THE INDIAN CONTRACT ACT, 1872

The Indian Contracts Act 1872, creates rights and duties between the contracting parties. The parties are free to set the terms of contract.  However, such rights and duties created must not be unlawful and must not infringe the legal principles.  Promises which do not create legal obligation are not contracts.  This chapter is an abridged summary of the Indian Contract Act, 1872.

PRELIMINARY

CLAUSE 1

Short title

This act may be called the Indian Contract Act, 1872.

Extent, commencement

In extends to the whole of India (except the State of Jammu and Kashmir); and it shall first day of September; 1872.

Savings

Nothing herein contained shall affect the provisions of any Statute, Act or Regulation pealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

CLAUSE 2

Interpretation

In this act the following words and expressions are used in the following senses, unless pears from the context:

i.       When one person signifies to another his willingness to do or to abstain from doing to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

ii.      When the person to whom the proposal is made signifies his assent thereto, the accepted. A proposal, when accepted, becomes a promise.

iii.     The person making the proposal is called the “promisor”, and the person accepting the “promise”;

iv.     When, at the desire of the promisor, the promisees or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

v.      Every promise and every set of promises, forming the consideration for each other, is an agreement.

vi.     Promises which form the consideration or part of the consideration for each other are called reciprocal promises;

vii.    An agreement not enforceable by law is said to be void;

viii.   An agreement enforceable by law is a contract;

ix.     An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

CLAUSE 3

Communication Acceptance and Revocation of Proposals

The communication of proposals, the acceptance of proposals, and the revocation of, proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing; accepting or revoking, by which he intends to communicate such proposal acceptance or revocation, or which has the effect of communicating it.

CLAUSE 4

Communication when complete 

The Communication of a proposal is complete when it becomes to the knowledge of the to whom it is made.

The communication of an acceptance is complete

a.     as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor.

b.     as against the acceptor when it comes to the knowledge of the proposer. Also the communication of a revocation is complete.

c.      as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it;

d.     as against the person to whom it is made, when it comes to his knowledge.

CLAUSE 5

Revocation of Proposals and acceptance.

A proposal maybe revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

CLAUSE 6

Revocation how made

A Proposal is revoked

i.       by the communication of notice of revocation by the proposer to the other party;

ii.      by the lapse of the time prescribed in such proposal for its acceptance or if no time is so prescribed, by the by the lapse of a reasonable time, without communication of the acceptance,

iii.     by the failure of the acceptor to fulfil a condition precedent to acceptance or

iv.     by the death or insanity of the proposer, if the fact’ of his death or insanity comes to the knowledge of the acceptor before acceptance.

CLAUSE 7

Acceptance must be absolute

In order to convert a proposal into a promise the acceptance must

a.     be absolute and unqualified.

b.     Be expressed in some usual and reasonable manner unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner the proposer may, within a reasonable time after the acceptance is communicated to him insist that his proposal shall be accepted in the prescribed manner and not otherwise; but, if he fails to do so he accepts the acceptance.

CLAUSE 8

Acceptance by performing conditions, or receiving consideration

Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise ‘which may be offered with a proposal is an acceptance of the proposal.

CLAUSE 9

Promises, express and implied 

In so far as the proposal or acceptance of any promise is made in words the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words the , promise is said to be implied.

CLAUSE 10

CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

What agreements are contracts 

All agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in (India) and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

CLAUSE 11

Who are competent to contract

Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

CLAUSE 12

What is a sound mind for the purposes of contracting

A person is said to be of sound mind for the purpose of making a contract if at the time it, he is capable of understanding it and of forming a rational judgement ‘as to its interests.

A Person, who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.

A person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

CLAUSE 13

 “Consent” defined

Two or more persons are said to consent when they agree upon the same thing in the same sense.

