Q.  What do you mean by the term contract?

Ans. The Indian Contract Act, of 1872 has defined contract in Section 2(h)-“An agreement enforceable by law is a contract”. And Sec. 2(e) says that “Every promise and every set of promises, forming the consideration for each other, is an agreement”.

Sec.2(d) defines consideration. The latter part of Sec. 2(b) says “A proposal, when accepted, becomes a promise.”

Section 2(a) says that “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.”

Q.  What is a cross offer?

Ans. When the offers made by two persons to each other containing similar terms of bargain cross each other in post they are known as cross offers. In cross offers, even though both parties intend the same bargain, there arises no contract. A contract could arise only if either A or B, after having the knowledge of the offer, had accepted the same.

 In Tinn Vs. Hoffmann,It was held that there were only two cross offers and the offer of neither of the parties having been accepted by the other, there was no contract which could be enforced.

Q. What is the difference between an offer and an invitation to treat?

Ans. Offer has been defined in Sec. 2(a). Sometimes a person may not offer to sell his goods, but make some statement or give some information with a view to inviting others to make offers on that basis eg., a book-seller sends catalog of various books at prices indicated against those books.

This is an ‘invitation to treat’. Inviting persons to an auction, where goods to be auctioned are displayed, is not an offer for the sale of goods. An offer is made by the intending buyers in the form of bid. Such an offer (bid), when accepted by the fall of the hammer or in some other customary manner will result in a contract.

Application for tender is not a proposal or offer but merely an invitation to the contractors for making an offer. Submission of a tender is in the nature of an offer. It will result in a contract only when the tender is accepted by the competent authority and the said acceptance is communicated to the tender. An offer can be withdrawn before it is accepted.

Q. What do you understand by a standard form of contract?

Ans. In this form of contract the terms of the contract are prepared beforehand by one of the parties and the other party does not have much say in the matter, and he, therefore, enters into the contract with those pre-drafted terms. There is no legal bar on such contract being entered into. If the contract has been properly entered into with the free consent of both parties, there is a full understanding of the terms of the contract, and there is no attempt on the part of one party to take an undue advantage at the cost of the other, there would arise a valid contract.

Due to the enormous increase in the volume and complexities of trade and business, a business concern may have to enter into a large number of contracts with its customers or clients. When a large number of contracts have got to be entered into by a person, from a practical point of view and for the sake of convenience, a standard form for the numerous contracts may be used. The contracts with standard terms may be drafted by one party and on the same terms contracts may be made with numerous persons.

Q.  What is the effect of acceptance of an offer?

Ans. A contract is created only after an offer is accepted. before the acceptance is made neither party is bound thereby. At that stage, the offeror is free to revoke or withdraw his offer, and the offeree is free not to accept the offer or to reject the same. After the offer has been accepted it becomes a promise which, if other conditions of a valid contract are satisfied, binds both parties to the promise. After acceptance, each party becomes legally bound by the promise made by him through the medium of offer and acceptance of it. The effect of acceptance of an offer has been explained by Anson: “Acceptance is to an offer what a lighted match is to a train of gun power. It produces something which cannot be realized or undone. But the powder may have laid until it has become damp, or the man who laid the train may remove it before the match is applied. So an offer may lapse for want of acceptance or be revoked before acceptance. Also, the offeree may decide to reject the offer. Until an offer is accepted, it creates no legal rights, and it may be terminated at any time.”

Q. When the parties are at a distance and are contracting through post or by messengers, then when is the contract concluded?

Ans. In England when a letter of acceptance is posted, both the offeror and the acceptor become irrevocably bound. But in India, the acceptor does not become bound by merely posting his acceptance. He becomes bound only when his acceptance comes to the knowledge of the proposer”. The gap of time between the posting and the delivery of the acceptance can be utilized by the acceptor for revoking his acceptance by speedier communication which will overtake the acceptance (section 5). But, the contract is concluded at the place where the letter of acceptance is posted.

Q. What is the effect of communication by E-mail?

Ans. In the case of e-mail, the message is transmitted immediately, however, it may happen that an acceptance sent by fax may not be received or may not be legible. And hence should not be considered effective instantaneously. The addressee will receive it if the server facility is available and when the addressee accesses it. This case is equivalent to communication by post. Once the message is sent it goes into transmission so as to be out of the control of the sender. In this case (e-mail) the sender is not able to know whether the communication has reached or not. it is, therefore, submitted that the rules of postal communication must be made applicable to communication by e-mail. It should also apply to cases where communication is sent by electronic devices except where there is the opportunity of making the communication instantaneously.

