Law of Contract and Specific Relief Notes | B.A. LL.B. (Five Year Course) Semester 5 | Mumbai University | munotes

In one line

A contract is a promise the law will back you up on.

In the words a student can write in an exam: section 2(h) of the Indian Contract Act 1872 defines a contract as "an agreement enforceable by law". Every contract is therefore made of two things, an agreement and enforceability, and the whole of the first three modules of this paper is the study of what each of those two words requires.

Why the law has this at all

People make promises to each other all day. Almost none of them go to court, and almost none of them should. You promise to meet a friend at six; you do not turn up; nobody sues.

But some promises are different. A builder promises to finish a house by June, and a family sells the flat they were living in on the strength of it. A supplier promises ten tonnes of steel at a fixed price, and a factory turns down other offers because of it. In both cases somebody has arranged their life around another person's word, and has given something up in order to do it.

That is the problem the law of contract exists to solve. If promises of that kind could be broken freely, nobody could plan anything: no one would pay in advance, no one would build to order, no one would extend credit. So the law selects a class of promises and says: these we will enforce. If you break one, the other side can come to court, and the court will make you pay.

The whole difficulty, and the whole subject, is in the selection. Which promises get that backing, and which are left to conscience?

The provision itself

Section 2(h) of the Indian Contract Act 1872 states it in six words:

"An agreement enforceable by law is a contract."

Section 2(e) tells us what an agreement is:

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

And section 2(b) tells us where a promise comes from:

"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."

Broken down: the chain the Act builds

Read those three definitions in order and the Act's design becomes visible. It builds a contract out of smaller parts, one at a time, and each part has its own definition:

1. Proposal. One person signifies to another his willingness to do or not do something, wanting that other person's assent to it. Section 2(a).
2. Acceptance. The person to whom the proposal was made signifies his assent. Section 2(b).
3. Promise. A proposal that has been accepted. Section 2(b) again.
4. Consideration. Something done, not done, or promised, at the desire of the promisor. Section 2(d).
5. Agreement. Every promise, and every set of promises, forming the consideration for each other. Section 2(e).
6. Contract. An agreement that is enforceable by law. Section 2(h).

In one line

A contractual obligation is a duty you brought on yourself by agreeing, which is what makes it different from every other duty the law imposes.

In the words a student can write in an exam: the obligation in contract is voluntarily assumed. It is created by the agreement of the parties and its content is fixed by them, whereas an obligation in tort or under a statute is imposed by law regardless of consent. The Indian Contract Act 1872, Act 9 of 1872, received assent on 25 April 1872 and came into force on 1 September 1872. It was drafted for India by the Third Indian Law Commission, and although it is largely a codification of the English common law of contract as it stood in the middle of the nineteenth century, it departs from that law deliberately at several points.

Why this topic is in the syllabus at all

Students treat "history and nature" as decoration to be skipped. It is not, for two reasons that pay off directly in the exam.

First, the nature of the obligation explains the remedies. Because a contractual duty is one the defendant chose, the ordinary remedy is to put the plaintiff where the performance would have put him, which is why damages in contract are measured by expectation and not by restoring the plaintiff to where he began. That is section 73, and it is why [Compensation for Loss or Damage Caused by Breach] looks the way it does.

Second, the history explains the oddities. Several of the Act's rules make no sense until you know that the drafters were writing English law for Indian conditions and consciously changed it. A student who knows that answers "distinguish Indian and English law" questions without effort.

Where a contractual obligation sits among obligations

An obligation is simply a legal duty to do or not do something. The law creates them in several ways, and this paper is about only one of them.

Two entries deserve a note.

Tort. The word means a civil wrong other than a breach of contract. A duty in tort is owed to people generally and its content is set by law: nobody agreed to it. A duty in contract is owed to the other party and its content is whatever the parties wrote. The same facts can produce both, as where a surgeon who operates under a contract also owes a duty of care.

In one line

A statute written in 1872 for merchants who sent offers by post now governs a tap on a phone, and the interesting question is which of its rules survived the journey and which had to be replaced.

In the words a student can write in an exam: the contemporary relevance of the Indian Contract Act lies in three things. It remains the general law on which every specialised commercial statute is built, so sale of goods, partnership, negotiable instruments, insurance and arbitration all rest on its rules of offer, acceptance, consideration and free consent. Its general principles have proved adaptable, so section 10's requirements apply as readily to an application accepted by a click as to one accepted by a letter. But its assumption of parties bargaining as equals has not survived, and the gaps have been filled from outside the Act, by the Information Technology Act 2000 for electronic contracting, by the Consumer Protection Act 2019 for unfair terms, and by the courts through the doctrine of unconscionability in standard form contracts.

