Law of contract (BASICS)

By
Roshni Manuel Kiran LL.M (Notts)
Lawyer/Faculty

A contract may arise in following way
 Agreement and Contract
 Standard form Contract
 Promissory Estoppel

 S.2 (h) of Indian Contract Act 1872- ‘An agreement
enforceable by law is a contract’
 All agreements are not contracts but all contracts are
agreements
 All agreements that satisfy the essentials mentioned in
S.10 become contracts.
 S.2(e) ‘ every promise and every set of promises
forming the consideration for each other is an
agreement’

 S.2 (b)- “ 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”.
 S.10- “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’

 Agreement between two parties
 Legal capacity
 Lawful consideration
 Free consent
 Agreements not declared void

 Contract
 Void contracts ( agreement not enforceable by law is
said to be void)
 Voidable contracts (one which could be avoided by one
party at his/her option)
 Illegal agreements (law forbids)

 Proposal or Offer
 Section 2 (a) as “when one person will signify to
another person his willingness to do or not do
something (abstain) with a view to obtain the assent of
such person to such an act or abstinence, he is said to
make a proposal or an offer.”
Indian and English law- term ‘offer’ denotes willingness
to do or to abstain from doing something

 The person making the offer/proposal is known as the “promisor” or
the “offeror”. And the person who may accept such an offer will be the
“promisee” or the “acceptor”/Offeree.
 The offeror will have to express his/her willingness to do or abstain
from doing an act. Only willingness is not enough. Or simply a desire to
do/not do something will not constitute an offer.
 An offer can be positive or negative. It can be a promise to do some act,
and can also be a promise to abstain (not do) some act/service. Both
are valid offers.

 There can be many types of offers based on their
nature, timing, intention, etc. Let us take a look at the
classifications of offers.
 General Offer
 Specific Offer
 Cross Offer
 Counter Offer

 A general offer is one that is made to the public at
large. No specified parties. The public can accept the
offer and be entitled to the rewards/consideration. Ex:
issuing reward for solving a puzzle. Any member of the
public can accept the offer and be entitled to the
reward if the puzzle is solved successfully .

 A specific/special offers are made only to specific
parties, only they can accept the said offer or proposal.
 Example, Abc offers to sell his horse to Bxy for Rs
5,00000/-. Then only Bxy can accept such an offer
because it is specific to him.

 In certain circumstances, two parties can make a cross
offer. This means both make an identical offer to each other
at the exact same time. However, such a cross offer will not
amount to acceptance of the offer in either case.
 For example, both A and B send letters to each other
offering to sell and buy A’s horse for Rs 5,00000/-. This is a
cross offer. Acceptance depends on confirming the same

 changes or modifications in the terms of the original
offer.
 A counteroffer amounts to a rejection of the original
offer.
 New terms and conditions would arise

 1] Offer must create Legal Relations
The offer must lead to a contract that creates legal relations and legal
consequences in case of non-performance. So a social contract which
does not create legal relations will not be a valid offer. Say for
example a dinner invitation extended by A to B is not a valid offer.
 2] Offer must be Clear, not Vague
The terms of the offer or proposal should be very clear and definite. If
the terms are vague or unclear, it will not amount to a valid offer. Take
for example the following offer – A offers to sell B fruits worth Rs 5000/-
. This is not a valid offer since what kinds of fruits or their specific
quantities are not mentioned.

 3] Offer must be Communicated to the Offeree
For a proposal to be completed it must be clearly communicated to the
offeree. No offeree can accept the proposal without knowledge of the
offer. Acceptance in ignorance of the proposal does not amount to
acceptance.
 4] Offer may be Conditional
While acceptance cannot be conditional, an offer might be conditional.
The offeror can make the offer subject to any terms or conditions he
deems necessary. So A can offer to sell goods to B if he makes half
the payment in advance. Now B can accept these conditions or make a
counteroffer.

 5] Offer cannot contain a Negative Condition
 The non-compliance of any terms of the offer cannot lead to automatic acceptance of the
offer. Hence one cannot say that if acceptance is not communicated by a certain time it
will be considered as accepted. Example: A offers to sell his cow to B for 5000/-. If the
offer is not rejected by Monday it will be considered as accepted. This is not a valid offer.
 6] Offer can be Specific or General
 Offer can be to one or more specific parties. Or the offer could be to the public in general.
 7] Offer may be Expressed or Implied
 The offeror can make an offer through words or even by his conduct. An offer which is
made via words, whether such words are written or spoken (oral contract) we call it an
express contract. And when an offer is made through the conduct and the actions of the
offeror it is an implied contract.

