Unit -(i)
1. Define contract. What are the essentials of a valid contract?
A contract is defined under Section 2(h) of the Indian Contract Act, 1872 as “an agreement enforceable by law.” To be valid, a contract must have the following essentials: (1) Offer and acceptance; (2) Lawful consideration; (3) Lawful object; (4) Capacity of parties; (5) Free consent; (6) Intention to create legal obligations; and (7) Not declared void. These elements ensure that the agreement is legally binding and enforceable. The parties must agree upon the same thing in the same sense (consensus ad idem), and the contract must not involve illegal or immoral acts. If any one of these conditions is not fulfilled, the agreement may be void or voidable.
2. What is an offer? What are its essential elements?
An offer is a proposal by one party (offeror) to another (offeree) expressing willingness to do or not to do something, intending to obtain the other’s assent. Section 2(a) of the Indian Contract Act defines a proposal as an expression of willingness to do or abstain from doing something. The essentials of a valid offer include: (1) It must be communicated; (2) It must show clear intention to create legal relations; (3) It must be certain and definite; (4) It must not be vague; and (5) It must be distinguished from mere invitation to offer (e.g., advertisements or auctions). A valid offer, when accepted, results in an agreement.
3. What is acceptance? What are its essentials?
Acceptance is the act of agreeing to the terms of an offer, resulting in a binding contract. According to Section 2(b) of the Indian Contract Act, acceptance is when the person to whom the proposal is made signifies his assent. Essentials of a valid acceptance are: (1) It must be absolute and unconditional; (2) It must be communicated to the offeror; (3) It must be given in the prescribed mode; (4) It must be made while the offer is still open; (5) It must be made by the person to whom the offer is made. Any variation from the offer amounts to a counter-offer, not acceptance.
4. How is communication of offer made?
The communication of an offer can be made expressly or impliedly. According to Section 4 of the Indian Contract Act, communication of an offer is complete when it comes to the knowledge of the person to whom it is made. The offer may be oral, written, or inferred from the conduct of the parties. For example, a shopkeeper displaying goods with a price tag implies an offer. Communication through letters, email, or electronic means is also valid. It is essential that the offeree is aware of the offer; otherwise, acceptance will not result in a valid contract.
5. When is the communication of acceptance complete?
Section 4 of the Indian Contract Act states that communication of acceptance is complete: (i) against the proposer, when it is put into transmission beyond the control of the acceptor (e.g., when posted); and (ii) against the acceptor, when it comes to the knowledge of the proposer. This principle is known as the “postal rule.” In the case of electronic communication (e.g., email), the acceptance is complete when the message is received in the offeror’s inbox. Until communication is complete, the parties are free to revoke the offer or acceptance.
6. Can an offer be revoked? When and how?
Yes, an offer can be revoked any time before it is accepted. As per Section 5 of the Indian Contract Act, an offer may be revoked before the communication of acceptance is complete against the offeror. Revocation must be communicated to the offeree before they post their acceptance. Revocation may be expressed (e.g., via notice) or implied (e.g., offeror sells the goods to someone else). Once the offer is accepted, it cannot be revoked. In the case of electronic contracts, revocation must reach the offeree before the acceptance is electronically sent.
7. When can acceptance be revoked?
Acceptance can be revoked any time before the communication of acceptance is complete against the acceptor (i.e., before it reaches the offeror). For example, if a letter of acceptance is sent but a telegram revoking it reaches the offeror before the letter, the revocation is valid. In electronic communications, if a party sends an email accepting the offer but withdraws it before the other party opens the mail, revocation is valid. The revocation must be communicated in a clear and timely manner, as recognized in Section 5 of the Indian Contract Act.
8. What is consideration? What are its essential features?
Consideration is the price of the promise. It refers to something in return, which may be an act, abstinence, or promise. As per Section 2(d) of the Indian Contract Act, consideration is when the promisee or any other person does something at the desire of the promisor. Essentials are: (1) Must move at the desire of promisor; (2) May be past, present, or future; (3) Must be real and not illusory; (4) Must be lawful; (5) Must have some value in the eyes of law. Without consideration, a contract is void unless it falls under exceptions.
9. What are the exceptions to the rule ‘no consideration, no contract’?
Generally, an agreement without consideration is void, but the Indian Contract Act provides exceptions under Section 25:
- Natural love and affection – when made in writing and registered.
- Past voluntary services – if the act was done voluntarily and the promisor later promises to compensate.
- Promise to pay a time-barred debt – must be in writing and signed.
- Completed gift – once the gift is given, it cannot be revoked for lack of consideration.
These exceptions recognize moral and ethical obligations enforceable in specific circumstances.
10. Define the Doctrine of Privity of Contract.
The Doctrine of Privity of Contract means only those parties who are privy (i.e., part) to a contract can sue or be sued upon it. A third party cannot enforce a contract even if it is made for their benefit. This principle was recognized in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. However, India provides some exceptions to this doctrine, where even a stranger to the contract may sue under certain circumstances.
11. What are the exceptions to the Doctrine of Privity of Contract?
Exceptions to the doctrine where third parties can sue include:
- Beneficiary under a trust: A third party can enforce the benefit.
- Marriage settlements: Where contract is for the benefit of a person not party to it.
- Acknowledgement of liability: If a party acknowledges liability to a third party.
- Agency contracts: A principal can sue even if agent made the contract.
- Family arrangements and maintenance: Where third parties benefit, they can enforce it.
These exceptions aim at equitable justice and fairness.
12. What is a standard form contract?
A standard form contract is a pre-prepared contract where terms are set by one party and the other has little or no opportunity to negotiate. Common in banking, insurance, and online services, these contracts are signed on a “take it or leave it” basis. Though efficient, they raise issues of unequal bargaining power. Courts have developed doctrines like reasonable notice, fundamental breach, and contra proferentem rule to protect weaker parties from unjust terms. Despite being legally valid, such contracts are scrutinized for fairness and transparency.
13. What is an e-contract? How is it formed?
An e-contract is a legally enforceable agreement created and signed electronically, often over the internet. It may be in the form of click-wrap, shrink-wrap, or browse-wrap agreements. The formation of an e-contract follows the same principles as a traditional contract: offer, acceptance, consideration, and intention. The Information Technology Act, 2000 supports the legal recognition of electronic records and signatures. E-contracts are common in online shopping, software licensing, and service agreements. They must ensure consent is free and informed, and terms should be accessible to both parties.
14. What are the advantages and disadvantages of standard form contracts?
Advantages: Standard form contracts save time, cost, and effort in repeated transactions. They bring uniformity and are especially useful in mass contracts like insurance, mobile services, and online platforms. Businesses can operate efficiently without negotiating individual terms each time.
Disadvantages: These contracts may be one-sided, often favoring the party drafting them. The weaker party may not understand or even read the terms before agreeing. This leads to a lack of bargaining power, increasing the risk of unfair or exploitative clauses. Courts may intervene if terms are unconscionable or the weaker party was unaware of key conditions.
15. Explain ‘click-wrap’ and ‘browse-wrap’ contracts in the context of e-contracts.
Click-wrap contracts require the user to click “I agree” after going through the terms and conditions (e.g., software installation). Browse-wrap contracts do not require express agreement; mere browsing or using the website implies consent. Click-wrap agreements are generally more enforceable as explicit consent is obtained. Courts require that terms in both types be accessible, clear, and not buried in complexity. For enforceability, users must have reasonable opportunity to read the terms. While click-wrap contracts are widely accepted, browse-wrap contracts are more vulnerable to legal challenge due to presumed or implied consent.
16. What is the legal recognition of electronic contracts in India?
Electronic contracts are recognized under the Information Technology Act, 2000. Section 10-A of the Act gives validity to e-contracts formed through electronic means if all essential elements of a valid contract are present. The Act also validates electronic records and digital signatures. However, contracts like wills, trusts, and real estate transactions must still follow traditional legal formalities. Indian courts uphold e-contracts provided there is free consent, lawful consideration, and valid acceptance. E-contracts are enforceable in areas like e-commerce, online services, and app usage, subject to adherence to consumer protection and IT laws.
17. Explain the postal rule regarding acceptance. Is it applicable to e-contracts?
Under the postal rule, acceptance is complete as soon as the letter of acceptance is posted (not when received). This rule applies in traditional postal communications and benefits the acceptor. However, in e-contracts, the rule is modified. In electronic communications (like emails), acceptance is considered complete only when the message reaches the offeror’s server or inbox. Courts view electronic communications as instantaneous and thus expect confirmation of receipt. Therefore, while postal rule may apply in physical correspondence, it is generally not applicable in the context of electronic or digital contracts.
18. Can silence amount to acceptance in a contract?
Generally, no. Silence does not constitute acceptance in contract law. For an acceptance to be valid, it must be communicated clearly. An offeror cannot impose a contract by stating that silence will be deemed as acceptance. The principle was upheld in Felthouse v. Bindley (1862), where the court held that silence cannot amount to consent. However, in certain exceptional circumstances—like ongoing business relationships or prior conduct between parties—silence combined with action (e.g., accepting goods/services without objection) may be considered implied acceptance. But as a rule, acceptance must be overt and intentional.
19. What is the difference between invitation to offer and an offer?
An invitation to offer is a preliminary step where a person invites others to make an offer. An offer, on the other hand, is a definitive proposal to enter into a contract. For example, price tags in a shop window are invitations to offer—not offers themselves. When a customer offers to buy, the shopkeeper can accept or reject it. Advertisements, auction announcements, and tenders are usually invitations to offer. An actual offer must show a clear intention to be bound upon acceptance, while an invitation merely initiates negotiation.
