contract act

3.Communicaon, acceptance and revocaon of proposals.-The communicaon of proposals the

acceptance acceptance of prop osals osals,, and t he revocaon of proposals and acceptances, respecvely, are deemed to be m ade by any act act o r om iss ission of_ t he party p roposing, roposing, accepng or revoking by which he intends to com m unicate such such pro- p osal osal acceptance acceptance or revocaon, or which., has the effect of communicang it.

5.Revocaon of proposals and acceptances.-A proposal may be revoked at any me before the communicaon of its acceptance acceptance is comp lete as against the proposer, but not aerwards. An acceptance acceptance may be revoked at any me before the communicaon of t he acceptance is com plete as agains againstt the

accepto accepto r, but not aerwards. Illustraons A proposes, by a leer sent by po st, t o sell his house to B. B accepts the proposal by a leer sent by post. A may revoke his proposal at any me before or at the moment when B posts his leer of acceptance, but not aerwards. B may revoke his acceptance at any  me before or at t h e m o m e n t when the leer communicang it reaches A, but not aerwards.

8.Acceptance by performing condions, or receiving consideraon.- Performance of the condions of a

prop osal, osal, or th e acceptance of any consideraon for a reciprocal promise which m a y b e offered with a prop osal, osal, is an acceptance acceptance o f t he p roposal.

10.Wh at agreement s are cont cont racts.-All racts.-All agreement agreement s are cont cont racts if they are m ade by the fr ee consent consent of pares competent to contract, for a lawful consideraon and with a lawful object, and are not hereby

expressly expressly declared to b e void. Nothing herein contained shall affect any law in force in 1* [India] [India] and not hereby expressly expressly repealed by w hich any cont cont ract is required to be made in wring2* or in the presence of w itnesses itnesses,, or any law re lang to the registraon of documents.

11. Who are competent to cont ract.-E ract.-Every very person person is com petent t o contract w ho is of the age of majority according according to t he law to w hich he is subject, 3*and who is of sound mind, and is not disqualified from contracng by any law law to w hich he is subject. subject.

12.What is a sound mind for the purposes of contrac ng.-A person is said to be of sound m ind for the

purpose of m aking a contract if, at the me when he makes it, he is capable of understanding it and of  form ing a r aonal judgment as to its effect upon his i nterests. A person who is usually of unsound m ind, but o ccasionally of sound m ind, may m ake a contract w hen he is of sound m ind. A person w ho is usually of sound m ind, but occasionally of unsound m ind, may not m ake a contract w hen he is of unsound mind.

Illustraons (a) A paent in a lunac asylum, who is at intervals of sound m ind, may contract durin g tho se interv als.

(b) A sane man, who is delirious from fever or w ho is so drunk t hat he cannot understand t he term s of a contract or form a raonal judgment as to its effect on his interests, cannot contract whilst such

delirium or dr unkenness lasts.

13."Consent" defined.-Tw o or m ore persons are said to consent w hen they agree upon the same thing in

the sam e sense.

14."Free consent" defined.-Consent is said to be fr ee w hen it is not caused by(1) coercion, as defined in secon 15, or (2) undue influence, as defined in secon 16, or (3) fraud, as defined in secon 17, or (4) misrepresentaon, as defined in secon 18, or (5) mistake, subject to the provisions of secons 20, 21 and 22.

Consent is said to be so caused w hen it w ould no t have been given but f or t he existence of such coercion, undue influence, fraud, misrepresentaon or mistake.

15. " Coercion " defined.- "Coercion" is the comming, or threatening to comm it, any act forb idden by the Indian Penal Code, or the u nlawful det aining, or threatening to d etain, any property , to the prejudice of any person whatever, with the intenon o f causing any person to enter into an agreement.

Explanaon.-It is imm aterial whet her th e Indian Penal Code is or is not in force in th e place wh ere the

coercion is em ployed. (45 of 1860.)

Illustraon

A, on bo ard an English ship on the high seas, causes B to enter int o an agreement by an act amounng to criminal inmidaon under th e Indian Penal Code. (45 of 1860.) A aerwards sues B for breach of  contract at Calcua.

A has employed coercion, although his act is not an offence by the law of England, and altho ugh secon

506 of t he Indian Penal Code was not in force at the me when or place w here the act w as done.