CLAUSE 14

“Free consent’ defined 

Consent is said to be free when it is not caused by -

a.     Coercion, as defined in section 15, or

b.     Undue influence, as defined in section 16, or

c.      Fraud, as defined in section 17, or.

d.     Misrepresentation, as defined in section 18, or

e.     Mistake, subject to the provisions of sections 20, 21 and 22.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

CLAUSE 15

 “Coercion” defined ‘

Coercion” is the committing, or threating to commit, any act forbidden by the Indian penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property to the rejudice of any person whatever, with the intention of causing any person to enter into an agreement.

CLAUSE 16

 “Undue influence” defined

i.       A contract is said to be induced by “undue influence” where the relations assisting between the parties are such that one of the parties is in a position to dominate the other and uses that position to obtain an unfair advantage over the other.

ii.      In particular and without prejudice to the generally of the foregoing Principle, on his deemed a position to dominate the will of another

a.   Where he holds a real or apparent authority over the other or where, he fiduciary relation to the other; or

b.   Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

iii.  Where a person who is in a Position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or, on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.

CLAUSE 17

“Fraud” defined

“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party thereto or his agent, or to induce him to enter into the contract. –

i.       the suggestion, as a fact, of that which is not true, by one who does not believe it to

ii.      the active concealment of a fact by one having knowledge or belief of the fact;

iii.     a promise made without any intention of performing it;

iv.     any other act fitted to deceive;

v.      any such act or omission as the law specially declares to be fraudulent.

CLAUSE 18

“Misrepresentation” defined

“Misrepresentation” means and includes

a.     The positive assertion, in a manner not warranted by the Information of the person making it, of that which is not true, though he believes it to be true;

b.     Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him; by misleading another to his prejudice, or to the prejudice of anyone claiming under him;

c.      Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing, which is the subject of the agreement.

CLAUSE 19

Voidability of agreements without free consent

When consent to an agreement is caused by Coercion, fraud or misrepresentation, the agreement is a contract Voidable at the option of the “party whose consent was so caused-

         A party to contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, Insist that the contract shall be performed, and that he shall be put in the position in which he would have been If the representations made had been true-

         Exception: If such consent was caused by misrepresentation or by silence, fraudulent with in the meaning of section 17, the contract, nevertheless, is not voidable, If the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

         Explanation: A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a Contract voidable. 

CLAUSE 19A

Power to set aside contract induced by undue influence

When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

When such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the court may seem just.

CLAUSE 20

Agreements void where both parties are under mistake as to matter of fact

Where both the parties to an agreement are under mistake to a matter of fact essential to the agreement, the agreement is void.

CLAUSE 21

Effect of mistakes as to Law

A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact.

CLAUSE 22

Contract caused by mistake of one party as to matter of fact

A contract is not voidable merely because it was caused by one of the parties to it being under mistake as to a matter of fact.

CLAUSE 23

What consideration and objects are lawful, and what not

The consideration or object of an agreement is lawful, unless- forbidden by law; or

         is such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or

         involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed .to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful is void.

Void Agreements

CLAUSE 24

Agreements void, if considerations and objects unlawful in part

If any part of a single consideration for one or more objects or anyone or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

CLAUSE 25

Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law. 

An agreement made without consideration is void, unless

a.     it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or illness.

b.     it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless

c.      it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract.

Acknowledgment of liability

Where a party to a contract has acknowledged in writing for the payment of certain amount of in consideration of services rendered, it amounts 10 a promise In writing. He is liable to pay the said amount notwithstanding the provisions of s. 18 (1) of the Limitation Act, 1963.

CLAUSE 26

Agreement in restraint of marriage, void

Every agreement in restraint of the marriage of any person other than a minor is void.

CLAUSE 27

Agreement in restraint of trade, void

Every agreement by which anyone is restrained from exercising a lawful profession trade or business of any kind is to that extent void.

CLAUSE 28

Agreements in restraint of Legal proceedings, void

Every agreement

a.     by which any party there to is restricted absolutely from enforcing his rights under or in respect of any contract by the usual legal proceedings in the ordinary tribunals or which limits the time within which he may thus enforce his rights; or

b.     which extinguishes the rights of any party thereto or discharges any party thereto from any liability under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights is void to that extent.

