B.Com 1st Year Low Of Contract 1872 Long Question Answer Notes
B.Com 1st Year Low Of Contract 1872 Long Question Answer Notes :- In this post is very useful for BCOM Students you will get full information related to Low of Contract (1872): Nature of Contract; Classification; Offer and acceptance; Capacity of parties to contract;Free Consent; Consideration; Legality of object; Agreement declared void; Performance of contract; Discharge of Contract; Remedies for breach of contract. Notes Study Material.
Long Answer Questions
Q.1. Explain contract. Discuss the essentials of a valid contract. Who are the persons disqualified from entering into a contract?
Ans. Contract: The term ‘contract’ has been defined under Sec. 2(h) of Indian Contract Act 1872 As per this ‘an agreement enforceable by law is a contract.
Thus, to constitute a contract, firstly there must be an agreement and secondly such an agreement must be ‘enforceable by law!
Section 2fel of Indian Contract Act, 1872 defines the term agreement as ‘Every promise or every set of promises forming the consideration for each other is an agreement. It tnay be noted that for an agreement to be enforceable, it must be coupled with obligation to do or abstain from doing a particular act.
Therefore, in the broadest sense, a contract is an exchange of resulting in an obligation to do or abstain from doing a particular act, whose obligation is recognised and enforced by law.
It may be noted that those agreements in which there is no intention to create legal relations are not contracts. For instances, agreements relating to social matters are not contracts. Thus, all agreements are not contracts. But all contracts are agreements.
To conclude Agreement is a wider concept whereas contract is a narrower concept.’
Formation of Valid Contract or Essential Elements of a Valid Contract Sec. 10 of the Indian Contract Act, 1872 provides the following:
“All agreements are contracts, if they are made by free consent of parties con for a lawful consideration and with a lawful object and are not hereby expressly declared to be void!
Thus, the essential elements of a valid contract are:
1. An offer or proposal by one party and on acceptance of that offer by another party results in an agreement.
2. Free consent of the parties is present.
3. The parties to contract are legally capable of contracting.
4. The agreement is supported by consideration.
5. The consideration and object of the contract is legal. Persons Disqualified by Law or Disqualified from Entering into a Contract
Besides minors and persons of unsound mind, there are others who are disqualified from contracting under the provision of some other laws.
1. Alien Enemies: A person who is not an Indian citizen is an alien. An alien may be either an alien friend or a foreigner whose sovereign or state is at peace with India and has usually contractual capacity of an Indian citizen. On the declaration of war between his country and India, he becomes an alien enemy. A contract with an alien enemy becomes unenforceable on the outbreak of war.
2. Foreign Sovereigns and Ambassadors: Foreign sovereigns and accredited representatives of foreign states, i.e. Ambassadors, High Commissioners, enjoy a special privilege in a way that they cannot be saved in Indian courts, unless they voluntarily submit to the jurisdiction of the Indian courts. Foreign sovereign governments can enter into contracts through agents residing in India. In such cases, the agent becomes personally responsible for the performance of the contracts.
3. Corporations: A corporation is an artificial person created by law, e.g. a company registered under the Companies Act, public bodies created by statute, such as Municipal Corporation of Delhi. A corporation exists only in contemplation of law and has no physical shape or form. The Indian Contract Act does not speak about the capacity of a corporation to enter into a contract. But if properly incorporated, it has a right to enter into a contract. It can sue and can be sued in its own name. There are some contracts into which a corporation cannot enter without its seal and others not at all. A company, for instance, cannot contract to marry. Further, its capacity and powers to contract are limited by its charter or memorandum of association. Any contract beyond such power is ultra vires and void.
4. Insolvents: When a person is adjusted insolvent, whole of his property stands vested in the official receiver or official assignee appointed by the court. He cannot enter leage into the contracts relating to his property and sue or be sued. However, he will have a right to make contracts which are necessary for his reasonable maintenance and that of his family. This disqualification does not operate after he is discharged.
5. Convicts: A convict is incapable of entering into a contract during the continuance of sentence of imprisonment. However, he can enter into a valid contract after the expiration of his term of imprisonment. A convict can also, enter into, or sue on, a contract when on payroll or when has been pardoned by the court.
Q.2. Classify contracts on the basis of different aspects.
