DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

SUBJECT: HISTORY

PROJECT TITLE:

“INDIAN CONTRACTS ACT, 1872 AND CHANGES”

PROF. DR. VISWACHANDRANATH MADASU

SUBMITTED BY: M. BHUVANESWARI RAM

ROLL NO: 2018LLB124
SEMESTER: II

1
 ACKNOWLEDGEMENT
I would sincerely like to put forward my heartfelt appreciation to our respected HISTORY
professor DR. VISWACHANDRANATH MADASU for giving me a golden opportunity in
doing the project about “INDIAN CONTRACTS ACT-1872 AND CHANGES”. I have
tried my level best in doing the project to give a clear description about the topic. I would
also like to thank for the eminent support and suggestions.

2
 TABLE OF CONTENTS:

 INTRODUCTION……………………………………………………………..
 GENESIS OF INDIAN CONTRACT ACT 1872……………………………
 ENGLLISH LAW, COMMON LAW, INDIAN LAW
 HISTORICAL BACKGROUND…………………………………………….
 DIVISION OF INDIAN CONTRACT ACT………………………………….
 DEFNITION OF CONTRACT LAW ……………………………………….
 TYPES OF CONTRACTS………………………………………………………
 CLASSIFICATION ACCORDING TO VALIDITY OR ENFORCEABILITY…
 VOIDABLE CONTRACT
 VOID CONTRACT
 AN UNENFORCEABLE CONTRACT
 INTERPRETATION OF INDIAN CONTRACT ACT 1872…………………..
 SECTION 10 OF INDIAN CONTRACT ACT 1872……………………………..
 AGREEMENTS …………………………………………………………………….
 SECTION 28 ANALYSIS ………………………………………………………….
 CONSENT ………………………………………………………………………….
 COMPETENCY OF CONTRACT ………………………………………………
 LOOPHOLES OF INDIAN CONTRACT ACT ……………………………….
 SUGGESTIONS……………………………………………………………………
 CONCLUSION………………………………………………………………………

3
 INTRODUCTION:

The History of the Law highlights the very origin of economic processes and, in
this sense, the importance of contracting to carry out business in everyday life.
The prevailing system in ancient times was barter and was based on the mutual
principle of giving and receiving. This was limited to commodities since there
was no means of exchange as seen today in the form of money and this system
goes back in time to the civilization of the Indus Valley (the oldest human
civilization). The system still finds relevance in the contemporary world, where
it can be found in commercial and economically underdeveloped areas.
However, the relevance of such a system in modern times is questioned due to
the complexity of the nature of economic systems, as well as the increase of
supply and demand systems due to the change in the desires and needs of the
Humans. In addition, money had evolved as a means of exchange, so that now
the value of each product could be quantified. Thus, in an era of such large
economic transactions, one finds the existence of contractual laws and, with it,
their relevance.

Contract Law of India codifies how we enter into a contract, execute a contract
and implement the violations of a contract and the breaches of a contract. In
some cases the contractual capacity is restricted, otherwise, it is the exclusive
authority of the recruiter. Property, mobile gods and certain performance,
property transfer, property law and specific relief law. Some of these actions
were originally part of the Contracts Act that came into effect in 1872, but
subsequently codified as separate laws. In addition, the law is not repetitive.
Therefore, the Act was passed before September 1, 1872, but this would be
done after the approval of this Act, which would not be affected by the Act.
Contracting is covered by the Indian Contracts Act and is an important area of
law of deep origins in the history of civilization, and is the subject of this
project of course of Legal History.

GENESIS OF INDIAN CONTRACT LAW:

It is noteworthy to mention here that the ancient concept of contractual

existence existed, but not in the present form. Transactional sale, mortgage,
pledge, bailment and debt were identified in previous system contracts. The
whole business life in modern society revolves around contracts. However, in

4
the predefined formula there is no right in the war. In this section, we will
investigate Contract Law in both English and Indian laws in both jurisdictions.

ENGLISH LAW:
The history of English law is not its own, it belongs to all European countries.
The history of English law begins from the Babylonian era and ends until
recently. During the Roman Empire, the Act was in twelve tables. When
Christianity converted to church i.e Papal when Christianity became the official
religion law, that law is called religious law. Coming into Contract Law, the
history of the English Contract Act starts at Henry II. First we must take into
consideration the works of the Hammurabi Code, the Roman law, the Anglo-
Swanson Act and come later to common law.
COMMON LAW:
As it was explicitly stated in ancient times, the English law's agreement relied
on Roman law. The administration of Henry III was not radically altered.
Glanville and Bracken also did not act as a separate flow. Contract law gave
both parties less space in their workplace. The influence of the English law of
Roman law was ruined on this occasion. Compensation under common law
relies on common law acts or various types of work. Consequently, the
Agreement of the Treaty includes five types of writs, accounts, Surety, debt,
agreements, and Assumpsit.
INDIAN LAW:
First we start with the old legal system. Based on the fate of the ancient Indian
community, the entire society is bound by "Dharma". The definition of Dharma
is said to have righteousness, fate, justice and truth. The law of Indian law
compromised the system of religious and citizenship. It has played a vital role in
the practice of religion in Indian society. Almost all sages in ancient times gave
the Vedas a prominent place. One can say that the Vedas are the origins of the
Indian judicial system. Manu Smriti or Manus Code is one of India's most
prominent signals. In ancient times, the whole community was well established
and people were happy with their lives and thought about the prosperity of the
entire community. If any men or women fail in his / her work show he is
punished. The fear of punishment forced their people to maintain their virtues.
For example, in the ancient society, if artists or artisans make any unreasonable
delay in repetitive stories, they are less than one-fourth of the appropriate
salaries, and the wages are penalized both. The above society continued until
the invasion of Islamic rulers. During the rule of Sultan and Mughal rulers

5
began using the Sharia laws for the administration of justice. But there is a
continuation in the villages above the system.
During the modern era in the British Army, the legal system was found to be in
its chaos. For this they began to introduce general legal theories in judicial
administration. They created laws based on common law theories. Following
independence India followed the system of the founding of the British.

