Fiche de révision : Indian Contract Law

📋 Course Outline

1. Contract Foundations and Validity
2. Contract Classification
3. Offer and Acceptance
4. Consideration and Privity
5. Capacity to Contract
6. Free Consent
7. Lawful Object and Wagering
8. Contingent and Quasi Contracts
9. Discharge and Breach
10. Indemnity and Guarantee
11. Bailment and Pledge
12. Agency Law

📖 1. Contract Foundations and Validity

🔑 Key Concepts & Definitions

• Offer : A person's signification of willingness to do or abstain from doing something with a view to obtaining another person's consent to that act or abstinence.
• Reciprocal Promise : Reciprocal promises are promises that form consideration for each other.

📝 Essential Points

★ Must-know

⚡ Commercial agreements are enforceable, whereas personal, moral, social, and religious agreements are not enforceable.

• The essentials of a valid contract are proper offer and acceptance, intention to create a legal relationship, certain or ascertainable terms, lawful object and consideration, competent parties, free consent, and absence of a declaration that the agreement is void.

🧮 Formula — A promise consists of an offer and acceptance, an agreement consists of a promise and consideration, and a contract consists of an agreement enforceable by law.

💡 Memory Hook

Promise plus consideration creates enforceability

📖 2. Contract Classification

🔑 Key Concepts & Definitions

• Voidable Contract : Enforceable at the option of the aggrieved party, such as a contract formed without free consent.
• Quasi Contract : Arises by operation of law rather than agreement between the parties.

📝 Essential Points

★ Must-know

⚡ Contracts are classified by creation as express, implied, tacit, quasi, or electronic contracts; by validity as valid, void, voidable, illegal, or unenforceable contracts; by execution as executed, executory, or partly executed and partly executory contracts; and by liability as bilateral or unilateral contracts.

⚡ An executed contract has obligations fulfilled by both parties, an executory contract has obligations fulfilled by neither party, and a partly executed and partly executory contract has performance by only one party.

Further detail

• A present void contract was valid in the past but became invalid because of later changes, and a void contract is described as a hybrid of a void agreement and a valid contract.

💡 Memory Hook

Creation, validity, execution, liability

📖 3. Offer and Acceptance

📝 Essential Points

★ Must-know

⚡ A general offer is made to the public and may be accepted by anyone without communication of acceptance, a special offer is made to a particular person or group, a counter offer modifies and rejects the original offer, a cross offer consists of similar offers made without mutual knowledge, and a standing offer remains open for acceptance over a period.

📌 A valid offer must be communicated, certain and definite, capable of creating a legal relationship, express or implied, aimed at obtaining acceptance, and distinct from an invitation to offer, a mere communication of information, or a statement of intention during negotiation.

📌 Acceptance must be unconditional, made by the offeree or an authorized person, communicated to the offeror within the specified or reasonable time and in the specified or reasonable manner, and mere silence or acceptance subject to another person's approval is invalid.

• An offer terminates by notice of revocation, death or insanity of the offeror, lapse of time, counter offer, rejection, destruction of the subject matter, change in law, non-fulfilment of a condition precedent, or failure to accept in the prescribed mode.

Further detail

📌 Communication of an offer is complete when it comes to the offeree's knowledge, and a postal offer is complete when it reaches the offeree.

💡 Memory Hook

Offer, acceptance, agreement

📖 4. Consideration and Privity

📝 Essential Points

★ Must-know

📌 Consideration must be at the desire of the promisor, may move from the promisee or a third person, must differ from an existing obligation, may be past, present, or future and positive or negative, and must be lawful, real, and not illusory.

📌 Adequacy of consideration is not required, but consideration is generally necessary for every contract under the rule that there is no contract without consideration.

📌 Under privity of contract, a third party may provide consideration but cannot sue on the contract, because only parties to the contract can sue.

• No consideration is required for agreements involving natural love and affection when written, registered, between persons in immediate relation, and based on natural love and affection; a written and signed promise to pay a time-barred debt; a completed gift; agency; gratuitous bailment; guarantee; past voluntary services; or a promise to charity.

Further detail

• Exceptions to privity include a trust beneficiary, a beneficiary under a family settlement, an assignee, estoppel by acknowledgment of liability, an agency contract, and an official receiver in insolvency.

💡 Memory Hook

No consideration, no contract

📖 5. Capacity to Contract

🔑 Key Concepts & Definitions

• Incompetent Person : Persons incompetent to contract are minors, persons of unsound mind, and persons disqualified by law.

📝 Essential Points

★ Must-know

⚡ An idiot has permanently lost mental power, a lunatic has alternating periods of sanity and insanity, and a drunken or intoxicated person cannot think rationally while intoxicated.