Ans. Classification of Contracts: The contracts can be classified on the basis of different aspects which are as under:
On this Basis of Enforceability
Various contracts are:
1. Valid Contract: It fulfils all the essential requirements of a contract given under Section 10 and is enforceable by law.
2. Void Contract: It is a contract without any legal effect and cannot be enforced in a court of law.
It is a contract that ceases to be enforceable by law.
3. Void Agreement: According to Section 2(g), an agreement not enforceable by law is void. An
agreement is void because it lacks the basic elements of a valid contract.
4. Voidable Contract: It is an agreement which is enforceable by law at the option of one or more parties but not at the option of others.
5. Illegal Contract: It is a contract which is forbidden by law and if permitted, it would defeat the provisions of any law or is fraudulent. All illegal agreements are void but all void agreements or contracts are not necessarily illegal.
6. Unenforceable Contract: A contract is said to be unenforceable if due to some technical defect, one or both the parties cannot sue up on it.
On the Basis of Formation
Various contracts are:
1. Express Contract: When the contract has taken place in an express manner with the use of words spoken or written, it is an express contract.
2. Implied Contract: It is one that is made otherwise than by words spoken or written. It is inferred from the conduct of a person or the circumstances of the particular case.
3. Quasi-contract: It literally means ‘semi-contract and is created by law. Such contracts are not contracts as there is no intention of parties to enter into a contract. This contract is based on the principle that a person shall not be allowed to enrich himself as the expense of another. It is a legal obligation that is imposed on a party who is required to perform it. Relationship between the finder of lost goods and its true owner is an example of a quasi-contract.
On the Basis of Performance
Various contracts are:
1. Executed Contract: A contract is executed where both the parties have done their respective work. Where one party has already executed the consideration for which the promise was made, executed consideration results that in turn results into executed contract. Such a contract cover both the cases that of past and present consideration.
2. Executory Contract: It is a contract where one or both the parties involved in the contract have to perform their obligations in the future. It is a contract which is partially performed or wholly unperformed. Executory consideration results when the consideration for the promise exists in the form of a promise only. All this is referred to as future consideration and the contract that results in such a situation is called an executory contract.
On the Basis of Obligation
Various contracts are:
1 Unilateral Contract: It is a one-sided contract in which only one party has to perform his promise or obligation to doer it forbears. For example, a person makes payment for bus fare for his iourney from place A to place B. He has performed his promise but a transport company has also, to perform the promise.
2. Bilateral Contract: In such a contract, the obligation or promise in a
on the part of both the parties. In reality, a contract is a contract from the time it is made and is due.
Q.3. ‘A mere mental acceptance not evidenced by words or cond evidenced by words or conduct is in the eye of law not acceptance’ (2014) Explain.
Ans. A mere mental acceptance which is not expressed in won an acceptance from the legal standpoint. So an acceptance must be someting more than mere mental acceptance. There must not only be a desire to accept but the desire must beexpressed in words whether oral or written.
Like proposal, its acceptance is also needed to be followed up and communicated to the person who makes the proposal. According to the Indian Contract Act, the acceptance must be given within the specified time limit or within a reasonable time.
According to Section 9 of the act, Mere mental acceptance not evidenced by words or conduct is, in the eyes of law and not acceptance communicating thfe acceptance of an offer is a pre-requisite of agreement.
Mental acceptance is no acceptance. A decision in the mind of offeree’s to accept the offer by itself becomes acceptance. It must find an external expression.
This mental acceptance can be seen in the case studies.
1. In case of Brogden vs Metropolitan Rail Co., the manager kept the written approval of the
tender in his drawer but forgotten to send his approval of the offer to the coal company. Till the acceptance of the offer is communicated to the offerer, it cannot result in a contract.
2. Another case is of Powell Lee. The Plaintiff Powell was a candidate for the principal of
a school who was interviewed by a selection committee and a proposal was made for his appointment. The committee agreed on his appointment to the post. Powell filed a suit against the committee for breach of promise but the court ruled that a promise or agreement between the two would not exist as the committee’s decision had not been officially communicated to Powell. Thus, Powell could not enforce his appointment.