For this purpose, we are concerned about the contract law, and the above
discussion has been discussed for the understanding of the system. Manu Smriti
and many other texts contain references to the Act of Convention. The oldest
form of the contract does not exist by the time of ancient times. Contracts law
existed through various daggers; Selling those loans, deposits and guarantees,
ownership, sales and without gifts.
HISTORY OF INDIAN CONTRACT ACT 1872:1
Before the implementation of the Indian Contract Act in 1872, English law was
applied to the East India Company through the Charter issued by King George I
in Madras, Bombay and Calcutta in 1726. In 1781, the British Government
adopted a settlement law, which deals with agreements dealing with parties in
the case of Muhammad and Hindus, in their heritage and heritage matters, and
their respective laws. The case is the Muhammad or Hindu, the laws and uses of
the defendant are considered. This rule was applied in presidential towns. In the
areas outside the Presidency, judgment, equity and good conscience judged the
decision. The Indian Contract Act also commenced with the Sales of Goods,
Indemnity and Guarantee, Law of Bailment, Agency and Partnership in the
beginning of 1872. However, in 1930, a special law was passed on the sale of
goods. The Partnership Act of India was passed in 1932.
One of Modern Contract was largely influenced by Greek and Roman Law. One
of the earliest references to the agreement is specified in the laws created by
Plato. Although his work was very little about launching an agreement, we have
specifically stated that we can cancel deals on what we see today.
The history of contracts can be traced through the course of the contract:

 English Contracts
 European Contracts
 Contracts as seen in the 20th Century
 Changing face of Contracts in the Globalization era.

1
https://www.lawnotes.in

6
DIVISION OF THE INDIAN CONTRACT ACT:

In the past, Indian contract Act had a wide scope and included:

1. General principles of contract-Section 1 to 75.

2. Sale of Goods Act-Sections 76-123
3. Contracts of indemnity and Guarantee- sections 124-147
4. Contracts of bailment and pledge-sections 182-238
5. Partnership Act- section 239-266

Present contract Act:

1. Basic principles of contract (sections 1 to 75)

2. Indemnity and Guarantee (sections 124 to 147)
3. Bailment (sections 148-181)
4. Agency (sections 182-238)

DEFNITION OF CONTRACT LAW:

An agreement enforceable by law is a contract. Therefore in a contract there

must be (1) an agreement and (2) the agreement must be enforceable by law. An
agreement comes into existence wherever one or more persons promise to one
or others, to do or not to do something. “Every promise and every set of
promises, forming the consideration for each other, is an agreement. Some
agreements cannot be enforced thought he courts of law. e.g., An agreement to
play cards or go to cinema. An agreement which can be enforced through the
courts of law. The law of contract is most important part of commercial law
because every commercial transaction starts from an agreement between two or
more persons. According to Salmond a contract is an “agreement creating and
defining obligations between the parties.” According to Sir William Anson “A
contract is an agreement enforceable at law made between two or more persons,
by which rights are acquired by one or more to acts or forbearances on the part
of the other or others. The Indian contract act 1872 (Act IX of 1872) lays down
certain general rules regarding contracts. The act is not exhaustive.

TYPES OF CONTRACTS:

Contracts may be classified in terms of their (1) validity or enforceability, (2)

mode of formation, or (3) performance.

7
CLASSIFICATION ACCORDING TO VALIDITY OR ENFORCEABILITY:

Contracts may be classified according to their validity as (i) Voidable (ii) void
(iii) valid, (iv) illegal or (v) unenforceable:- A contract to constitute a valid
contract must have all the essential elements discussed earlier. If one or more of
these elements is/are missing, the contract is voidable, void, illegal or
Unenforceable.

(a) VOIDABLE CONTRACT AS PER SECTION 2:

A voidable contract is one which may be repudiated at the will of one of the
parties, but until it is so repudiated it remains valid and binding. It is affected by
a flaw (e.g., simple misrepresentation, fraud, coercion, undue influence), and
the presence of anyone of these defects enables the party aggrieved to take steps
to repudiate the contract. It shows that the consent of the party who has the
discretion to repudiate it was not free. An agreement which is not enforceable
by either of the parties to it is void.2 Such an agreement is without any legal
effect ab initio(from the very beginning). Under the law, an agreement with a
minor is void.3

(b) VOID CONTRACT: A contract which ceases to be enforceable by law

becomes void when it ceases to be enforceable.4 In fact in that case there is
no contract at all. It may be called a void agreement. However, a contract
originally valid may become void later. An illegal agreement is one the
consideration or object of which (1) is forbidden by law; or (2) defeats the
provisions of any law.; or (3) is fraudulent ; or (4) involves or implies injury
to the person or property of another; or (5) the court regards it as immoral, or
opposed to public policy.
(c) An Unenforceable contract: An unenforceable contract is neither void nor
voidable, but it cannot be enforced in the court because it lacks some item of
evidence such as writing, registration or stamping. An agreement which is
required to be stamped will be unenforceable if the same is not stamped at all
or is under-stamped. In such a case, if the stamp is required merely for
revenue purposes, as in the case of a receipt for payment of cash, the
required stamp may be affixed on payment of penalty and the defect is then
cured and the contract becomes enforceable. If, however, the technical defect

2
Section 2(i), Indian contract Act, 1872.
3
Section 11, Indian contract Act, 1872.
4
Section 2(i), Indian contract act, 1872.