📌 An agreement with a minor is void ab initio, cannot be ratified after majority, is not subject to estoppel against the minor, and does not generally permit restitution of benefits.

Further detail

📌 When a minor falsely represents age, the minor must restore property or money acquired under the void agreement but is not personally liable.

• Persons disqualified by law include an alien enemy, convict, insolvent, foreign diplomat, company acting beyond its memorandum of association, and married woman.

💡 Memory Hook

Minor, mind, legal disqualification

📖 6. Free Consent

🔑 Key Concepts & Definitions

• Coercion : Consists of committing or threatening to commit an offence under the IPC or unlawfully detaining or threatening to detain property to cause a person to enter an agreement.

📝 Essential Points

★ Must-know

⚡ Undue influence exists when one party dominates another's will through a near relationship and uses that position to obtain an actual unfair advantage, such as in a doctor-patient relationship.

⚡ Fraud involves intentional deception through active concealment, an intentionally false promise, or a deliberate false statement that actually deceives, whereas misrepresentation is an innocent false representation on which the other party acts without knowledge of its falsity.

⚡ A mistake of domestic law is not treated like a mistake of fact, while a mistake of foreign law has the same effect as a mistake of fact; mistakes may also be bilateral, unilateral, or concern the subject matter.

Further detail

📌 Silence amounts to fraud when silence is equivalent to speech, including partial disclosure of truth that deceives the other party.

💡 Memory Hook

Coercion, influence, fraud, mistake

📖 7. Lawful Object and Wagering

🔑 Key Concepts & Definitions

• Wagering Agreement : A promise to pay money on the happening or non-happening of an uncertain event where parties have equal chances of gain or loss, no interest in the event, no control over it, and a common intention to bet.

📝 Essential Points

★ Must-know

⚡ Champerty is financial or other assistance in litigation by an uninterested person in return for a share of the proceeds, whereas maintenance is such assistance without sharing the proceeds.

📌 An agreement is void when its object or consideration is forbidden by law, defeats the provision or object of law, is fraudulent, injures a person or property, or is immoral or opposed to public policy.

📌 Agreements in restraint of trade are void, subject to exceptions for restrictions on sellers of goodwill, partners during partnership, retiring partners, specified trade combinations, and agreements referring existing or future disputes to arbitration.

Further detail

• Public-policy void agreements include trading with an alien enemy, suppressing prosecution, trafficking in public offices, interfering with administration of justice, marriage brokerage, restraint of parental rights, restriction of personal liberty, and agreements to commit crimes.

• Wagering agreements are expressly void in India, illegal in Maharashtra and Gujarat, and a loser may recover a deposit from the stakeholder but cannot recover it from the winner after the stakeholder has paid the winner.

💡 Memory Hook

Lawful purpose, no forbidden bargain

📖 8. Contingent and Quasi Contracts

🔑 Key Concepts & Definitions

• Contingent Contract : Requires performance only if an uncertain collateral event happens or does not happen, and the collateral event must be independent of the consideration.
• Quasi Contract : A quasi-contractual obligation is imposed by law to prevent unjust enrichment, is not based on agreement, and creates a right in personam rather than a right in rem.

📝 Essential Points

★ Must-know

• The causes of quasi-contractual obligations are supply of necessaries to an incompetent person, non-voluntary payment for another, a lawful non-gratuitous act whose benefit was enjoyed, finding goods, and payment or delivery by mistake or coercion.

Further detail

📌 A supplier of necessaries to an incompetent person may recover from that person's property, including property relevant to persons the incompetent person is legally bound to support, but cannot impose personal liability on the incompetent person.

📌 A finder of goods must take reasonable care, seek the true owner, and may recover lawful preservation expenses.

💡 Memory Hook

Collateral event versus restitution

📖 9. Discharge and Breach

📝 Essential Points

★ Must-know

⚡ Initial impossibility makes a contract void ab initio, while supervening impossibility arises from unexpected events such as destruction of the subject matter, non-occurrence of an essential event, incapacity, change of law, or war.

⚡ Actual breach is failure to perform on the due date, whereas anticipatory breach is a declaration before the due date that performance will not occur.

📌 A valid tender must be unconditional, made at the proper time and place, give the promisee reasonable opportunity to verify conformity, be made to the promisee or agent, be made by a person able and willing to perform, and cover the whole obligation.

📌 If a promisor refuses to perform, the promisee may cancel or continue the contract and claim damages in either case, but a promisee who continues cannot later terminate it; only the promisee may demand performance even when the promise benefits a third person.

• A contract is discharged by performance, impossibility of performance, lapse of time, operation of law, mutual agreement, or breach of contract.

• Remedies for breach include rescission and damages, specific performance, injunction, quantum meruit, and damages classified as ordinary, special, nominal, vindictive, or liquidated.