Q.How can a proposal be revoked?

Ans. A proposal is revoked –

(1)by the communication of notice of revocation by the proposer to the other party;

(2)by the lapse of the time prescribed in such proposal for its acceptance or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(3)by the failure of the acceptor to fulfill a condition precedent to acceptance; or

(4)by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

Q.  What is the effect of a minor’s agreement?

Ans. Section 10 requires that the parties to a contract must be competent and Section 11 says that a minor is not competent. But neither section makes it clear that, if a minor enters into an agreement, it would be voidable at his option or altogether void.

The controversy was resolved in 1903 by the Privy Council in Mohoribibee Vs. Dharmodas Ghose, Sir Lord North Observed, that “the Act makes it essential that all contracting parties should be competent to contract and expressly provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act. The question of 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.”

Q. What is past consideration and how it is different from executory consideration?

Ans. Past consideration though given prior to the promise, but at the request of the promisor, is deemed to be a good consideration. It is deemed that when the previous request was made the promisor had in mind his promise which he expressed afterwards. The previous request and the subsequent promise are not considered to be independent of one another but part of the same transaction.

Executory Consideration: Consideration may consist of an act that is only promised to be done at some future time. There may be a simple exchange of promises and each promise is a consideration for the other eg., A agrees to sell and B to buy a number of goods at a stated price. In other words, A has promised to sell and B has promised to pay. Until the goods are actually delivered to B under the contract, the consideration is executory.

Q.In all contracts there should be a consideration, is there any exception to this rule?

Ans. Section 25 of the Indian Contract Act provides some exceptionsto this rule. Agreement without consideration is void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.– An agreement made without consideration is void, unless –

(1)It is expressed in writing and registered under the law for the time being in force for 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

(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 a debt of which the creditor might have enforcement payment but for the law for the limitation of suits.

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

Q. What is the difference between coercion and duress?

Ans. 1. In India, coercion means committing or threatening to commit an act forbidden by the Indian Penal Code. Duress, under Common Law, consists of actual violence or threat of violence to a person, whether it be a crime or a tort. Thus, unlike coercion, duress is not confined to unlawful acts forbidden by any specific penal law, like the I.P.C. in India.

2.In India, coercion can also be there by detaining or threatening to detain any property. In other words, in coercion, an act may be directed against a person or his property. In England, duress is constituted by acts or threats against the person of a man and not against his property.

3.Coercion, in India, may proceed from a person who is not a party to the contract, and it may also be directed against a person who, again, maybe a stranger to a contract. Whereas in England, duress should proceed from a party to the contract and is also directed against the party to the contract himself, or his wife, parent, child, or other near relative.

Q.What is fraud? When does silence amount to fraud?

Ans. Intentional misrepresentation of facts, speaking, broadly, is called “fraud”. According to Sec. 17, Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract-

1.the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (Suggestiofalse)

2.the active concealment of a fact by one having knowledge or belief of the fact; ( Suppresioveri)

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

4.any other act fitted to deceive;

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

Explanation-

(1) 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 being had to them,

(2) it is the duty of the person keeping silence to speak, or

(3) unless his silence is, in itself, equivalent to speech.

Q. What is common between fraud and misrepresentation?

Ans. Misrepresentation and fraud have many points in common. Both render the contract voidable; there is a false representation in both; in either case, it is necessary that the consent should have been caused by the fraud or misrepresentation and finally, where there is fraud by silence, the fact, that there were “means of discovering the truth by ordinary diligence”, is a good defence. This is so in misrepresentation also. Yet the following points of distinction are also noticeable.

Firstly, fraud is more or less an intentional wrong, whereas misrepresentation may be quite innocent.Secondly, fraud, in addition to rendering the contract voidable, is a cause of action in tort for damages. Simple misrepresentation is not a tort but under Section 75 of the Contract Act, “a person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract”. The (English) Misrepresentation Act, of 1967, also enables the court to award damages instead of rescission.

 Lastly, a person complaining of misrepresentation can be met with the defence that he had, “the means of discovering the truth with ordinary diligence”, but excepting fraud by silence, it does not lie in the mouth of the person committing fraud to say that this victim was too easily deceived or had the means of discovering the truth. “Fools have to be protected against knaves.”

