority within the following two ways: When an individual holds real or maybe apparent authority over the opposite person or if he's during a fiduciary relationship with the opposite person. He makes a contract with an individual whose brain is suffering from age, illness or distress. The unsoundness of mind are often temporary or permanent
Example: A sold his gold awaits only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) isn't freely given, he was under the influence of his teacher.
Now undue influence to be evident the dominant party must have the target to require advantage of the opposite party. If influence is wielded to profit the opposite party it'll not be undue influence. But if consent isn't free thanks to undue influence, the contract becomes voidable at the choice of the aggravated party and therefore the burden of proof is going to be on the dominant party to prove the absence of influence.
3. Fraud (Section 17)
Factors Impairing Free Consent: Fraud
Fraud means deceit by one among the parties, i.e. when one among the parties deliberately makes false statements. Therefore the misrepresentation is completed with full knowledge that it's not true, or recklessly on faith for the trueness, this is often said to be fraudulent. It absolutely impairs free consent.
So consistent with Section 17, a fraud is when a celebration convinces another to enter into an agreement by making statements that are suggesting a incontrovertible fact that isn't true, and he doesn't believe it to be true the active concealment of facts a promise made with none intention of performing it the other such act fitted to deceive.
Example: A bought a horse from B. B claims the horse are often used on the farm. seems the horse are lame and A cannot use him on his farm. Here B knowingly deceived A and this may amount to fraud.
One factor to think about is that the aggravated party should suffer from some actual loss thanks to the fraud. There’s no fraud without damages. Also, the falsehood must be a fact, not an opinion. Within the above example if B had said his horse is best than C’s this is able to be an opinion, not a fact. And it might not amount to fraud.
4. Misrepresentation (Section 18)
Misrepresentation is additionally when a celebration makes a representation that's false, inaccurate, incorrect, etc. The difference here is that the misrepresentation is innocent.
i.e. not intentional. The party making the statement believes it to be true. Misrepresentation are often of three types an individual makes a positive assertion believing it to be true any breach of duty gives the person committing it a plus by misleading another. But the breach of duty is with none intent to deceive.
When one party causes the opposite party to form an error on the topic matter of the contract. But this is often done innocently and not intentionally.
5. Mistake: an error is described as a component , which when occurs during a contract makes it void.
There are two sorts of mistakes, which occurs during a contract
Example: “A” made an offer to “B” to sell his scooter. “A” intended to sell his 3G scooter but “B” believed that “A” would sell his 4G scooter. Thus there was no proper communication and therefore the fact was mistaken. it might amount to an effective agreement.
For a contract to be a legitimate contract two things are absolutely essential – lawful object and lawful consideration. Therefore the Indian Contract Act gives us the parameters that structure such lawful consideration and objects of a contract. Allow us to take a glance at the legality of object and consideration of a contract.
Lawful Consideration and Lawful Object
Section 23 of the Indian Contract Act clearly states that the consideration and/or object of a contract are considered lawful consideration and/or object unless they're specifically forbidden by law of such a nature that they might defeat the aim of the law are fraudulent involve injury to the other person or property the courts regard them as immoral are against public policy.
So lawful consideration and/or lawful object cannot contain any of the above. allow us to take a more intimately check out each of them.
1. Forbidden by Law
When the thing of a contract or the consideration of a contract is prohibited by law, then they're not lawful consideration or object anymore. They then become unlawful in nature. then such a contract can't be valid anymore.
Unlawful consideration of object includes acts that are specifically punishable by the law. This also includes people who the acceptable authorities prohibit via rules and regulations. But if the principles made by such authorities aren't in tandem with the law than these won't apply.
Example. A received a license from the Forest Department to chop the grass of a particular area. The authorities at the department told him he cannot expire such interest to a different person. But the Forest Act has no such statute. So A sold his interest to B and therefore the contract was held as valid.
2. Consideration or Object Defeats the supply of the Law
This means if the contract is trying to defeat the intention of the law. If the courts find that the important intention of the parties to the agreement is to defeat the provisions of the law, it'll forgot the said contract.
Example: A and B enter into an agreement, where A is that the debtor, that B won't plead limitation. This, however, is completed to defeat the intention of the Limitation Act, then the courts can rule the contract as void thanks to unlawful object.