8
 cannot be cured the contract remains unenforceable, e.g., in the case of an
unstamped bill of exchange or promissory note.
INTERPRETATION OF INDIAN CONTRACT ACT, 1872:5

1. When one person signifies to another his willingness to do or to 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;
2. When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. A proposal, when accepted, becomes a
promise;
3. The person making the proposal is called the "promisor", and the person
accepting the proposal is called the "promisee";
4. When, at the desire of the promisor, the promisee 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;
5. Every promise and every set of promises, forming the consideration for each
other, is an agreement;
6. Promises, which form the consideration or part, of the consideration for each
other are called reciprocal promises;
7. An agreement not enforceable by law is said to be void;
8. An agreement enforceable by law is a contract;
9. 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;
10. A contract which ceases to be enforceable by law becomes void when it
ceases to be enforceable.
Essential Elements of a Contract as defined in Section 10 of the Indian Contract
Act 1872.
1. Agreement - Offer and Acceptance
2. Legal purpose
3. Lawful Consideration
4. Capacity to contract
5. Consent to contract
6. Lawful object

5
www.advocatekhoj.com-interpretationclause

9
 7. Certainty
8. Possibility of Performance
9. Not expressly declared void
10. Legal formalities like Writing, Registration etc.
SECTION 10 OF INDIAN CONTRACT ACT 1872:

INTRODUCTION:

Section 10 of Indian contract act which came into force on the first day of
September, 1872 is what agreements are contracts which says that: what
agreements are contracts which says that “All agreements are contracts if they
are made by the free consent of the parties competent to contract, for a lawful
consideration of 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”. 6

RELATION BETWEEN AGREEMENTS AND CONTRACT:

“The most common way of making of a contract is through an agreement. The
two parties may agree to something through mutual negotiations. When one
party makes an offer and the other party accepts the same, there arises an
agreement enforceable by law”. 7

Section 2(h) defines a contract as “agreement enforceable by law” thus to make

a contract there must be:
6. An agreement
7. The agreement shall be enforceable by law.
8. All agreements are not enforceable by law and therefore, all
agreements are not contracts.
It has been noted above that an agreement enforceable by law is a contract. All
such agreements which satisfy the condition mentioned in section 10 of the act
1872.

6
From the act, http://www.lawnotes.in/Section 10 of Indian Contract Act, 1872 accessed on 05-04-2019 at
2:45pm
7
Dr. R.K.Bangia,1(2012)

10
Agreement is a wider term than contract where as all contracts are agreements.
All agreements are not contracts. All contracts are agreements, but all
Agreements are not contracts.
The various agreements may be classified into two categories:
1. AGREEMENT NOT ENFORCEABLE BY LAW
Any essentials of a valid contract is not available.
2. AGREEMENT ENFORCEABLE BY LAW:
All essentials of a valid contract are available. All agreements are not
enforceable are not enforceable by law and therefore, all agreements are not
contracts. Some agreements may be enforceable by law and others not. For
example to sell radio set may be a contract, but an agreement to go to see a
movie may be a mere agreement not enforceable by law. Thus, all agreements
are not contracts, only those agreements which satisfy the essentials mentioned
in section 10 of Indian contracts Act, 1872 become contracts. However all
contracts are agreements.

CASE: “UNION OF INDIA V. MADDALA THATHAIAH”8

FACT: The dominion of the India as the owner of a railway invited tenders for
the supply of 14,000 maunds of cane jiggery to the railway grain shops.
Although the dates by which the supplies were to be made had been mentioned,
yet orders for the supply had to be made from time to time. One of the
conditions stipulated in tender form was that the “Administration reserves the
right to cancel the contract at any stage during the tenure of the contract without
calling up the outstanding on the unexpired on the unexpired portion of the
contract.”
JUDGEMENT:
It was held that the stipulation whereby the appellant could cancel the
agreement(revoke the offers in the strict sense) as regards the supplier of
jiggery about which no formal order had been placed was a valid one, and the
appellants were bound only for the supply of such quantities for which specific
orders had already been placed.
WHAT AGREEMENTS ARE CONTRACTS:
If entering into a contract prescribed terms and conditions is a must under the
statue then that contract becomes a statutory contract. If contract incorporates
certain terms and conditions in it, which are statutory then, the said contract to
that extent is statutory;

8
Dr. R.K. Bangia, 18 (2012)

11
 Thermal power Ltd. V. State of Madhya Pradesh, AIR 2000 SC 1005.
In order to constitute a contract, both the parties must consent to the agreement;
Steel Authority of India Ltd. v. Salem Stainless Steel Suppliers, AIR 1995 SC
1415.
A person who by reason of infancy is incompetent to contract cannot make a
contract within the meaning of the Act. The question whether a contract is void
or voidable presupposes the existence of a contract within the meaning of the
Act, and cannot arise in the case of an infant; Mohoribbi v. Dharmodas Ghose,
(1903)30 IA 114.

WHAT AGREEMENTS ARE NOT CONTRACT:

Agreement subject to ratification by others who are not parties to it is not a
conclusive contract: M.V. Shankar Bhat v. Claude Pinto (Deseased) BY LRs,
(2003) 4 SCC 86.

AGREEMENT:
According to section 2(e) of Indian contract act the term agreement is defined
as “every promise and every set of promises, forming the consideration for
each other, is an agreement. An agreement consists of reciprocal promises
between the two parties. In an agreement there is a promise from both sides.
For example: A promise to deliver his watch to B and in return B promises to
pay a sum of Rs. 2, 000 to A. There is said to be an agreement between A and
B. Thus we can say that when there is a proposal from one side and the
acceptance of the proposal by the other side, it results in promise. This promise
from the two parties to one another is known as an agreement. “As already
mentioned, to constitute a contract there must be an agreement. An agreement
is composed of two elements-Offer and acceptance. The party making the offer
is known as the offeror, the party to whom the offer is made is known as
offeree. Thus, there are essentially to be two parties to an agreement. They both
must be thinking of the same thing in the same sense. In other words, there
must be consensus-ad-idem.”9

From the point of view o the legality, there are different types of agreements.