Q. Is there any similarity between common mistakes and mutual mistakes?

Ans. Under Section 20 an agreement is void by reason of mistake when both parties are mistaken as to matter of fact essential to the agreement. This is further supplemented by the declaration in Section 22 that “a contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact”. The mistake of both parties of which Sec. 20 speaks may be either common or mutual. “In common mistake, both parties make the same mistake. Each knows the intention of the other and accepts it, but each is mistaken about some underlying and fundamental facts. Common mistakes will definitely render the agreement void if the parties are mistaken about the existence of the subject matter. “In mutual mistake, the parties misunderstand each other and are at cross purposes. A, for example, intends to offer his Ford Cortina Car for sale, but B believes that the offer relates to the Ford Zephyr also owned by A.”

Q. What is the effect of a mistake of fact in the formation of a contract?

Ans. Sec. 20 says that, where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation-An erroneous opinion as to the value of the thing which forms the subject- matter or the agreement, is not to be deemed a mistake as to a matter of fact.

Mistakes should be of fact and not of law, for, Sec. 21 declares that “a contract is not voidable because it is caused by a mistake as to any law in force in India.” The section carries an illustration. A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation; the contract is not voidable. But a mistake as to a foreign law will avoid.

A mistake as to the effect of registration upon the validity of a document has been regarded by the Supreme Court as a mistake of law.

A Government was not permitted to withdraw from its promise of subsidizing a hotel project by saying that it mistakenly believed that such a project was covered by the scheme. A mistake as to the meaning and purport of public documents is also a mistake of law.

Q. What is the effect of unlawful object and consideration in a contract?

Ans. One of the essentials of a valid contract is that the consideration and the object should be lawful. Every agreement of which the object or consideration is unlawful is void. Sec. 23 mentions the circumstances when the consideration or object of an agreement is not lawful:

The consideration or object of an agreement is lawful, unless-

it is forbidden by law, or

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

is fraudulent; or

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

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

Q. Agreement in Restraint of Trade is void. Is there any exception to this rule?

Ans. Section 27 of the Indian Contract Act deals with it. Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.

Exception 1: Saving of agreement not to carry on business of which goodwill 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 reasoned, regard being had to the nature of the business.

Q. What do you mean by a wagering agreement?

Ans. The Contract Act does not define a wagering agreement. Hawkins J. has explained the nature of such an agreement in Carlill Vs. Carbolic Smoke Ball Co. (1892) 2 Q.B 484, “A wagering contract is one by which two persons professing to hold opposite views touching the issue of a future uncertain event, mutually agree that dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or another stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there is no other real consideration for the making of such contract by either of the parties.

It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event and therefore, remaining uncertain until that issue is known. If either of the parties may win but cannot lose, or may lose but cannot win, is not a wagering contract.”

Q.  What is the contingent contract?

Ans. A contingent contract is a contract to do or not to do something, if some event collateral to such contract does or, does not happen. When the contract is dependent or conditional upon the happening or non-happening of a certain future event, the contract is contingent, eg.,A contracts to pay B Rs. 10,000 if B’s horse is burnt this is a contingent contract.

The payment of the amount is contingent on the happening of a collateral event i.e., the burning of the house. All contracts of insurance or indemnity aim at payment of money only after a certain event happens, or the loss is caused, and, therefore, they are contingent contracts. A wagering agreement is also a contingent contract, but, has been specifically declared to be void by Sec. 30.

Q. What is an Anticipatory breach of Contract?

Ans. It means the repudiation of a contract by one party to it before the due date of its performance has arrived. Sec. 39, contains the law relating to anticipatory breach of contract and provides.

“When a party to a contract has refused to perform or disabled himself from performing, his promise in its entirety, the promise may put an end to the contract, unless he has signified, by words or conduct his acquiescence in its continuance”.

Anticipatory breach of contract could be made by promisor in 2 ways, (1) either by refusing to perform the contract or (2) disabling himself from performing the contract in its entirety, before the due date of performance has arrived.

Q.  What is the basis of quasi-contract?

Ans. Secs. 68 to 72 of the Indian Contract Act deals with “certain relations resembling those created by contract”. It incorporates those obligations which are known as “Quasi Contracts” under English law. In various situations mentioned in that chapter, a person is obliged to compensate another although the basis of this obligation is neither a contract between the parties nor any tort on the part of the person who is bound to compensate. The basis of the obligation is that no one should have unjust benefits at the cost of the other. If A gets unjustly enriched at the cost of B, A has an obligation to compensate B for the same. An action for a quasi-contract resembles a contractual action in so far as such an action is against a certain person or certain persons, who have got the unjust benefit. Such an action, it may be further noted, is for a liquidated sum of money.