MU prints "Contemporary Relevance" as part of topic 1.1. It is examined as a short note or as the second half of an introductory essay question, and the answer is expected to name modern statutes and modern problems, not to repeat the history.

Why the topic exists

It is fair to ask why a first year student should spend time on the relevance of a statute rather than on its sections. The reason is that this Act is unusual: it is over 150 years old, it has been amended remarkably little, and it still does the work. Understanding why tells you what kind of statute it is.

The answer is that the Act codifies general principles rather than particular transactions. It does not say what a contract for the supply of software must contain. It says that agreements are contracts if made by the free consent of parties competent to contract, for a lawful consideration and object, and not expressly declared void. That formula is indifferent to the subject matter, which is exactly why it has outlived the transactions it was written for.

The Act as the general law

This is the first and most examinable point, and the one students usually miss.

Every commercial statute in India presupposes the Contract Act and does not repeat it. The Sale of Goods Act 1930 tells you when property in goods passes, but it does not tell you what an offer is: for that you go back to section 2(a). The Indian Partnership Act 1932 defines partnership as a relation between persons who have agreed to share profits, and the validity of that agreement is tested by sections 10 to 30 of the Contract Act. The Arbitration and Conciliation Act 1996 rests on an arbitration agreement, which must satisfy the general law before any of the Act's machinery starts.

In one line

Section 2 is ten lettered definitions that every other section in the Act depends on, and it is the single most quotable section in the paper.

In the words a student can write in an exam: section 2 of the Indian Contract Act 1872 is the interpretation clause. It defines, in clauses (a) to (j), proposal, acceptance, promisor and promisee, consideration, agreement, reciprocal promises, void agreement, contract, voidable contract, and a contract which becomes void. The definitions are linked, each building on the one before, so that the Act constructs a contract out of a proposal in six steps.

Because the whole book leans on this section, it is worked here once and in full, and later chapters cite it rather than restating it.

Why an interpretation clause at all

A statute that used ordinary English words in their ordinary senses would be argued about forever. Does "agreement" include an arrangement to meet for lunch? Does "consideration" mean thoughtfulness? An interpretation clause removes the argument by fixing the meaning inside the statute.

Section 2 opens with the standard formula:

"In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context."

Two things follow. First, these meanings apply in this Act, not generally. Second, they yield where the context shows a contrary intention, which is a safety valve and is rarely used.

The provision itself, clause by clause

The Act's own words, which are what should be quoted:

(a) Proposal.

"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."

(b) Acceptance and promise.

"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."

(c) Promisor and promisee.

"The person making the proposal is called the 'promisor', and the person accepting the proposal is called the 'promisee'."

(d) Consideration.

"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."

(e) Agreement.

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

(f) Reciprocal promises.

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

(g) Void agreement.

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

In one line

Void, voidable, valid, illegal and unenforceable are five different things, they produce five different outcomes, and using the wrong word is the commonest visible error in a contract answer.

In the words a student can write in an exam: an agreement is every promise and every set of promises forming the consideration for each other, section 2(e). A contract is an agreement enforceable by law, section 2(h). Every contract is an agreement but every agreement is not a contract, because an agreement becomes a contract only if it satisfies section 10. A void agreement is one not enforceable by law, section 2(g); a voidable contract is enforceable at the option of one party but not the other, section 2(i); and a contract becomes void when it ceases to be enforceable, section 2(j).

Why the vocabulary matters

This looks like terminology and it is really about outcomes. Ask what the plaintiff actually gets:

• If the agreement is void, nobody can sue on it, but money or benefit already passed may have to be restored under section 65.
• If the contract is voidable, the innocent party chooses. He may affirm it and sue for breach, or avoid it, in which case section 64 governs what goes back.
• If the agreement is illegal, it is void and something more: collateral transactions connected with it are also tainted, and the court will generally leave the parties where it finds them.
• If the contract is merely unenforceable, it is a good contract that a court cannot enforce for a technical reason, usually the expiry of limitation or the absence of a required stamp or registration.

Four different answers to "what can my client recover?" A student who calls a voidable contract void has answered a different question from the one asked.

