Mistake as to the existence of subject matter

ILLUSTRATION A TO SECTION 20
It is a void agreement as it is bilateral
MISTAKE AS TO THE QUALITY OF THE SUBJECT MATTER
Not voidable but valid

SECTION 23

WHAT CONSIDERATIONS AND OBJECTS ARE LAWFUL, AND WHAT NOT

LAWFUL OBJECT AND LAWFUL CONSIDERATION
Essence of section 23:-
Ex turpi causa, non oritur action – from a dishonorable cause an action does not arise
SECTION 23 Lays down that a consideration or object of an agreement is unlawful if it is forbidden by
law,
would defeat provisions of law if it is fraudulent,
would involve injury to person or property of another,
It is immoral it is against public policy

FORBIDDEN BY LAW

Act forbidden by law consists of

Forbidden by IPC+ acts prohibited by special legislation or by regulations or orders would defeat
provisions of law, If there is an act by which the intention of the legislature would be defeated directly
or indirectly an agreement to do such an act is void.
For eg :
An agreement to receive any payment or reward in consideration to adoption is punishable as it
would defeat the provisions of hindu adoption and maintainence act

FRAUDULENT OBJECT OR CONSIDERATION

Ex dolo malo non oritur actio :-
A right of action cannot arise out of fraud
For eg a and b execute a sale deal the object of the sale deal is to defraud the creditors of a, such an
agreement is unlawful
IMMORAL

ILLUSTRATION J TO SECTION 23
For eg a agrees to let her daughter to hire to B for concubinage in exchange of certain sum of money,
The agreement is void

AGAINST PUBLIC POLICY

SECTION 27
Agreements in restraint of trade

Absolute restraint is void

Partial restraint has been made applicable as it is in the within limits
Restraint of trade not allowed.
This section was enacted, when in India trade was at the stage of infancy and was yet to be
developed this section was enacted to protect trade from any kind of restraint. This section applies to
both absolute and partial restraint
The law commission has recommended that this provision should be amended to allow reasonable
restriction.
In today’s world when the trade has developed the courts have started taking a liberal stand wherever
necessary and have evolved certain exceptions.

CASE LAW :-
MADHUBCHANDER VS RAJ COOMAR (1874)
One shopkeeper had told the other to shut his shop in consideration of some money he did not pay
the money and this resulted in an action against him. No relief was granted as the agreement was a
void agreement

EXCEPTION:
Exception could be statutory or through judicial interpretation
STATUTORY EXCEPTION
• Sale of goodwill
Section 27 of the Indian contract act 1872 only provides this as an exception
In such agreements the local limits of restraints should not be very wide, neither the time should be
unreasonable
For eg anywhere in the world or for the next 100 years, for the life of the person
(under Indian partnership Section 11, 36, 54, 55)

SOLUS AGREEMENTS – SOLE DEALERSHIP AGREEMENTS.

TRADE COMBINATIONS – Traders and manufacturers get into an agreement

RESTRAINT ON EMPLOYEES –

CHARLES WORTH VS. MCDONALD (1898)

The defendant agreed to work with the assistance as a plantiff a surgeon for 3 year after 1 year he
left and started its own practice, defendant was restricted from doing so for 3 years
CASE LAW-
PERCEPT D’MARK INDIA PVT LTD VS. ZAHEIR KHAN (2006,SC)
It was held that during the period of employment the employee cannot carry on competing businesses
or employment when that is provided in the contract. However, an employee cannot be restrained
from carrying on the business after cesattion of the contract as this would amount to restraint of trade.

SECTION 28 AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS

Discharge of the contract (Free from the contract)
WHAT IS DISCHARGE:

When the agreement which was binding on the parties seizes to bind them, the contract is said to be
discharged or when the rights and obligations are arsing out of the contract are extinguished, it is said
to be discharged
MODES OF DISCHARGE OF CONTRACT
1. By performance
2. By breach
3. By impossibility of performance (Doctrine of frustration)
4. By agreement and Novation
5. By operation of law