9
Agreement, http://www. Newagepublishers.com/samplechapter/001048.pdf,last accessed on 05-04-2018 at
4:00 pm

12
 1. CONTRACTS
According to section 2(h) of Indian contract act 1872, contract is an agreement
which is enforceable by law. It is an agreement or set of promises giving rise to
obligations which can be enforced or are recognized by law. It has been noted
above that in order that an agreement becomes a contract, it has to satisfy all the
essentials of a valid contract as mentioned in section 10.
2. VOID AGREEMENTS:
According to section 2(g), of the act 1872, an agreement not enforceable by
law is said to be void. For instance, an agreement by a minor has held to void.
Section 24-30 of the Indian Contract Act 1872; make a specific mention of
agreement in restraint of marriage, and an agreement in restraint of trade.
SECTION 24- AGREEMENTS VOID IF CONSIDERATIONS AND
OBJECTS ARE UNLAWFUL IN THEIR PART.
If any part of a single consideration for one or more objects, or any one or any
part of any one of several consideration of a single object, is unlawful, the
agreement is void.
“Non –compoundable offences, which are a matter of public concern, cannot
be subject matter of private bargains and administration of criminal justice
should not be allowed to pass from the hands of judges to private individuals.
Where the offence is of public nature, no agreement can be valid that is
founded on the consideration of stifling of a prosecution for it.
The payment of 470 million US dollars by the Union Carbide Corporation to
Union of India was held not to be stifling of prosecution and the payment not
unlawful.”10
SECTION 25-AGREEMENT WITHOUT CONSIDERATION, VOID
UNLESS IT IS WRITING AND REGISTERED OR IS A PROMISE TO
COMPENSATE FOR SOMETHING DONE OR IS A PROMISE TO
PAY DEBT BARRED BY LIMITATION LAW
An agreement made without consideration is void, unless-
(1) 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 unless.

10
Section 24, https://www.vakilnot.com/bareacts/indiancontractacg/indiancontractact.html, last accessed on 05-
04-2019 at 4:45 pm

13
 (2) 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.
(3) 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 debt of which the creditor might have enforced
payment but for the law for the limitations of suits. In any of these cases,
such an agreement is a contract.
SECTION 26-AGREEMENT IN RESTRAINT OF MARRIAGE IS VOID:
Every agreement in restraint of the marriage of any person, other than a minor,
is void. An agreement between two co-widows that if any of them remarried,
she should forfeit her right to her share in the deceased husband’s property is
not in restraint of marriage.
SECTION 27- AGREEMENT IN RESTRAINT OF TRADE IS VOID:
Every agreement by which anyone is restrained from exercising a lawful
profession, trade or business of any kind, is to that certain extent void.
EXCEPTION 1: saving of agreement not to carry on business of which good
will is sold-One who sells the goodwill of a business may agree with the buyer
to refrain from carrying on a similar business, within specified local limits, so
long as the buyer, or any person deriving title to the goodwill from him, carries
on a like business therein, provided that such limits appear to the court
reasonable, regard being had to the nature of the business.
SECTION 28:
AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS IS
VOID:11
Every agreement, by which any party thereto 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, is void to the extent.
It is a well known rule of the English law that “an agreement purporting to oust
the jurisdiction of the courts is illegal and void on grounds of public policy.”
Thus, any clause in an agreement providing that neither party shall have the
right to enforce the agreement by legal proceedings is void. Agreements
stipulating no intention to contract or a gentleman’s agreement which is an
agreement that relies upon the honour of the parties for its fulfillment, rather
than being in anyway enforceable by law is not in violation of section 28.

11
The Indian contract Act, 1872-11th edition –bare act

14
Section 28 of the Indian contracts act renders void two kinds of agreement,
namely:
1. An agreement by which a party is restricted absolutely from enforcing his
legal rights arising under a contract by the usual legal proceedings in the
ordinary tribunals.
2. An agreement which limits the time within which the contract rights may
be enforced.
Every agreement:-
1. By which any party thereto 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;
2. Which extinguishes the right 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 be 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
parties agree to refer to arbitration any question between them which has
already arisen, or affect any provision of any law in force for the time being as
to references to arbitration.
RESTRAINT OF LEGAL PROCEEDDINGS:
An agreement having for its object the restrain of an individual from enjoying
the fundamental right of restoring to a court of law for redress and relief is
invalid. Section 28 applies to agreements that wholly or partially restrain this
right of the parties. A contract having a clause that no action should be brought
up on it is void since it restricts both parties from enforcing their rights under
the contract in a court of law. An agreement by a servant not to sue for wrongful
dismissal is invalid; so is a condition restraining a transferee from enforcing his
rights under the transfer in anyway.