20. What is a counter-offer? How does it affect the original offer?
A counter-offer is a response to an offer in which the terms are changed or new conditions are added. It is not acceptance, but a rejection of the original offer and a proposal of a new one. Once a counter-offer is made, the original offer lapses and cannot be accepted later unless revived. This principle was stated in Hyde v. Wrench (1840), where the court held that once a counter-offer is made, the original offer stands rejected. A counter-offer must be accepted by the original offeror to form a valid contract.
21. What is a void and voidable contract? Give a difference.
A void contract is not enforceable by law from the beginning (ab initio). A voidable contract is initially valid but can be annulled by one party due to lack of free consent, fraud, misrepresentation, etc.
- Void: No legal effect (e.g., contract with a minor).
- Voidable: Valid until avoided (e.g., contract under coercion).
The main difference lies in enforceability. Void contracts are dead from the start, while voidable contracts are binding unless challenged.
22. Explain ‘intention to create legal relationship’ in a contract.
One of the essentials of a valid contract is that parties must intend to create legal obligations. Social or domestic agreements, like between family members or friends, generally lack this intention and are not enforceable (e.g., dinner invitations). In commercial agreements, courts presume legal intent unless clearly stated otherwise. This element distinguishes binding contracts from mere informal understandings. Without this intention, even if an agreement has offer, acceptance, and consideration, it may not be treated as legally valid.
23. What is lawful consideration? What makes consideration unlawful?
A lawful consideration is one that is not forbidden by law, does not defeat any law, is not fraudulent, does not involve injury, and is not immoral or opposed to public policy. If the object or consideration is unlawful, the contract is void.
Examples of unlawful consideration include:
- Payment for committing a crime
- Bribes
- Contracts in restraint of trade
- Agreements to influence court proceedings
The Indian Contract Act, under Section 23, outlines these parameters, ensuring contracts adhere to legal and moral standards.
24. What is past consideration? Is it valid in India?
Past consideration refers to a promise made after the act or service has already been performed. In English law, past consideration is not valid. However, under Indian law (Section 2(d) of the Contract Act), past consideration is valid if done at the desire of the promisor. For example, if A voluntarily saves B’s goods from fire, and later B promises to reward A, the promise is enforceable. This reflects the Indian law’s broader acceptance of moral obligations turned into contractual promises.
25. Define quasi-contract and its relevance.
A quasi-contract is not an actual contract but a legal obligation imposed to prevent unjust enrichment. Even though there is no formal agreement, law treats certain relationships as if a contract exists. Examples include:
- Person supplying goods/services by mistake
- Recovery of money paid under mistake
- Obligation of finder of lost goods
The Indian Contract Act covers such cases under Sections 68 to 72. These ensure fairness and equity when one party benefits at the expense of another without a formal contract.
Unit -(ii)
1. Who is competent to contract under Indian law?
According to Section 11 of the Indian Contract Act, 1872, a person is competent to contract if he/she: (1) is of the age of majority, (2) is of sound mind, and (3) is not disqualified from contracting by any law. This provision ensures that the party entering into the contract has the legal capacity and mental ability to understand the consequences of their actions. Contracts with minors, insane persons, or legally disqualified individuals (e.g., alien enemies, foreign sovereigns, or insolvents) are not valid contracts and generally void.
2. What is the effect of a minor’s agreement?
As per Indian Contract Law, a minor’s agreement is void ab initio, i.e., invalid from the beginning. This was upheld in Mohiri Bibi v. Dharmodas Ghose (1903). A minor cannot enter into a legally enforceable contract because he lacks the capacity to understand the obligations. However, a minor may be a beneficiary of a contract. Contracts for the minor’s benefit (e.g., education, medical care) can be enforced through a guardian. If a minor misrepresents his age, he still cannot be compelled to perform the contract, as the law protects minors.
3. Can a minor be asked to return benefits under an agreement?
Generally, a minor is not personally liable to return benefits under a void agreement. However, courts may allow recovery of such benefits under Section 33 of the Specific Relief Act, based on equity. If a minor has unjustly enriched himself, the court may order restitution. But this is discretionary and applies only if the minor is still in possession of such benefit or property. The aim is not to enforce the void contract but to prevent injustice due to misrepresentation or fraud by the minor.
4. What is the legal status of a contract with an insane person?
A person of unsound mind cannot enter into a contract when he is incapable of understanding its nature and consequences. However, if he is of sound mind at the time of entering into the contract, it will be valid. As per Section 12 of the Indian Contract Act, a person who occasionally suffers from insanity (e.g., due to illness, intoxication) can contract during lucid intervals. Contracts made during insanity are void. The law seeks to protect such individuals from exploitation or misunderstanding.
5. What is coercion in contract law?
Coercion is defined under Section 15 of the Indian Contract Act. It means committing or threatening to commit any act forbidden by the Indian Penal Code or unlawful detaining of property with the intention of compelling a person to enter into a contract. A contract entered under coercion is voidable at the option of the coerced party. For example, threatening someone with physical harm or blackmail to obtain consent is coercion. The burden of proof lies on the party claiming coercion. The victim can rescind the contract once free from such influence.
6. What is undue influence? How is it different from coercion?
Undue influence occurs when one party is in a position to dominate the will of another and uses that position to gain unfair advantage. It is defined under Section 16 of the Indian Contract Act. Common examples include relationships like guardian-ward, doctor-patient, or spiritual advisor-devotee.
Unlike coercion (which involves threats or force), undue influence is psychological or moral pressure. A contract induced by undue influence is voidable at the option of the influenced party. Courts scrutinize such contracts closely, especially if terms are unfair or one-sided.
7. What is misrepresentation in a contract?
Misrepresentation involves making a false statement without intent to deceive, which induces another party to enter into a contract. It is covered under Section 18 of the Indian Contract Act. Though there’s no intent to cheat, the contract is still voidable if the misled party relied on the false statement. For example, if a seller wrongly believes a car is new and says so, the buyer can cancel the contract on discovering the truth. The aggrieved party can also claim compensation for any loss suffered.
8. What constitutes fraud in a contract?
Fraud involves intentional deception to induce another into a contract. It is defined under Section 17 of the Indian Contract Act and includes: (1) suggesting facts that are untrue, (2) active concealment, (3) making promises without intention to perform, or (4) any act to deceive. Contracts induced by fraud are voidable at the option of the deceived party. They may also claim damages. Fraud differs from misrepresentation as it involves intentional dishonesty.
9. What is a mistake in contract law?
Mistake refers to an incorrect belief held by one or both parties about a fact essential to the contract. A bilateral mistake (by both parties) of fact renders the contract void under Section 20. A unilateral mistake (by one party) does not usually void a contract unless the mistake is about the identity or nature of the contract. Mistakes of law (especially Indian law) are not excusable, but mistakes of foreign law may be treated as mistakes of fact. Courts assess the nature and impact of the mistake to determine validity.
10. What is a lawful object in a contract?
Under Section 23 of the Indian Contract Act, the object of a contract must be lawful. A contract’s object is unlawful if:
- It is forbidden by law
- It defeats legal provisions
- It involves fraud
- It causes injury to person/property
- It is immoral or against public policy
If the object is unlawful, the contract is void. For instance, an agreement to smuggle goods or pay for bribes is void due to unlawful object. The law ensures contracts promote justice and public welfare.
11. What is an immoral agreement? Is it enforceable?
Immoral agreements are those that offend accepted standards of morality, like agreements for prostitution, concubinage, or suppression of evidence in criminal cases. As per Section 23, such agreements are void as their object is unlawful. The courts interpret morality based on prevailing social values. For example, a contract where one party promises financial support to a mistress in return for cohabitation has been declared void. The judiciary discourages exploitation and transactions that undermine moral standards.
12. What are agreements opposed to public policy?
Public policy refers to matters affecting the welfare of society. Agreements that interfere with justice, morality, or government functioning are void as per Section 23. Examples include:
- Agreements to commit crime
- Restraint of legal proceedings
- Interference with marital duties
- Trading with enemy
- Agreements in restraint of trade (with exceptions)
These contracts are void as they harm the public at large. Courts interpret public policy cautiously to prevent overreach while protecting social interest.
Question 13: What is the effect of a contract made with a person disqualified by law?
Answer:
Certain individuals, such as foreign diplomats, insolvent persons, and certain corporations, are considered legally disqualified from entering into specific types of contracts. A contract made with such a disqualified person is usually void or unenforceable in the eyes of law.
Example: A person who has been declared insolvent cannot enter into a contract involving property unless permitted by the court. Similarly, a government servant cannot enter into a contract that violates official service rules or regulations.
These legal restrictions are imposed to maintain social order, ensure fairness, and prevent misuse of position or power.
Any contract made with a legally disqualified person is not enforceable in court, and the parties involved cannot seek legal remedies under such agreements. This rule protects public interest and promotes integrity in contractual dealings.
Question 14: What is the importance of Free Consent in a contract?
Answer:
Free Consent is a fundamental element of a valid contract. If the consent of the parties is obtained through coercion, undue influence, fraud, misrepresentation, or mistake, it is not considered “free.”
According to Section 14 of the Indian Contract Act, 1872, consent is said to be free when it is given without any kind of pressure or deception.
If consent is not free, the contract becomes either void or voidable, depending on the circumstances.
Example: If a person is forced to sign a contract at gunpoint, the contract is not legally binding because the consent was not given freely.
Free consent ensures fairness, transparency, and willingness between the parties. It protects individuals from being trapped in unfair or exploitative agreements and upholds the integrity of contractual relationships.
Question 15: What is the meaning of ‘Zabardasti’ or ‘Coercion’ in a contract?
Answer:
According to Section 15 of the Indian Contract Act, Coercion refers to the use of unlawful pressure, threats, or force to compel a person to enter into a contract. It includes threats to commit an act forbidden by law, wrongful detention of property, or any threat intended to force a person into agreement.
Example: If a person is held captive and forced to sign over property, the contract is said to be made under coercion.