Agreement against contract

Section 2(e) and section 2(h) put the two in a line: agreement first, contract second, with enforceability in between. Section 10 supplies what has to be added.

"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."

The relationship is one of containment. Draw it as a large circle labelled agreements with a smaller circle inside it labelled contracts. Everything in the small circle is also in the large one; most of the large one is outside the small one.

In one line

An offer is a statement that you are ready to be bound if the other person says yes, and a great many statements that look like offers are only invitations to make one.

In the words a student can write in an exam: section 2(a) of the Indian Contract Act 1872 provides 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. The Act uses "proposal"; "offer" is the English term and the two are used interchangeably. The essential feature is the last limb: the statement must be made in order to obtain the other party's assent, so that assent alone completes the bargain.

Why the law needs the distinction

Commerce is full of statements about price and availability. A shop displays goods with price tags. A newspaper carries an advertisement. A company invites tenders. A builder circulates a brochure. If every one of those were an offer, the maker would be bound the moment anybody said yes, and a shop with one item in stock would be in breach to the hundredth customer through the door.

So the law separates two things: a statement inviting the other side to make an offer, and an offer itself. The first is called an invitation to treat or invitation to offer. It creates no power of acceptance at all. The person who responds to an invitation to treat is the one making the offer, and the person who issued the invitation is the one who accepts or refuses. That reversal decides many problems.

The provision itself

"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."

Section 3 tells you how signifying is done:

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

Section 9 completes the picture:

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

Broken down: the four requirements of a valid proposal

1. Signified to another person. The willingness must be made known. An unexpressed intention, a note in a diary, a decision not yet communicated, is not a proposal. Section 3 says the signifying may be by any act or omission intended to communicate it, or which has the effect of communicating it, so conduct counts.
2. Willingness to do or to abstain from doing anything. Both directions are covered. A promise not to sue, not to compete or not to build is as much a proposal as a promise to sell.
3. Made with a view to obtaining the assent of the other. This is the operative limb and the one that separates offers from everything that resembles them. Ask: did the maker intend to be bound if the other simply said yes?
4. Certain in its terms. This does not appear in section 2(a) but follows from section 29, which makes agreements void for uncertainty. A proposal whose terms cannot be made certain cannot become a contract.

In one line

Section 4 says that a posted acceptance binds the offeror the moment it is posted, but binds the acceptor only when it arrives, and that single asymmetry is where most examination problems on this topic live.

In the words a student can write in an exam: section 4 of the Indian Contract Act 1872 fixes three moments. The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete as against the proposer when it is put in a course of transmission to him, so as to be out of the power of the acceptor, and as against the acceptor when it comes to the knowledge of the proposer. The communication of a revocation is complete as against the person who makes it when it is put into a course of transmission, and as against the person to whom it is made when it comes to his knowledge.

MU names communication in the topic itself, so this section is examined directly and not only inside problems.

Why the law needs a rule at all

Two people negotiating face to face have no difficulty: the offer is heard, the acceptance is heard, and everyone knows where they stand. The problem is distance. If A in Mumbai posts an offer to B in Nagpur, and B posts an acceptance, there is a period of days in which the letter is travelling and the parties know different things.

Somebody has to bear the risk of that gap, and the Act allocates it deliberately. It chooses to protect the acceptor, on the reasoning that once he has done everything in his power, by posting, he should be entitled to act on the footing that there is a contract. The offeror, who chose to negotiate by post, bears the risk of delay or loss in the post.

That policy explains the whole of section 4, and an answer that states the policy before the rule reads far better than one that recites the rule alone.

The provision itself

"The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made."

"The communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer."

"The communication of a revocation is complete, as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge."

In one line

An offer can be pulled back until the acceptance is posted, an acceptance can be pulled back until it arrives, and section 6 lists four other ways an offer simply dies.

In the words a student can write in an exam: section 5 of the Indian Contract Act 1872 provides that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards, and that an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Section 6 provides that a proposal is revoked in four ways: by notice of revocation communicated by the proposer; by the lapse of the time prescribed, or if none is prescribed, of a reasonable time; by the failure of the acceptor to fulfil a condition precedent to acceptance; and by the death or insanity of the proposer, if that fact comes to the knowledge of the acceptor before acceptance.

Why the law fixes a cut off

An offer that could be withdrawn after acceptance would be worthless, and an offer that could never be withdrawn would trap a person who offered something in January into selling it in December. So the law must fix a point of no return, and section 5 does it by borrowing the two moments section 4 has already defined.