3. One case was that of Felthouse vs Bindley, Felthouse offered to buy his nephew’s horse and wrote about the horse to be him of he didn’t hear more about it. But the nephew did not write to Felthouse and told Bindley, his auctioneer not to sell the horse in question as it had already been sold to his uncle. Bindley sold the horse and Felthouse filed a suit against him. The court ruled that he had no right of action against the auctioneer as his offer had not been accepted by his nephew and so did not constitute a contract.
4. One more case was of Carlill vs Carbolic Smoke Ball Co. In it, Carlill had used the smoke balls of the company according to its directions which amounted to acceptance of the offer by doing the required act.
Q.4. Explain clearly the law relating to communication of ‘Offer’, ‘Acceptance’ and ‘Revocation’. (2014)
Ans. The communication of an offer to acceptance and revocation are deemed to be made by an act or its omission by the party offering, accepting or revoking as according to section 3 of the contract act. Such an act or omission must be affected from communication of such offer, acceptance or revocation There are some laws relating to communication of ‘offer’, its acceptance and the revocation.
1. Communication of Offer: It is complete when it comes to the knowledge of the person to whom it is made. An offer may be communicated either by words spoken or it may be written or inferred from the conduct of the parties.
In case of proposal made by post, the communication will be complete when the letter containing the proposal reaches the person to whom it is made
For example; If A makes an offer by post to sell his house to B at 30 lacs, the proposal would be made when B receives the letter making the proposal.
- Communication of Acceptance: Such a communication is made from the person to whom the proposal has been made to the person who has made the proposal. There cannot be any acceptance without communication and without this acceptance, no contract is possible.
There are some rules that govern the completion of communication of acceptance:
- Agreement entered into by a minor is altogether void as against the proposer when it is put in course of transmission to him so as to be out of he power of the acceptor in order to withdraw the same.
For example: if a’ s proposal is accepted by A by post, the communication of acceptance would be deemed to be complete as against A. This communication is complete as against the proposer when the letter is posted but he is not bound by such acceptance if the address on the letter is incorrect.
- As Agains the Acceptor: The communication of acceptance is complete as against the person to whom it is made, when it conmes to his knowledge or the knowledge of the proposer according to the Section 4.
- The time of completion of acceptance’s communication is not the same for the proposer and the acceptor. Here, the acceptor gets the option to revoke his acceptance of the proposal before it is received by the proposer.
- Communication of Revocation: Revocation means ‘taking back’ or withdrawal’. It may be a revocation of offer of acceptance. Here the communication of a revvoction is complets as.
- Against hte person who is revoking or the person who makes it. When it is put into a course of transmission to the person to whom it is made so as to be out of the power of person who makes it. So, a proposal may be revoked aat any time before the communication of acceptance is complete as against the proposer but this is not afterwards as according to section 5.
- Aganist the person to whom it is made-when it comes to hisknowledge.
For Example; A proposes to sell a house to B by a letter at a certain price. Such a revocation against A will be complete when he sends the telegram. It will be complete against B when he receives A’s telegram. In the same way, if B revokes his acceptane telegraphically, the revocation complete against B when he sends the telegram.
A proposal or offer may be revoked at any time before the communicationof its acceptance is complete as against the proposer but not afterwards.
In the same way, andacceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor but not afterwards. According to Section 5, acceptance of an offer is revocable as against the acceptor at any time before the completion of the communication of acceptance.
Q.5. What do you mean by ‘Capacity of contract’? Who are the various persons regarded as incompetent by law to enter into contract? (2015)
Or Write a short note on minor. (2016)
Ans. Capacity to contract means and include the legal capacity of the parties to enter into a contract. It is the competence of the parties to enter into a valid contract. According to Section 11 of the Indian Contract Act, ‘Every person is competent to contract who is of the age of majority according to the law to which he is subject and having a sound mind. He is not disqualified from contracting by any law to which he is subject’. So, a party to a contract must be a major, be of sound mind and not be disqualified by any law.
According to Section 11, the persons who are regarded as incompetent by law to enter into contract are:
1. Minor: He is a person who has not completed eighteen years of age. Section 11 expressly provides that the age of majority of a person is to be determined according to the law which. he is subject.
Q.6. Discuss about free consent.