3. Fraudulent Considerations or Object
Lawful consideration or object can never be fraudulent. Agreements entered into containing unlawful fraudulent consideration or object are void naturally .
Example: A decides to sell goods to B and smuggle them outside the country. this is often a fraudulent transaction as so it's void. Now B cannot recover the cash under the law if A doesn't deliver on his promise.
4. Defeats any Rules in Effect
If the consideration or the thing is against any rules in effect within the country for the nonce, then they're going to not be lawful consideration or objects. Then the contract thus formed won't be valid.
5. Once they involve Injury to a different Person or Property
In legal terms, an injury means to a criminal and harmful wrong done to a different person. So if the thing or the consideration of the contract does harm to a different person or property, this may amount to unlawful consideration. Say for instance a contract to publish a book that's a violation of another person’s copyright would be void. this is often because the consideration here is unlawful and injures another person’s property, i.e. his copyright.
6. When Consideration is Immoral
If the thing or the consideration is regarded by the court as immoral, then such object and consideration are immoral. Say for instance A lent money to B to get a divorce from her husband C. it had been agreed once B obtains the divorce A would marry her. But the court passed the judgment that A cannot recover money from B since the contract is void on account of unlawful consideration.
7. Consideration is against Public Policy
For the great of the community, we restrict certain contracts within the name of public policy. But we don't use public policy during a wide sense during this matter. If that was the case it might curtail individual freedom of individuals to enter into contracts. So for the aim of lawful consideration and object public policy is employed during a limited scope. We only specialize in public policy under the law.
Some agreements that are against public policy:
Trading with the Enemy: getting into an agreement with an individual from a rustic with whom India is at war, void be a void agreement.
Example, a trader getting into a contract with a Pakistani national during the Kargil war.
Stifling Prosecution: this is often a pervasion of the natural course of law, and such contracts are void.
Example: A agrees to sell land to B if he doesn't participate within the criminal proceedings against him.
8. Maintenance and Champers:
Maintenance agreement is when an individual promises to take care of a suit during which he has no real interest and champers is when an individual agrees to help another party in litigation for some of the damages or proceeds.
• An Agreement to Traffic publicly Offices
• Agreements to make Monopolies
• An agreement to brokerage marriage for rewards
• Interfering with the Courts: An agreement whose object is to induce judicial or state officials to act corruptly and interfere with legal proceedings
VOID AGREEMENT:
An agreement not enforceable by law is void.
AGREEMENT SECTION 2(E):
Every promise and every set of promises, forming the consideration for each other is an agreement.
VOID AND VOIDABLE CONTRACT
An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract
A contract which ceases to be enforceable by law becomes a void contract.
The section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. This makes all those contracts that are not enforceable by a court of law as void.
Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A dies of natural causes in 4 years. The contract isn't any more valid and becomes void due to the non-enforceability of the agreed terms.
Void Agreement: Void Contract means a contract doesn't exist in any respect. The law can't enforce any legal obligation to either party especially the disappointed party because they are not entitled to any protective laws as far as contracts are concerned.
An agreement to carry out an illegal act is an example of a void contract or void agreement.
Example: Contract between drug dealers and buyers could also be a void contract simply because the terms of the contract are illegal. In such a case, neither party can move to court to enforce the contract.
As per Section 2(g) of The Indian Contract Act , 1872 “An agreement not enforceable by law is claimed to be void”, and as per Section 2(j) of The Act “A Contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”
Thus Void Contracts are often of following two types :-
Void agreements as per the provisions of Indian Contract Act , 1872 : Any agreement with a bilateral mistake is void.(Section 20) :- Where both the parties to an agreement are under a mistake on matter of fact essential to agreement , the agreement is void , for ex. A agrees to shop for from B a specific horse. It seems that the horse was dead at the time of the discount, though neither party was aware of the particular fact. The agreement is void.
But a contract isn't voidable merely because it had been caused by one of the parties thereto being under a mistake on a matter of fact . (Section 22)
Agreements which have unlawful consideration and objects are void.(Section 23 & 24): The consideration or object of an agreement is unlawful if it's forbidden by law or of such a nature that if permitted , it'd defeat the provisions of any law or is fraudulent or involves injury to the person or property of another or court regards it as immoral or against public policy .
