Indian Contract Act - Some Important Issues

INDIAN CONTRACT ACT – SOME
IMPORTANT ISSUES
by :
DR. T.K. JAIN
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My words....
Here I present a few questions about Indian

contract Act.
What are the cases when
agreement is not a valid contract ?
Answer
When there is no consideration

when the object is illegal
when there is illegal consideration
when there is no intention to create a legally
binding mistake
when there is lack of common understanding
Give examples of agreements
which are not contracts ?
Answer
Agreements relating to social matters
Domestic arrangements between

husband and wife
What was the matter of Balfour
v. Balfour (1919) case?
Answer
a husband working in Ceylone, had agreed in
writing to pay a housekeeping allowance to
his wife living in England. On receiving
information that she was unfaithful to him, he
stopped the allowance: Held, he was entitled
to do so. This was a mere domestic
arrangement with no intention to create
legally binding relations. Therefore, there was
no contract.
What are the essential elements of
a valid contract ?
Answer
An offer or proposal by one party and acceptance of that offer by another

party
An intention to create legal relations or an intent to have legal
consequences.
lawful consideration.
The parties to the contract are legally capable of contracting.
Genuine consent between the parties.
The object and consideration of the contract is legal and is not opposed to
public policy.
The terms of the contract are certain.
The agreement is capable of being performed
What was the matter of (Harris v.
Nickerson (1873) ?
Answer
a person who attended the advertised place

of auction could not sue for breach of contract
if the auction was cancelled
What was the matter of (Harvey v.
Facey (1893) ?
Answer
Merely a statement of the price at which

one is prepared to consider negotiating
the sale of piece of land is not an offer.
What was the matter in Felthouse v.
Bindley (1865)?
Answer
Felthouse offered by letter to buy his nephews
horse for £ 30 saying: “If I hear no more about
him I shall consider the horse is mine at £ 30".
The nephew did not reply, but he told an
auctioneer who was selling his horses not to
sell that particular horse because it was sold
to his uncle. The auctioneer inadvertently sold
the horse. The court held that Felthouse had
no claim against the auctioneer because the
horse had not been sold to him
What was the matter in Lalman
Shukla v. Gauri Dutt (1913)?
Answer
A servant brought the boy without knowing

of the reward, he was held not entitled to
reward because he did not know about the
offer.
What is a standing offer?
Answer
Where a person offers to another to

supply specific goods, up to a stated
quantity or in any quantity which may be
required, at a certain rate, during a fixed
period, he makes a standing offer
What was the matter of Dunlop Pneumatic Tyre
Co. v. Selfridge Ltd. (1915) A.C. 847?
Answer
Dunlop supplied tyres to a wholesaler X, on
condition that any retailer to whom X re-supplied
the tyres should promise X, not to sell them to
the public below the list price. X supplied tyres to
S upon this condition, but nevertheless S sold
the tyres below the list price. Held: There was a
contract between D and X and a contract
between X and S. Therefore, D could not obtain
damages from S, as D had not given any
consideration for S's promise to X nor was he
party to the contract between D and X.
When can a stranger sue for
enforcement of a contract ?
Answer
A Beneficiary
An assignee under an assignment
in case of family arrangement – for the
marriage / maintenance expenses of
female members of the family
when a person has made a contract for
rd rd
the benefit of a 3 party, the 3 party can
sue
What are the kinds of
consideration?
Answer
There are 3 types of consideration :

1. future
2. present
3. past
What are the rules governing
consideration?
Answer
Consideration need not be adequate

consideration may be an act or an abstinance of
an act
consideration must be real
Consideration must be legal
Consideration must be mutual
What are the cases, when
consideration is not required ?
Answer
1. natural love
2. agency (read sec. 185)
3. past event – where a person has helped /
supported
4. time barred debt
5. gift
When can gratuitous promise be
enforced ?
Answer
A gratuitous promise to subscribe to a charitable

cause cannot be enforced, but if the promisee is
put to some detriment as a result of his acting on
the faith of the promise and the promisor knew
the purpose and also knew that on the faith of
the subscription an obligation might be incurred,
the promisor would be bound by promise (Kedar
Nath v. Gorie Mohan)
What are the flaws in a contract ?
Answer
Incapacity
Mistake
Misrepresentation
Fraud
Undue Influence
Coercion
Illegality
Impossibility.
How can payment be recovered
regarding necessities supplied to a
minor ?
Answer
A minors estate is liable to pay a reasonable

price for necessaries supplied to him or to
anyone whom the minor is bound to support
(Section 68 of the Act).
Can a lunatic person, who
becomes normal sometimes, make
a contract when he is sane?
Answer
Yes
A person unsound mind cannot enter into a
contract. A lunatics agreement is therefore void.
But if he makes a contract when he is of sound
mind, i.e., during lucid intervals, he will be bound
by it.
Give examples of void contracts ?
Answer
Agreement in restrain of parental right