A contract formed under coercion is voidable at the option of the coerced party. This means the affected party can approach the court to cancel the contract.
Consent obtained through coercion is not considered free, which undermines the legal foundation of the contract. Courts provide protection to victims of such contracts to ensure justice and fairness in contractual relationships.
Question 16: What is the concept of Undue Influence?
Answer:
As per Section 16 of the Indian Contract Act, Undue Influence occurs when one party uses moral, emotional, or legal pressure to dominate the will of the other and gain an unfair advantage in a contract. This typically happens when one party is in a position of power or authority, and the other is in a weaker or dependent position—such as teacher-student, doctor-patient, or lawyer-client relationships.
If the dominant party uses their influence to benefit themselves unfairly, the contract can be challenged in court and declared voidable.
Example: If an elderly person, under the influence of a trusted servant, transfers property in the servant’s favor, the court may declare such a contract invalid.
The concept of undue influence aims to protect parties not just from external pressure, but also to ensure ethical behavior and fairness in relationships involving trust and dependency.
Question 17: What is the significance of Fraud in a contract?
Answer:
According to Section 17 of the Indian Contract Act, Fraud occurs when one party knowingly makes a false statement or deliberately conceals a material fact to deceive the other party into entering a contract. Fraud affects the core objective of the contract and destroys the element of free consent.
Example: If a seller knowingly misrepresents the quality of a product and the buyer enters into the contract based on that misrepresentation, it amounts to fraud.
A contract obtained by fraud is voidable at the option of the deceived party. The aggrieved party may not only cancel the contract but also claim damages for any losses suffered.
To prevent fraud, honesty and transparency are essential in all contractual dealings. Fraud undermines trust and fairness, and the law provides protection to those misled by such dishonest practices.
Question 18: What is the difference between Misrepresentation and Fraud?
Misrepresentation and fraud are both factors that lead to defective consent in a contract, but they differ primarily in intent. Misrepresentation refers to a situation where a party makes a false statement unknowingly or without any intention to deceive. In contrast, fraud involves knowingly making a false statement with the intent to deceive the other party.
For example, if a seller gives incorrect information about a product because he himself is unaware of the truth, it is misrepresentation. However, if he deliberately provides false information to mislead the buyer, it constitutes fraud.
In cases of misrepresentation, the contract becomes voidable at the option of the aggrieved party. However, in cases of fraud, the aggrieved party may not only void the contract but also claim damages. This distinction is vital in contract law to ensure fairness and accountability in contractual dealings.
Question 19: What is the effect of Mistake in a Contract?
If the parties to a contract are confused about a fact, it is referred to as a “mistake.” This can be of two types — mutual mistake and unilateral mistake. If both parties are mistaken about a fundamental fact essential to the agreement, the contract becomes void. For example, if the subject matter does not exist but both parties believe it does, the contract is void due to mutual mistake. On the other hand, a unilateral mistake (mistake by one party only) generally does not affect the validity of the contract, unless the other party is exploiting that mistake for unfair advantage. A mistake can render the contract’s objective unachievable, thereby questioning its enforceability. Therefore, verifying facts and maintaining clarity is essential while entering into a contract.
Question 20: What is the importance of Lawful Object in a contract?
The object of a contract must be lawful, meaning it should not be against any law, morality, or public policy. According to Section 23 of the Indian Contract Act, if the object of an agreement is connected to any criminal activity, corruption, fraud, or immoral act, the contract becomes void.
For example, an agreement to pay someone to commit murder is not lawful and will be considered void. Similarly, contracts involving bribery, gambling, or unethical trade practices are illegal and unenforceable.
A lawful object ensures that the contract aligns with legal and societal standards, maintaining the ethical and legal foundation of the contractual system. It protects public interest and reinforces the legitimacy of agreements within the framework of the law.
Question 20: What is an Illegal Agreement? Explain its effects.
Answer: An illegal agreement is one that is against the law or involves an unlawful objective or act. According to Section 23 of the Indian Contract Act, if the object or consideration of an agreement is illegal — such as committing a crime, violating moral values of society, or breaching any legal provision — the agreement is considered illegal and void.
The principle “ex turpi causa non oritur actio” applies here, meaning “no action arises from an immoral cause.” In other words, courts will not help either party to an illegal agreement. For example, if two parties enter into an agreement to share stolen property, the agreement is illegal and unenforceable.
Effects of an illegal agreement:
- The agreement is void and cannot be enforced in a court of law.
- Neither party can claim any benefit arising out of the illegal agreement.
- If even a single clause of the agreement is illegal and inseparable from the rest, the entire contract becomes void.
Question 21: What is an Uncertain Agreement? Explain with an example.
Answer:
An uncertain agreement is one in which the terms are vague, incomplete, or ambiguously stated, making it impossible to enforce or perform the contract. According to Section 29 of the Indian Contract Act, “Agreements, the meaning of which is not certain or capable of being made certain, are void.”
For example, if A and B enter into an agreement where “A will sell a car to B at a reasonable price,” the phrase “reasonable price” is ambiguous unless it is clearly defined in the contract. In such cases, the court may find it difficult to enforce the agreement.
Key effects of uncertain agreements:
- They are void and cannot be enforced in a court of law.
- If an uncertain part of the contract can be separated from the rest, only that part becomes void.
- If the uncertainty can be clarified later or interpreted through trade usage or common practice, the agreement may still be enforceable.
Question 22: What is a Wagering Agreement? Explain its status under Indian Law.
Answer:
A Wagering Agreement is a contract in which two parties agree to stake money or valuables on the outcome of an uncertain future event, where the gain of one party is the loss of the other, purely based on the occurrence or non-occurrence of that event. According to Section 30 of the Indian Contract Act, 1872, such agreements are void and unenforceable by law.
Key features of a Wagering Agreement:
- It is based on an uncertain future event.
- Profit or loss depends solely on the occurrence of the event, not on any effort or skill of the parties.
- There is no expectation of any service or work from either party.
Example: If A and B agree that “If India wins the cricket match, A will pay ₹1,000 to B; otherwise, B will pay ₹1,000 to A,” it is a wagering agreement and is void under Indian law.
However, insurance contracts and stock market transactions are not considered wagering agreements, as they are entered into for legitimate commercial purposes and are recognized as legally valid.
Question 23: What is a Contingent Contract? Explain with an example.
Answer:
A Contingent Contract is a contract whose performance depends on the occurrence or non-occurrence of a future uncertain event. According to Section 31 of the Indian Contract Act, a contract is said to be contingent when its performance is conditional upon the happening of a collateral event.
Example: A tells B, “If my car gets stolen and you find it, I will pay you ₹50,000.” Here, the contract depends on the uncertain event of the car being stolen. Only if that happens, B can perform and claim the reward.
Key Features of Contingent Contracts:
- It is based entirely on an uncertain future event.
- The contract does not become enforceable until the event occurs.
- If the event becomes impossible, the contract becomes void.
Thus, contingent contracts are different from ordinary contracts because their enforceability relies on a specific future occurrence.
Question 24: Distinguish between Void and Voidable Contracts.
Answer:
Void Contract and Voidable Contract are two distinct legal concepts under contract law.
1. Void Contract:
- A contract that is not enforceable by law.
- It has no legal effect from the beginning or becomes invalid later.
- Example: A contract made for an illegal purpose.
2. Voidable Contract:
- A contract that is legally valid, but can be canceled by one party if consent was not free.
- If consent was obtained through coercion, fraud, undue influence, or misrepresentation, the aggrieved party can make it void.
- The contract remains enforceable unless revoked by the affected party.
Key Differences:
| Basis | Void Contract | Voidable Contract |
|---|---|---|
| Validity | Never valid in the eyes of law | Initially valid, but can be declared void |
| Rights | No legal rights arise | Aggrieved party has the right to cancel it |
| Example | Contract for illegal activity | Contract signed under fraud or coercion |
In summary, a void contract is invalid from the start or becomes so later, while a voidable contract is valid unless rejected by the party whose consent was not free.
Question 25: What is the validity of contracts made for immoral purposes?
Answer:
According to Section 23 of the Indian Contract Act, if the object or consideration of a contract is immoral, opposed to public policy, or unlawful, the contract is void. Contracts made for immoral purposes are those that harm moral values or social order.
Example: If A and B enter into a contract where B agrees to assist A in illegal business in return for ₹1 lakh, such a contract is void as its object is immoral.
Courts do not enforce such contracts, as they go against public conscience and ethical standards of society.
Common types of immoral contracts include:
- Contracts based on illicit relationships
- Contracts involving bribery
- Agreements that aim to influence the course of justice
Thus, if a contract’s object is immoral, it is not valid in the eyes of law, and no party can claim rights or remedies under it.
Unit-(iii)
प्रश्न 1. What is discharge of contract by performance?
उत्तर:
Discharge of contract by performance occurs when both parties fulfill their respective obligations as agreed in the contract. Once the contract is fully performed, it ceases to exist legally. This is the most common and ideal way to discharge a contract. Performance can be actual or attempted. Actual performance happens when each party completes their duties. Attempted performance, or tender, is when one party offers to perform but the other refuses. According to the Indian Contract Act, 1872, if a party offers to perform but is prevented by the other party, they are discharged. Proper time, place, and manner are essential for valid performance. If the promisee accepts partial performance without protest, the contract may be considered fulfilled. However, if the contract requires complete performance and one party fails to do so, it may be treated as a breach. Performance also includes payment of money, delivery of goods, or provision of services. In joint promises, all promisors must perform unless otherwise agreed. Once the contract is discharged by performance, no further rights or obligations remain, and no legal action can be taken.
प्रश्न 2. What is appropriation of payments?
