LAW OF CONTRACTS 1 AND SPECIFIC RELIEF ACT
Summary notes of Law of Contracts 1
HISTORY:
The Indian Contracts Act was passed by the legislature, received its assent and was brought into force on the 1st of September, 1872. It was enacted with an intention to ensure reasonable fulfilment of agreements between parties. The English system acted as a base and formed an important part in the formation of the Indian Contracts Act. The English Contract Act brought in the concepts of writs, surety and other remedies. In the Indian system, Dharma was given utmost importance. Dharma was a set of rules and principles that were followed and anyone who violated Dharma would be punished. This acted as one of the sources of reference for the formulation of the act . Other sources can be seen taken from Manu Smriti which stated that any contract made by an insane person infant or intoxicated person is invalid and also Yajnavalkya Smriti which agreed with Manusmriti and preached the reasons for the disqualification of contracts. Gradually courts started interpreting contracts in different ways , without altering the basic legal characters. This led to the formation and enactment of the Contracts Act, in order to retain its essential ingredients. The Initial act had 266 sections and a vast applicability. But, currently the act is divided into part 1 that deals with general principles( section 1-75) and part 2 that deals with special kinds of contracts.
ACT 9 of 1872:
Section 2 of part 1 of the act deals with the definitions and basic understanding of terms in the act such as proposal, promise, consideration etc. Section 2(a) talks about proposal. When one party signifies to another his/her willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. There are certain essentials for the constitution of a valid proposal such as ;
1) There should be 2 or more parties involved, namely the promisor and the promisee. Promisor is the one who makes the offer and promise is the one who accepts the offer (as defined under section2(c)).
2) The offeror must express his willingness to do or abstain from doing an act. Mere willingness is not sufficient and only a desire to do something is not enough to constitute an offer.
3) The offer can be positive or negative i.e., an offer can be to do something ( positive) or can be to stop doing something( negative).
4) The offer has to create a legal relation between the parties. A social contract does not create a legal relation and hence does not constitute a valid offer. E.g. An invitation for breakfast does not constitute a valid offer.
5) The terms and conditions in the offer must not be vague and should be clear and understandable. Vague terminology leads to loopholes and hence makes the contract invalid.
6) The offer must be communicated to the offeree and there can be no acceptance without the offeree being aware of it.
7) The offer may be conditional and can be negotiated and can subject the offer to any terms necessary.
8) An offer cannot contain a negative condition which may lead to forcing anyone into entering into a contract.
9) An offer can be expressed or implied.
Section 2(b) deals with the domain of acceptance. Only when the person to whom a proposal was made, assents to it ; the proposal is said to be accepted. Once a proposal is accepted, it becomes a promise. In the popular case of Harvey v. Facey, Harvey asked Facey via telegram to sell his Bumper hall pen and asked him for the lowest price possible, for which Facey stated as 900 pounds, to which Harvey agreed and asked Facey to provide his title deed to the pen as well. The issue in this case was whether Facey’s response was an acceptance to the offer and whether a contract had been formed and was the contract binding. The privy council held that there was no contract between them because Facey merely stated the price and gave only information but did not expressly mention his assent/ intent to sell .
For an acceptance to be valid there are certain essentials that must be satisfied, such as; reasonable time to respond, communication, manner of communication, expressed or implied etc. Silence cannot be considered as acceptance. In the case of Felthouse v. Bindley, Paul and his nephew John had a discussion regarding the nephew’s horse . After the discussion the uncle sent a letter to the nephew stating that if his nephew doesn’t reply to his letter, he will consider his silence as acceptance. He did not reply and the uncle sold the horse. The issue is this case is whether silence can be treated as acceptance. It was held that there was no contract between the complainant and his nephew as there was no acceptance.
An offer can lapse under various circumstances. On the death of the offeror, on Insanity of the offeror, on not fulfilling the prescribed condition, revocation of the offer, rejection of the offer, expiry of time limit of response, change in law which makes the performance of the conditions of the contract partially or completely impossible, and subsequent impossibility.