If any a neighborhood of one consideration for one or more objects, or anybody or any a neighborhood of anybody of several consideration for one object , is unlawful , the agreement is void. But where the legal a neighborhood of an agreement is severable from the illegal, the previous would be enforced.
Agreements made inconsiderately is void.(Section 25) : An agreement without the consideration is void unless :
Agreement in check of marriage of any major person is void (Section 26):
Every agreement in check of the marriage of an individual, apart from a minor is void. It’s the policy of the law to discourage agreements which restrains freedom of marriage. The restraint could even be general or partial, that's to say , the party could even be restrained from marrying within the least , or from marrying for a hard and fast time or from marrying a selected person or class of persons , the agreement is void .
Agreement in check of trade is void. (Section 27): Every agreement by which anyone is restrained from exercising a lawful profession, or trade or business of any kind , is thereto extent void. There are two kinds of exception to the rule, those created by Statutes:-
Sale of Goodwill: the only exception mentioned within the proviso to section 27 is that regarding sale of goodwill. It states that “One who sells the goodwill of the business may accept as true with the customer to refrain from carrying on the same business, within specified local limits, so long because the buyer , or an individual deriving the title to the goodwill from him , carries on a like business therein : as long intrinsically limits appear to the court reasonable , regard being had to the character of the business.
Partnership Act: There are four provisions within the Partnership Act which validate agreements in restraint of trade. Section 11 enables partners during the continuance of the firm to limit their mutual liberty by agreeing that none of them shall keep it up any business apart from that of the firm. Section 36 enables them to restrain an outgoing partner from carrying on an equivalent business within a specified period or within specific local limits. an equivalent agreement could even be made by partners upon or I anticipation of dissolution.
EXCEPTION TO THE RULE AS PER JUDICIAL INTERPRETATION:
Exclusive Dealing Agreements: Business practice hip is that a producer or manufacturer likes to market his goods through a sole agent or distributor and thus the latter agrees successively to not affect the products of the opposite manufacturer.
Restraints upon Employee: An agreement of service often contain negative covenants preventing the worker from working elsewhere during the amount covered by the agreement. Trade Secrets, name of consumers etc. are also the property of master and servant isn't imagined to disclose it to anyone else . An agreement of this class doesn't falls within Section 27.
Agreement in check of legal proceedings is void. (Section 28): An agreement purporting to oust the jurisdiction of the courts is against the law and void on grounds of public policy. Section 28 of the Act renders void two sorts of agreement, namely:
However this is often often also not an absolute rule and it's two exceptions thereto which is as follows:-
This section shall not render illegal a contract , by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be mentioned arbitration , which only the quantity awarded in such arbitration shall be recoverable in respect of the dispute so referred.
Nor shall this section render illegal any accept writing, by which two or more persons suits arbitration any question between them which has already arisen , or affect any provision of any law effective for the nonce on references to arbitration.
But right to Appeal doesn't come within the purview of this section. a celebration to a suit may comply with not appeal against the selection .
An agreement the terms of which are uncertain is void. (Section 29): Agreements , the meaning of which isn't certain , or capable of being made certain , are void. it is a necessary requirement that an agreement so as to be binding must be sufficiently definite to enable the court to supply it a practical meaning. An agreement to agree within the longer term is void, for there is no certainty whether the parties will b able to agree.
Where only a neighborhood or a clause of the contract is uncertain , but the remainder is capable of bearing a reasonably certain meaning , the contract are getting to be considered.
Similarly , if the agreement is totally silent on price , it'll be valid , for , therein case , Section 9 of the Sale of products Act,1930 will apply and reasonable price shall be payable.
An agreement by way of wager (betting/gambling) is void. (Section 30): Agreements by way of wager are void ; and no suit shall be brought for recovering anything imagined to be won on any wager or entrusted to an individual to abide by the results of any game or other uncertain event on which any wager is made . The section doesn't define “Wager”. But wager are often said as a promise to supply money or money’s worth upon the determination or ascertainment of an uncertain event.