💡 Memory Hook

Performance, impossibility, breach

📖 10. Indemnity and Guarantee

🔑 Key Concepts & Definitions

• Contract of Indemnity : A promise by one party, the indemnifier, to save another party, the indemnity holder, from loss caused by the promisor or another person.
• Contract of Guarantee : A contract to perform a promise or discharge the liability of a third person in case of that person's default.

📝 Essential Points

★ Must-know

⚡ A specific guarantee covers one transaction, whereas a continuing guarantee extends to a series of transactions.

📌 The surety's liability is secondary and ordinarily equal to the principal debtor's liability, although it may be limited or reduced by express contract, and the creditor may proceed against the surety first unless agreed otherwise.

• The surety's rights include subrogation and indemnity against the principal debtor, claims to securities and set-off against the creditor, and equal contribution and sharing of securities benefits among co-sureties.

Further detail

📌 A continuing guarantee may be revoked by notice to the creditor for future transactions or by the surety's death, while liability for transactions before revocation remains unaffected.

• A surety may be discharged by revocation, death, release of the principal debtor, an unauthorized variance, an unauthorized extension of time or agreement not to sue, or creditor conduct impairing the surety's eventual remedy.

💡 Memory Hook

Primary debtor, secondary surety

📖 11. Bailment and Pledge

🔑 Key Concepts & Definitions

• Bailment : Delivery of goods by one person to another for a purpose under a contract that the goods will be returned or disposed of according to the deliverer's directions after the purpose is accomplished.
• Pledge : A bailment of goods as security for payment of a debt or performance of a promise, with the pledgor or pawnor delivering the goods to the pledgee or pawnee.

📝 Essential Points

★ Must-know

⚡ Actual delivery transfers physical possession, symbolic delivery transfers control through an act such as handing over car keys, and constructive delivery leaves custody with a third party who acknowledges holding the goods for the bailor.

📌 The bailee must take reasonable care, avoid unauthorized use or mixing, return the goods and any increase or profit at the end of bailment, and comply with its terms; the bailee also has a right of lien for charges due.

📌 A pawnee may retain and sell the pledged goods, sue the pawnor, and recover a deficit, while any surplus from sale must be paid to the pawnor; the pawnor has a right to redeem and receive notice of sale.

• The essential elements of bailment are a contract, delivery of goods, a specified purpose, and return or disposal of the goods, and no consideration is necessary.

Further detail

📌 The bailor must disclose defects, reimburse extraordinary expenses and ordinary expenses in gratuitous bailment, indemnify defective title, and receive the goods after the purpose is complete.

💡 Memory Hook

Delivery, custody, security

📖 12. Agency Law

🔑 Key Concepts & Definitions

• Agency : A relationship in which an agent is employed by a principal to act on the principal's behalf with a third person.

📝 Essential Points

★ Must-know

⚡ A sub-agent acts under the original agent's control and is generally the agent of the original agent, whereas a substituted agent is appointed with the principal's knowledge and consent and is an agent of the principal.

📌 An agent must follow the principal's directions, exercise reasonable care and skill, render accounts, avoid secret profits, remit sums received, and not misuse information obtained during the agency.

• Agency may be created by express authority, implied authority, estoppel, necessity, or ratification, and ratification relates back to the date of the original act rather than the date of ratification.

• The principal is generally liable for an agent acting within authority and for authorized fraud or misrepresentation, while an agent may be personally liable by express agreement, trade custom, non-disclosure of the principal, action for a nonexistent principal, excess authority, or dealings for a principal resident abroad.

Further detail

⚡ A special agent is appointed for a specified act or function, whereas a general agent is appointed to conduct transactions within the authority given by the principal.

📌 An agent may retain money for remuneration and expenses, receive remuneration, exercise a lien over the principal's property, and claim compensation for injury caused by the principal's neglect or lack of skill.

• An agent's authority terminates by revocation, renunciation, completion of business, death or insanity of either party, or insolvency of the principal, subject to rules protecting an agency coupled with interest, personal liability, or partly exercised authority.

💡 Memory Hook

Principal acts through agent

📊 Synthesis Tables

Contract Validity Categories

Bailment and Pledge Comparison

⚠️ Common Pitfalls & Confusions

1. An agreement is not necessarily a contract because enforceability is additionally required.
2. A tacit contract is a subtype of implied contract formed by conduct, such as obtaining cash from an ATM.
3. An invitation to offer is not itself an offer capable of acceptance.
4. Inadequate consideration is different from no consideration.
5. A minor's false representation does not make the minor personally liable.
6. The burden of proof for undue influence is on the defendant, whereas for coercion it is on the party seeking to avoid the contract.
7. Insurance and transactions based on skill are not wagers because the parties have an interest or skill-based outcome.