Section 2(d) deals with consideration. When at the desire of the promisor, the promisee or any other person has done or has abstained from doing or does or abstains from doing or promises to do or abstain from doing such act, it is called a consideration. It is any act done by both parties as an exchange. The essential of a valid consideration are that it must be :
1) at the desire of the promisee
2) may move from the promisee or any other person
3) consideration can be past, present and future
4) must be lawful
5) may not be adequate to the promise
6) It should be real and definite and not illusionary
7) Must be something which promisee is not already bound to do. In Durgaprasad v. Baldeo, the court held that the consideration should move from the promisor to the promisee , otherwise there is no contractual obligation.
Section 2(e) states that an agreement should be the result of an offer/proposal along with acceptance. Every promise or set of promises forming consideration for each other is an agreement.
Section 2(g) states that an agreement that is not enforceable by law is void . For an agreement to be valid it should fulfill all essentials of a valid contract(section 10). Section 2(h) states that an agreement enforceable by law is a contract. It can be enforceable by law only on the introduction of a legal obligation upon the parties. Exception is a social contract. In Balfour v. Balfour, the term contract is clearly defined and helps in interpretation of the term legal contract.
Section 3 deals with the communication o f proposals, acceptance of proposals, revocation. It also deals with the modes of communication such as instantaneous (phone/direct etc.) and non-instantaneous(post/telegram etc.). In Entorres v Miles Far east, the court stated that the ‘postal rule’ would not apply to instantaneous modes of communication. Section 4 states that communication is complete only when it comes to the knowledge of the person to whom it is made to. The communication is complete as against the proposer when it comes to the knowledge of the person to whom it is made. Section 5 deals with revocation of proposals and acceptance. A proposal can be revoked at any time before communication of its acceptance is complete as against the proposer but not afterwards.
Essentials of a Valid Contract (Section 10)
All agreements are contracts if they are made by the free consent of the parties competent to a contract for a lawful object and are not hereby expressly declared to be void. The essentials are that 1)There has to be a proper offer and acceptance, 2)There must exist an intention to create a legal relationship, 3) the parties to the contract must be competent ( section 11), 4) there must be free consent among the parties(section 14) , 5) there has to exist a consideration ( section25), 6) there must exist a lawful object(section 23), 7) the agreements should not expressly declared void (section 26-28) , 8) the terms and conditions must be certain and definite(section 29), 9) possibility for their performance(section 56), 9) must fulfill all legal possibilities. In Collins v. Godefroa, X was called as witness to court for y and was promised a certain amount for doing so. Such a consideration is invalid because it was the duty of X to appear in court for Y. Theory Of Nudum Pactum states that naked agreements that do not fulfil the essentials are not legally enforceable. For instance, if A and B enter into a contract and A agrees to pay B an appropriate amount for their service and no agreement existed that stated the monetary amount should be decided by the defendants, such an agreement does not contain mutual consent /consideration and is not legally enforceable.
Section 11 of the act deals with the capacity of the parties to enter into a contract . Capacity means the competence of the parties to enter into a valid contract. Section 11 states that an individual must be of the age of majority ( under section 3 of the Indian Majority Act 1875), sound mind, and is not disqualified from contracting by any law to which he is subject to under the section. In the case of Mohori Bibee v. Dharmodas Ghose, the court laid down that a minor cannot be in the position of a promisor for his/her benefit, and the promise is notenforceable. But when the minor is the promisee the agreement is valid and enforceable (Raghavacharian v. Srinivas).
Section 13 defines consent. Free consent of all the parties to an agreement is one of the essential elements of a valid contract. Section 14 states that consent is said to be free when it is not caused by a0 coercion b) undue influence c) misrepresentation. Consent and acceptance are not the same. Consent is something more. Sometimes there may be acceptance but the parties have different intentions. SO there is no meeting of minds. Then there is no consent, which makes the contract void-ab-initio. A contract can be voidable if the consent to agreement is caused by coercion , undue influence , misrepresentation or fraud( section 19) . Fraud and misrepresentation are two different concepts. In fraud there is malicious intent and aggrieved party can claim damages; but in misrepresentation there is no malicious intention and the aggrieved party cannot claim damages. Mere silence of facts cannot constitute fraud ( Peek v. Gurney) .