उत्तर:
Appropriation of payments refers to the application of a payment made by the debtor to one or more of several debts owed to the same creditor. The Indian Contract Act, 1872, under Sections 59 to 61, deals with this principle. If a debtor owes several debts and makes a payment without specifying which debt it applies to, the creditor has the right to appropriate the payment to any lawful debt.
There are three main scenarios:
- Debtor specifies appropriation – If the debtor mentions the specific debt for which payment is made, the creditor must apply the amount accordingly.
- No specification by debtor – The creditor can choose to appropriate the payment toward any debt, even if it is time-barred.
- Neither party appropriates – The law automatically applies the payment to the earliest debt in chronological order.
This doctrine prevents disputes and ensures clarity in handling multiple debts. It is especially relevant in long-standing business relationships or banking transactions. The rule helps in settling accounts and ensures fairness. However, it does not apply to payments made under court directions or specific contract terms. Thus, appropriation plays a vital role in managing obligations between contracting parties.
प्रश्न 3. Explain performance by joint promisors.
उत्तर:
When two or more persons make a promise to perform a contract jointly, they are called joint promisors. Section 42 to 45 of the Indian Contract Act, 1872, deals with joint promises. Joint promisors are collectively and individually responsible for fulfilling the obligation. The promisee can compel any one or all of the joint promisors to perform the entire obligation.
If one joint promisor fulfills the promise, he has the right to claim contribution from the others. For example, if A, B, and C jointly promise to pay ₹60,000 and A pays the whole amount, he can recover ₹20,000 each from B and C. If any promisor defaults, the burden is equally shared among the remaining.
In case of the death of a joint promisor, the responsibility passes to his legal representatives. If one of them dies, the remaining joint promisors and legal heirs are jointly liable.
This doctrine ensures that the promisee is not at loss if one party defaults. It protects the interests of the promisee and maintains fairness among joint promisors. However, any arrangement among the promisors regarding internal contribution does not affect the rights of the promisee unless he consents. Thus, joint liability ensures contract enforcement.
प्रश्न 4. What is discharge by novation?
उत्तर:
Novation means the substitution of a new contract in place of an existing one. It discharges the original contract and creates a fresh agreement, either between the same parties or involving new parties. Section 62 of the Indian Contract Act, 1872, governs novation.
There are two types:
- Change in terms between the same parties.
- Change in parties with the same or different terms.
For example, if A owes ₹50,000 to B, and both agree that C will now pay B instead of A, this is novation. The original contract between A and B ends, and a new contract between B and C begins.
Novation must be with the mutual consent of all concerned parties. It should be made before the original contract is breached; otherwise, it becomes a settlement rather than novation. Also, the new contract must be valid and enforceable.
If the new contract fails, the old one cannot be revived unless agreed by parties. Novation offers flexibility in business and legal relationships and allows for restructuring without litigation. Thus, novation is a recognized legal method of discharging obligations and reforming contractual ties.
प्रश्न 5. What is the concept of remission in contract law?
उत्तर:
Remission, under Section 63 of the Indian Contract Act, 1872, refers to the acceptance of a lesser fulfillment of the promise by the promisee. It allows the promisee to forgo part or whole of the performance without receiving full consideration.
For example, if A owes B ₹10,000, and B agrees to accept ₹7,000 in full settlement, and A pays it, the contract is discharged. The remaining ₹3,000 cannot be claimed later.
Remission can be granted without any fresh consideration. This makes Indian law different from English law, which requires consideration for remission. The promisee can also extend the time for performance or accept performance from a third party.
Remission must be voluntary and unconditional. Once accepted, the promisee cannot later demand the original obligation. It promotes flexibility and reduces litigation by enabling out-of-court settlements.
Remission is often used in commercial transactions, debt settlements, and in situations where strict enforcement may not be feasible. It reflects the principle that a person has the right to modify or waive their rights. In essence, remission simplifies the discharge of contracts and is a powerful tool in resolving disputes.
Question 6: What is Discharge by Novation?
Answer:
Discharge by Novation means replacing an old contract with a new one, either by changing the parties involved or by altering the terms and conditions of the original contract. It is a valid mode of contract discharge recognized under Section 62 of the Indian Contract Act.
When all parties mutually agree to substitute the old contract with a new valid contract, the original contract automatically becomes void.
Example: A and B have a contract. Later, with B’s consent, A enters into a new contract with C for the same obligation, and B steps out. This is an instance of Novation.
Key requirements for Novation include:
- Mutual consent of all concerned parties
- The new contract must be valid and enforceable
If the new contract turns out to be invalid, the old contract does not automatically revive.
Thus, Novation offers a flexible and practical mechanism in commercial dealings to restructure or reassign contractual obligations.
Question 7: What is the role of Remission in the discharge of a contract?
Answer:
Remission refers to the acceptance by the promisee of a lesser performance than what was originally agreed, and treating it as full performance. According to Section 63 of the Indian Contract Act, the promisee has the right to waive off a part of the obligation or accept a lesser performance.
Example: A is entitled to receive ₹10,000 from B. Later, A agrees to accept ₹8,000 in full satisfaction and releases B from further liability. A can no longer claim the remaining ₹2,000.
Remission is a unilateral act and does not require any new consideration. It is considered legally valid because, in practical situations, full performance may not always be feasible.
Remission provides a fair and flexible way to discharge a contract, especially in cases involving financial hardship or exceptional circumstances.
Question 8: How is a contract discharged through Accord and Satisfaction?
Answer:
Accord and Satisfaction is a two-step process by which a contract is discharged through a new agreement and its performance.
- Accord refers to a new agreement between the parties to settle an existing obligation on different terms.
- Satisfaction is the actual performance of that new agreement.
Example: A owes B ₹20,000. They agree (Accord) that A will pay ₹15,000 in full settlement, and B will waive the remaining amount. When A pays ₹15,000 (Satisfaction), the original contract is discharged.
Accord without Satisfaction does not terminate the contract, and Satisfaction cannot exist without Accord.
This method offers an alternative resolution, reduces litigation, and saves judicial time. The discharge occurs only when the new agreement is both made and performed.
Question 9: How is a contract discharged under the doctrine of Frustration?
Answer:
The Doctrine of Frustration states that if the main purpose of a contract becomes impossible to fulfill or the performance becomes impracticable due to unforeseen events, the contract is automatically terminated. This principle is laid down under Section 56 of the Indian Contract Act.
Example: A rents a hall to B for a wedding event, but before the event, the hall burns down. Since the purpose of the contract can no longer be fulfilled, the contract is said to be frustrated.
Frustration can occur due to reasons such as natural disasters, war, legal or government restrictions, etc. In such cases, no party is at fault.
The purpose of this doctrine is to ensure that when performance becomes impossible, no party is unfairly burdened. It upholds the principles of justice and fairness in contractual relationships.
Question 10: How does a contract terminate due to Actual Breach?
Answer:
An Actual Breach of contract occurs when a party fails to perform their contractual obligation on the due date or during the performance of the contract. It is one of the most common grounds for termination of a contract.
Example: If A promises to deliver goods to B on 1st August but fails to do so on that date, it is an actual breach of contract.
As a result of an actual breach, the non-breaching party has the right to:
- Treat the contract as terminated, and
- Claim damages for any loss suffered due to the breach.
Courts may grant termination of the contract along with compensation. Actual breach is taken seriously in business transactions, as it affects not only contractual obligations but also commercial relationships.
Question 11: What is Anticipatory Breach and what are its effects?
Answer:
Anticipatory Breach occurs when one party to a contract refuses or fails to perform their contractual obligation before the due date of performance. This breach can be express (clearly stated) or implied through conduct.
Example: A is supposed to deliver goods to B on 1st September, but on 15th August, A informs B that he will not deliver the goods. This is an anticipatory breach.
In such a situation, the non-breaching party has two options:
- Sue immediately for breach of contract, or
- Wait until the due date to see if the contract is actually breached.
This principle helps in saving time and enables the affected party to seek legal remedies in advance. It is crucial for commercial certainty and timely justice.
Question 12: What is the principle of Appropriation of Payment?
Answer:
The principle of Appropriation of Payment refers to the method of allocating a single payment made by a debtor towards multiple debts owed to the same creditor. Sections 59 to 61 of the Indian Contract Act govern this concept. There are three scenarios:
- If the debtor specifies which debt the payment is for, the payment must be applied accordingly.
- If the debtor is silent, the creditor may apply the payment to any lawful debt, even if it is time-barred.
- If neither party specifies, the payment is applied in discharge of debts in order of time — the oldest debt is paid first.
Example: A owes B ₹5,000 and ₹10,000. A pays ₹5,000 and clearly states it is for the smaller debt. The payment will be appropriated to the ₹5,000 debt.
This principle ensures clarity, fairness, and proper debt management in financial transactions.
Question 13: What are the rules regarding the performance of Joint Promisors?
Answer:
When two or more persons make a joint promise under a contract, they are known as Joint Promisors. Sections 42 to 45 of the Indian Contract Act govern such situations. The key rules are as follows:
- The promisee can compel any one of the joint promisors to perform the entire obligation.
- A joint promisor who pays the whole amount is entitled to claim contribution from the other joint promisors.
- In case of the death of a joint promisor, his legal representatives become liable for performance.
Example: A, B, and C jointly promise to pay ₹30,000. If B pays the entire ₹30,000, he can recover ₹10,000 each from A and C.
This principle ensures shared liability and fairness among the joint promisors.
Q14: What is the difference between Novation and Accord & Satisfaction?
Answer:
Novation and Accord & Satisfaction are both methods of discharging a contract, but they differ in their nature and legal implications.
Novation involves replacing an old contract with a completely new one. It may also involve a change in the parties to the contract. The original contract becomes void, and the new one takes its place. For example, if A and B are in a contract and C agrees to assume B’s obligations with the consent of A, a new contract arises between A and C — this is novation.