15
HYMAN V HYMAN:
In this case, a covenant in a separation deed provided that the wife would not
apply to the divorce-court for maintenance and it was HELD that it was void as
being contrary to public policy.
NIHAL CHAND SHASTRI V. DILAWAR KHAN:
In this case it was held that a special agreement between am advocate and his
client that the latter would not be sued for fees has been held void under this
section.
It should be noted that an agreement, whereby the parties to a suit bind
themselves before the judgment is passed in the court of first instance, to abide
by the decree of that court and forego their right to appeal , is valid and binding.
An important case in this regard is that of MUNSHI AMIR ALI V.
MAHARANI INDERJIT KOER: It has also been followed by the Allahabad
High court in Anant Das v. Ashburner & Co. there are various other cases that
stress this point. Some of them include Coringa Oil Co. v Koegler, Pratap
Chunder Dass v Arathoon etc. An agreement by which the parties agreed to a
procedure to be adopted in a court deciding a case on merits and consenting that
the decision will be binding on them was equivalent to providing that no right of
appeal will be exercised as seen in the case of Bashir Ahmed v Sadiq Ali. It was
also held in this case that an agreement whereby a judgment-debtor engaged
himself not to appeal against him in consideration of the judgment-creditor
giving him time for the satisfaction of the judgment-debt is not prohibited by
this section. In Anant Das’s case, by the agreement not to appeal, for which the
indulgence granted by the respondents was a good consideration, the appellant
did not restrict himself absolutely from enforcing a right under or in respect of
any contract. He forewent his right to question in appeal the decision which has
been passed by an ordinary tribunal. Such an agreement is in our judgment
prohibited neither by the language nor the spirit of the Contract Act, and an
‘appellate court is bound by the rules of justice, equity, and good conscience to
give effect to it and to refuse to allow the party bound by it to proceed with the
appeal.’
It was held in Rambilas Mehto v Babu Durga Bijai Prasad Singh, it was held
that a clause in an arbitration agreement providing that the award shall be
accepted by the parties and any objection thereto shall be null and void and shall
not be put forth in any court of law was held to be void as imposing a restriction
on the right of the party affected to institute legal proceedings.

16
RELATING JUDGMENT:

THYSSEN STAHLUNION GMBH v. STEEL AUTHORITY OF INDIA Ltd.

SECTION 29: AGREEMENT VOID FOR UNCERTAINTY:12

Agreement the meaning of which is not certain, or capable of being made

certain, are void. A agrees to sell B “a hundred tons of oil”. There is nothing
whatever to show what kind of oil was intended. The agreement is void for
uncertainty.
SECTION 30: AGREEMENT BY WAY OF WAGER VOID:
Agreements by way of wager are void; and no suit shall be brought for
recovering anything alleged to be won on any wager, or entrusted to any person
to abide the result of any game or other uncertain event on which may wager is
made. Exception on favour of certain prizes for horse-racing: this 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
sum of money, of the value or amount of five hundred rupees or upwards, to be
rewarded to the winner or winners of any horse-race.
3. VOIDABLE CONTRACTS:
According to section 2(i), of the act 1872, 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, is a voidable contract. Thus, a voidable contract is one which could be
avoided by one of the parties to contract at his option. If such a party does not
avoid the contract, the contract remains valid, but if it prefers to avoid the
contract, then the contract becomes void. For instance, when the consent of a
party to a contract has been obtained by coercion, undue influence, fraud or
misrepresentation, the contract is voidable at the option of the party whose
consent has been so obtained. Once an innocent party exercises the option and
rescinds to contract, the contract becomes void.
4. IILEGAL AGREEMENTS:
There are certain agreements which are “illegal” in the sense that the law
forbids the very act, the doing of which is contemplated by the agreement. For
example, an agreement to commit a crime or a tort, or an agreement which
tends to corrupt public life, or an agreement to defraud public revenue, is

12
The Indian contract Act, 1872 -bare act 11th edition.

17
 illegal. Such an agreement is patently opposed to public policy. The law
forbids making of such agreements. An illegal agreement may be distinguished
from a mere “void” agreement which may not be opposed to public policy. For
example, an agreement to do an impossible act is void, although there may be
nothing in such an agreement which is opposed to public policy. The law does
not forbid making of such agreement, the same is not enforceable in a court of
law, whether an agreement can be termed as illegal or not may depend on the
degree to which it is opposed to public policy. For example: an agreement in
restraint of trade is void but we may not term it as an “illegal” agreement as we
do when it is an agreement to commit a crime.
An illegal agreement is that agreement which is actually forbidden by law. It is
a void agreement. To distinguish an illegal agreement from other void
agreement, it is stated that while in case of a void agreement a collateral
transaction is also held void. For example, A gives money to B to enable him to
pay his wagering debt. The wager is the main transaction which is void, but
loan transaction which is void, but loan given by a A is subsidiary to it, which
is not void and A can recover his money from B. on the other hand, where A
gives loan to B to smuggle goods. Smuggling is the main transaction and loan
is subsidiary to it. But, loan transaction is also said to be tainted with the same
illegality and A will not be able to recover his money.
CASE: “GHERULAL PARAKH V. MAHADEODASS”13
FACT: The appellant and the respondent entered into partnership for carrying
on wagering transactions. The respondents, who incurred some loss on behalf of
the firm, brought an action against the appellant to recover his share of the loss.
The claim was allowed by the Supreme Court.
JUDGEMENT: It was held that when two partners make a contract, even of a
wagering nature and one of the parties satisfies his and his co-partner’s liability,
such a partner can legally claim indemnity from each other.
CONSENT:
According to section 13 two or more person are said to consent when they agree
upon the same thing in the same sense. In next section it is mentioned about free
consent, it is one of the essentials of a valid contract and is that parties should
enter into the contract with their free consent. Consent is said to be free when it
is not caused by
(1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16, or