 Q: A agrees to sell to B 3000 liters of milk in
exchange for 5000 kg of grains. Is this a valid
offer?

 No
 The terms of the offer are very vague.
 Specification of goods is compulsory for valid offer.

Pharmaceutical Society of Great Britain v. Boots Cash
Chemists Ltd. When the goods are displayed either in a
show-window or inside the shop and such goods bear
price-tags, the question which arises in such case is,
whether that amounts to an offer to sell goods at prices
mentioned on the price tags. In this case, it was held that
display of goods along with price tags merely amounts to
invitation to treat and therefore if an intending buyer is
willing to purchase the goods at a price mentioned on the
tag, he makes an offer to buy the goods. Thus, the
shopkeeper has the right to accept or reject the same. The
contract would arise only when the offer is accepted.

 Harvey v. Facey- In this case, the quotation of the price was held not to be an offer. In this case, the
defendants were the owners of a plot of land known as Bumper Hall Pen. The plaintiffs being
interested in purchasing the same sent a telegram to the defendants- “Will you sell us Bumper Hall
Pen? Telegraph lowest cash price.” The defendant’s in reply telegraphed- “lowest price for Bumper Hall
Pen, £ 900.”The Plaintiffs sent another telegram to the defendants saying “we agree to buy Bumper
Hall Pen for £ 900 asked by you…”The Plaintiffs in the Court contended that the second telegram from
defendants quoting the lowest price was an offer and the same had been accepted by the Plaintiff,
hence the contract was complete. In the case it was eventually held that the exchange of aforesaid
telegrams had not resulted in formation of a contract. It was observed that the first telegram had
asked two questions, one regarding willingness to sell and other regarding the lowest price. In reply
only lowest price was quoted and this quoting of the price was not an offer. That the third telegram
from the Plaintiffs saying we agree to buy was only an offer and not the acceptance of an offer. Since
this offer had not been accepted by defendants, there was no binding contract between the parties

 English case of Stilk v. Myrick [1809], a captain
promised to divide the wages of two deserters among
the remaining crew if they agreed to sail home short-
handed; however, this promise was found
unenforceable as the crew were already contracted to
sail the ship.

 Intention to create legal relationship
 Balfour v. Balfour- In this case, the defendant who was
employed on a government job in Ceylon, went to England with
his wife on leave. For health reasons the wife was unable to
accompany the husband Ceylon. The husband promised to pay
£300/ month as maintenance to wife for the time she lived apart.
The husband however failed to pay the amount and was
eventually sued by his wife.In the case it was held that the
husband was not liable to pay as there was no intention to create
a legal relationship between the parties

 offer can be accepted only after the same has come to
the knowledge of the offeree. It means that the offer
has to be communicated to the offeree in order that
the offeree can accept it. Section 4 of the Indian
Contract Act states that the communication of a
proposal is complete when it comes to the knowledge of
the person to whom it is made.

 Lalman Shukla v. Gauri Dutt -the defendant’s nephew absconded
from home. The plaintiff who was defendant’s servant was sent to
search for the missing boy. After the plaintiff had left in search of the
boy, the defendant issued handbills announcing a reward of Rs. 501 to
anyone who might find out the boy. The plaintiff who was unaware of
this reward, was successful in searching the boy. When he came to
know of the reward, which had been announced in his absence, he
brought an action against the defendant to claim this reward. It was
held that since the plaintiff was ignorant of the offer of reward, his act
of bringing the lost boy did not amount to the acceptance of the offer
and therefore he was not entitled to claim the reward.

 Carlill v. Carbolic Smoke Ball Co.- in the case, the defendants
advertised their product Carbolic Smoke Ball for a preventive remedy
against influenza and in the ad they offered to pay £100 as reward to
anyone who contacted influenza, cold or any disease caused after
having used the product in prescribed manner. The plaintiff relying on
the ad purchased a Smoke Ball and used the same in accordance with
the directions, but she still caught influenza. Thus, she sued the
defendants to claim the reward of £100. It was held that this being a
general offer addressed to all the world had ripened into contract with
the plaintiff by her act of performance of the required conditions and
thus accepting the offer. Hence, the plaintiff was held entitled to claim
the reward.This case is also an illustration of communication of
acceptance of offer by conduct.