Ans. Free Consent: According to Section 13 of Indian Contract Act, 1872 ‘Two or more persons are said to consent when they agree upon the same thing in same sense. This is known as consensusad-idem’, i.e. meeting of two minds upon the same thing in the same sense. For instance, Amar, who owns two horses named X and Y, is selling horse X to Shyam. Shyam thinks he is purchasing horse Y. Thus, there is no consensus-ad-idem and consequently no contract.
According to Sec. 14 of Indian Contract Act, 1872 consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.
Effect of Absence of Free Consent (Sec. 19): When there is consent but is not free, the contract is usually voidable at the option of the party whose consent was so caused by coercion, undue influence, frau misrepresentation, etc.
Misrepresentation (ie. Innocent Misrepresentation): If a person makes a representation which is actually not true but believing what he says true, he commits innocent misrepresentation. The effect of innocent misrepresentation is that party misled by it can avoid the contract, but cannot sue for damages in the normal circumstances.
It may be noted that misrepresentation as to fact renders a contract voidable but misrepresentation as to law does not, ordinarily, makes the contract voidable, as ignorance of law is no excuse.
Fraud (i.e. Wilful Misrepresentation): Fraud means and includes any of the following acts committed by a party to a contract with intent to deceive another party or to induce him to enter into the contract.
1. The suggestion, as to 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 such act or omission as the law specially declares to be fraudulent.
Q.7. Who can enter into contract? What is the effect on a contract of incompetency to contract? Discuss the law relating to minor’s contract.(2016)
Or Who is competent to contract? Explain the laws related to agreement with minors.
Or By whom contract must be performed?(2016)
Ans. Competent to Contract: In law, persons are either natural or artificial. Natural persons are human beings and artificial persons are corporations. Contractual capacity or incapacity is an incident of personality.
Sec. 11 provides that every person is competent to contract:
1. who is of the age of majority.
2. who is of sound mind.
3. who is not disqualified from contracting by any law to which he is subject.
Minor: According to the Indian Majority Act, 1875, a minor is a person, male or female, who has not completed the age of 18 years. In case a guardian has been appointed to the minor or where the minor is under the guardianship of the court of wards, the person continues to be a minor until he completes the age of 21 years.
According to Indian Contract Act, only a major person is competent to contract. Thus, contract with or by a minor is altogether void. The word ‘void’ when used in relation to a minor, it should be understand as ‘void against the minor. Thus, an agreement by or with a minor is void only if it involves a promise on his part or his promise is a necessary part of the agreement because a minor is incapable of giving a promise imposing a legal obligation. But if the minor has carried out his part of the contract; the contract is valid and he can proceed, against the other party. The rationale is to protect minor’s interest.
In this case of Mohiri Bibee vs Dharmodas Ghose, a minor borrowed 20,000 from Y, a money -lender. As a security for the money advanced, X executed a mortgage in Y’s favour. When sued by Y, the court held the contract by X was void and he cannot be compelled to repay the money advanced to him. It was also held that mortgage was also void and, therefore, it was cancelled.
The following points must be kept in mind with respect to minors contract also called as laws related to agreement with minors:
1. A minor’s contract is altogether void in law, and a minor cannot bind himself by a contract. If
the minor has obtained any benefit, such as money on a mortgage, he cannot be asked to repay, nor can his mortgaged property be made liable to pay.
2. Since the contract is void-ab-initio, it cannot be ratified by the minor on attaining the age of majority.
3. A minor’s estate is liable to pay a reasonable price for necessities supplied to him or to anyone whom the minor is bound to support (Sec. 68 of the Act).
4. The necessary supplies must be according to the position and status in life of the minor and must be things which the minor actually needs.
5. An agreement by a minor being void, the court will never direct specific performance of the contract.
6. A minor can be an agent, but he cannot be a principal nor can be a partner. He can, however, be admitted to the benefits of a partnership.
7. Since, a minor is never personally liable, he cannot be adjudicated as an insolvent
Effect on a Contract of Incompetency to Contract: Refer to section-B,Q.5.
Q.8. Discuss the agreements which have been expressly declared void by the Indian contract Act. Give suitable examples.
Or What are the agreements which have been expressly declared to be void as per the Indian Contract Act, 1872?
ANS. Agreements Expressly Declared Void: As per Sec. 2(g) of Indian Contract Act, 1074, A Vold agreement is one which is destitute of all legal effects. It cannot be enforced and confers no rignts on either party. A void agreement is void-ab-initio.’