13
Dr.R.K. Bangia, 251(2012)

18
 (3) Fraud. As defined in section 17, or
(4) Misrepresentation, as defined in section 18, or
(5) Mistake, subject to the provisions of section 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 and
mistake. If the consent of one of the parties is not free consent, i.e it has been
caused by one or the other of the above stated factors, the contract is not valid
one. “When consent to an agreement is caused by coercion, undue influence,
fraud, misrepresentation, the agreements is a contract is voidable at the option
of the party whose consent was so caused”. “if however, the consent is caused
by mistake, the agreement is void”. Now discussing separately above mentioned
factors. Starting with the Coercion is defined in section 15. “Coercion is the
committing or threaten 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 prejudice of any person whatever, with the intention of causing any person
to enter into an agreement.
For coercion, it is not necessary that the Indian penal code should be applicable
at the place where the consent has been so caused. Explanation to section 15
makes it clear that to constitute coercion, “it is immaterial whether the Indian
penal code is or is not in force in the place where the coercion is employed.” As
for example, A on board an English ship on the high seas, causes B to enter in
to an agreement by an act amounting to criminal intimidation under the Indian
penal code (45 of 1860). A afterwards sues B for breach of contract at Calcutta.
A has employed coercion, although his act is not an offence by the law of
England, and although section 506 of the Indian penal code (45 of 1860) was
not in force at the time when or place where the act was done.14
CASE:
RANGANAYAKAMMA V. ALWAR SETTI:15
FACT:
On the death of a women’s husband, the husband’s dead body was not allowed
to be removed from her house for cremation, by the relatives of the adopted boy
until she adopted of the boy.

ISSUE: The question before the court was regarding the validity of the adoption
of a boy by a widow, aged 13 years.

14
Avtar Singh, Law of Contract, 12th edition 2017.
15
https://indiankanoon.org

19
JUDGEMENT: It was held that the adoption was not binding on the widow as
her consent had been obtained by coercion.
UNDUE INFLUENCE: SECTION 16 DEFINES the undue influence.
(1) A contract is said to be induced by “undue influence” where the rations
subsisting between the parties are such that one of the parties is in a
position to dominate the will of the other and uses that position to obtain
unfair advantage to over the other.
(2) In particular and without prejudice to the generally of the forgiving
principle, a person is deemed to be in a position to dominate the will of
another-
(a) Where he hold a real or apparent authority over the other, or where he
stands in a 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.
(3) 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.
FRAUD – SECTION 17 DEFINES Fraud.
“Fraud” means and includes any of the following acts committed by a party to a
contract, or with his connivance or by his agents, with intent to deceive another
party thereto his agent, or to induce him to enter into the contract.
(1) The suggestion as a fact, of that which is not true, by one who does not
believe it to be true;
(2) The active concealment of a fact by one having knowledge or belief of
the fact;
(3) A promise made without any intention of performing it;
(4) Any other ac fitted to deceive;
(5) Any such act or omission as the law specially declares to be fraudulent.

“mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard

20
being had to them, it is the duty of the person keeping silence to speak, or unless
his silence, is , in itself, equivalent to speech.”16
Fraud is a conduct either by letter or words, which induces the other person or
authority to take a definite determinative stand as a response to the conduct of
the former either by words or letter. It is an act of deliberate deception with the
design of securing something by taking unfair advantage of another. It is a
deception in order to gain by another’s loss.

CASE: STATE OF ANDHRAPRADESH V. T. SURYACHANDRA RAO

FACT:
The respondent surrender certain land as found surplus under the A.P. land
Reforms (Ceiling of agricultural holdings) Act, 1973. It was noticed that the
land which was surrendered had already been acquired in proceedings under the
land acquisition act, 1898. Holding it a case of fraud on the part of the
respondent the apex court held that by fraud is meant an intention to deceive;
whether it is from any expectation of advantage to the party himself or
expression fraud involves two element, deceit and injury to the person deceived.
Injury is something other than economic loss, that is deprivation of property,
whether movable or immovable or of money and it will include any harm
whatever caused to any person in body, mind, reputation or such others.
MISREPRESENTATION: -UNDER SECTION 18 it means and includes:
(1) 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.
(2) 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 any one claiming under him;
(3) Causing, however innocently, a party to an agreement, to make a mistake as
to the substance of the thing which is subject of the agreement.
CASE: NOORUDEEN V. UMAIRATHU BEEVI:17
FACT: the defendant who was plaintiff’s son got a document executed from the
plaintiff describing it as hypothecation deed of the plaintiff’s property. In fact,
by fraud and misrepresentation the document executed was a sale deed of
plaintiff’s property. The plaintiff was a blind man and the sale was for an
inadequate consideration. The possession of the property was also not given to
the defendant.
16
“Fraud https://www.vakilnot.com/bareacts//indiancontractact//indiancontractact.html last accessed on
6/04/2019 at 6:30 AM
17
Avtar Singh. Law of contracts, 12th edition, 2017.

21
JUDGEMENT:
It was held that such a deed, which was got executed by fraud and
misrepresentation, was rightly set aside. If above mentioned factors are used as
means of obtaining consent from the parties to enter into a contract then under
section 19 agreements are voidable.
“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 on the position in which he would have been
if the representation made had been true.”18
COMPETENCY OF CONTRACT:
“The parties to a contract should be competent to enter into a contract.
According to Section 11, every person is competent to contract if he (i) is of the
age of majority, (ii) is of sound mind and, (iii) is not disqualified from
contracting by any law to which he is subject. Thus, there may be a flaw in
capacity of parties to the contract. The flaw in capacity may be due to minority,
lunacy, idiocy, drunkenness or status. If a party to a contract suffers from any of
these flaws, the contract is unenforceable except in certain exceptional
circumstances.19A valid contract may be made by any person recognized by
laws as having legal personality, that is natural persons, corporations and the
crown.
However, the following classes of persons are in law incompetent to contract, or
are only capable of contracting to a limited extent or in a particular manner.
1. Bankrupts;
2. Minors;
3. Persons of unsound mind;
4. Alien enemies;
5. Drunkards; corporations;
6. Companies;
7. Partnership; and
8. Receivers of companies.
CASE: “MOHORIBIBEE V DHARMODAS GHOSE:20
FACTS:

18
Section 19, the Indian contract act, 1872, bare act
19
Anonymous, http://www.newagepublishers.com/samplechapter/oo1048.pdf, last accessed on 06-04-2019 at
6:55 am
20
Case, Dr. R K Bangia, 135(2012)

22
The plaintiff Dharmodas Ghose, while he was a minor, mortagaged his property
in favour of the defendant, Brahmo Dutt, who was a money lender to secure a
loan. At the time of transaction the attorney, who acted on behalf of the money-
lender, had the knowledge that the plaintiff was a minor.
HELD:
It was held that the defendant’s contentions were rejected. Minor’s agreement
was held void, and it was held that the minor could not be asked to repay the
loan taken by him.