Communication of Acceptance can be made by Offeree or his
authorized agent
 Powell v. Lee– In order that an acceptance is treated as
valid, it is necessary that the same must be communicated
to the offeror either by the offeree or by some duly
authorized person on his behalf. If the communication is
made by an unauthorized person, it does not result in a
contract.

Terms of the Contract should be reasonable
 Central Inland Water Transport Corporation Ltd. v. Brojo Nath- In
this case one of the clauses of the employment contract was that the
employer could terminate the services of a permanent employee by
giving him 3 months’ notice or 3 months’ salary. The services of the
respondent and one other was accordingly terminated instantly by
giving three months’ salary. When the case came up before the
Supreme Court the Court held the contract to be void under Section 23
of the Contract Act and observed that such a clause in the service
agreement between persons having gross inequality of bargaining
power was wholly unreasonable and was against the public policy.

Consideration only at the desire of the Promisor
 Durga Prasad v. Baldeo- In the case it was held that
it is essential that the consideration must have been
given at the desire of the promisor, rather than merely
voluntarily or at the instance of some third party.

 Privity of Contract
The doctrine means that only those persons who are parties
to the contract can enforce the same.
 Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd.-
. only a person who is party to a contract can sue on it.
However such a right may be conferred by way of property,
for example under a trust, but cannot be enforced on a
stranger to a contract as a right to enforce the contract in
personam.

 Contract with Minor
 Mohori Bibee v. Dharmodas Ghose– In this case it
was held that an agreement by a minor is void.

1] Acceptance can only be given to whom the offer was made
 In the case of a specific proposal or offer, it can only be
accepted by the person it is made to. No third person
without the knowledge of the offeree can accept the offer.
 When the proposal is a general offer, then anyone with
knowledge of the offer can accept it.

 2] It has to be absolute and unqualified
 Acceptance must be unconditional and absolute. There
cannot be conditional acceptance, that would amount to a
counteroffer which nullifies the original offer.
 A offers to sell his cycle to B for 2000/-. B says he accepts if
A will sell it for 1500/-.(No acceptance just counteroffer)
 silence is not acceptance. Offeror cannot say if no answer is
received the offer will be deemed as accepted.

 3] Acceptance must be communicated
 For a proposal to become a contract, the acceptance of
such a proposal must be communicated to the
promisor.
 The communication must occur in the prescribed
form, or any such form in the normal course of
business if no specific form is prescribed.

 4] It must be in the prescribed mode
 Acceptance of the offer must be in the prescribed
manner demanded by the offeror.
 If no such manner is prescribed, it must be in a
reasonable manner that would be employed in the
normal course of business.

 5] Implied Acceptance
 S. 8 - provides that acceptance by conduct or actions of the
promisee is acceptable. So if a person performs certain
actions that communicate that he has accepted the offer,
such implied acceptance is permissible.
 A agrees to buy from B 100 bales of hay for 1000/- and B
sends over the goods, his actions will imply he has accepted
the offer.

 Section 2(d)
 “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
abstain from doing something, such act or abstinence
is called a consideration for the promisee.”

At the desire of the promisor if the promisee either
 Does something (in the past, present or future) OR
 Abstains from doing something (in the past, present or
future)
 Then, this act of doing or abstinence is called
Consideration. Now, it has two aspects, either doing some
act or abstaining from doing something.

 Example 1 – Doing something
 Peter and John enter into a contract where Peter promises to deliver 15
curtains to John in one month’s time. Also, John promises to pay Peter
an amount of Rs 3,000 on delivery. In this contract, John’s promise to
pay Rs 3,000, on delivery, is the consideration for Peter’s promise. Also,
Peter’s promise of delivering 15 curtains is the consideration of John’s
promise to pay.
 Example 2 – Not doing something
 Peter has taken a loan from his friend John. However, he has not repaid
the loan yet. John promises not to file a suit against Peter if he promises
to repay the loan within a week. In this case, abstinence on the part of
John is due to the consideration of Peter’s promise of repayment of
the loan.

 (i) Consideration must move at the desire of the promisor
 Consideration can be offered by the promisee or a third-party only at
the request or desire of the promisor. If an action is initiated at the
desire of the third-party, it is not a consideration.
 Peter is going back home from work. On his way, he saw that his
neighbour John’s house is on fire. He immediately arranges for
a water hose and puts off the fire. Peter cannot claim any reward
because it was a voluntary act and was not done at the desire of John
(promisor).