Mistake is an erroneous belief about something. Mistake of law of the country is no excuse and is not justifiable, but mistake of foreign law and its ignorance can be excused . Under section 20, when both parties to an agreement are under a mistake as to matter of facts essential to the agreement there is a bilateral mistake, and the contract can be void.
Agreements opposed to public policy are agreements that are injurious to the public or against the interest of the society. For example, agreements of trading with national enemies, agreements that interfere in the course of justice, maintenance and champerty, agreements restricting enforcement of rights etc. Maintenance is an agreement whereby one party having no interest in suit, agrees to assist another to maintain the suit. Champerty is an agreement whereby one party agrees to assist another in recovering property and in turn agrees to share the proceedings of the action. Such agreements are void. As per section 2(g) of the Indian Contract act, a void agreement is an agreement which is not enforceable by law. For example , the object of the consideration of the agreement which is unlawful ( section 23) , agreement in restraint of trade( sec 27) , agreement in restraint of marriage( sec 26), uncertain agreements( sec 29), wagering agreements( sec 30) , agreement to do impossible acts ( sec 56) etc.
Wagering agreements are agreements that promise to give money or money’ s worth upon the determination or ascertainment of an uncertain event. According to section 30 , a wages is an agreement between two parties by which one party promises to pay money or money’s worth on the happening of some uncertain event in consideration of the other party’s promise to pay the event does not happen. For example, A and B enter into an agreement that A shall pay B 1000 rupees if it rains on Monday and B shall pay to A the same amount if it does not rain. It is a wagering agreement.
SUMMARY OF THE SPECIFIC RELIEF ACT , 1963
The Specific Relief Act, 1963 is an Act of the Parliament of India which gives solutions for people whose civil or contractual rights have been disregarded. It replaced a prior Act of 1877. The fundamental objectives of the Act have been vested in the very title of this rule for example Specific Relief, because of which we can have a basic agreement that the Specific Relief Act is a legitimate rule managing reliefs or recovery of the harms of the harmed individual. This Act was enacted in 1963 after the approach that when an individual has removed himself from the performance of a particular guarantee or a contract with respect to someone else, the other individual so distressed is qualified for a relief under Specific Relief Act, 1963. This Act is considered to be in one of the branches of the Indian Contracts Act, 1872. Section 2(a) talks about duties which are obligations forced on an individual by the law or the lawful body. Section 2(b) manages the settlement that implies conveyance of the movable or immovable property to their successive advantages when it is consented to be discarded. Section 2(c) manages “trust” which has a similar significance as characterized in section 3 of the Indian Trusts Act, 1882. Section 2(d) manages “trustee” which implies the individual holding trust in the property. The remedies granted by a court under the provisions of the Specific Relief Act are recovering of the right and possession of one’s property, specific performance of the contracts, rectification of instruments, rescission of contracts, cancellation of instruments, declaratory decrees, injunction. Section 3 deals with the recovering of the possession of property. Recovery is done for both movable and immovable property . Section 5 gives a brief account of the available remedies to a person disposed of his property. Section 7 deals with recovery of movable property and how one can recover it and gives certain essentials for the same. Section 10 deals with the specific performances that are available to the aggrieved party under respective conditions. Section 15 deals with the person against whom the contracts can be specifically enforced. The Specific Relief Act, 1963 has a bunch of reliefs given to the parties that are aggrieved through the procedures of contracts. They have various reliefs and enforcing rules which focus on giving enough compensation to all. This act’s primary point is that no individual will live with the harms and misfortunes and the individuals who have caused such a circumstance should be in a situation to re-establish all unlawful advantages received by them. This act focuses on giving justice to all and not discriminatory preferring a single party .
Author: Anil George,
Christ University