The following types of agreements have been expressly declared void under the Indian Contract Act, 1872:
1. Agreement by or with a minor or a person of unsound mind or a person disqualified to enter into a contract.
2. Agreement made under a mistake of fact.
3. Agreement is restraint of trade.
4. Agreement by way of wager.
5. Agreement made without consideration, subject to three exceptions as provided under Sec. 25,
6. Agreement of which the consideration or object is unlawful.
7. Agreement, the meaning of which is not certain/clear.
8. Agreement to enter into an agreement in the future, Some of these agreements are discussed as under:
Agreement Made under a Mistake of Fact: Where both the parties to an agreement are under a mistake as to a matter of fact essential to agreement, the agreement is void. For instances, A agrees to buy from B a certain horse. It was later found out that the horse was dead at the time of agreement, though neither party was aware of the fact. The agreement is void.
A mistake must satisfy the following conditions, so as to render the contract void:
1. Mistake must be of fact and not of law or opinion.
2. The fact must be essential for the performance of contract.
3. Mistake must be on the part of both the parties.
Agreement in Restraint of Trade: An agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind is, to that extent void.
But the court held that if the restraint is one, which is really necessary for the carrying on business, the same is not prohibited and it shall not render the contract void. For instance, where a person sells the goodwill of a business and agrees with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer carries on a like business therein, such an agreement is valid
The words to that extent’ make it clear that if in an agreement, there are some conditions which are prohibited whereas the others are not and if the two parts can be separated, then only those conditions which operate as restraint of trade would be void and not the whole agreement itself.
Agreement by Way of Wager: The literal meaning of the word ‘wager’ is ‘beť. Thus, wagering agreement is nothing but ordinary betting agreement and is void
For example: A and B enter into an agreement that if England’s cricket team wins the test match, a will pay 100 to B, and if it loses, B will pay 100 to A. This is wagering the agreement and hence void and thus, the winning party cannot legally recover anything under the agreement.
It may be noted that in a wagering contract, there must be mutuality in the sense that the gain of the one party should be loss to the other on the happening of an uncertain event, which is the subjectmatter of the contract.
Q.9. ‘All agreements are void in the absence of an agreement’. While explanining this law, explain its exception with illustrations.(2015)
Ans. According to Section 2(g) of the Indian Contract Act, ‘An agreement not enforceable by law is void. Such an agreement has no legal effect and does not satisfy the essential elements of contract. Unlawfulness of object and consideration of the contract, i.e. illegality of the contract makes it void. It confers no rights over any person and hence creates no obligation.
The agreements that have been declared void have some exceptions too.
1. The Exceptions to the Rule of Restraint in Marriage Agreement are:
(a) A promise made by a hindu husband from his wife that he would not remarry till they are husband and wife will be valid.
(b) The agreement made by a muslim husband from his wife that she has the right to divorce him if he marries again, will be valid.
2. The Exceptions to the Rule that ‘An Agreement in Restraint of Trade is Void are: Section 27 can’t restrict a person to make an agreement binding the other party to specific conditions in trade
(a) Restrain on the activity of partners not to engage in any business activity other than that of the firm is deemed to be valid.
(b) When a person sells the goodwill of a business, he may be restrained from carrying on a similar business within specified local limits till the buyer of the goodwill carries on a like business.
(c) Agreements between the traders in the same line of business in order to regulate the business or to fix prices are valid agreements.
3. There are also situations where an agreement in restrain of legal proceedings may not be void like:
(a) An agreement to refer future disputes to arbitration.
(b) An agreement to refer a present dispute to arbitration, are valid agreements. If the parties make an agreement in writing to refer a present dispute to arbitration, it would be a valid agreement but if the parties make an agreement that no party would have the right to go to court and would be bound to accept the verdict of arbitrator such an agreement would not be void.
4. The following agreements are not deemed to be wagering agreements and are not void but are valid agreements.
(a) Agreements relating to horse racing have the ingredients of a wager they are deemed to be valid.
(b) Commercial activity involves delivery and the receipt of goods and all agreements and such activity are valid.