Section 56 (para-2)- doctrine of frustration

In England, the common law rule was that a man is bound to perform the obligations that he had
undertaken and could not claim to be excused by the mere fact that the performance has become
impossible, this was called the absolute contract theory and it was laid down in the year 1647, in the
case PARADINE VS JANE
According to this if a man binds himself by a contract absolutely he cannot escape the liability for
damages, even if the performance becomes impossible, so the essence of absolute contract theory
was- once a contract, always a contract this was considered harsh and unjust
In the year 1863, the queens bench in the case TAYLOR VS CALDWELL, introduced an exception to
this rule and subsequent impossibility was made as an excuse.
In this case a music hall hired by the plantiff was destroyed by fire before the date of performance,
this contract was held to have subsequently become impossible & no damages was allowed

IMPOSSIBILITY AS PER SECTION 56-PARA 2, ICA

This can broadly be divided into 3 categories

1. Physical impossibility

Destruction of subject matter which happened in the case of TAYLOR VS CALDWELL

Death or disability CASE LAW – GRAVES VS COHEM (1921)
The death of the jockey in a contract to ride horses rendered the contract void
DISABILITY -ROBBINSON VS DAVINSON 1871
The pianist was incapacitated by illness from performing on a specified date, this rendered the
contract void for that particular date

NON- OCCURRENCE OF EVENTS – CASE LAW KRELL VS HENRY (1903)

WAR
2. Legal impossibility
Any subsequent change in the law rendering the performance of a contract unlawful would frustrate
the contract automatically
Case law – Mann Singh vs Khazan Singh (1960)
A contract for cutting trees became frustrated by a subsequent law prohibiting the cutting of trees

3. Practical Impossibility

SECTION 32 and section 56 para 2 difference

FORCE MAJEURE – WIDER THAN VIS MAJOR (ACT OF GOD)

The force which is beyond the control – Force majeure

Not naturally but the act was beyond your contemplation
Can be temporary limitation
Renegotiate the terms of the contract

FORCE MAJEURE
Many contracts expressly provide for the performance to be excuse if rendered impossible
by unavoidable causes such clauses are force majeure clauses
Force majeure is more extensive than vis major if such clause is not provided than section
56- para 2 is applied

This was held in satyaprakash ghose vs mugneebaar bangur case, it was held in this case
that a contract contains a force majeure clause then section 56 para 2 has no application
Exceptions where the contract is not discharged by supervening impossibility

1. Impossibility from commercial stand point

-CASE LAW- ENERGY WATCH DOG VS CENTRAL REGULATORY ELECTRICITY
REGULATORY BOARD
 It was held that neither was the fundamental basis of the contract dislodged nor was any
frustrating event except for a rise in the prices of coal, alternative modes of performance were
available even though at a higher price, This does not lead to the contract as a whole being
frustrated as commercial hardships do not render the contract void.

2. Impossibility owing to a third party failure

3. Performance difficulty will not render the contract void
4. Self induced frustration- case law Boothalinga agencies vs poriaswami nadar (1969,Supreme
court)
If the act which is alleged to have frustrated the contract arises from the act or election of the party
then the provision of section 56- para 2 cannot apply as it will be considered as self induced
frustration
Failure of one of the many objects
rights, lockdowns, strikes, civil unrest.

DISCHARGE BY OPERATION OF LAW

1. Insolvency
2. Death
3. Lapse of time -
The limitation act lays down that at the case of breach of contract the legal action should be
taken within 3 years otherwise the promisee is debarred from instituting a suit and the contract
stands discharged
4. Merger - When an inferior right contract merges into a superior rights contract
5. Discharge by unauthorised material alterations

DISCHARGE BY PERFORMANCE (Section 37)

TIME AND PLACE OF PERFORMANCE

If the time is specified you have to complete the contract by then and that time and if the time is not
specified then during the reasonable time you have to complete the agreement.
The question “what is a proper time and place” is, in each particular case, a question of fact, depends
on facts of the case.

DISCHARGE BY AGREEMENT (Section 62 and section 63)

- Through alteration (Somewhat change)
- Novation (whole new)
- And through recision
- Unilateral
Section 62
This section provides for discharge of the contractual obligations where the contract is substituted with
a new contract or altered or resigned it by all the parties

Alteration, novation, rescission cannot be affected unilaterally by one party.