The result is elegant and is best remembered as a mirror:

• The proposer loses his power to revoke at the moment he becomes bound, which is when the acceptance is posted.
• The acceptor loses his power to revoke at the moment he becomes bound, which is when the acceptance arrives.

Each party may withdraw right up to the moment the contract binds him, and not one moment later.

The provision itself

Section 5:

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

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

Section 6:

"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 fulfil 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."

In one line

Saying yes but is not saying yes: an acceptance that changes anything is a fresh offer, and it kills the offer it was answering.

In the words a student can write in an exam: section 7 of the Indian Contract Act 1872 provides that in order to convert a proposal into a promise, the acceptance must (1) be absolute and unqualified, and (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. Where the proposal prescribes a manner and the acceptance is not made in that manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal be accepted in the prescribed manner and not otherwise; but if he fails to do so, he accepts the acceptance.

Why the law insists on this

A contract is the meeting of two minds on the same terms. If one party says "I will sell for five lakhs" and the other says "I will buy for four and a half", their minds have not met on anything: there are two proposals and no agreement. The requirement that acceptance be absolute is simply the requirement that the parties agree, expressed as a rule about the answer.

The rule about the manner of acceptance has a different purpose. An offeror is entitled to say how he wants to be answered, because he may have good reasons: he may need a written record, or an answer by a particular date, or notification to a particular office. But the Act does not let him use that entitlement as a trap. If he is answered in another way and says nothing, he is taken to have accepted the answer as it came.

The provision itself

"In order to convert a proposal into a promise, the acceptance must:

(1) be absolute and unqualified;

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

Broken down: limb one, absolute and unqualified

The acceptance must correspond exactly with the proposal. Three consequences follow, and each is a favourite examination point.

A counter offer destroys the original offer

If B answers A's offer with different terms, B has made a counter offer. It is a new proposal, which A may accept or refuse. Crucially, it also rejects and destroys A's original offer, so B cannot change his mind and accept the original terms afterwards. The offer he is trying to accept no longer exists.

In one line

Some offers are accepted by doing the thing rather than by saying yes, and the Act says so in one sentence.

In the words a student can write in an exam: section 8 of the Indian Contract Act 1872 provides that performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. Section 9 provides that in so far as a proposal or acceptance is made in words the promise is express, and in so far as it is made otherwise than in words the promise is implied.

Together the two sections explain how a general offer to the world is accepted, and how a contract can arise without a word being spoken on either side.

Why the law needs this

A reward advertisement presents a puzzle for the ordinary rules. The offer is made to the world, so nobody has been asked individually. The person who finds the lost dog and returns it has not written back to say "I accept". If acceptance always required a communicated statement, no reward advertisement would ever produce a contract, and the person who did the work would have no claim.

The Act solves it by making the act itself the acceptance. Section 8 dispenses with any separate communication where the proposal invites performance. That is the whole of the doctrine of the general offer, and it is why a contract with an unascertained member of the public is not the absurdity it first appears.

The provision itself

Section 8:

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

Section 9:

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

Broken down: section 8 has two limbs

Limb one: performance of the conditions of a proposal. Where the proposal asks for an act, doing the act is the acceptance. No further communication is required, because the offeror has, by the form of his offer, dispensed with it.

Limb two: acceptance of any consideration for a reciprocal promise offered with a proposal. This covers the case where the offeror sends something along with his proposal and the offeree takes it. Taking the advance payment offered with an order, and keeping it, is itself an acceptance of the order.

Two conditions are implicit in limb one and are regularly examined:

In one line

Section 4 was written for the post, and the moment communication became instantaneous the Supreme Court had to decide whether the same rule applied: it held that it does not.

In the words a student can write in an exam: where parties contract at a distance by post or telegram, section 4 of the Indian Contract Act 1872 applies and the acceptance is complete as against the proposer when it is put in course of transmission. Where the communication is instantaneous, as on a telephone, the rule does not apply: the contract is made where and when the acceptance is heard by the proposer. For an electronic record, the time and place of despatch and receipt are fixed by section 13 of the Information Technology Act 2000.

This chapter matters twice over. It is examined as a question on the place of a contract, and it decides jurisdiction, because a suit for breach may be brought where the contract was made.