This rule has two exceptions thereto, which is as follows:-
An agreement contingent upon the happening of an impossible event is void. (Section 36):-
A contingent contract could also be a contract to try to to or to not do something , if some event , collateral to such contract , does or doesn't happen . Contingent agreements to undertake to or to not do anything , if an impossible event happens , are void , whether the impossibility of the event is known or to not the parties to the agreement at the time when it's made .
For ex. A agrees to pay B 1000 Rs if two straight lines should enclose a neighborhood . The agreement is void.
Agreement to undertake to impossible acts is void. (Section 56): An agreement to try to an act impossible in itself is void. A contract to try to to an act which, after the contract is made , becomes impossible, or, by reason of some event which the promisor couldn't prevent, unlawful, becomes void when the act becomes impossible or unlawful.
VOIDABLE CONTRACT:
An agreement which is enforceable by law at the choice of the one or more of the parties thereto, but not at the choice of others or others, may be a voidable contract. Voidable Contract is valid unless one of the parties has set it aside. Voidable Contract generally happens when one side of the party is tricked into entering a contract by other party.
(I) Voidable Agreements as per provisions of Indian Contract Act,1872 :-
• Void ability of agreements without free consent: - when consent to an agreement is caused by coercion, fraud or misrepresentation the agreement is voidable at the selection of the party whose consent was so caused.. However, a celebration to a contract, whose consent was obtained by fraud or misrepresentation, may , if he thinks fit , insist that the contract shall be performed.
• Power to line aside contract induced by Undue Influence: When consent to an agreement is caused by undue influence, the agreement could also be a contract voidable at the selection of the party whose consent was so caused. A contract is claimed to be induced by undue influence where the relation subsisting between the contracting parties are such during all during a ll|one in every of"> one of one in every of" one of the parties is in a position to dominate the desire of the other .
In such a case the burden of proving that such a contract wasn't induced by undue influence shall lie upon the one that's during an edge to dominate the desire of other.
• Liability of a celebration preventing event on which contract is to require effect:- When a contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the selection of the party so prevented. Obvious principle is that a private cannot cash in of his own wrong.
For ex. A and B contract that B shall execute certain work for A for a specific sum of money . B is ready and willing to execute the work accordingly, but A prevents him from doing so , The contract is voidable at the selection of B.
• Effect of failure to perform at fixed time , during a accept which period is crucial : When time is essence of contract and party fails to perform in time, it's voidable at the choice of other party. a private who himself delayed the contract cannot avoid the contract on account of (his own) delay.
(II) Consequences of rescission of Voidable Contract:
When an individual at whose option a contract is voidable rescinds it , the other party thereto needn't perform any promise therein contained within which he's promisor . The party rescinding a voidable contract shall , if he has received any benefit there under from another party to such contract , restore such benefit , so far as could even be , to the person from whom it had been received.
(III) Mode of Communicating or revoking rescission of voidable contract:
The rescission of a voidable contract could even be communicated or revoked within an equivalent manner , and subject to the same rules , as apply to the communication or revocation of a proposal.
Void and illegal Agreement : The Contract Act draws distinction between an agreement which is simply void and thus the one which is unlawful or illegal . An illegal agreement is one which is forbidden by law ; but a void agreement won't be forbidden , the law may merely say that if it's made , the courts won't enforce it . Thus every illegal contract is void but a void contract isn't necessarily illegal.
The main difference between a void and illegal contract is that , a void contract isn't punishable and its collateral transactions aren't affected but on the contrary illegal contract is punishable and its collateral transactions are also void.
DIFFERENCE BETWEEN VOID AND VOIDABLE AGREEMENT :
A void contract is taken into account to be a legal contract that's invalid, even from the start of signing the contract. On the other hand, a voidable contract is additionally a legal contract which is claimed invalid by one of the two parties, surely legal reasons.
While a void contract becomes invalid at the time of its creation, a voidable contract only becomes invalid if it's cancelled by one of the two parties who are engaged within the contract.
In the case of a void contract, no performance is possible , whereas it's possible during a voidable contract. While a void contract isn't valid at face value, a voidable contract is valid, but is usually declared invalid at any time.
While a void contract is nonexistent and cannot be upheld by any law, a voidable contract is an existing contract, and is binding to a minimum of 1 party involved within the contract.