Exception 1: Saving of contract to refer to arbitration dispute that may arise - This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall e referred ,to arbitration. and that only the amount awarded in such arbitration shall be recoverable In respect of the dispute so referred.

Exception 2: Saving of contract to refer questions that have already arisen - Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question them which has already arise or affect any provisions of any law in force for the time being as to references to arbitration,

Restraint of legal proceedings: Object and Nature

Notwithstanding anything contained in any agreement between the partied only that court with in whose territorial limits the cause of action arises has the jurisdiction and power to entertain a claims In dispute, as by section 20 of the Code of Civil Procedure, 1908, Parties cannot confer by agreement jurisdiction on any court not possessed by it under the Code. And by Section 28 of contract Act, 1872, any agreement between the parties curtailing the normal statutory period of limitation is void. These provisions are to be constructed strictly.

CLAUSE 29

Agreements void for uncertainly

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

CLAUSE 30

Agreements by way of wager, void

Agreement by way of wager are void and no suit shall be brought for recovering alleged to be won any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.

Exception in favour of certain prizes for horse-racing

Section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or one of the value or amount of five hundred rupees or upwards, to be awarded to the winners of any horse-race.

Section 294A of the Indian Penal Code not affected

Nothing in this section shall be deemed to legalize any transaction connected with horse - which the provision of section 294A of the Indian penal code (45 of 1860) apply.

CLAUSE 31

CONTINGENT CONTRACTS

“Contingent Contract” defined

A “contingent contract” is a contract to do or not to do something, if some event, to such contract, does or does not happen.

CLAUSE 32

Enforcement of contracts contingent on an event happening.

Contingent contracts to do or not to do anything in a uncertain future event happens, cannot be enforced by law unless and until that event has happened.

If the event becomes impossible, such contracts become avoid.

CLAUSE 33

Enforcement of contracts contingent on an event not happening 

Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.

A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The enforced when the ship sinks.

CLAUSE 34

When event on which contract is contingent to be deemed impossible, if it is the conduct of a living person

If the future event on which a contract is contingents the way in which a person will act fled time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or under further contingencies.

CLAUSE 35

When contracts become void, which are contingent on happening of specified event fixed time

Contingent contracts to do or not to do anything if a specified uncertain event happens within fixed time, become void if, at the expiration of the time fixed, such event has not happened or if, before the time fixed, such event becomes impossible.

When contracts may be enforced, which are contingents on specified event not happening within fixed time.

Contingent contracts to do or not to do anything, if a specified uncertain event does not happen within fixed time, may be enforced by law when the time fixed has expired and such event has not happened, or, before the time fixed has expired, if it becomes certain that such event has happen.

CLAUSE 36

Agreements contingent on impossible event void

Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.

CLAUSE 37

PERFORMANCE OF CONTRACTS

Obligation of parties to contract

The parties to a contract must either perform or offer to perform, their respective promises.  Unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.

Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.

CLAUSE 38

Effect of refusal to accept offer of performance

Where a promisor has made an offer of performance to the promisee, and the offer has been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.

Every such offer must fulfil the following conditions:

i.       It must be unconditional;

ii.      It must be made at a proper; time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do;

iii.     If the offer is an offer to deliver anything to the promisee, the promisee must have reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.

An offer to one of several joint promisees has the same legal consequences as an offer to of them.

CLAUSE 39

Effect of refusal of party to perform promise wholly

When a party to a contract has refused to perform,  or disable himself from performing his promise in its entirety, the promisee may put an end to the contract unless he has signified, words or conduct, his acquiescence in its continuance. By whom contracts must be performed

CLAUSE 40

Person by whom promise is to be performed.

If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor him, the promisor must perform such promise.  In other cases, the promisor or his representatives may employ a competent person to perform it.