in restraint of marriage
in restraint of trade
in restraint of personal freedom
Marriage brokerage Agreements
What are the cases when
agreements in restraint of trade is
valid ?
Answer
Sale of goodwill
agreement between partners (not to enter into
competing business)
Can employment bond be a valid
contract ?
Answer
Yes,
In Niranjan Shanker Golikari v. The Century Spinning
and Manufacturing Co. Ltd., AIR 1967 S.C. 1098
Niranjan entered into a bond with the company to
serve for a period of five years. In case, N leaves his
job earlier and joins elsewhere with companys
competitor within five years, he was liable for
damages. N was imparted the necessary training but
he left the job and joined another company. The former
employer instituted a suit against N. The Supreme
Court, held that the restraint was necessary for the
protection of the companys interests
Can you mention a few cases on
restraint of trade ?
Answer
In Nordenfelt v. Maxim Nordenfelt Guns Co.,

(1894) A.C. 535 Nordenfelt was an inventor
and a manufacturer of guns and ammunition.
He sold his world-wide business to Maxim and
promised not to manufacture guns anywhere in
the world for 25 years. The House of Lords
held that the restraint was reasonable
What is restitution ?
Answer
When a contract becomes void, it is not to be

performed by either party. But if any party has
received any benefit under such a contract
from the other party he must restore it or make
compensation for it to the other party
What are the principles of quasi
contract ?
Answer
A quasi-contract rests on the equitable principle

that a person shall not be allowed to enrich
himself unjustly at the expense of another.
What are the cases of quasi
contract ?
Answer
Necessaries supplied to person incapable of

contracting .
Suit for money had and received
Quantum Meruit
Obligations of a finder of goods .
Obligation of person enjoying benefit of a non-
gratuitous act
What is the meaning of quantum
meruit ?
Answer
“as much as earned”

or
reasonable remuneration.
What constitutes a valid offer ?
Answer :
Clear
definite
complete
final
not be vague
communicated
How can offer be communicated?
Answer
Verbally or
orgally
What types of offers are
possible ?
Answer
General offer – to everyone

specific offer (to a particular person)
What was the matter in Carlill v.
Carbolic Smoke Ball Co. case?
Answer
The company offered by advertisement, a reward of

100 pounds to anyone who contacted influenza after
using their smoke ball in the specified manner. Mrs.
Carlill did use smoke ball in the specified manner,
but was attacked by influenza. She claimed the
reward and it was held that she could recover the
reward as general offer can be accepted by
anybody. Since this offer is of a continuing nature,
more than one person can accept it and can even
claim the reward.
What was the matter in Harbhajan Lal v.
Harcharan Lal (AIR 1925 All. 539)?
Answer
In this case, a young boy ran away from his fathers home.
The father issued a pamphlet offering a reward of Rs. 500 to
anybody who would bring the boy home. The plaintiff saw the
boy at a railway station and sent a telegram to the boys father.
It was held that the handbill was an offer open to the world at
large and was capable to acceptance by any person who
fulfilled the conditions contained in the offer. The plaintiff
substantially performed the conditions and was entitled to the
reward offered.
Is it an offer ?
display of priced goods in a self- service

store
Answer
No
Is it an offer ?
a shopkeepers catalogue of prices
Answer
No
it is an invitation to offer
When will an offer lapse?
Answer
If it is not accepted within the specified time (if any) or after a

reasonable time, if none is specified.
it is not accepted in the mode prescribed or if no mode is prescribed
in some usual and reasonable manner, e.g., by sending a letter by
mail when early reply was requested;
the offeree rejects it by distinct refusal to accept it;
either the offeror or the offeree dies before acceptance;
the acceptor fails to fulfill a condition precedent to an acceptance.
the offeree makes a counter offer,
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INDIAN CONTRACT ACT – SOME

Here I present a few questions about Indian

When there is no consideration

Agreements relating to social matters

Domestic arrangements between

An offer or proposal by one party and acceptance of that offer by another

a person who attended the advertised place

Merely a statement of the price at which

A servant brought the boy without knowing

Where a person offers to another to

There are 3 types of consideration :

Consideration need not be adequate

A gratuitous promise to subscribe to a charitable

A minors estate is liable to pay a reasonable

Agreement in restrain of parental right

In Nordenfelt v. Maxim Nordenfelt Guns Co.,

When a contract becomes void, it is not to be

A quasi-contract rests on the equitable principle

Necessaries supplied to person incapable of

“as much as earned”

General offer – to everyone

The company offered by advertisement, a reward of

display of priced goods in a self- service

a shopkeepers catalogue of prices

If it is not accepted within the specified time (if any) or after a

GIVE YOUR SUGGESTIONS AND JOIN

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