16."Undue influence" defined. -(1) A cont ract is said to be induced by " undue influence where the relaons subsisng between the pares are such that one of the pares is in a posion to d o m i n a t e t h e will of the other and uses that posion to obtain an unfair advantage over the other. (2) In parcular and without prejudice to the g enerality of the foregoing prin ciple, a person is deemed to

be in a posion to d o m i n a t e t h e w i l l o f a no t h e r (a) wh ere he holds a real or apparent auth ority over t he other or where he stands in a fiduciary relaon to the other ; or (b) where he m akes a contract w ith a person w hose mental capacity is tem porarily or perm anently affected by reason of age, illness, or m ental o r b odily d istress. (3) Where a person who is in a posion to dominate the will of  another, enters into a contract w ith him , and the transacon appears, on th e face of it or on t he evidence adduced, to b e unconscionable, the

burden of proving that such contract w as not induced b y undue influence shall lie upon the person in a posion to dominate the will o f t h e o t h e r .

Not hing in this sub- secon shall affect the provisions of secon Ill of the Indian Eviden ce Act, 1872. (1 of 1872.) Illustraons

(a) A having advanced mo ney to his son, B, during his mino rity, upo n B's com ing of age obt ains, by misuse of parental influence, a bond from B for a greater am ount t han the sum due in respect of the

advance. A employs undue influence. (b) A, a m an enfeebled by d isease or age, is induced, by B's influence over him as his medical aendant, to agree to pay B an unr easonable sum for his professional services. B employs undu e influence.

(c) A, being in debt to B, the m oney-lender of his village, cont racts a fresh loan on t erm s which appear to be unconscionable. It lies on B to prove that the contract w as not induced by undue influence. (d) A applies to a banker for a loan at a me when there is strin gency in the m oney m arket. The banker

declines to m ake the loan except at an un usually high rate of in terest. A accept s the loan on t hese terms. This is a transacon in the ordinary course of  business, and the cont ract is not induced by und ue influence.]

17."Fraud" defined.-"Fraud" m eans and includes any of t he following acts commied by a party to a contract, or w ith his connivance, or by his agent w ith intent to deceive another party t hereto of his agent, or to induce him t o enter into the contract:(1) the sugg eson, as a fact, of that which is not true, by one who d oes not b elieve it to be true ; (2) the acve concealment of a fact by one having know ledge or belief of th e fact ; (3) a promise made without any intenon of performing it (4) any other act fied to deceive ;

(5) any such act o r om ission as the law specially declares to be fraudu lent. Explanaon.- Mere silence as to facts likely to affect the w illingness of a person to ent er into a cont ract is

not fraud, unless the circum stances of t he case are such t hat, regard being had to them , it is the dut y of the person keeping silence to speak,1* or unless his silence is, in it self, equivalent to speech.

Illustraons (a) A sells, by aucon, to B, a horse which A knows to be unsound. A says not hing to B about the h orse's

unsoundness. This is not f raud in A. (b) B is A's daughter and has just com e of age. Here, the relaon between the pares would make it A's dut y to t ell B if the ho rse,is unsound. (c) B says to A--"If you d o no t den y it , I shall assume t hat t he hor se is sound." A says not hing. Here, A's silence is equivalen t t o speech. (d) A and B, being traders, enter up on a cont ract. A has private informaon of a change in prices which would affect B's w illingness to proceed w ith the contract. A is not b ound t o inform B.

18."Misrepresentaon" defined.- "Misrepresentaon" means and includes-

(1) the posive asseron, in a manner not warranted by the informaon of the person making it, of that

w hich is not t rue, though he believes it t o be tru e (2) any breach, of dut y w hich, withou t an intent to deceive, gains an advantage to the person omming it, or any one claiming under him , by m isleading anoth er to his prejudice or t o the pr ejudice of any one claiming under him ; (3) causing, how ever innocently, a party to an agreem ent t o m ake a m istake as to the substance of the thing w hich is the subject of t he agreem ent.

22.Contract caused by mistake of one party as to maer of fact. - A cont ract is not voidable m erely

because it w as caused by one o f t he par es to it being under a mistake as to a maer of fact.

23.What consideraons and objects are lawful and what not.-The consideraon or object of an

agreement is lawfu l, unless it is forbidden by law 1* ; or is of such a nature that, if permied, it would defeat th e provisions of any law; or is fraudulen t ; or involves or implies injury to th e person or pr opert y of another or ; the Court regards it as im m oral, or opposed to pu blic policy. In each of these cases, the consideraon or object of an agreem ent is said to be unlaw ful. Every agreem ent of w hich the object or consideraon is unlaw ful is void. Illustraons

(a) A agrees to sell his house to B for 10,000 rupees. Here B's prom ise to pay th e sum o f 10,000 ru pees is the consideraon for A's prom ise to sell the hou se, and A's prom ise to sell the hou se is the consideraon for B's promise to pay the 10,000 rupees. These are lawful consideraons.