Q. What is the decision of Hadley Vs? Baxendale?

Ans. In Hadley Vs. Baxendale, (1854) 9 Ex. 341: The plaintiff’s mill had been stopped due to the breakage of a crankshaft. The broken shaft had to be sent to the makers at Greenwich as a pattern for preparing the new one. The defendants, who were common carriers, agreed to carry the broken shaft to Greenwich. The only information given to the carriers was that the article to be carried was the broken shaft of a mill and the plaintiffs were the millers of that mill. Owing to the defendant’s negligence the delivery of the shaft was delayed. Due to this delay, the mill remained stopped for a longer time than it would have been, had the shaft been delivered at Greenwich without any delay. The plaintiff’s brought an action to recover damages for the loss of profits arising out of the delay. It was held that the plaintiffs were, not entitled to recover the loss. It was observed:

“It is obvious that, in a great multitude of cases of millers sending off broken shafts to thirdpersons by a carrier under the ordinary circumstance, such consequences would not, in all probability, have occurred red, and these special circumstances were never communicated by the plaintiffs to the defendants. It follows, therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both parties when they made this contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances nor were the special circumstances, which perhaps, would have made it is a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants.”

Q.  What is Bailment?

Ans. A “bailment” is the delivery of goods by one person to another for some purpose, upon a contract that they shall when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them (Sec. 148 of Indian Contract Act).

Q.  What is Continuing Guarantee?

Ans. Under Sec.129, “Continuing Guarantee- A guarantee which extends to a series of transactions is called a “continuing guarantee”.

Q.  What do you mean by consent?

Ans. Consent is the state of the meeting of the mind. This is the basis of contractual obligation.

Q.Whether Acceptance by tender is an offer?

Ans. Where the person issuing the invitation binds himself to accept the highest tender to buy.

So an invitation for tenders may amount to an offer.

Q. Do you agree that the law of contract restricts itself to voluntarily created whole law of civil obligation?

Ans. No, this is not the whole law of civil obligations.

Q.  What do you mean by partial Acceptance?

Ans. If the offeror accepts a part of its terms that are favorable to him and reject the rest then it is called Partial Acceptance.

Q. What do you mean by Provisional Acceptance?

Ans. Provisional Acceptance is no acceptance until the final approval is given so that the offeror will be free to revoke his offer.

Q. The price of promise called?

Ans. Consideration.

Q. What do you mean by the doctrine of Constructive Consideration?

Ans. When consideration is given by a person who is not a party to the contract. This is called the doctrine of Constructive Consideration.

Q. What do you mean by the Privity of contract?

Ans. Privity of contract means that a stranger to the contract cannot sue.

Q. Name the person who is incompetent to contract?

Ans.

1. Minors

2.Persons of unsound mind.

3.Persons disqualified by law.

Q. A supplies B, a lunatic, with necessaries suitable to his condition in life. Whether A is entitled to be reimbursed from B’s property?

Ans. Yes, under 68 of the Contract Act Ais entitled to be reimbursed from B’s property.

Q. A patient in a lunatic asylum who is at intervals of sound mind. When he may go into a contract?

Ans. Under section 12 of the Contract Act. A may contract during those intervals when he is a sound mind.

Q. When a minor is allowed to enforce a contract?

Ans. A minor is allowed to enforce a contract which is of some benefit to him and under which he is required to bear no obligation.

Q. A promises for no consideration, to give to B Rs. 1000. What is the nature of this agreement?

Ans. This is a void agreement.

Q. A, a tradesman, leaves goods to B’s house by mistake. B treats the goods as his own. Whether he is bound to pay A?

Ans. Yes, under section 70 of Indian Contract Act B is bound to pay A.

Q. A and B agree that A shall pay B 1,000 rupees, for which B shall afterward deliver to A either rice or smuggled opium.

Ans. Under section 58 of the Indian Contract Act, this is a valid contract to deliver rice though void agreement as to the opium.

Q. A and B agree to marry each other. Before the time is fixed for the marriage, A goes mad. Tell me about this contract.

Ans. Under section 56 of t   Indian Contract Act, such agreement is void.

Read more: Analysis of Article 13 of the Indian Constitution