 (ii) Consideration may move from the promisee to any
other person
 the phrase ‘promisee or any other person…’
 This essentially means that in India, consideration
may move from the promisee to any other person.
However, there can be a stranger to consideration but
not a stranger to the contract.

 Mr.X gifted his son, Z an apartment in the city with a
condition that he pays a fixed amount of money to his
uncle, Q, every year. On the same day, Z executed a deed to
pay a fixed amount of money to Q every year. However, Z
failed to pay and Q filed a suit for recovery. Z pleaded that
he was not liable since no consideration had moved from
Q. However, the court held the words ‘promisee or any
other person…’ and allowed Q to maintain his suit for
recovery

 (iii) It can be in the past, present or future
 a. Past
 Since consideration is the price of a promise, it is
normally given to induce the promise. However,it can
be given before the promise is made by the promisor.
This is called past consideration.
 ‘past considerations’ is ‘good consideration’ if it was
given at the desire of the promisor.

 Peter employs John to work in his field during the
months of agricultural harvesting. He promises to pay
John an amount of Rs 5,000 for his services when he
sows the new crop in the fields. The services of John in
the past constitute a valid consideration

 voluntary services without any request or promise from
another.
 If the person receiving such services makes a subsequent
promise to pay for the services, then such a promise is
enforceable under Section 25(2) of the Indian Contract Act,
1872
 ‘An agreement made without consideration is void, unless
it’s 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.’
 XYZ finds ABC’s wallet on the road. He returns it to him and
ABC promises to pay XYZ Rs 500 for his services. This is a
valid contract.

 b. Present
 If the promise and consideration takes place simultaneously then
it is present or executed consideration. An example is XYZ goes
to a supermarket, picked groceries and pays for the same
immediately at the cash counter.
 c. Future
 When the consideration for a promise moves after the contract is
formed
 XYZ promises to modify a car for ABC. ABC promises to pay XYZ
an amount of Rs 1,00,000 provided the plans are approved by his
brother.

 (iv) It must have value in the eyes of law
law allows the parties to decide an ‘adequate’
consideration but it must be real and valuable in the
eyes of law.
 A wife agrees to withdraw the suit she has filed against
her husband in return for his promise to pay her a
monthly maintenance amount. This is a good
consideration and holds value in the eyes of law.

 (v) It should be over and above the Promisors’ existing obligations
 If the promisor is obligated either by his promise or law to
perform or abstain from a certain act, then it is not a good
consideration for a promise.
 Dev receives a summons from the Court to appear before it as a
witness for Juhi. Juhi promises to pay him Rs 10,000 to appear in
the Court.
This contract is not valid because Dev is obligated by law to
appear in the Court on receiving a summons.

 (vi) It cannot be Unlawful
 A consideration that is against the law or public
policies is not valid.
 ABC offers Rs 10,000 to XYZ to beat up his business
rival. XYZ beats him up but ABC refuses to pay him.
XYZ cannot file a suit for recovery since the
consideration is against the law.

 Q1. Which of these contracts are valid?
 Peter promises to pay John an amount of Rs 500,000 if his car
meets with an accident and gets damaged more than 50%
provided John pays him Rs 25,000 per year for the next 10 years.
 Arjun promises to take care of Ravi’s house while Ravi is away for
work for six months provided he pays him Rs 5,000 upon his
return.
 Rita promises to get Amita a job with the Indian Government if
Amita promises to pay her Rs 20,000 when she gets the job

 Ans.
 Peter’s promise is the consideration for John’s payment and vice
versa. Further, these are lawful considerations and have value in
the eyes of law. Hence, it is a valid contract.
 Arjun’s promise is the consideration for Ravi’s payment and
Ravi’s payment is for Arjun’s promise. Further, these are lawful
considerations and have value in the eyes of law. Hence, it is a
valid contract.
 This is not a valid contract because the consideration is against
the law.

A person who
a. is of the age of majority according to the law to which he is subject
b. Is of sound mind - A person is said to be of sound mind for the purpose of making a contract, if, at
the time when he makes it, he is capable of understanding it and of forming a rational judgement as
to its effect upon his interests.
c. is not disqualified from contracting by any law to which he is subject
d. Is competent to contract.
Therefore a minor is not competent to contract and an agreement by a minor is void ab initio. He can
not ratify an agreement on attaining the age of majority and validate the same.
(Void ab initio means it has at no time had any legal validity).