CLAUSE 41

Effect of accepting performance from third person

When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.

CLAUSE 42

Devolution of joint liabilities

When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfil the promise.

CLAUSE 43

Any one of joint promisors may be compelled to perform

When tow or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary compel any (one or more) of such joint promisors to perform the whole of the promise.

Each promisor may compel contribution

Each of two or more joint promisors may compel every other joint promisors to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

Sharing of loss by default in such contribution

If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.

CLAUSE 44

Effect of release of one joint promisor

Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors neither does it free the joint promisors so released from responsibility to the other joint promisor or joint promisors.

CLAUSE 45

Devolution of joint rights

When a person has made a promise to two or more persons jointly, then unless a contrary intention appears from the contract, the right to claim performance rests, as between him and then, with them during their joint lives and, after the death of any of them, with the representative of such deceased person jointly with the survivor or survivors, and after the death of the last, survivor, with the representatives of all jointly2.

CLAUSE 46

Time for performance of promise, where no application is to be made and no time is specified.

Where, by the contract, a promisor is to perform his promise without application by the promise, and no time for performance is specified, the engagement must be performed within a reasonable time.

Explanation – The question “what is a reasonable time” is, in each particular case, a question of fact.

CLAUSE 47

Time and place for performance of promise, where time is specified and no application to be made

When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee, the promisor may perfom it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed

CLAUSE 48

Application for performance on certain day to be at proper time and place

When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business.

CLAUSE 49

Place for performance of promise, where no application to be made and no place fixed for performance.

When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place.

CLAUSE 50

Performance in manner of at time prescribed or sanctioned by promisee.

The performance of any promise may be made in any manner, or at any time, which the promisee prescribes, or sanctions.

PERFORMANCE OF RECIPROCAL PROMISES

CLAUSE 51

Promisor not bound to perform, unless reciprocal promisee ready and willing to perform

When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

CLAUSE 52

Order of performance of reciprocal promises

Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and where the order is not expressly fixed by the contract they shall be performed In that order which the nature of the transaction requires.

CLAUSE 53

Liability of party preventing event on which contract is to take effect

When a contract contains reciprocal promises, and one party to the contract prevents the other from performing this promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.

CLAUSE 54

Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises

When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract.

CLAUSE 55

Effect of failure to perform at fixed time, in contract in which time is essential

When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before a specified time, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.

Effect or such failure when time is not essential

If it was not the intention of the parties that time should be of the essence of the contract, the contract, does not become voidable by the failure to do such thing on or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than that agreed upon

If, in case of a contract voidable on account of the promisors failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to so.

CLAUSE 56

Agreement to do impossible act

An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful

A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful

Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

CLAUSE 57

Reciprocal promise to do things legal; and also other things illegal

Where persons reciprocally promise, firstly to do certain things which are legal, and secondly, under specified circumstances, to do certain other things, which are illegal, the first set of promises is a contract, but the second is a void agreement.

CLAUSE 58

Alternative promise, one branch being illegal

In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

CLAUSE 59

Application of payment where debt to be discharged is indicated.

Where debtor owing several distinct debts to one person, makes a payment to him, either with express intimation or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

CLAUSE 60

Application of payment where debt to be discharged is not indicated

Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor, may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits. 

Payment of debt and right to appropriate

Where the debtor omits to indicate as to which of several debts, a particular payment is to be applied and there are no circumstances from which such indication can be inferred, the creditor has the right, at his option, to apply the payment to any lawful debt due by the debtor to the creditor, notwithstanding that the specific claim may have become barred by limitation. However, the said debt must not be an illegal debt. The creditor can exercise the right of appropriation at any time, even while filing a suit against the debtor for the balance due.

CLAUSE 61

Application payment where neither party appropriates

Where neither party makes any appropriation, the payment shall be applied in discharge the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits.  If the debts are of equal standing, the payment shall be applied discharge of each proportionally.