(b) A prom ises to p ay B 1,000 rupees at th e end of six m ont hs, if C, who ow es that sum t o B, fails to p ay it. B prom ises to grant me to C accordingly. Here the promise-of each party is the consideraon for the prom ise of the other party and th ey are law ful consideraons. (c) A prom ises, for a certain sum p aid to h im by B, to m ake good to B t he value of his ship if it is w recked on a certain voyage. Here A's promise is the consideraon for B's payment and B's payment is t he consideraon for A's promise and these are lawful consideraons.

(d) A prom ises to m aintain B's child and B prom ises to pay A 1,000 rupees yearly for t he purp ose. Here the prom ise of each party is the consideraon for the promise of the 'other party. They are lawful consideraons.

(e) A, B and C enter int o an agreement for t he division am ong them of gains acquired, or- to b e acquired, by th em by fraud. The agreement is void, as its object is unlawfu l. (f) A prom ises to o btain for B an em ploym ent in t he pub lic service, and B prom ises to pay 1,000 rupees to A. The agreem ent is void, as the consideraon for it is unlawful. (g) A, being agent for a landed pro prieto r, agrees for m oney, wit hout the kno w ledge of his principal, to obt ain for B a lease of land belonging to his principal. The agreemen t bet w een A and B is void. as it im plies a fraud by concealment , by A, on his principal. (h) A p romises B to drop a prosecuon which he has instuted against B for robb ery, and B prom ises to restore th e value of the thin gs taken. The agreemen t is void, as its object is unlawfu l. (i) A's estate is sold for arrears of revenu e under the pro visions of an Act of the Legislature, by w hich the defaulter is prohibit ed from purchasing, the estate. B, upon an understandin g wit h A, becom es the purchaser, and agrees to convey the estate t o A upo n r eceiving from him the p rice which B has paid. The agreement is void, as it renders the transacon, in effect a purchase by the defaulter, and w ould so defeat the object of t he law . (j) A, who is B's mukhtar, promises to exercise his influence, as such, w ith B in favour o f C, and C

prom ises to p ay 1,000 rupees to A . The agreement is void, because it is imm oral. (k) A agrees to let her daughter to hire t o B for concubi nage. The agreement is void, because it is immoral, though the leng may not be pun ishable under t he Indian Penal Code. (45 of 1860.)

24.Agreem ent void , if consideraons and objects unlawful in part.- If any part of a single consideraon for one or m ore objects, or any one or any part of any one of several consideraons for a single o bject, is unlaw ful, the agreement is void.

Illustraon

A prom ises to superint end, on behalf of B, a legal m anufacture of indigo, and an illegal traffic in other arcles. B promises to pay to A a salary of 10,000 rup ees a year. The agreem ent is void, the object o f A's promise, and the consideraon for B's promise, being in part unlawful.

25.Agreement without consideraon, void, uncles it is in wring and registered, or is a prom ise to

compensate for som ething done, or is a promise to pay a debt barred by limitaon law. -An agreem ent m a d e without consideraon is void, unless(1) it is expressed in wring and registered under the law for the me being in force for the registraon

of 1* [document s], and is m ade on account of natural love and affecon between pares standing in a, near relaon to each other ; or unless (2) it is a prom ise to com pensate, w holly or in part , a person w ho has already voluntarily done som ething for the prom isor, or som ething which the prom isor w as legally comp ellable to do ; or u nless (3) it is a promise, made in wring and signed by th e person to be charged therew ith, or by his agent

generally or specially authorized in th at behalf, to pay w holly or in part a debt of w hich t he creditor m i g h t have enforced payment but for the law for the limitaon of suits. In any of these cases, such an agreement is a cont ract. Explanaon 1.- Nothing in this secon shall affect the validity, as betw een the donor and donee, of any gi actually made. Explanaon 2.-An agreement to w hich the consent o f t he prom isor is freely given is not void m erely because the consideraon is inadequate ; but the inadequacy of the consideraon may be taken into account by the Court in determining the queson whether the consent of t he prom isor w as freely given. Illustraons

(a ) A promises, for no consideraon, to give to B Rs. 1,000. This is a void agreement . (b) A, for natural love and affecon, promises to give his son, B, Rs. 1,000. A put s his prom ise to B int o wring and registers it. This is a cont ract. (c) A finds B's pur se and gives it t o him . B prom ises to give A Rs. 50. This is a contract.