 The following persons are therefore incompetent
to contract
1. Minors
2. Persons of unsound mind
3. Persons disqualified by law to which they are
subject.

 All agreements are contracts if they are made
1. BY THE FREE CONSENT OF PARTIES competent to
contract - Consent is said to be free if it is not caused by

* Coercion - Consent is said to be caused by coercion when
it is obtained by pressure exerted by either committing or
threatening to commit an act forbidden by the Indian
Penal Code or unlawfully detaining or threatening to detain
any property.
 * Undue influence - A contract is said to be induced by
“undue influence” where the relation 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 an unfair advantage over the other.


 * Fraud - Means and includes the following acts done with the
intention to deceive or to induce a person to enter into a contract. (a)
the suggestion that a fact is true when it is not true and the person
making the suggestion does not believe it to be true (b) active
concealment of a fact by a person who has knowledge or belief of the
fact, (c) promise made without the intention of performing it.
 * Misrepresentation - When a person positively asserts that a fact is
true when his information does not warrant it to be so, though he
believes it to be true, it is misrepresentation.
 A breach of duty which brings an advantage to the person committing
it by misleading the other to his prejudice is also a misrepresentation.

 * Mistake - Where both parties to an agreement are
under a mistake as to a matter of fact essential to the
agreement, the agreement is void.
 Unilateral mistake, i.e. the mistake in the mind of only
one party does not affect the validity of the contract.

 1. For A Lawful Consideration And Object -
 Consideration or object is unlawful if
(1) It is forbidden by law,
(2) Is of such a nature if permitted it would defeat the provisions
of any law,
(3) It is fraudulent,
(4) The court regards it immoral,
(5) The court regards it opposed to public policy. Every
agreement of which the consideration or object is unlawful is
void.


1. Agreement is void if considerations and objects unlawful in parts.
2. Agreement without consideration is void, unless it is in writing
and registered, or it is a promise to compensate for something done,
or is a promise to pay a debt barred by limitation.
3. Agreement in restraint of marriage. Every agreement in restraint
of the marriage of any person, other than a minor is void
 . It is the policy of law to discourage agreements, which restrain
freedom of marriage. Where a party is restrained from marrying at
all, or for marrying for a fixed period or from marrying a particular
person, or class of persons, the agreement is void.

 4. Agreement in restraint of trade. Every agreement, by which one is restrained
from exercising a lawful profession, trade or business of any kind, is to that
extent void.
5. Agreement in restraint of legal proceedings. Every agreement by which any
party thereto is restricted absolutely from enforcing his rights under or in respect
of any contract.
6. Agreements for uncertainty. Agreements the meaning of which is not certain,
or capable of being made certain, are void.
7. Agreements by way of wager/ Bet. Agreements by way of wager are void; and no
suit shall be brought for recovering anything alleged to be won on wager, or
entrusted to any person to bide by the result of any game or other uncertain event
on which any wager is made. (Wager means betting or gambling). However
certain prizes for horseracing are exempted.

 Quasi Contract
 Can there be a contract without offer, acceptance,
consideration, etc?
 Yes there can be such a contract based on social
responsibility.
 such contracts are quasi contracts.

 The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract.
A valid contact should have certain elements like offer and acceptance,
consideration, the capacity to contract, and free will. But there are other types
of contracts as well.
 There are cases where the law implies a promise and imposes obligations on
one party while conferring rights to the other even when the basic elements of a
contract are not present. These promises are not legal contracts, but the Court
recognizes them as relations resembling a contract and enforces them like a
contract.
 These promises/ relations are Quasi contracts. These obligations can also arise
due to different social relationships .

 The core principles behind a Quasi Contract are
justice, equity and good conscience.
 It is based on the maxim: “No man must grow rich out
of another persons’ loss.”

 XYZ and ABC enter a contract under which XYZ agrees to deliver
a basket of fruits at ABC’s residence and ABC promises to pay Rs
1,500 after consuming all the fruits. However, XYZ erroneously
delivers a basket of fruits at Q’s residence instead of ABC’s.
When Q gets home he assumes that the fruit basket is a birthday
gift and consumes them.
 Although there is no contract between XYZ and ABC, the Court
treats this as a Quasi-contract and orders Q to either return the
basket of fruits or pay XYZ.