NOVATION
In case of novation, there's a contract in existence and theres a new contract substituted for it,
substitution of a contract is the core of novation upon substitution the original contract is discharged by
agreement of substituting it with a new contract,
2 elements of novation are
1. Discharge of original contract
2. Substitution by a new contract

CASE LAW- CITY BANK VS STANDARD CHARTERED BANK (2003, SC)

Highlighted how novation cannot be done unilaterally.

ALTERATION
Here the contract is the same but the parties agree to alter or modify the terms of the original contract.

RESCISSION
A contract may be discharged by agreement between the parties that it shall no longer bind them such
an agreement amounts to rescission or cancellation of the contract and no new contract is substituted
in it’s place.
SECTION 63
There are 3 things
1. That the promisee may dispense or remit the performance.
2. Extent the time of performance.
3. Except any other satisfaction
Section 62 and section 63 do not overlap, under 62 rights to all the parties are affected under 63 the
rights of promisee are affected.
DISPENSE WITH
This means to get rid of once the claim is foregone under this section, it cannot be revived.

CASE LAW- LIC VS RAM DAS AGARWAL (1979, Patna high court)
The assured paid the premium for the revival of his insurance policy, the life insurance company did
not demand interest for the delayed payment so the assured did not pay that, it was held that the
abundant right to claim the interest could not be later demanded by the LIC as it will be considered to
have been dispensed or remitted.
EXTENSION OF TIME
Under section 63, the promisee has a right ot extend the time, however when the promisee exercises
his right the consent of the promisor is also required, Therefore we can say that extension of time can
be done by mutual consent
ACCEPT ANY OTHER SATISFACTION
The promisee may accept instead of the performance of the promise such satisfaction as he thinks fit
Under english law, this is called as the theory of accord and satisfaction.

BREACH AS A MODE OF DISCHARGE

Breach can be
1. Anticipatory (Aware of before the event)
2. Actual

QUASI-CONTRACT
(Half, something that is similar to a contract)
When the obligations arise not out of agreement because they are not based on consent or offer or
acceptance, these are the contracts based on the principles of natural justice and equity for the
prevention of unjust enrichment i.e. enrichment of one person at the cost of another it is a contract not
in fact but in law.
In an action for unjust enrichment following essentials have to be proved
1. The defendant has enriched himself by the receipt of a benefit
2. This enrichment is at the expense of the plaintiff
3. Retention of this enrichment is unjust.
4.
SECTION 68 - ESSENTIALS
1. Necessaries are supplied,
2. To a person who is incapable of making a contract
3. Or to a person who is dependent upon such an incapable person, i.e. a person whom the
incapable person is bound to support.
4. These necessaries should be suited to that person’s condition in life

Following are held to be necessary:

● Debt incurred for performing the funeral rites of incapable person’s father.
● Funeral expenses of the husband by the infant widow.
● Money advanced for defending criminal proceedings.
● Books for the minors' education.

CASE LAW- NASH VS IANMAN (Early 1908)

SECTION 69- PAYMENT BY AN INTERESTED PERSON

ESSENTIALS-
● The plaintiff should be interested in making the payment.
● The plaintiff should not himself be legally bound to pay.
● The defendant can be under legal compulsion to pay.
● The plaintiff should have made the payment to another person and not to himself

CASE LAW - SECRETARY OF STATE VS FERNANDES

Facts -
Zamindar gave the land on lease to the forest department of the Madras government, on
zamindars failure to pay for the land revenue to the revenue department of madras his land
was advertised for sale, the forest department made the payment for the land revenue, it was
held that the payment was not made to another person,

SECTION-70 LIABILITY TO PAY FOR NON-GRATUITOUS ACT

ESSENTIALS
1. Person should lawfully do something for another person or deliver something to hin
2. In doing the said thing or delivering the said thing he must not intent to act gratuitously
3. The other person for whom something is done or something is delivered must enjoy the
benefit
FOR EG- Where a coolie or a orter takes the luggage at the railway station without being asked
by the passenger or the shoe shiner starts shining the shoes of a passer by without being
asked to do so and if the passenger or passer by doesnot object to that then he is bound to
pay reasonably for the same as the work was not intended to be done gratuitously.

SECTION 71- FINDER OF GOODS

The finder of goods takes the goods into his custody he has the same responsibility as a bailee.