(d) A support s B's infant son. B p rom ises to p ay A's expenses in so do ing. This is a cont ract. (e) A owes B Rs. 1,000, but the debt is barred by the Limitaon Act. A signs a wrien prom ise to p ay B

Rs. 500 on account of t he deb t. This is a contr act. (f) A agrees to sell a horse w ort h Rs. 1,000 for Rs. 10. A's consent to the agreement w as freely given. The agreement is a contract notwithstanding the inadequacy of the consideraon. (g) A agrees to sell a horse wo rth Rs. 1,000 for Rs. 10. A denies that h is consent t o t he agreem ent w as freely given. The inadequacy of the consideraon is a fact which the C ourt should take into account in considering w heth er or not A's consent w as freely given.

27.Agreement in restraint of t rade void.-Every agreement b y w hich any one is restrained from exercising a lawfu l profession, trade or b usiness of any kind, is to t hat extent void. Saving of agreement not t o carry on bu siness of w hich good-w ill is sold.- Excepon 1.-One w ho sells the goo d-w ill of a business m ay agree with the bu yer to ref rain from carrying on a similar business, within specified local limits, so long as the b uyer, or any p erson deriving tle to the good-w ill from him , carries on a like business therein, provided that such limits appear to t he Court reasonable, regard being had to the nat ure of the business.

37.Obligaon of pares to contracts.- The pares to a :contract must either perform, or offer to perform, their respecve prom ises, unless such perf orm ance' is dispensed w ith o r excused und er th e pro visions

of this Act, or of any other law. Promises bind the representaves of the promisors in case of the death of such prom isors befor e perform ance, unless a cont rary inten on appears from the contract. Illustraons

(a) A prom ises to deliver goods to B on a certain day on paym ent o f Rs. 1,000. A dies before that day. A's representaves are bound to d eliver the good s to B, and B is boun d t o pay t he Rs. 1,000 to A's

represe ntaves. (b) A prom ises to p aint a picture f or B by a certain day, at a certain pr ice. A dies before th e day. The contract cannot be enforced either by A's representaves or by B.

38.Effect of refusal to accept offer of performance.-Where a prom isor ha s made an offer of performance

to t he prom isee, and the offer has not been accepted, the promisor is not responsible for nonp erform ance, nor do es he thereb y lose his rights under th e cont ract. Every such offer must fulfil the following condions: -

(1) it must be uncondional; (2) it must be made at a proper me and place, and under such circumstances that the person to w hom

it is made m ay have a reasonable oppo rtu nity of ascertaining that t he person by w hom it is made is able and willing there and then to do the w hole of what he is bound by his prom ise to do (3) if the offer is an offer to deliver anything to the pro m isee, the pr om isee m ust have a reasonable

o p p o r t u n i t y o f seeing that the thing offered is the thing which the promisor is boun d by his prom ise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of  them, Illustraon

A contracts to deliver to B at his warehouse, on the 1st M arch, 1873, 100 bales of coon of a parcular quality. In order to m ake an offer of a performance with the effect stated in this secon, A m ust bring the coon to B's warehouse, on the appointed day, under such circumstances that B m ay have a

reasonable opportunit y of sasfying himself that the thing offered is coon of the quality contracted for , and that th ere are 100 bales.

39.Effect of refusal of party to perform promise wholly. -When a p arty to a contract has refused to

perform , or disabled him self from performing, his promise in its enrety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its connuance.

Illustraons

(a) A, a singer, enters into a cont ract w ith B, the m anager of a theat re, to sing at his theatre t w o nights in every w eek during the next t w o m ont hs, and B engages to pay her 100 rup ees for each night's perform ance. On the sixth night A w ilfully absents herself from the t heatre. B is at liberty to put an end to the contract. (b) A, a singer, ent ers into a cont ract w ith B, the m anager of a theatre, to sing at his theat re tw o nights in every. week during the next tw o m onths, and B engages to pay her at the rate o f 100 rupees for each night. On t he sixth n ight A w ilfully absents herself. With t he assent of B, A sings on t he seventh night. B has signified his acquiescence in the connuance of the contract, and cannot now put an end to it, but is entled to compensaon for the damage sustained by him thr ough A's failure to sing on the sixth night.

By w hom contracts must be performed

40.Person by w hom prom ise is to be perform ed.-If it appears from the nature of th e case that it w as the intenon of the pares to any contract t hat any prom ise contained in it should be performed b y the

prom isor him self, such prom ise m ust b e perform ed by t he prom isor. In other cases, the pr om isor or his representaves may employ a co m p e t e n t p e r so n t o p e r f o r m i t .