LOOPHOLES OF INDIAN CONTRACT ACT-1872: 21

MISUSE OF INDIAN CONTRACT ACT, 1872
According to section 7(2) of Indian contract act 1872, “the proposer may, within
a reasonable time after the acceptance is communicated to him, insists that his
proposal shall be accepted in the prescribed manner, and not otherwise: but if he
fails to do so, he accepts the (deviated) acceptance. This means that if the
offeror indicates approval by the telegram and if the offer is accepted by a
messenger, if the offer is accepted, the offer will not be accepted unless
indicated in the approval mode. But if the presenter fails, he is considered to
have accepted the agreement and the validity of the contract will increase.

So you can ask them to deliver a large amount of an order to your client and ask
them to respond if they agree to pay for the order, then it will not be considered
an agreement and this can lead to any legal action if they cannot reply and
complete the order of payment by its delivery. This is because they have not
been approved. In fact case may be something like that, you cannot get the
delivery item back. Because silence is not considered a way to accept the
proposal. If you agree with the agreement, you are responsible for your action.

If you are the client you are offered the offer and you can take a quiet mode at
this time. The other person assuming it your acceptance might ready himself for
the delivery. Just ask some person who is not a legal representative of your firm
to give the acceptance of offer in some other mode not prescribed by the offerer
and ensure it to be an informal means of communication. Hence the offerer will
deliver the orders and you can slip out of the case giving the example of
POWELL V LEE CASE and mentioning the legal rules of a valid acceptance

21
Dobusiness100.blogspot.com –loopholes of Indian contract act -1872

23
states “Acceptance must be given by the person to whom the offer is made. or
BOULTON V. JONES CASE.

ISSUE:
Whether damages other than the liquidated damages stipulated in the contract
can be claimed under sections 73 and 74 of the Contract Act 1872 (hereafter
“the 1872 Act”).
Opinion:22
The Contract Act is fundamentally administered by the 1872 Act. Section 73
and 74 deal with consequences for Breach of Contract. Section 73 imposes
general norms for loss or damage caused by contractual breach, but Section 74
specifically deals with a contractual breach of contract for a penalty.
Prior to loss, the plaintiff must satisfy the burden of proof on him, which means
that the contractor's breach of the contract and the damage or loss caused by him
may result in the breach. The breach of the agreement was proven before any
inquiry into the damaged quantum quarantine. If the defendant is guilty of
breach, he is liable to pay compensation: 1991 SCMR 1436.
Section 73 of the 1872 Act provides a general rule for compensation for loss or
damage caused by contractual breach. Contrary to an agreement, the party
suffered from such breach has received a damages or damages to a contractual
loss from the party: the PLD 1973 SC 311, which has naturally emerged in the
normal order when the parties are aware of such breach or breach of contracts.
This remedy is not granted for any remote and indirect damage or loss caused
by the breach: 1995 SCMR 1431.
However, Section 73 is a general rule for losses payable in silent contracts for
losses in the case of a violation. The law recognizes the right of parties to create
their own private laws through agreements and the courts will try to enforce the
terms of the agreement as far as possible. In the context of the terms contracts,
in the context of the contract, the appropriate section of the Act of 1872 to apply
for the restriction of restitution to the restoration, section 74.
In accordance with Section 74 of the 1872 Act, if a contract breaks out (if
breached), the amount paid in such a breach of the case is specified in the
contract or any other contract penalty, the complaint of party breach, the actual
damages or losses, whether it has been proven that the contract has been
received from the lost party Even if you do not pay a reasonable compensation,
be it for a penalty.

22
www.legal servicesindia.com-section 73 and 74-Law articles.

24
Section 74 of the agreements in which the damage to be paid for breach of
Contract Violation a specified amount of all the contracts paid for damages is
not specified or specified: AIR 1926 Nag. 473. When no losses or losses are lost
in the contract, Section 74 does not apply: PLD 1963 Kar 653 (DB). If the
parties in an agreement decreased, they would consider excluding the right not
to pay the amount that was not paid as compensation for the amount of money
to pay. The right to file bankrupt damages is enforced in accordance with
section 74 of the 1872 Act and the right to claim that there is no question of
truly losses. The parties intentionally cannot imagine loss of damages, they are
not valid or confirmed on the date of violation intended to allow the party
suffering from violation to pay for the sum total of the amount and instead pay
the amount: PLD 1985 Kar 71.
According to the jurisprudence developed by the courts the purpose behind
setting an amount for liquidated damages in a contract was to overcome
difficulties that would be found in settling the actual damages that might accrue
against the defaulting party on breach of contract. The manifest intention of
such clauses is to get rid of future calculations and disputes. An amount
mentioned in a contract can either be a penalty or liquidated damages. The
difference between the two is that liquidated damages must be ‘a genuine pre-
estimate of damages’ agreed between the parties. It does not include a sum fixed
in terrorem. Penalty is generally considered to be a liability over and above that
which a debtor would be liable to pay under the main contract. The question
whether a clause in a contract provides for liquidated damages or penalty (in the
sense of punishment), irrespective of damages sustained is a question of
substance, depending upon the real nature of the transaction, in order to decide
which the Courts must take into consideration the intention of the parties, as
evidenced by the language in the contract and circumstances of each case taken
as a whole as at the time the contract was executed (see generally: AIR 1960
Pat. 87). However, in the present case, the evidence is quite clear as clause 36
(1) (b) of the General Conditions of Contract clearly states that all sums payable
by the contractor to the owner shall be paid as damages and not in any event as
a penalty and the contractor agrees that such sum is a genuine pre-estimate of
the loss to be suffered by the owner.