Accord & Satisfaction, on the other hand, is a process where the parties agree (accord) to settle a contractual obligation with different terms, and when the new terms are fulfilled (satisfaction), the original obligation is discharged. For instance, if A owes B ₹20,000, and B agrees to accept ₹15,000 in full settlement, and A pays that amount, the contract is satisfied.
While novation requires the consent of all parties (including the new party if applicable) and involves a complete substitution of the contract, accord and satisfaction deals primarily with the performance of the contract and doesn’t always involve new parties.
Novation is more stringent in terms of legal formalities, whereas Accord & Satisfaction is more flexible and commonly used in debt settlements.
Q.15: Distinguish between Doctrine of Frustration and Impossibility.
Answer: The Doctrine of Frustration and Impossibility both relate to the termination of a contract, but their application and timing differ.
- Initial Impossibility refers to a situation where the contract was impossible to perform right from the beginning. For example, if a person agrees to teach a deceased individual, the contract is void due to initial impossibility.
- Frustration, on the other hand, occurs when a contract, valid at its inception, becomes impossible or unlawful to perform due to a subsequent event beyond the control of the parties. For instance, war, natural disasters, or government intervention making performance impracticable.
While impossibility is based on objective facts, frustration is largely derived from judicial interpretation and case law. Both lead to automatic termination of the contract without any party being held liable for non-performance.
In India, both concepts are recognized under Section 56 of the Indian Contract Act, 1872.
Q.16. What is Anticipatory Breach of Contract? Explain with example.
Ans.
Anticipatory breach of contract occurs when one party declares, before the time for performance has arrived, that they will not fulfill their contractual obligations. This breach gives the other party the right to terminate the contract and sue for damages immediately, rather than waiting for the performance date.
For example, A agrees to deliver goods to B on 1st August. However, on 15th July, A informs B that he will not be able to deliver the goods. This is an anticipatory breach. B can treat the contract as broken and file a suit for damages without waiting until 1st August.
Under Indian Contract Law, anticipatory breach is governed by Section 39 of the Indian Contract Act, 1872. The aggrieved party may choose either to treat the contract as still existing and wait for the actual date of performance or to treat it as breached immediately and claim compensation.
However, if the aggrieved party continues with the contract, and before the due date some other event occurs that makes performance impossible (e.g., destruction of subject matter), they may lose their right to claim damages for breach.
Q.17. What is Actual Breach of Contract? How is it different from Anticipatory Breach?
Ans.
An actual breach of contract occurs when a party fails or refuses to perform their part of the contract on the due date or during the course of performance. This breach gives immediate rights to the aggrieved party to take legal action for damages or specific performance.
For instance, if A promises to deliver goods to B on 1st August and fails to do so on that day, it is an actual breach.
Difference from Anticipatory Breach:
- Time of Breach: Anticipatory breach occurs before the performance is due, while actual breach occurs on or after the due date.
- Remedies: In anticipatory breach, the aggrieved party can either accept the breach immediately or wait for the actual date. In actual breach, the contract is already broken, and immediate legal remedy can be pursued.
Both types of breaches give rise to legal remedies, but anticipatory breach provides an option to mitigate losses earlier.
Q.18. Explain Discharge of Contract by Impossibility of Performance (Doctrine of Frustration).
Ans.
Discharge of contract by impossibility occurs when an unforeseen event makes it impossible to perform the contract, without any fault of either party. In such cases, the contract becomes void. This concept is known as Doctrine of Frustration under Section 56 of the Indian Contract Act.
Conditions for application:
- Performance must become impossible or unlawful.
- The event must occur after the formation of the contract.
- The impossibility must not be self-induced.
Example: A contracts to marry B. Before the marriage date, A dies. The contract is discharged due to impossibility.
Another example: A hires a hall for an event, but the hall burns down before the event. The contract is frustrated and hence void.
However, commercial hardship or difficulty in performance is not considered frustration. Courts apply this doctrine strictly to avoid misuse. If performance is still possible in an altered form, the contract is not discharged.
Q.19. What is meant by Remission under the Indian Contract Act?
Ans.
Remission refers to the acceptance by the promisee of a lesser fulfillment of the promise made by the promisor, without consideration. Under Section 63 of the Indian Contract Act, the promisee can:
- Dispense with or remit wholly or in part the performance of the promise;
- Extend the time for such performance;
- Accept any satisfaction instead of the promised performance.
Importantly, this can be done without fresh consideration, which is a departure from English law.
Example: A owes B ₹10,000. B agrees to accept ₹7,000 in full settlement. If A pays ₹7,000, B cannot later sue for the balance.
This provision is significant in debtor-creditor relationships and helps parties settle disputes amicably. It empowers the promisee to provide flexibility in enforcing the contract, promoting settlement outside court.
Q.20. What is Accord and Satisfaction? How does it discharge a contract?
Ans.
Accord and Satisfaction is a legal method of discharging a contract wherein:
- Accord is a new agreement made to settle a dispute or accept different performance than originally agreed.
- Satisfaction is the execution or performance of that new agreement.
Once satisfaction is completed, the original contract is discharged.
Example: A owes B ₹50,000. Due to financial difficulties, A and B agree (accord) that A will pay ₹40,000 as full and final settlement. When A pays ₹40,000 (satisfaction), the original contract is discharged.
In Indian law, this concept is covered under Section 63 of the Indian Contract Act. Unlike English law, Indian law does not require fresh consideration for remission or satisfaction.
This principle is useful in resolving disputes, especially when one party is unable to fulfill original obligations but offers a reasonable alternative acceptable to the other party.
Question 21. What is Discharge of Contract by Novation?
Answer:
Novation is the process by which an existing contract is replaced with a new contract, thereby discharging the original contract. It is governed by Section 62 of the Indian Contract Act, 1872. Novation can take place in two ways: (1) by substituting a new contract in place of the old one, or (2) by changing one of the parties to the contract.
For novation to be valid, the consent of all parties involved is essential, and the new contract must be lawful and enforceable. If the new contract is found to be invalid, the original contract also loses its effect. For example, if A agrees to pay ₹10,000 to B and later all parties agree that A will instead pay C, this is considered novation.
However, novation is only valid if the new contract is executed properly and all its essential conditions are fulfilled. It is important to note that novation is a mode of discharging a contract through mutual agreement and not by breach or performance.
Question 22. How does Remission lead to the discharge of a contract?
Answer:
Remission refers to the acceptance by the promisee of a lesser fulfillment than what was originally agreed upon in the contract, thereby waiving the right to claim the full performance. According to Section 63 of the Indian Contract Act, “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him.”
For example, if A is entitled to receive ₹5,000 from B, but A voluntarily agrees to accept ₹3,000 in full settlement, the remaining ₹2,000 is waived. In such a case, B is no longer legally bound to pay the balance amount.
Remission results in the discharge of a contract as it eliminates the necessity for full performance of the original promise. It is a unilateral act and does not require any additional consideration. This principle adds flexibility to the enforcement of contracts, especially in situations where the parties mutually agree to a compromise.
Question 23. What is the Doctrine of Frustration?
Answer:
The Doctrine of Frustration refers to a situation where the performance of a contract becomes impossible due to unforeseen circumstances, rendering the contract void. This principle is enshrined under Section 56 of the Indian Contract Act, 1872.
When a contract, after being formed, becomes impossible to perform due to an event beyond the control of both parties, and the purpose of the contract is destroyed, the contract is automatically discharged. For example, if A rents a hall to B for an event, but before the event date, the hall is destroyed by fire, the performance becomes impossible and the contract stands frustrated.
The doctrine ensures fairness by preventing parties from being held liable for circumstances they could not have anticipated or controlled. However, this doctrine will not apply if the impossibility is self-induced or arises due to the fault of either party. In such cases, the party at fault may still be held liable.
The Doctrine of Frustration serves as a safeguard to protect parties from the harsh consequences of failure to perform a contract when such failure is due to no fault of their own.
Question 24. How does a contract terminate through Breach?
Answer: When one party violates the terms of the contract, it is called a breach, and this may lead to termination of the contract. Breach of contract is of two types: (1) Actual Breach and (2) Anticipatory Breach.
An Actual Breach occurs when a party fails to perform its promise on the due date or thereafter. An Anticipatory Breach occurs when a party, before the performance is due, clearly expresses that it will not fulfill the contract.
For example, if A agreed to send goods to B on 1st August but on 25th July clearly informs that he will not send them, it is an Anticipatory Breach.
In such cases, the other party has the right to terminate the contract and claim damages. This principle ensures contractual liability and provides a remedy to the aggrieved party against betrayal of trust.
Unit-IV
1. What is a Quasi Contract?
A Quasi Contract is not a real contract but a legal obligation imposed by law. It arises not from an agreement but to prevent unjust enrichment of one party at the expense of another. For example, if a person mistakenly delivers goods to someone else, the recipient is obliged to return them or pay compensation. Section 68 to 72 of the Indian Contract Act, 1872, deal with quasi contracts. The core idea is based on equity and good conscience, and even though there is no offer, acceptance, or consideration in the traditional sense, the law enforces obligations as if there were a contract.
2. What is the liability for necessaries supplied to a person incapable of contracting?
Under Section 68 of the Indian Contract Act, if necessaries are supplied to a person who is incapable of contracting (such as a minor or lunatic), the supplier is entitled to reimbursement from the property of such a person. The term “necessaries” includes essential items such as food, clothing, medicine, and shelter suitable to the condition in life of the recipient. However, the person supplying must prove that the goods were indeed necessary and actually used for the benefit of the person incapable of entering into a contract.
3. What is meant by “payment by interested person” under quasi contract?
Section 69 of the Indian Contract Act states that if a person makes a payment, which another person is legally bound to pay, and the payer is interested in making such payment, then he is entitled to be reimbursed. For example, A pays B’s property tax to avoid auction of B’s property in which A has an interest. A can recover that amount from B. However, the payer must have a legal interest in the payment, and the original liability must rest with the other person.