Discharge of a contract implies termination of contractual obligations. this is often actually because when the parties originally entered into the contract, the rights and duties in terms of contractual obligations were found out . Consequently when those rights and duties are put out then the contract is claimed to possess been discharged. Once a contract stands discharged, parties thereto are not any more liable albeit the obligations under the contract remain incomplete.
A Contract is deemed to be discharged, that is, concluded and not binding, within the subsequent circumstances:
We shall examine each of them as follows.
Discharge by performance
Where both the parties have either carried out or tendered (attempted) to carry out their obligations under the contract, is mentioned as discharge of the contract by performance. Because performance by one party constitutes the occurrence of a constructive condition, the other party’s duty to perform is additionally triggered, and thus the one that has performed has the proper to receive the other party’ s performance. The overwhelming majority of contracts are discharged during this manner .
Discharge of Contract by Substituted Agreement
A contract emanates from an agreement between the parties. It thus follows that, the contract must even be discharged by agreement. Therefore, what's required, inevitably, is mutuality. Discharge by substituted agreement arises when a contract is abandoned, or the terms within it are altered, and both the parties are in conformity over it.
For example, A and B enter into some agreement, and A wants to change his mind and to not perform his terms of the contract. If he does this unilaterally then he are getting to be in breach of contract to B. However, if he approaches B and states that he would adore to be released from his liabilities under the contract then the latter might agree. therein case the contract is claimed to be discharged by (bilateral) agreement. In effect B has promised to not sue A if he doesn't perform his a neighborhood of the contract and thus the consideration for his promise could also be a ‘s promise to not sue B. Discharge by agreement may arise within the subsequent ways.
Discharge by lapse of your time
A contract stands discharged if not enforced within a specified period called the ‘period of limitation‘. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. as an example , period of limitation for exercising right to recover an immovable property is twelve years, and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time .
Discharge by Impossibility of Performance
Sometimes after a contract has been established, something might occur, though not at the fault of either party, which can render the contract impossible to perform, or illegal, or radically different from that originally undertaken.
However, if whatever happens to prevent the contract from being performe has not been caused by either party couldn't are foreseen, and its effect is to destroy the thought of the contract then the courts will, generality, state that the contract has become impossible to perform. If that happens then the contract is discharged and neither party will have any liability there under . Section 56 of the Indian Contract Act clearly provides that an agreement to undertake to to an act impossible in itself is void
The performance of a contractual obligation may become subsequently impossible on sort of grounds.
They include the next
• Objective impossibility of performance
• Commercial impracticability
• Frustration of purpose
• Temporary impossibility
Discharge of operation of law
A contract stands discharged by operation of law within the subsequent circumstances.
Unauthorized material alteration of a document
A party can treat a contract discharged (i.e., from his side) if the other party alters a term (such as quantity or price) of the contract without seeking the consent of the previous.
A contract stands discharged if not enforced within a specified period called the ‘period of limitation’. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. as an example , limitation period for exercising right to recover an immovable property is twelve years and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time .
A discharge in bankruptcy will ordinarily bar enforcement of most of a debtor’s contracts.
A contract also stands discharged through a merger that happens when an inferior right accruing to party during a contract amalgamates into the superior right ensuing to an equivalent party. as an example , A hires a factory premises from B for a couple of manufacturing activity for a year, but 3 months before the expiry of lease purchases that very premises. Now since A has become the owner of the building, his rights associated with the lease (inferior rights) subsequently merge into the rights of ownership (superior rights). The previous rental contract ceases to exist.
Discharge by Accord and Satisfaction
To discharge a contract by accord and satisfaction; the parties must suits accept performance that's different from the performance originally promised. it's getting to be studied under the next sub-heads.
Accord
An accord is an executor contract to perform an act which can satisfy an existing duty. An accord suspends, but doesn't discharge, the primary contract.
Satisfaction
Satisfaction is that the performance of the accord, which discharges the primary contractual obligation.
If the obligor refuses to perform. The oblige can sue on the primary obligation or seek a decree for performance on the accord.
A legal remedy may be a writ that seeks to uphold a person’s rights or to redress a breach of the law.
When one party breaches a contract, the opposite party may ask a court to supply a remedy for the breach. The court may order the breaching party to pay money to the non-breaching party.