(c) Speculative transactions are not regarded as wagers because the parties to a transaction can be bound to deliver or receive the goods in a future situation.
(d) Agreements related to Teji Mandi transactions also called as ‘option dealings’ are valid and are not deemed to be wagering contracts if the intention of he parties is to deliver and receive good.
(e) Lottery is a wagering agreement and as such is you the only effect is that the persons conducting the lottery will not be punishable by law.
(f) A chit fund is not deemed to be a lottery that means a chit fund agreemen
Q.10. What are the varlous ways in which a contract may be discharged
Ans. Discharge or Termination of Contracts or Meaning of Discharge of Contracts or Meaning of Discharge of a Contract: Discharge of a contract means termination of the contractual relations termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the rights and oblications of the parties under the contact come to an end. In other words, a contract is said to be discharged or terminated, when the rights and obligations out of it are extinguished.
Thus, a contract may be discharged or terminated in any of the following ways:
1. Performance of Contract: Sec, 37 of the Indian Contract Act. 1872 provides that the parties to a contract must either perform, or offer to perform their respective promises,
or offer to perform their respective promises, unless such performance is dispensed with (made unnecessary) or excused under the provision of this Act, or of any other law.
2. Mutual Consent or Agreement: A contract may be discharged by the mutual consent or agreement of all parties to the contract. A contract may be discharged by mutual consent in the following ways:
(a) Novation: Novation takes place when a new contract is substituted for an existing one between the same parties or between the new parties.
(b) Rescission: Rescission of a contract takes place when all of the terms of the contract are cancelled.
(C) Alteration: Alteration of a contract may take place when one or more of the terms is/are changed. Here parties to the contract must not change.
(d) Remission: Remission means acceptance of a lesser fulfilment of the promise made.
(e) Waiver: Waiver takes place when the parties to a contract agree that they shall no longer be bound by the contract.
3. Lapse of Time: If a contract is not performed and no action is taken by the aggrieved party within limitation period as specified under the Limitations Act, 1963, he is deprived of remedy at law and the other party is discharged of his liability to perform.
4. Operation of Law: A contract may be discharged by operation of law. For instance, if the promisor dies and the contract requires the performance of the promise by the promisor only, the contract shall be discharged by operation of law.
Similarly, when a person is adjudged insolvent, he is discharged from all liabilities incurred prior to his adjudication.
5. Impossibility of Performance- Impossibility Existing at the Time of Contract: A contract, which is entered in to perform something that is clearly impossible to perform, is void-ab-initio and hence stands discharged.
|1.||Wher both the promiseor and promise know about hte initial impossibility.||Such agreement is void-ab-initio.|
|2.||Where both the promisor and promise do not know about the initial impossibility.||Such agreement is void on the ground of mutual mistake.|
|3.||Where the promisor alone knows about the initial impossibility.||Such promisor must compensate for any loss which such promise sustains through the non- performance of the promise.|
6. Breach of Contract: Refer to Sec.-B,
Q.11. What are the remedies for a breach of contract?
Or Write a brief note on breach of contract.
Or What are the various remedies available to a party in case of breach of contract?
Ans. Breach of Contract: Where one party to a contract neither performs nor offer to performs promise or where the performance is defective, there is a breach of contract.
Types of Breach of Contract
Breach of contract may be actual or anticipatory breach of contract.
1. Actual Breach of Contract: Actual breach of contract occurs in the following two ways:
(a) On Due Date of Performance: If any party of a contract refuses or fails to perform his part of the contract at the time fixed for performance, it is called an actual breach of contract on due date of performance.
(b) During the Course of Performance: If any party has performed a part of the contract and then refuse or fails to perform the remaining part of the contract, it is called an actual breach of contract during the course of performance,
2. Anticipatory Breach of Contract: Anticipatory breach of contract occurs when the party declares his intention of not performing the contract before the performance is due.
If one of the parties to a contract breaks the promise, the party injured thereby has not only a right of action for damages but he is also discharged from performing his part of the contract. Remedies for Breach of Contract.
A remedy is the course of action available to an aggrieved party for the enforcement of a right under a contract.
In case of breach of contract, the injured or the aggrieved party has the following remedies:
1. Rescind the Contract: When a party to a contract has broken the contract, the other party may treat the contract as rescinded and he is absolved from all his obligations under the contract. When a contract is rescinded, any person; who has received any advantage or benefit under such contract, is bound to restore it to the person from whom to receive it.