According to the PLD 1969 SC 80, the courts in Pakistan are not required to
determine whether the amount settled in the contract is monetary compensation
or penalty, because the court must pay the compensation. If the parties to the
contract are appointed to pay an amount or penalty to pay a breach of contract, a
25
penalty or a certain amount cannot be obtained if a party complains of a breach.
(Generally see: 1999 YLR 500). The court has refused to exclude the maximum
or maximum limit for determining whether or not the actual loss or damage has
been proven. If the Court considers that the amount referred to in the Agreement
is too high or unreasonable, such a court may allow it to do so similarly to a
person who thinks it is reasonable.

Status of Liquidated damages clause in other jurisdictions:23 The nature and

effect of a liquidated damages clause will always depend on its construction.
However, applying Temloc v Errill (1987) 39 BRL 30, the general position is
that a liquidated damages clause will cover all damages for non-completion and
will therefore amount to an exhaustive remedy for all losses arising as a result
of the delay. The employer will not be able to elect to pursue a claim for general
damages in the hope of recovering sums over and above the contractual rate of
liquidated damages. Nor will the employer be able to claim general damages in
addition to the liquidated damages provided in the contract. In, Biffa Wasteland
Ltd v Machinfabrik Ernst Hese GMBH [2008] EWHC 6 (TCC,) the contract
provided for liquidated damages capped at 7.5% of the contract price. In
addition to claiming liquidated damages, the employer also tried to recover
unliquidated damages for delays to completion caused by breaches of other
contractual obligations. Applying Temloc v Errill, the Court rejected the claim,
holding that if there is a failure to complete then the liquidated damages will be
an exhaustive remedy for the default and, "[i]f there is a breach of another
obligation and that breach causes a failure to complete then liquidated damages
are still the only monies due for that default, that is a breach of contract causing
a failure to complete on time".

SUGGESTIONS:

The main suggestions for the problems found in present study are:
 Sec 11 &12 of Indian contract act 1872 state that minors are incompetent to
enter into a contract. But these sections don’t talk about the circumstances if
a minor becomes part of an agreement. What would be nature of that
agreement; whether that would be void or voidable? It is entirely based on
the case of MOHRIBIBEE V. DHARMODASH GHOSE. Where the court
held that minors agreements are void ab initio.

23
https://www.lexology.com-liquidateddamages

26
 My next suggestion is as to distinction in age of majority is different in the
same circumstances. A person who has attained age of 18y can entered into
a contract under section 4 of Indian majority act but in case of a guardian
appointed by court, minor can enter into a contract when he attains the age
of 21 y and such person have right to vote at the age of 18y, why this
distinction is made out? Uniformity should be maintained by adding a
provision to this effect.
 Under the Indian contract act as regards the remedy against a fraudulent
minor because the remedy is given under section 33(2) a & b of Specific
Relief Act1963.are only discretionary in nature but not obligatory.
 Contracts should be just, fair and reasonable. Contract terms should be
disclosed to consumers before entering into a contract.
 Disclosure should be clear and simple.
 The public and private sectors should check these disclosures practically.
 Contracting parties should be conscious while making a contract.
 Contracting parties should, be aware of contract terms.

CONCLUSION:
According to Section 10, consent is a subjective subject, but overall objective. It
is necessary to cover two offer and acceptance of contracts and make a deal. All
contracts but not all agreements are contracts, and these agreements only fulfill
the provisions of Section 10. For making a contract consent is an essential
ingredient and it should be free from coercion, fraud, misrepresentation, if it is
voidable under section 19 and 19-A. But if it is in compliance, it is valid under
Section 20-22. But the purpose of the English law is to create a legal
relationship. Anson has stated that the contract of the law is a child of
commerce and trade due to the law's legacy. Although discomfort, hardship and
responsibility are liable, these agreements are not a contract. It is not intended to
create a legal relationship. It is for a friendly relationship or social agreements.
Section 11 of Indian contract act specifies that every person is equally
competent to contract provided; everyone must satisfy the given essentials.
If any of these essentials are missed then the contract becomes void. The
agreement must be supported by consideration on both sides. Each party to the
agreement must give promise something and receive something or a promise in
return. Consideration is the price for which the promise of the other is sought.
However, this price need not be in terms of money. In case of promise is not
supported by consideration, the promise will be nudum pactum (a bare

27
promise) and is not enforceable at law. The object of the agreement must be
lawful and not one which the law disapproves.

BOOKS:

 The Indian contract Act, 1872 (As Amended by Act 4 of 2013, 11th
Edition.
 Dr. R. K. Bangia, Contract I, 2012, Allahabad Law Agency.
 Avatar Singh, Contract and Specific Relief, 12th edition -2017, Eastern
Book Company.

ONLINE WEBSITES:

 http://www.Vakilno1.com/bareacts/indiancontractact/
indiancontractact.html
 http://icai.org/resource-file/19698ipcc-blec-law-voll-chapter1.pdf
 http://my.safaribooksonline.com/book/management/9789332511248/Idot-
the indian-contract-act-1872-nature-and -kind-of-contracts/chapter001-
xhtml
 http://referableknowledge.over-blog.com/article-indian-contract-act-
1872-40294143.html
 Shodhganga.inflibnet.ac.in-changing concept of contract-recent problems.
 https://www.lawnotes.in-history of Indian contract act,1872.

28