CLAUSE 62

Effect of novation, rescission, and alteration of contract

If the parties to a contract agree to substitute a new contract for it, or to rescind or alter the original contract need not be performed. 

.

CLAUSE 63

Promise may dispense with or remit performance of promise

Every promisee may dispense with or remit, wholly or in part the promise made to him, or may extend the time for such performance or may accept instead of it any satisfaction, which he thinks fit.

Termination or rescission of a contract

A contract may be rescinded or terminated by the parties to the contract in the following manner i.e. (1) Release under seat (2) Recession by the consent of the parties; (3) Accord and satisfaction; (4) repudiation or non-performance by the other party; and (5) Frustration or impossibility of performance

CLAUSE 64

Consequences of rescission of voidable contract

When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit there under from another party to such Contract, restore such benefit so far as may be, to the person from whom it was received.

CLAUSE 65

Obligation of person who has received advantage under void agreement, or contract that becomes void

When a agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract, is bound restore it, or to make compensation for it, to the person from whom he received it.

CLAUSE 66

Mode of communication or revoking rescission of voidable contract

The rescission of a voidable contract may be communicated or revoked in the same manner and subject to the same rules, as apply to the communication or revocation of a proposal.

CLAUSE 67

Effect neglect of promise to afford promisor reasonable facilities for performance

If any promisee neglects or refuses to afford the promisor reasonable facilities for the his promise, the promisor is excused by such neglect or refusal as to any caused thereby.

CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACTS

CLAUSE 68

Claim for necessaries supplied to person incapable of contracting, or on his account

If a person incapable of entering into a contract, or anyone whom he is legally bound support is supplied by another person with necessaries suited to his condition in life, the who has furnished such supplies is entitled to be reimbursed from the property of such person.

CLAUSE 69

Reimbursement of person paying money due by another, in payment of which he is interested

A person who is interested in the payment of which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

CLAUSE 70

Obligation of person enjoying benefit of not-gratuitous act.

Where a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously and such other person enjoys the benefit thereof the latter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered.

CLAUSE 71

Responsibility of finder of goods

A Person who finds goods belonging to another, and takes them into his custody is subject to the same responsibility as a bailee.

CLAUSE 72

Liability of person to whom money is paid, or thing delivered, by mistake or under coercion

A person to whom money’ has been paid or anything delivered, by mistake or under coercion, must repay or return it.

THE CONSEQUENCES OF BREACH OF CONTRACT

CLAUSE 73

Compensation for loss or damage caused by breach of contract

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him hereby, which naturally arose in the usual course of things from such breach, or which the parties they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss of damage stained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract.

 When an obligation resembling those created by contract .has been incurred and has not been discharged, any person injured by the failure discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it, and had broken his contract.

EXERCISES

1.     A contract with B to make and deliver to B, by a fixed day, for a specified price, a certain piece of machinery. A does not deliver the piece of machinery at the time specified and in consequence of this B is obliged to procure another at a higher price than that which he was to have paid to A, and is prevented from performing a contract which B had made with a third person at the time of his contract with A but which had not been then communicated to A, and is compelled to make compensation for breach of that contract. How much A must pay to B, by way of compensation?

2.      A is builder, contracts to erect and finish a house by the first of January. In order that B may give possession of it at that time to C, to whom B has contracted to let it. A is informed of the contract between B and C. A builds the house so badly that before the first of January it falls down and has to be rebuilt by B, who in consequence loses the rent which he was to have received from C, and is obliged to make compensation to C for the breach of his contract. How much compensation A must make to B?

CLAUSE 74

Compensation for breach of contract where penalty stipulated for

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

CLAUSE 75

Party right, fully rescinding contract, entitled to compensation

A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract.

A, a singer, contracts with B, the manager of a theatre for two nights in every week during the next two months, and B engages to pay her 100 rupees for each night’s performance.  On the sixth night A willfully absents herself from the theatre, and B, in consequence, rescinds the contracts. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.