2. Sue for Damages: Damages are monetary compensation allowed for loss suffered by the aggrieved party due to breach of a contract. The object of awarding damages is not to punish the party at fault but to make good the financial loss suffered by the aggrieved party due to the breach of contract.
When a party to a contract breaks the contract, the aggrieved party is entitled to receive compensation for any loss or damages caused to him, from the party who has broken the contract. Damages for a breach of contract may be of two types namely, liquidated and unliquidated damages,
3. Suit for Specific Performance: Where damages are not an adequate remedy in the case of breach of contract, the court may, in its discretion, on a suit for specific performance, direct the party in breach for the specific performance of the contract, i.e. to carry out his promise according to the terms of the contract.
Generally specific performance is granted in the following types of contracts:
(a) Contracts for the sale/purchase of land.
(b) Contracts for sale of goods, provided goods are unique and cannot be purchased in the market.
However, specific performance shall not be ordered in the following cases:
(a) Where the court cannot supervise the execution of contract.
(b) Where the contract is for personal service.
c) Where damages are an adequate remedy.
(d) Where one of the party is minor.
4. Suit for Injunction: Where a party to a contract brea bring a suit for injunction, ie, order of the court restraining a pet a party to the contract does something which he promised not prohibiting him from doing so. Thus, injunction is a mode of negative terms of the contract.
It may be noted that in contracts involving personal skill or quality, specific performance cannot be granted but injunction may be granted in such cases.
5. Suit for Quantum Meruit: Quantum meruit mear for Quantum Meruit: Quantum meruit means ‘as much as is earned. Rignt to quantum meruit means a right to claim the compensation for the work that has been already done.
Q.12 What is quasi-contract? Enumerate the quasi-contract dealt
ontract dealt with under the Indian Contract Act, 1872.
Or What are quasi-contracts?
What types of quasi-contracts have been recognised by the Indian Contract Act?
Or ‘Quasi-contract is based upon the principle of equity.’ Comment,
Ans. Nature and Meaning of Quasi-contract: The literal meaning of the term ‘quasi’ is seeming but not really’. Thus a quasi-contract means something which seems to be a conta so. In truth, a quasi-contract is not a contract at all as it lacks one or more seesential elements of a valid contrat.
Although quasi-contracts are not contracts in the strict sense, the court recognise them as relations resembling those of contract and enforces them, as if they were contracts. A quasi-contract rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense on another. Thus, quasi-contracts are based on the principles of equity, justice and good conscience,
Types of Quasi-contracts
Indian Contract Act, 1872 provides for the following types of contracts:
1. Claim for Necessaries Supplied to Persons Incapable of Contracting: If necessaries are supplied to a person who is incapable of contracting (e.g, minor or a lunatic); or to anyone whom the incapable person is legally bound to support, the supplier is entitled to claim their price from the property of such person. However, if such person has no property, nothing would be realisable as he is not personally liable.
It may be noted that price only, of necessaries can be recovered and not of articles of luxury.
2. Right to Recover Money Paid for Another Person: A person, who has paid a sum of money which another has obliged to pay is entitled to be reimbursed by that other person, provided the payment has been made by him to protect his own interest.
3. Obligation of a Person Enjoying Benefits of Non-gratuitous Act: Where a person lawfully does something for another person or delivers anything to him, without any intention of doing so gratuitously and the other person accepts and enjoys the benefit thereof, the latter must compensate the former for restore to him the thing so delivered.
4. Responsibility of a Finder of Goods: The finder of goods belonging to someone else must take as much care of the goods as a man of ordinary prudence would take of his own goods of the same kind, Further he must not appropriate the goods to his own use and if the owner is traced, he must return the goods to him.
5. Liability for Money Paid or Things Delivered by Mistake or Under Coercion: A person to whom money has been paid or anything delivered by mistake or under coercion, must reply or return it
It may be noted that money paid or goods delivered under every type of mistake is recoverable. Further, the term ‘coercion’ appearing here is not governed by the definition given under Indian Contract Act, 1872. It should be interpreted in a general and ordinary sense and may include any kind of oppression, extortion or such type of other means.