 It is usually a right to money and is generally (not always) a sum of
money
 The right is not an outcome of an agreement but is imposed by law.
 The right is not available against everyone in the world but only against
a specific person(s). Hence it resembles a contractual right.
 Sections 68 – 72 details five circumstances under which a Quasi
contract comes to exist.
 There is no real contract between the parties and the law imposes the
contractual liability due to the peculiar circumstances.

 Section 68 – Necessaries Supplied to Persons Incapable of Contracting
 Imagine a person incapable of entering into a contract like a lunatic or a minor. If a
person supplies necessaries suited to the condition in life of such a person, then he can
get reimbursement from the property of the incapable person.
 JK is a lunatic. PR supplies JK with certain necessaries suited to his condition in life.
However, JK does not have the money or sanity and fails to pay PR. This is termed as a
Quasi contract and PR is entitled to reimbursement from JK’s property.
 However, to establish his claim, PR needs to prove two things:
 JK is a lunatic
 The goods supplied were necessary for JK at the time they were sold/ delivered.

 Section 69 – Payment by an Interested Person
 If a person pays the money on someone else’s behalf which the other person is
bound by law to pay, then he is entitled to reimbursement by the other person.
 A is a Zamindar. He has leased his land to JAI, a farmer. However, A fails to pay
the revenue due to the government. After sending notices and not receiving the
payment, the government releases an advertisement for sale of the land (which
is leased to JAI). According to the Revenue law, once the land is sold, JAI’s lease
agreement is annulled.
 JAI does not want to let go of the land since he has worked hard on the land
and it has started yielding good produce. In order to prevent the sale, JAI pays
the government the amount due from A. In this scenario, A is obligated to
repay the said amount to JAI.

 Section 70 – Obligation of Person enjoying the benefits of a Non-
Gratuitous Act
 Imagine a person lawfully doing something or delivering something to
someone without the intention of doing so gratuitously and the other person
enjoying the benefits of the act done or goods delivered. In such a case, the
other person is liable to pay compensation to the former for the act, or goods
received. This compensation can be in money or the other person can, if
possible, restore the thing done or delivered.
 However, the plaintiff must prove that:
 The act that is done or thing delivered was lawful
 He did not do so gratuitously
 The other person enjoyed the benefits

 Section 71 – Responsibility of Finder of Goods
 If a person finds goods that belong to someone else and takes them into his custody, then he has to
adhere to the following responsibilities:
 Take care of the goods as a person of regular prudence
 No right to appropriate the goods
 Restore the goods to the owner (if found)
 PQR owns a flower shop. O visits him to buy a bouquet but forgets her purse in the shop.
Unfortunately, there are no documents in the purse to help ascertain her identity. PQR leaves the
purse on the checkout counter assuming that she would return to take it.
 Jo, an assistant at Ram’s shop finds the purse lying on the counter and puts it in a drawer without
informing Ram. He finished his shift and goes home. When Olivia returns looking for her purse, Ram
can’t find it. He is liable for compensation since he did not take care of the purse which any prudent
man would have done.

 Section 72 – Money paid by Mistake or Under Coercion
 If a person receives money or goods by mistake or under coercion, then
he is liable to repay or return it.
 Abram misunderstands the terms of the lease and pays municipal tax
erroneously. After he realizes his mistake, he approached the
municipal authorities for reimbursement. He is entitled to be
reimbursed since he had paid the money by mistake.
 Similarly, money paid by coercion which includes oppression, extortion
or any such means, is recoverable.

 Contingent contracts, on the other hand, are the ones
where the promisor performs his obligation only when
certain conditions are met.

 In a life insurance contract, the insurer pays a certain
amount if the insured dies under certain conditions. The
insurer is not called into action until the event of the death
of the insured happens. -----contingent contract.
 Section 31 “If two or more parties enter into a contract to
do or not do something, if an event which is collateral to
the contract does or does not happen, then it is a
contingent contract.”

 ABC an insurer, enters into a contract with XYZ for fire
insurance of XYZ’s house. According to the terms, ABC
agrees to pay XYZ an amount of Rs 5 lakh if his house is
burnt against an annual premium of Rs 5,000. This is a
contingent contract.
 Here, the burning of the house is neither a performance
promised as a part of the contract nor a consideration.
ABC’s liability arises only when the collateral event occurs.

 1] Depends on happening or non-happening of a
certain event
 The contract is contingent on the happening or the non-
happening of a certain event.
 It could be precedent or subsequent.
 Jasmine & lavender are waiting at railway station for a train
. Jasmine promises to pay Lavender Rs 5,000 if the Rajdhani
Express reaches Delhi on time. This is a contingent event.