Why the question arises

Section 4's rule that acceptance is complete on posting is a rule about risk in transmission. A letter travels for days, out of the sight of both parties, and either the sender or the receiver has to bear the risk that it is delayed or lost. The Act puts that risk on the offeror.

Now take away the gap. On a telephone the acceptor speaks and the proposer hears in the same instant. There is no transmission period, no risk of loss, and if the line fails the acceptor knows at once and can repeat himself. The reason for the postal rule has vanished, so the question is whether the rule should follow it.

The Supreme Court answered that in 1965, and the answer has governed ever since.

The leading case

Bhagwandas Goverdhandas Kedia v. M/s Girdharilal Parshottamdas and Co., AIR 1966 SC 543.

Facts. The parties made a contract by long distance telephone. The offer was spoken by the respondents at Ahmedabad and the acceptance was spoken by the appellants at Khamgaon. Alleging breach, the respondents sued at Ahmedabad. The appellants objected that the Ahmedabad court had no jurisdiction, because on their argument the contract was made at Khamgaon, where the acceptance was spoken. The trial court held that it had jurisdiction and the High Court rejected the revision petition in limine, whereupon the appellants came to the Supreme Court by special leave.

Held. Making an offer at a place which is accepted elsewhere does not form part of the cause of action in a suit for damages for breach of contract. Ordinarily it is the acceptance of the offer and the intimation of that acceptance which result in a contract, and the intimation must be by some external manifestation which the law regards as sufficient. On a telephone the acceptance is complete where it is heard. The contract was therefore made at Ahmedabad, where the acceptance was received, and the Ahmedabad court had jurisdiction.

In one line

A standard form agreement is a contract you can take or leave but cannot change, and the law's problem with it is that the consent it rests on is real in form and thin in substance.

In the words a student can write in an exam: a standard form agreement, also called a contract of adhesion, is one whose terms are drafted in advance by one party and offered to the other on a take it or leave it basis, with no opportunity to negotiate. MU names it as a type of contract in topic 1.3. The Act's machinery is satisfied, because there is a proposal, an acceptance and consideration, but its assumption of equal bargaining power is not. The law has responded in four ways: by requiring reasonable notice of the terms, by construing them strictly against the party who drafted them, by striking down unconscionable terms as opposed to public policy under section 23, and by statute, chiefly the Consumer Protection Act 2019 and sector regulation.

Why these contracts exist, and why the law tolerates them

It is tempting to treat standard form contracts as an abuse. They are not, or not only. A bank cannot negotiate a separate account agreement with each of forty million customers; an insurer must price risk against uniform terms; a railway cannot bargain with each passenger. Standardisation is what makes mass transactions possible at all, and it lowers costs for everyone including the customer.

So the law does not prohibit them. What it does is police the point at which standardisation shades into imposition. The question is never "was this a standard form?" but "was this term brought to the other party's notice, and is it one the law will enforce?"

The features that identify one

1. Drafted in advance by one party, usually the stronger one.
2. Offered on a take it or leave it basis: no negotiation of terms.
3. Repeated across a large number of transactions.
4. Unequal bargaining power, either because the supplier is a monopoly or near monopoly, or because the customer has no practical alternative.
5. Terms the customer does not read, and frequently could not understand if he did.

Common examples in Indian practice: insurance policies, bank account opening forms, employment contracts of large employers, flat purchase agreements with builders, railway and airline tickets, mobile connection forms, and the terms of use of any website or application.

The problem, stated legally

Section 10 requires free consent. Section 13 defines consent as two or more persons agreeing upon the same thing in the same sense, and section 14 makes consent free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.

In one line

An e-contract is an ordinary contract made by electronic means, and the Information Technology Act exists to remove the three technical objections that would otherwise be made to it.

In the words a student can write in an exam: MU's syllabus brings sections 2 to 16 of the Information Technology Act 2000 into this paper because the Indian Contract Act contains nothing about electronic contracting. The Contract Act still decides whether there is a contract, through proposal, acceptance, consideration and section 10. The Information Technology Act supplies three things the Contract Act cannot: that an electronic record satisfies a requirement of writing (section 4), that an electronic signature satisfies a requirement of signature (section 5), and that a contract formed by electronic means is not unenforceable merely on that ground (section 10A). Sections 11 to 13 then fix attribution, acknowledgment and the time and place of despatch and receipt, and sections 14 to 16 deal with security.