SECTION 72- MISTAKE OR COERCION

ESSENTIALS
1. Money has been paid to a person, or anything has been delivered to a person who was
not legally entitled for the same.
2. Such payment or delivery has been done under mistake or coercion.
3. The person who has received such payment or delivery is bound to repay it.

REMEDIES FOR BREACH OF CONTRACT

It Rescission and damages
It is the most common remedy, which entitles the injured party to recover compensation for the loss
suffered due to the breach from the party who caused the breach (Section 73-75)
SPECIFIC PERFORMANCE AND INJUNCTION
SPECIFIC performance means performing or fulfilling the contracting parties exact fulfillment of
obligations which he has assumed this relief is granted under the SPECIFIC RELIEF ACT.
It is allowed when damages would not be an adequate remedy

INJUNCTION
This restrains the other party from making a breach of contract This is a preventive relief and
is appropriate in case of anticipatory breach of contract

QUANTUM MERUIT- It literally means as much as is earned or in proportion to the work done,
when the injured party has performed a part of its obligation under the contract before the
breach of the contract, he is entitled to recover the value of what he has done under this remedy
if should be noted that the party making the breach has performed a part of its promise he
cannot claim anything in respect of the remedy i.e. the party in default can out sue for quantum
meruit.

DAMAGES FOR BREACH

Damages means compensation in terms of money for the loss suffered by the injured party in
every case of assessment of damage, there are two problems(issues)
1. Remoteness of damage
2. Measure of damage

REMOTENESS OF DAMAGE

Theoretically, the consequence of breach maybe endless. But there must be an end to the liability, the
defendant cannot be held liable for all that follows from that breach, in other words- compensation is
not to be given for any remote or indirect loss sustained by the reason of breach
Damages could be of 2 distinguished types
1. General damages - Those which arise naturally in the usual course of things from the breach
itself. The liability is dependent on “reasonable man's foresight of the loss that will naturally
result from the breach”.
 2. Special damages - Those which arise on account of the unusual circumstances affecting the
plaintiff they are not recoverable unless the special circumstances are brought to the knowledge
of the defendant so that the possibility of special loss was contemplation of the parties.
CASE LAW (LANDMARK JUDGEMENT)- HADLY VS BAXENDALE (1854)
The plaintiff’s mill had been stopped due to the breakage of the crankshaft, the defendant a firm of
carriers were engaged to carry the shaft to the manufacturers as a pattern for a new one, the defendant
delayed the delivery by some neglect and thus the mill remained stop for a longer time then it would
have been, the action was brought for loss of profits arising out of the delay.

The defendants were not held liable for the loss of profits because, in a multitude of cases of millers'
sending of their broken shafts for repair would not have, in ordinary circumstances their mills stopped
as the millers would have another shaft in reserve. The fact that the mill was out of action for the want
of shaft was a special circumstance and the same should have been pointed out by the plaintiff in clear
terms so as to be contemplation of the parties.

The object of awarding damages to the aggrieved party is to put him in the same position in which he
would have been if the contract had been performed.

CASE LAW- 1. HOBBS VS LONDON AND SOUTH WESTERN RAILWAY COMPANY.

the court held that a railway company could be liable for physical inconvenience and discomfort
caused by a breach of contract, allowing the plaintiff to recover damages beyond the ticket price
for the physical discomfort of walking home after the railway company failed to deliver them to
their intended destination
2. ANGELIA TELEVISION LTD VS REEDS-
->The court allowed as damages the money spend in engaging a director a designer
arranging for the shoot venues as these expenses were within the contemplation of the parties.

MENTAL PAIN AND SUFFERING

CASE LAW- DIESEN VS SAMSON (1971)
Photographer failed to appear at a wedding as a result, bride has no photograph of her at the wedding.
Damages were provided for actual loss and mental pain and suffering
HOTSON AND HOTSON VS PAYNE
Court allowed damages when the hotel management cancelled the contract 2 days before the wedding
and the plaintiff was forced to organized only a simple function for his only daughters wedding reception,
general damages were awarded for inconvenience and disappointment and spcl damages were
awarded for cancellation fee of band and the telephone calls to notify the guests of the changed venue.