Illustraons

(a) A prom ises to pay B a sum of m oney. A m ay perform this prom ise, either b y personally paying the m oney to B or by causing it to be paid to B by another ; and, if A dies before the me appointed f o r payment, his representaves must perform the promise, or employ som e proper person t o do so.

(b) A prom ises to paint a picture for B. A must perfor m this prom ise personally.

46.T ime for performance of promise, when no applicaon is to be made and no me is specified.W here, by the contract, a prom isor is to perform his promise without applicaon by the promisee, and n o me for performance is specified, the engagement must be pe r f o r m e d within a reasonable me. Explanaon.- The queson " what is a reasonable me " is, in each parcular case, a queson of fact.

47.Time and place for performance of promise, where me is specified and no applicaon to be made.-

W hen prom ise is to be perform ed on a certain day, and the prom isor has undertaken to perform it without applicaon by the promisee, the promisor may perform it at any me during the usual hours of 

business on such day and at the place at w hich th e prom ise ought t o be perform ed. Illustraon A promises to deliver goods at B's warehouse on the first January. On th at day A b rings the goods to B's warehouse, but aer the usual hour fo r closing it, and t hey are not re ceived. A has not p erfor m ed his

promise.

182."Agent" and "principal" defined. -An "agent" is a person em ployed to do any act for another or to represent anot her in dealings w ith t hird persons. The person for w hom such act is done, or w ho is so represented, is called the " principal".

183.W ho m ay employ agent.-Any person w ho is of the age of m ajority according to t he law t o w hich he is subject, and w ho is of sound m ind, may em ploy an agent.

184. Who m ay be an agent.-As betw een the prin cipal and third p ersons any person m ay become an agent, but n o person who is not of the age of m ajority and of sound m ind can become an agent, so as to be responsible to his principal according to t he pro visions in that beh alf herein contained.

185.Consideraon not necessary.- No consideraon is necessary to create an agency,

186. Agent's auth orit y m ay be expressed or im plied.-The auth ority o f an agent m ay be expressed or implied.

187.Definions of express and implied authority. -An author ity is said to b e express w hen it is given by words spoken or wrien. An authority is said to be imp lied when it is to be inferred from the circumstances of the case; and things spoken or wri en, or the ordinary course of dealing, may be

account ed circum stances of t he case. Illustraon A owns a shop in Serampore, living himself in Calcu a, and vising the shop occasionally. The shop is

m anaged by B, and he Is in the habit of o rdering goods from C in the nam e. of A for t he purposes of t he shop, and of paying for them out of A's funds with A's know ledge. B has an im plied authority from A to order goods from C in the nam e of A for the purpo ses of the shop.

188. Extent of agent's auth ority.-An agent having an author ity to d o an act has auth orit y to do every lawf ul th ing w hich is necessary in ord er to d o such act. An agent h aving an auth orit y to carry on a business has aut horit y to do every law ful t hing necessary for t he purp ose, or u sually done in t he course, of conducng such business. Illustraons

(a) A is em ployed by B, residing in Londo n, to recover at Bom bay a debt d ue to B. A may adopt any legal process necessary for the purp ose of recovering th e debt , and m ay give a valid discharge for t he same. (b) A constutes B his agent to carry on his business of a ship- builder. B may purchase mber and other

m aterials, and hire w orkm en, for the pu rpose of carrying on the business.

211.Agent's duty in conducng principal's business. -An agent is bound t o conduct the business of his

principal according to t he direcons given by the principal, or, in the absence of any such direcons, according t o th e custom w hich prevails in doing business of t he sam e kind at th e place wh ere the agent conducts such bu siness. W hen t he agent acts otherw ise, if any loss be sustained, he m ust m ake it good to his principal, and, if any profit accrues, he mu st account for it. Illustraons

(a) A, an agent en gaged in carrying o n fo r B a business, in which it is the custom to invest from me to me, at interest, the m oneys w hich may be in hand, om its to m ake such investm ent. A m ust m ake good

to B th e interest usually obt ained by such investm ents. (b) B, a broker , in w hose business it is not the custom to sell on credit , sells goods of A on credit t o C, whose credit at the me w as very high. C, before paym ent, becom es insolvent. B m ust m ake good the

loss to A.

213.Agent's accounts.-An agent is bound t o render p rop er account s to h is principal on dem and.

214.Agent's duty t o com m unicate w ith principal.-It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicang wit h his principal, and in seeking to obt ain his instrucons.