 2] The event is collateral to the contract
 The event is not a part of the contract.
 It cannot be the performance promised or a consideration for a promise.
 Stark enters into a contract with Lannister and promises to deliver 5 television
sets to him. Lannister promises to pay him Rs 75,000 upon delivery. This is
NOT a contingent contract since Lannister’s obligation depends on the event
which is a part of the contract (delivery of TV sets) and not a collateral event.
 Arya enters into a contract with John and promises to deliver 5 television sets to
him if Brazil wins the FIFA World Cup provided John pays her Rs 25,000 before
the World Cup kicks-off. This is a contingent contract since Arya’s obligation
arises only when Brazil wins the Cup which is a collateral event.

 3] The event should not be a mere will of the
promisor
 The event cannot be a wish of the promisor.
 Xyz promises to pay Abc Rs 50,000 if he leaves
Mumbai for Dubai on March 30, 2020. This is a
contingent contract. Going to Dubai can be within
Abc’s will but is not merely his will.

 4] The event should be uncertain
 If the event is sure to happen, then the contract is due
to be performed (then not a contingent contract). The
event should be uncertain.
 ABC promises to pay XYZ Rs 500 if it rains in Mumbai
in the month of July . This is not a contingent contract
because in July, rains are almost a certainty in Mumbai.

 Rule # 1 – Contracts Contingent on the happening of an Event
 Contingent contracts to do or not to do anything if an uncertain
future event happens cannot be enforced by law unless and until
that event has happened
 If the event becomes impossible, such contracts are void. This rule is
specified in Section 32
 A’ promises to pay B’ Rs 50,000 if he can secure a job at Maersk. This is
a contingent contract. Unfortunately, Maersk stopped recruiting. Since
the happening of the event is no longer possible, the contract is void.

 Rule # 2 – Contracts Contingent on an Event not happening
 Contingent contracts to do or not do anything if an uncertain future
event does not happen, can be enforced when happening of that event
becomes impossible.
 If the event takes place, then the contingent contract is void. This rule
is specified in Section 33
 A promises to pay B Rs 50,000 if the ship named Shreyas’ which leaves
on a dangerous mission does not return. This is a contingent contract.
This contract is enforceable by law if the ship sinks making its return
impossible.

 Rule # 3 – Contracts contingent on the future conduct of a living
person
 Section 34 states that if a contract is contingent upon how a person
will act at a future time, then the event is considered impossible when
the person does anything which makes it impossible for the event to
happen.
 Peter promises to pay John Rs 5,000 if he marries Julia. However, Julia
marries Oliver. Julia’s act thus renders the event of John marrying her
impossible. (A divorce is still possible though but the happening of the
event is considered impossible.)

 Rule # 4 – Contracts Contingent on happening of a specified
event within a fixed time
 contingent contracts to do or not do anything if a specified uncertain
event happens within a fixed time, becomes void if at the expiration of
the time fixed , such event has not happened or if, before the time
fixed, such event becomes impossible. This rule is specified in Section
35
 Peter promises to pay John Rs 5,000 if the ship named Oceanus which
leaves on an artic mission returns before June 01, 2020. This contract is
enforceable by law if the ship returns within the fixed time. On the
other hand, if the ship sinks, then the contract is void.

 Rule # 5 – Contracts Contingent on not happening of a specified event
within a fixed Time
 Contingent contracts to do or not do something if the event does not happen
within the said time may be enforced by law if the fixed time has expired and
the event has not happened before the expiry of the time or if it becomes
certain that the event will not happen before the time has expired, then it can
be enforced by law. This rule is specified in Section 35
 A promises to pay B Rs 5,000 if the ship named Enchantment’ which leaves on
a dangerous mission does not return before 1ST December 2020. This contract
is enforceable by law if the ship does not return within the fixed time. Also, if
the ship sinks or is burnt, the contract is enforced by law since the return is not
possible.

 Rule # 6 – Contracts Contingent on an Impossible Event
 If a contingent contract is based on the happening or non-
happening of an impossible event, then such a contract is void.
This is regardless of the fact if the parties to the contract are
aware of the impossibility or not. This rule is specified in Section
36
 A & B lives in Maldives. A’ promises to pay B’ Rs 50,000 if it
snows the next morning. This contract is void since the
happening of the event is impossible.

Law of contract (BASICS)

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