SECTION-74
LIQUIDATED DAMAGES
Sometimes parties to a contract at time of making the contract agree upon the sum/ amount of
compensation to be paid in event of breach of contract. If the sum to be paid is a genuine pre estimated
sum it is liquidated damages, if the sum is excessive and highly disproportionate to the laws it is known
as penalty
Penalty as a rule is never awarded as damages in the law of contract.

SECTION 75
CASE LAW - ONGC VS SAW PIPES LIMITED
Delay in supply of goods, a stipulation would be provided (liquidated damage clause)
Dispute arises, arbitration would be done.
 SPECIFIC RELIEF ACT

Provides certain reliefs as the name suggests

Categorised into 3 different parts
1. Preliminary round
2. Specific relief
3. Preventive relief (Injunctions)
Declarative, rectification , possession of movable and immovable properties

INJUNCTIONS

An injunction is a legal remedy provided under the Specific Relief Act, 1963 in India. It is a court order
that directs a party to either do something or refrain from doing something. Injunctions are commonly
used in cases where monetary compensation would not adequately address the harm caused.

Injunction could either be temporary or perpetual(Forever)(keeps on happening) based on its nature

Type of injunction can be restrictive or prohibitory, second is mandatory.

1. An injunction is a judicial remedy by which a person is ordered to refrain from doing something
or is ordered to do a particular thingt he former is prohibitory or restrictive injunction and the
latter mandatory injunction.

2. An injunction is a judicial process by which one who has invaded or is threatening to invade the
legal rights of other is restrained from continuing or commencing such wrongful act.

3. Injunction is a discretionary relief which will not be granted if there is an adequate remedy in
damages.

INJUNCTION
TYPES
Restrictive or prohibitory
Mandatory

NATURE
Temporary
Perpetual

THE DIFFERENCE BETWEEN TEMPORARY AND PERPETUAL INJUNCTION

TEMPORARY PERPETUAL S.38-41

It is always granted upon an application in a suit It is always granted upon a suit

Relief will be in the form of order Relief is always in the form of decree

It is temporary because its purpose is to prevent It is permanent, until reversed in appeal

the suit from becoming infructuous

It is decided upon the merits of the application It is decided upon the merits of the suit.
and not of the suit

It is regulated section 94C OXXXIX of CPC It is regulated Section 38-42 of SRA

MANDATORY PROHIBITORY/ RESTRICTIVE

It directs you to do something Restrains the party from doing something

TEMPORARY INJUNCTION

CASE LAW- GUJARAT BOTTLING [Link] COCA COLA LTD. (1995,SC)

In this case, the test for exercising the discretion in temporary injunction has been given
TEST 1 - Whether the p/f has a prima facie case
TEST 2- Whether the balance of convenience is in the favour of the plaintiff
TEST-3 - Whether the plaintiff would suffer irrepairable injury if his prayer for temporary injunction is
resolved

WHEN IS PERPETUAL INJUNCTION GRANTED SECTION 38

1. For the enforcement of obligations - Eg A and B have an agreement where B has promised to
do something for A like, not build a fence that would obstruct free movement, if B tries to break
such promise in order to protect the interest of A, the court can issue perpetual injunction.
2. Defendant is causing or about to cause a harm - Acting as a trustee
Court can grant perpetual injunction when the defendant is causing or is about to cause a harm
to the plaintiff’s legal right or enjoyment of property, the defendants are legally forbidden from
doing such harmful act.

ACTING AS A TRUSTEE- Trustee here means when someone is looking after your property
making sure that it is for your interest.
3. HARD TO MEASURE EXACT HARM- When its not possible to measure the exact damage that
has been done or might be done than in such circumstances, court may order perpetual
injunction. Eg-

4. MONEY COMPENSATION WOULD NOT FIX THE HARM -

5. WHEN STOPPING THE HARM HELPS AVOID MULTIPLICITY OF PROCEEDINGS - If

allowing the harmful action causes numerous cases to be brought to the court the court can
order a perpetual injunction. In other words, court can grant perpetual injunction to stop the
harmful action to avoid a situation where both the parties keep going to the court over and over
again for the same matter.

WHEN PERPETUAL INJUNCTION CANNOT BE DONE

1. Injunction against an alien
2. Injunction against breach of contract.
3. Where damages are adequate remedy
4. Injunction in illegal agreements