4. Explain liability for non-gratuitous acts under quasi contract.
Section 70 of the Indian Contract Act explains that when a person lawfully does something for another person or delivers something, not intending to do so gratuitously, and the other person enjoys the benefit, then the receiver is bound to compensate. This is based on the principle of “no unjust enrichment.” For instance, if A paints B’s house by mistake, and B sees it and benefits from it, B is bound to compensate A.
5. Who is a ‘finder of lost goods’ and what are their rights?
As per Section 71 of the Indian Contract Act, a finder of lost goods is treated like a bailee. The finder must take reasonable care of the goods and return them to the true owner. If the owner is not found, the finder can retain the goods but cannot claim ownership. However, if the true owner announces a reward for the return, the finder can sue to recover that reward. In some cases, if the expenses for preservation are not paid, the finder can sell the goods under specific conditions.
6. What is the legal effect of receiving things delivered by mistake or coercion?
Section 72 of the Indian Contract Act states that a person to whom money or goods are delivered by mistake or under coercion is bound to return them. For example, if A mistakenly pays B ₹10,000, which was meant for C, B must return the money. If he refuses, A can sue to recover the amount. Similarly, if money is paid under coercion, the payer has the legal right to recover it.
7. What is the meaning of Quantum Meruit?
“Quantum Meruit” means “as much as is earned” or “as much as one deserves.” It is a principle that allows a person to recover compensation for partial performance of a contract when full performance becomes impossible or the contract is terminated by the other party. It ensures that a party who has rendered services or supplied goods is not left uncompensated, even in the absence of a complete contract.
8. What is meant by ‘Remedies for breach of contract’?
When a contract is breached, the aggrieved party has the right to seek legal remedies. These include damages, specific performance, injunction, rescission, and restitution. The main aim is to put the injured party in the same position as they would have been if the contract had been performed. Courts analyze the nature of the breach and award appropriate remedies accordingly.
9. What are the types of damages awarded for breach of contract?
The types of damages include:
- Ordinary (Compensatory) damages: For direct loss.
- Special damages: For indirect loss due to special circumstances.
- Exemplary damages: To punish (rare in contracts).
- Nominal damages: Small sum when legal right is violated without real loss. These damages aim to compensate, not penalize, the party suffering the breach.
10. What is the difference between liquidated damages and penalty?
Liquidated damages are pre-estimated damages agreed upon in the contract, which are a genuine attempt to assess probable loss. Penalty is a sum fixed to penalize the defaulter. In India, courts do not enforce penalties but award reasonable compensation not exceeding the amount mentioned. This principle is covered under Section 74 of the Indian Contract Act.
11. What is meant by “Duty to mitigate loss”?
The injured party in a contract breach has a legal duty to take reasonable steps to reduce the loss caused by the breach. They cannot claim damages for losses that could have been avoided with reasonable care. For example, if a supplier fails to deliver goods, the buyer must try to obtain them elsewhere and cannot let the loss increase just to claim higher damages.
12. What is the concept of restitution under contract law?
Restitution means restoring the injured party to their original position before the contract. It is usually granted when a contract is rescinded or found void. The idea is that no party should unjustly benefit at the cost of another. For example, if A pays money under a void contract, A can claim restitution of that amount.
13. What is specific performance as a remedy?
Specific performance is a remedy where the court orders the breaching party to perform their obligations as per the contract, instead of paying damages. This remedy is generally used when monetary compensation is not sufficient, such as in the sale of unique property. It is granted at the court’s discretion under the Specific Relief Act, 1963.
14. When can an injunction be granted in contract law?
An injunction is a court order restraining a party from doing something that breaches the contract. For example, in employment contracts or intellectual property disputes, courts may prevent a party from disclosing confidential information. This remedy ensures that the terms of the contract are not violated even before or during its enforcement.
15. Explain anticipatory breach and its remedy.
An anticipatory breach occurs when one party declares, before the due date of performance, that they will not perform the contract. The other party can treat the contract as breached and sue for damages immediately or wait until the performance date. This right provides early legal relief to the aggrieved party.
16. What is Accord and Satisfaction?
“Accord and Satisfaction” is a method of discharging a contract. Accord refers to a new agreement made to settle a dispute, and Satisfaction is the performance of that new agreement. Once both are completed, the original contract is discharged. It is often used to settle contractual claims outside court.
17. What is the relevance of Section 73 of the Indian Contract Act?
Section 73 deals with compensation for loss or damage caused by breach of contract. It allows the injured party to recover losses which naturally arose in the course of the breach or which were known to both parties. However, remote or indirect damages cannot be claimed.
18. Can a person sue for loss of profit in breach of contract?
Yes, a person can sue for loss of profit if it is a natural consequence of the breach or if it was known to both parties at the time of making the contract. These are considered special damages, but must be proven with reasonable certainty to be recoverable.
19. What are non-compensatory damages?
Non-compensatory damages, like nominal or exemplary damages, are not meant to compensate for actual loss. Nominal damages are symbolic, awarded when no real loss is proven. Exemplary damages punish the wrongdoer and are rarely awarded in contractual matters, except in cases involving fraud or bad faith.
20. How is liability determined in cases of mistake or coercion in delivery?
Under Section 72, when something is delivered under mistake or coercion, the receiver must return it. The law imposes liability regardless of the receiver’s intent. If a person receives money or goods by mistake, knowingly or unknowingly, and keeps it, they are liable to repay or return it.
Q21. What are ‘necessaries’ under Quasi Contract and who is liable for them?
Under Section 68 of the Indian Contract Act, ‘necessaries’ are goods or services suitable to the condition in life of a person and to his actual requirements at the time of sale and delivery. When such necessaries are supplied to a person incapable of contracting, such as a minor or a person of unsound mind, the supplier is entitled to reimbursement from the property of the incapable person. This quasi-contractual obligation ensures fairness and prevents unjust enrichment. However, liability is not personal but limited to the value of the property of the incapable person. The supplier must prove the necessity and appropriateness of the goods supplied in the particular circumstance. Essentials include that the person was incapable, the goods were suitable to their status, and they were not already sufficiently supplied.
Q22. What is meant by ‘Payment by an interested person’ under quasi contracts?
Section 69 of the Indian Contract Act deals with situations where a person pays money on behalf of another, in which the latter is legally bound to pay. The payer must have an interest in the payment and should not be a volunteer. This section creates a quasi-contract, entitling the person who makes the payment to recover it from the one who is bound to pay. For example, if a person pays property tax on behalf of another to protect his own interest in the property, he can recover that amount. The key elements are: (i) the payer is interested in the payment; (ii) the payment is made to fulfill another’s legal obligation; and (iii) the payer does not act officiously. It prevents unjust enrichment and ensures equitable treatment between parties.
Q23. What is the liability to pay for non-gratuitous acts under quasi-contracts?
According to Section 70 of the Indian Contract Act, if a person lawfully does something for another or delivers something to another, not intending to do so gratuitously, and the benefit is enjoyed by the other person, then the latter is bound to compensate the former. This principle arises from equity, justice, and good conscience. For instance, if A mistakenly delivers goods to B, and B uses them, B must pay A the reasonable value of the goods. The essentials are: (i) lawful act or delivery, (ii) no intention to act gratuitously, and (iii) the other person must enjoy the benefit. This provision prevents unjust enrichment and ensures fair compensation even without a formal agreement.
Q24. What are the rights of a finder of lost goods?
Section 71 of the Indian Contract Act states that a person who finds goods belonging to another and takes them into custody is subject to the same responsibility as a bailee. The finder has a duty to take reasonable care of the goods and make efforts to locate the true owner. However, the finder also gains certain rights — such as retaining the goods until receiving compensation for trouble and expenses incurred. If the owner declares a reward, the finder can sue for the reward and retain the goods until it is paid. In case the owner cannot be found or refuses to pay lawful charges, and the goods are perishable or of negligible value, the finder may sell them. These provisions aim to balance the responsibilities and rights of finders in a fair manner.
Q25. What happens when goods are delivered by mistake or under coercion?
Section 72 of the Indian Contract Act provides that if a person receives anything by mistake or under coercion, he is bound to return it or compensate the rightful owner. This principle is rooted in equity and prevents unjust enrichment. For example, if A mistakenly transfers ₹10,000 to B’s account, B must return it. Similarly, if C is forced to pay D under duress, D must repay the money. Mistake may be of law or fact, and coercion must involve unlawful compulsion. The section applies even if there is no existing contract between the parties. This rule enforces the moral and legal obligation of not retaining benefits obtained wrongfully or unfairly, ensuring justice and fairness in civil transactions.
Unit-V
Q1. What is the purpose and scope of the Specific Relief Act, 1963?
Ans:
The Specific Relief Act, 1963 aims to provide specific remedies for the enforcement of individual civil rights. Unlike general damages, which compensate for loss, specific relief enforces exact performance or prevents breach of obligations. It is primarily governed by equity and discretion of courts. The Act provides remedies such as specific performance of contracts, injunctions, declaratory reliefs, rectification and cancellation of instruments, and recovery of possession of property. It ensures that a person wronged by breach or denial of rights can be restored to the original position. The Act does not provide for penal or punitive measures, nor does it enforce criminal obligations. Its scope is confined to civil disputes. Amendments in 2018 have made it more business-friendly by limiting judicial discretion in some cases and encouraging performance of commercial contracts. Thus, the Act plays a crucial role in equitable enforcement of legal rights, especially where monetary compensation is inadequate.
Q2. Explain the remedy of recovery of possession of property under the Specific Relief Act.