Why a separate Act was needed

Nothing in the Indian Contract Act prevents a contract being made by email. Sections 3 and 9 are indifferent to the medium: communication may be by any act or omission intended to communicate, and a promise made otherwise than in words is implied and equally binding.

The difficulty was never the Contract Act. It was every other statute that required writing, signature, an original document or a stamped instrument, and the ordinary law of evidence, which was built around paper. A party wishing to escape an inconvenient electronic bargain had three technical arguments available:

1. "That was not in writing." Wherever a law required writing, an electronic file arguably did not qualify.
2. "That was not signed." A typed name or a cryptographic key is not a signature in the traditional sense.
3. "A contract cannot be made this way at all." A general objection to the medium.

The Information Technology Act 2000 was enacted to remove all three. It received assent on 9 June 2000, and it was substantially amended by the Information Technology (Amendment) Act 2008, which came into force on 27 October 2009. That amendment matters throughout this part of the syllabus, because it replaced "digital signature" with the wider "electronic signature" and inserted section 10A.

The structure of sections 2 to 16

MU's range is not arbitrary. It is the first three substantive chapters of the Act, and they answer the questions in order:

In one line

Sections 4 and 5 say that where a law demands writing or a signature, an electronic record and an electronic signature will do, and sections 3 and 3A say what counts as a signature.

In the words a student can write in an exam: section 4 provides that where any law requires information or any matter to be in writing, or in typewritten or printed form, that requirement is deemed satisfied if the information is rendered or made available in an electronic form and accessible so as to be usable for a subsequent reference. Section 5 provides that where any law requires authentication by signature, that requirement is deemed satisfied if the matter is authenticated by an electronic signature affixed in such manner as may be prescribed by the Central Government. Section 3 provides for authentication by a digital signature using an asymmetric crypto system and hash function, and section 3A, inserted by the 2008 amendment, provides for electronic signatures generally.

MU's topic prints "Digital Signatures", which is why sections 3 and 3A belong here.

Why the sections are drafted as they are

Notice what sections 4 and 5 do not say. Neither says that an electronic record is writing, or that an electronic signature is a signature. Each says that where a law imposes a requirement, that requirement shall be deemed to have been satisfied if certain conditions are met.

That is a careful choice. Parliament did not redefine "writing" across the entire statute book, which would have had unpredictable effects on hundreds of Acts. It provided instead that the requirement is treated as met. The technique is called deeming, and it is why both sections open with "Where any law provides" and contain the words "notwithstanding anything contained in such law".

The practical consequence is that you must always identify the law that imposes the requirement before you can use section 4 or section 5. If no law required writing in the first place, the sections have nothing to operate on, and an oral or electronic contract was always good.

Section 4: legal recognition of electronic records

"Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is:

(a) rendered or made available in an electronic form; and

(b) accessible so as to be usable for a subsequent reference."

Two conditions, and both must be met.

1. Rendered or made available in an electronic form. The definition of electronic record in section 2 supplies the meaning: data, record or data generated, image or sound stored, received or sent in an electronic form.
2. Accessible so as to be usable for a subsequent reference. This is the condition students ignore and examiners like. It requires that the record be retrievable and readable later. A message that self destructs, or one stored in a format that cannot be opened again, fails the second limb however electronic it is. The purpose of writing is to create a record that can be produced afterwards, and section 4 preserves that purpose rather than the paper.

In one line

Sections 6 to 10 let the Government work electronically, and section 9 says that letting it does not mean anyone can force it.

In the words a student can write in an exam: Chapter III of the Information Technology Act 2000 is headed Electronic Governance, and MU names it as a topic. Section 6 permits filings with, and licences and payments by, government offices to be made in electronic form as prescribed. Section 6A, inserted by the 2008 amendment, permits the appropriate Government to authorise a service provider to deliver public services and to collect service charges. Section 7 governs the retention of electronic records where a law requires documents to be retained. Section 7A, also inserted in 2008, extends audit requirements to documents maintained electronically. Section 8 provides for publication of rules and regulations in an Electronic Gazette. Section 9 is the important limitation: sections 6, 7 and 8 confer no right upon any person to insist that a document be accepted or issued in electronic form. Section 10 empowers the Central Government to make rules about electronic signatures.

Why these sections sit inside a contract syllabus

They do not look like contract law, and in a sense they are not. They are here for two reasons.

First, MU names electronic governance in topic 1.3 in terms, so it is examinable as a short note.