TYPES OF REMEDIES
• Suit for rescission
• Suit for damages
• Suit for quantum meruit
• Suit for performance
• Suit for an i injunction
• Suit for Rescission
SUIT FOR RESCISSION
The term Rescission refers to the cancellation of contract.
In such cases, if one party has broken his contractual relations, the opposite party may treat the breach as discharge and refuse to perform his a part of performance.
Thus just in case of rescission of contract, the aggrieved or casualty is discharged from all his obligations of the contract.
UNDER FOLLOWING CASES THE COURT MAY REFUSE TO GRANT RESCISSION:
• The parties can't be restored to their original positions thanks to changed circumstances.
• The party(s) has acquired rights in straightness and value during subsistence of contract.
• Only a neighborhood of the contract is rescinded and this part can’t be separated from remainder of the contract.
• But if an individual rightfully rescinded, he's entitled to compensation for any damage which he has sustained through non fulfillment of the contract by the opposite party.
EXAMPLE:
'A' contracts to provide 10kg of tea leaves for Rs. 8,000 to 'B' on 15 June. If 'A' doesn't supply the tea leaves on the appointed day, 'B' needn't pay the worth. 'B' may treat the contract as rescinded and should sit quietly reception. 'B' can also file a ‘suit for rescission’ and claim damages. 12 A B Breach of contract when ‘A’ don’t supply to ‘B
SUIT FOR DAMAGES
Damages are a monetary compensation allowed to the casualty for the loss or injury suffered by him as a results of the breach of contract. the elemental principle underlying damages isn't punishment but to compensate the aggrieved party for the loss suffered by him within the original position as he would are .
Rules regarding damages
• The damages must naturally arise within the usual course of things from such breach i.e. the damages must be the proximate or direct consequence of the breach of contract.
• The aggrieved party must have suffered damages by breach of contract.
• Damages are awarded to compensate the loss caused by a celebration but to not punish the party at default for the breach of contract.
• Amount of damages are often decided at the time of agreement by the mutual consent of both the parties.
TYPES OF DAMAGES
• Ordinary
• Special
• Exemplary
• Nominal damages
• Damages for inconvenience and discomfort
• Liquidated damages and penalty
• Stipulation for interest
• Forfeiture of margin there are 8 sorts of damages
EXAMPLE : Mr. A to pay 3 lac to Mr.B on 1st April. Mr.A doesn't pay the cash thereon day. Mr. B is unable to pay her debts and suffer a loss. Mr. A is susceptible to pay B principal amount and also interest thereon . 16 A B Breach of contract when ‘A’ don’t give money to ‘B’. Payable money
SUIT FOR QUANTUM MERUIT
It means “AS much as EARNED” or “in proportion to the work done.”
Right to ‘Quantum Meruit’ literally means a right to say the compensation for the work already done.
EXAMPLES Mr.A engages Mr.B a contractor, to create a 3 storied house. After a neighborhood is made ‘A’ prevents ‘B’ from working any longer . ‘B’ the contractor, is entitled to urge reasonable compensation for work done under the doctrine of quantum merit additionally to the damages for breach of contract. 18 Breach of contract when ‘A’ told ‘B’ to prevent building construction. A B
SUIT FOR PERFORMANCE
Suit for performance means demanding the court’s direction to the defaulting party to hold out the promise consistent with the terms of contract. Cases where suit for performance isn't maintainable
i. Where compensatory damages arising from breach aren't measurable
ii. Where monetary compensation isn't an adequate remedy.
Example:X agreed to sell an old painting to Y for Rs50,000. Subsequently, X refused to sell the painting . Here, Y may file a suit against X for the precise performance of the contract.
SUIT FOR INJECTION
It means demanding court’s stay order.
An order of the court which prohibits an individual to try to to a specific act.
A party to a contract does something which he presumed to not do, the court may issue an order prohibiting him from doing so.
EXAMPLES : A, a singer contracts with B the Manager of a theatre to Sing at his theatre for one year and to abstain from Singing at other theatres during the theatre. She absents herself , B cannot compel A to sing at his theatre, but he may sue her for an injunction restraining her from Singing at other theatres .
G agreed to require the entire of his supply of electricity from a particular company. The agreement was held to import a negative promise that he would take none from elsewhere. He was, therefore, restrained by an injunction from buying electricity from the other company.