Ans:
Section 5 to 8 of the Specific Relief Act deal with recovery of possession of property. If a person is dispossessed of immovable property without his consent and not in accordance with the law, he is entitled to recover possession. Section 6 specifically allows any person dispossessed without due process of law to file a suit for possession, even against the true owner. The law upholds the principle that no one can take law into their own hands. This remedy ensures peace and stability in property disputes. The person must prove previous possession and unlawful dispossession. The limitation period is six months from the date of dispossession. The remedy applies regardless of ownership rights and even tenants can claim protection. For movable property, Section 7 and 8 provide that possession can be recovered by proving a better right or when the goods were entrusted or obtained unlawfully. Thus, the Act protects possession as a legal right and discourages unlawful self-help remedies.
Q3. What is specific performance of a contract and when is it granted?
Ans:
Specific performance is a remedy where the court orders the defaulting party to perform their contractual obligations as agreed. It is granted when monetary compensation is inadequate to remedy the breach. This equitable remedy is governed by Part II of the Specific Relief Act, particularly Section 10 to 14. Earlier, it was a discretionary remedy, but after the 2018 amendment, it is now enforceable as a general rule, especially in contracts involving infrastructure and commercial transactions. However, specific performance is not granted in cases involving contracts based on personal skill, those that are uncertain, revocable, or involve continuous duties. A plaintiff seeking specific performance must demonstrate readiness and willingness to perform his part of the contract. The court considers the fairness, enforceability, and equity of the contract. For example, in sale of a unique property, the buyer can seek specific performance rather than damages. This remedy ensures that contractual obligations are honored and fulfilled as intended by the parties.
Q4. What is rectification of instruments under the Specific Relief Act?
Ans:
Rectification of instruments is a remedy provided under Section 26 of the Specific Relief Act, 1963. It applies when a written document (like a contract or deed) does not reflect the true intention of the parties due to fraud or mutual mistake. The court may rectify the instrument so that it conforms to the actual agreement between the parties. This remedy ensures that the legal documentation reflects the true intention and prevents unjust consequences. To claim rectification, the plaintiff must prove that a mutual mistake existed and that the written document misrepresents what was agreed upon. The application for rectification must be made specifically in the pleadings. The rectification may be claimed in a standalone suit or as part of another proceeding. However, it cannot be used to rewrite or modify the terms unilaterally or correct unilateral mistakes. Thus, rectification protects the interests of parties and maintains the sanctity and correctness of legal documents.
Q5. What is rescission of a contract and when can it be granted?
Ans:
Rescission is the cancellation of a contract, restoring both parties to their pre-contractual position. It is provided under Sections 27 to 30 of the Specific Relief Act. Rescission is granted when the contract is voidable or unlawful or when one party commits a fundamental breach or misrepresentation. A contract may also be rescinded when consent was obtained by coercion, undue influence, fraud, or mistake. Once rescinded, the obligations under the contract cease to exist. The court may refuse rescission if the party seeking it has affirmed the contract or if substantial performance has occurred. Delay or change in circumstances may also bar this remedy. Rescission may also be partial in some cases. The aim is to avoid injustice and prevent the enforcing of unfair or invalid contracts. Courts use discretion based on equity and fairness. For example, if a buyer was induced into a contract through fraud, the court may rescind the contract and order restitution.
Q6. What is cancellation of instruments under the Specific Relief Act?
Ans:
Cancellation of instruments is governed by Sections 31 to 33 of the Specific Relief Act. It allows a person to seek cancellation of a written instrument (such as a deed or contract) that is void or voidable and may cause serious injury if left outstanding. The instrument may be cancelled wholly or partially by the court. The objective is to prevent potential misuse of a document that can cloud title, create legal obligations, or cause harm. A plaintiff must prove that the instrument was obtained through fraud, coercion, or mistake. Even if the document is not used or enforced, its mere existence can threaten legal rights. The court may order the defendant to return or destroy the document. If the plaintiff was a party to the instrument, it must be surrendered. However, courts do not cancel instruments merely on suspicion or moral grounds; legal injury or risk must be evident. Thus, cancellation ensures that defective instruments do not harm parties.
Q7. What are declaratory decrees and when can they be granted?
Ans:
Declaratory decrees are governed by Section 34 of the Specific Relief Act. A declaratory decree declares the legal status, rights, or entitlement of a person without necessarily granting further relief like damages or possession. It is used when a person is denied or threatened in his legal character or right to property and wants the court to pronounce his title or rights officially. For example, a person whose name is removed from a property record may seek a declaratory decree affirming his ownership. The plaintiff must show an existing legal right and a valid interest in the subject matter. However, a mere threat or doubt is insufficient; the risk must be substantial. The court has discretion in granting such a decree and cannot issue a mere opinion or advisory judgment. If further relief such as injunction or possession is possible, the plaintiff must also claim it, failing which the suit may be dismissed. Thus, declaratory decrees safeguard civil rights and prevent future litigation.
Q8. Explain the concept of preventive relief under the Specific Relief Act.
Ans:
Preventive relief refers to remedies that stop a person from infringing another’s rights, rather than compensating after the wrong is done. Under the Specific Relief Act, preventive relief is mainly provided through injunctions (Section 36 to 42). These injunctions are equitable remedies where the court commands or restrains the defendant from doing certain acts. Preventive relief is granted in cases of breach of negative covenants, nuisance, trespass, defamation, or intellectual property violations. It is available when monetary damages are inadequate or impractical. Temporary injunctions are granted during the pendency of a case to maintain status quo, while perpetual injunctions are granted by final decree to permanently prevent violation of rights. Preventive relief ensures timely protection and discourages unlawful conduct. Courts consider urgency, irreparable harm, and balance of convenience before granting such relief. This form of relief plays a crucial role in protecting rights, maintaining legal order, and preventing future harm to affected parties.
Q9. What are temporary and perpetual injunctions? How do they differ?
Ans:
Temporary and perpetual injunctions are two forms of injunctive relief provided under the Specific Relief Act.
Temporary injunctions (Section 37(1)) are granted during the pendency of a case to prevent irreparable harm or maintain status quo until final judgment. They are governed by procedural law (Order 39 Rules 1 & 2, CPC) and are discretionary, usually passed through interlocutory orders.
Perpetual injunctions (Section 37(2)) are granted by final decree after a full trial. They permanently restrain a party from acting in violation of the plaintiff’s rights. They are based on substantive rights and can be granted to prevent the breach of an obligation existing in favor of the plaintiff.
The key differences lie in their duration (temporary vs. permanent), timing (during vs. after trial), and legal basis (procedural vs. substantive law). Both are important tools to protect legal rights proactively and preserve the interests of the aggrieved party before and after adjudication.
Q10. What is an injunction to perform a negative agreement?
Ans:
An injunction to perform a negative agreement is a specific kind of relief where the court prevents a person from doing something he agreed not to do. It is covered under Section 42 of the Specific Relief Act. Such injunctions are typically associated with employment contracts or business agreements containing a negative covenant. For example, if an employee agrees not to join a rival company for a certain period, and then attempts to do so, the employer can seek an injunction restraining such action. The court will consider whether the agreement is fair, reasonable, and enforceable. However, courts avoid enforcing personal service contracts, especially if the employee is being forced to stay in employment. Only the negative aspect of such contracts is enforced. The remedy ensures contractual promises are respected and prevents unfair competitive practices or misuse of confidential information. The court ensures the balance between contractual freedom and individual liberty.
Q.10: What is Specific Relief and how does it differ from compensatory relief?
Ans: Specific relief is a legal remedy that involves the actual performance of a contract or the enforcement of an individual’s legal right. It is granted when monetary compensation (damages) is inadequate to meet the ends of justice. Unlike compensatory relief, which seeks to reimburse the injured party for the loss suffered, specific relief focuses on fulfilling the promise made in the contract or restoring possession. For instance, if a seller refuses to deliver a rare painting after accepting payment, the buyer can seek specific performance to compel the seller to deliver it, as monetary damages may not compensate the uniqueness. The Specific Relief Act, 1963 governs such remedies in India. The Act deals with specific performance, injunctions, rectification, rescission, and declaratory decrees. It plays a vital role in ensuring that obligations are honored, especially where the subject matter is unique or irreplaceable.
Q.11: What remedies are available under the Specific Relief Act, 1963?
Ans: The Specific Relief Act, 1963 provides several remedies to enforce civil rights. These remedies include:
- Specific Performance of Contracts – A decree to compel a party to perform their contractual obligations.
- Injunctions – Court orders directing a person to do or not to do a specific act.
- Recovery of Possession of Property – Helps individuals reclaim possession of immovable or movable property.
- Rectification of Instruments – Correcting errors in written agreements to reflect true intentions.
- Rescission of Contracts – Cancelling a contract and restoring parties to their original position.
- Cancellation of Instruments – Nullifying void or voidable documents to prevent misuse.
- Declaratory Decrees – Legal declarations of rights or legal status without ordering any further action.
Each of these remedies has specific conditions and limitations and is granted based on judicial discretion. The Act ensures fairness by compelling performance or undoing injustice rather than merely awarding damages.
Q.12: When is Specific Performance granted and what are its limitations?
Ans: Specific performance is granted when monetary compensation is inadequate and the subject matter of the contract is unique or of special value. For example, contracts relating to the sale of land, rare items, or personalized services may warrant specific performance. However, the remedy is discretionary and not granted in the following cases:
- When the contract is of a determinable nature
- If constant supervision by the court is required
- Where the contract involves personal skills or services
- When the party seeking relief has not fulfilled their obligations
Additionally, the performance must be lawful, certain, and not involve hardship to either party. Under Section 10 and 11 of the Specific Relief Act, the courts evaluate the conduct of parties, feasibility of enforcement, and adequacy of compensation before granting this equitable relief.
Q.13: What is an injunction and what types exist under the law?
Ans: An injunction is a judicial order that restrains a person from doing a particular act (prohibitory injunction) or compels them to perform a specific act (mandatory injunction). Under the Specific Relief Act, injunctions are classified as:
- Temporary Injunctions – Granted during the pendency of a suit to preserve status quo until final judgment (Order 39 CPC).
- Perpetual Injunctions – Granted by the court after full hearing, permanently restraining an act that violates the plaintiff’s rights.
- Mandatory Injunctions – Directs the defendant to undo a wrong or perform a duty.
- Injunctions for Negative Covenants – Used to prevent a person from breaching a negative term in a contract (e.g., non-compete clauses).
Injunctions aim to prevent future harm rather than punish past acts. The court uses its discretion based on urgency, irreparable injury, and balance of convenience.
Q.14: What is rectification of instruments under Specific Relief Act?
Ans: Rectification of instruments refers to the correction of a written document when it fails to express the real intention of the parties due to fraud or mutual mistake. Under Section 26 of the Specific Relief Act, a party can seek rectification in a civil court to bring the written instrument in alignment with the actual agreement.
For example, if a sale deed wrongly states the area of land due to a clerical error, the aggrieved party can request rectification. However, rectification is only available if both parties had the same intention and a mutual mistake occurred in drafting the instrument.
To succeed, the plaintiff must prove:
- Existence of a valid agreement
- Common intention
- Error due to mutual mistake or fraud
Rectification ensures justice by preventing one party from taking advantage of technical or drafting errors.
Q.15: What does rescission of contract mean and when is it allowed?
Ans: Rescission means canceling a contract and restoring the parties to their original positions as if no contract existed. It is a remedy granted when the contract is vitiated by fraud, misrepresentation, undue influence, mistake, or breach. Under Section 27 to 30 of the Specific Relief Act, rescission can be sought when:
- The contract is voidable or unlawful
- There is a material breach by one party
- Restoration to original status is possible
For instance, if a buyer discovers that the seller misrepresented property details, he can seek rescission. Once rescinded, both parties are discharged from future obligations, and restitution (return of benefits) may be ordered. However, rescission is not allowed when third-party rights have intervened or if restitution is impossible. Courts may also partially rescind a contract under certain conditions.
Q.16: Explain cancellation of instruments with relevant provisions.
Ans: Cancellation of instruments refers to nullifying a document that is void, voidable, or likely to cause injury if left in effect. According to Section 31 to 33 of the Specific Relief Act, any person fearing serious harm from a document wrongly executed (e.g., forged or obtained by fraud) can approach the court to have it canceled.
The court considers:
- Whether the instrument is void or voidable
- Whether it may cause serious injury
- Whether it affects the plaintiff’s rights
For example, if a forged power of attorney is created in someone’s name to sell property, the rightful owner can seek its cancellation to avoid loss or misuse. Courts may also order partial cancellation in complex cases. Cancellation protects individuals from the potential misuse of faulty or fraudulent instruments.
Q.17: What is a declaratory decree under the Specific Relief Act?
Ans: A declaratory decree is a judicial declaration of the legal status or rights of a person without granting any consequential relief. Under Section 34 of the Specific Relief Act, a person entitled to a legal character or right to property may seek the court’s declaration to that effect.
For instance, a person whose title to property is challenged may seek a declaratory decree to affirm ownership. The essentials are:
- The plaintiff must be entitled to a legal character or right
- There must be a denial or threat to that right
- The court’s declaration must serve a useful purpose
Declaratory relief helps prevent future disputes and secures the plaintiff’s position without enforcing any action or awarding damages.
Q.18: What is the difference between temporary and perpetual injunctions?
Ans:
- Temporary Injunctions are interim orders granted during the pendency of a suit. They are governed by Order 39 of CPC and can be modified or vacated. Their purpose is to maintain status quo and prevent irreparable harm until the final decision.
- Perpetual Injunctions, on the other hand, are permanent orders granted at the conclusion of a trial. They restrain the defendant from doing an act that violates the plaintiff’s rights.
For example, if someone tries to build on your property, you may obtain a temporary injunction to stop construction until the case is resolved. If the court finds in your favor, it may issue a perpetual injunction preventing future encroachments.
Both remedies aim to prevent injury, but the former is provisional and the latter final and binding.
Q.19: What is a mandatory injunction and when is it granted?
Ans: A mandatory injunction is a court order that directs a party to perform a specific act to undo a wrongful situation. It is different from a prohibitory injunction, which merely restrains an act.
Mandatory injunctions are granted in cases where:
- There is a breach of obligation
- The harm is continuous or recurring
- The situation cannot be remedied without active steps
For instance, if a neighbor illegally blocks your access road, the court can issue a mandatory injunction compelling them to remove the obstruction.
Courts exercise caution before granting mandatory injunctions and consider urgency, hardship, and the feasibility of enforcement. It is a powerful remedy but only granted in clear cases to prevent injustice.
Q.20: Can courts enforce negative agreements through injunctions?
Ans: Yes, courts can enforce negative agreements—clauses where a party agrees not to do something—through prohibitory injunctions. A common example is a non-compete clause in employment contracts, where an employee agrees not to work for a rival firm for a certain period.
Under the Specific Relief Act, such injunctions are enforceable if:
- The clause is not in restraint of trade under Section 27 of the Indian Contract Act
- The negative promise is clear and enforceable
- There is a valid and subsisting contract
In the landmark case Niranjan Shankar Golikari v. Century Spinning, the Supreme Court upheld an injunction to prevent an employee from joining a rival during the contract term. However, courts do not enforce such clauses if they are unreasonable or restrict livelihood.
Q21. What is a declaratory decree under the Specific Relief Act?
A declaratory decree is a judgment issued by a civil court that declares the legal status or rights of a person without ordering any specific relief or damages. Under Section 34 of the Specific Relief Act, a person entitled to any legal character or right may file a suit for declaration when their status or right is denied or threatened. This relief is preventive in nature and serves to avoid future legal complications.
For example, if a person’s title over a piece of property is challenged, they can seek a declaratory decree to confirm their ownership. However, the court will not grant this relief if the plaintiff is able to seek more effective remedies, such as possession. A declaratory decree is discretionary in nature and will not be granted in a case where there is no actual denial of right.
The purpose of this remedy is to remove uncertainty and establish legal clarity regarding one’s rights. It cannot be used to claim damages or enforce performance, but only to affirm legal status.
Q22. What is the difference between temporary and perpetual injunctions?
An injunction is a court order that compels a party to do or refrain from doing certain acts. Under the Specific Relief Act, injunctions are of two main types: temporary and perpetual.
Temporary injunctions are granted during the pendency of a suit. They are meant to preserve the status quo until the case is finally decided. These are governed by the Civil Procedure Code (Order 39 Rules 1 & 2) and require the applicant to show a prima facie case, balance of convenience, and likelihood of irreparable harm.
Perpetual injunctions, on the other hand, are granted by the court after full consideration of the merits of the case. They are permanent in nature and form part of the final judgment. These injunctions are granted when a party’s right is continuously being infringed or likely to be infringed, and monetary compensation is inadequate.
For example, a court may issue a temporary injunction to stop the demolition of a building during a suit and later grant a perpetual injunction prohibiting demolition entirely after ruling in favor of the plaintiff.
Q23. What is a mandatory injunction and when is it granted?
A mandatory injunction is a type of court order that compels a person to perform a certain act, typically to undo a wrong or restore a situation to its original state. It differs from a prohibitory injunction, which restrains an action.
Mandatory injunctions are granted under Section 39 of the Specific Relief Act. The court issues them when it is necessary to prevent the breach of an obligation, and when the damage caused by non-performance cannot be adequately compensated by monetary damages. Courts exercise caution before granting such relief because it requires a positive action rather than mere abstention.
For example, if a builder illegally constructs a wall that blocks access to a neighbor’s property, the court may issue a mandatory injunction ordering the demolition of that wall.
To obtain a mandatory injunction, the plaintiff must prove:
- A strong prima facie case
- Irreparable harm if the injunction is not granted
- That the balance of convenience lies in favor of granting the injunction
This type of relief is equitable and discretionary, and courts ensure fairness before enforcing it.
Q24. What is meant by rescission of a contract under the Specific Relief Act?
Rescission of a contract means the revocation, cancellation, or repeal of a contract. Under Section 27–30 of the Specific Relief Act, rescission is a remedy that allows an aggrieved party to cancel a contract and be relieved from its obligations.
A contract can be rescinded in the following situations:
- When the contract is voidable due to misrepresentation, fraud, undue influence, or mistake
- When the contract is unlawful or has become impossible to perform
- When a party fails to perform its part of the contract
Once a contract is rescinded, the parties are restored to their original positions as if the contract never existed. This includes returning any benefits or consideration received under the contract.
For instance, if A sells a car to B by falsely claiming it has never been in an accident, B can seek rescission when the truth is discovered.
However, rescission will not be granted when:
- The plaintiff has affirmed the contract after knowing the facts
- Third-party rights have intervened
- Restitution is impossible
Q25. What is cancellation of an instrument, and how is it different from rescission?
Cancellation of an instrument refers to the court-ordered nullification of a document that is void or voidable. Under Section 31 of the Specific Relief Act, any person who apprehends serious injury from an instrument that is fraudulent, void, or has become voidable may request the court to cancel it.
This typically applies to written documents such as deeds, contracts, or agreements that may affect the rights of a person if allowed to remain on record. The primary objective is to remove the document from legal existence and prevent it from being used to harm the claimant.
For example, if someone forges a sale deed in your name, you can approach the court to cancel that deed so that it has no legal effect.
Difference from rescission:
- Rescission deals with undoing the obligations under a contract due to certain legal grounds (like misrepresentation).
- Cancellation specifically involves a document (instrument) that is invalid or falsely created, and the focus is on removing its legal effect.
Both remedies are preventive in nature but apply in different contexts and circumstances.