Second, and more usefully, they complete the logic of sections 4 and 5. Those sections said that a requirement of writing or signature is deemed satisfied by electronic means. Sections 6 to 8 apply that recognition to the largest single class of transactions in the country, those with the State, and section 9 then draws the boundary of the whole scheme. A student who understands section 9 understands what the Act is and is not doing.

Section 6: use of electronic records in Government

Section 6(1) covers three activities. Where any law provides for:

• (a) the filing of any form, application or other document with any office, authority, body or agency owned or controlled by the appropriate Government in a particular manner;
• (b) the issue or grant of any licence, permit, sanction or approval, by whatever name called, in a particular manner;
• (c) the receipt or payment of money in a particular manner,

then, notwithstanding anything in any other law, that requirement is deemed satisfied if the filing, issue, grant, receipt or payment is effected by such electronic form as the appropriate Government may prescribe.

Section 6(2) lets the appropriate Government make rules prescribing the manner and format in which electronic records are to be filed, created or issued, and the manner of payment of any fee or charge.

In one line

This is the section MU's topic is actually about: it says that a contract is not bad merely because it was made electronically, and it did not exist when the Act was passed.

In the words a student can write in an exam: section 10A of the Information Technology Act 2000 provides that where, in a contract formation, the communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose. The section was inserted by the Information Technology (Amendment) Act 2008 and came into force on 27 October 2009. It is the provision that gives "legal recognition to e-contracts" in MU's own words.

Why the section had to be added nine years later

The Act of 2000 recognised electronic records (section 4) and electronic signatures (section 5). It did not say anything about contracts.

That gap was real. A party could accept that an email was a record and that a digital signature was a signature, and still argue that the law of contract had never contemplated a bargain concluded in this way, that the Act's silence on contracts was deliberate given how carefully it dealt with records and signatures, and that the Contract Act's machinery, built around communication under section 4, could not accommodate it.

The argument was probably bad, because the Contract Act is indifferent to the medium. But it was available, and availability is what matters to a party looking for a way out of a bargain. Section 10A closes it by name. It is a short section doing one job: removing an objection.

Note also what its insertion tells you about the Act's history. The original statute was drafted with electronic commerce in view, and the model law it drew on dealt with contracts expressly. The omission in 2000 was a gap, and it took the 2008 amendment to fill it.

The provision itself

"Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic records, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose."

The section reproduces the vocabulary of the Indian Contract Act deliberately: proposal, acceptance, revocation are sections 2(a), 2(b) and 5 of that Act. It is written to slot into the existing law rather than to replace any of it.

In one line

Three sections answering three questions about an electronic message: whose is it, did the other side confirm it, and when and where was it sent and received.

In the words a student can write in an exam: Chapter IV of the Information Technology Act 2000 carries MU's topic heading word for word. Section 11 attributes an electronic record to the originator if it was sent by him, or by a person authorised to act on his behalf in respect of it, or by an information system programmed by or on behalf of the originator to operate automatically. Section 12 governs acknowledgment of receipt, and provides that where the originator has stipulated that the record shall be binding only on acknowledgment, the record is treated as never having been sent if no acknowledgment is received. Section 13 fixes the time and place of despatch and receipt: despatch occurs when the record enters a computer resource outside the originator's control, receipt turns on whether a computer resource has been designated, and the place is deemed to be the parties' places of business regardless of where the machines are.

Why these sections exist

Paper carries its own evidence. A letter on a company's letterhead, signed by its manager and posted from its office, tells you whose it is and roughly when it was sent. An electronic message carries none of that reliably: an address can be shared, a system can send automatically, and a message can sit unread in a server for a week.

So the Act supplies the answers by rule rather than by inference. Section 11 is about authorship, section 12 about confirmation, and section 13 about timing and location. For contract law, section 13 is the most important, because it is the electronic replacement for section 4 of the Indian Contract Act.

Section 11: attribution

"An electronic record shall be attributed to the originator:

(a) if it was sent by the originator himself;

(b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or

(c) by an information system programmed by or on behalf of the originator to operate automatically."

Three limbs, and each has a practical use.

(a) Sent by the originator himself. The straightforward case.

(b) Sent by a person authorised to act on his behalf in respect of that record. Note the last five words. The authority must extend to that record: a person authorised to place orders up to a limit does not bind the company beyond it. This limb is where the ordinary law of agency does its work, and it is the limb that answers "the email came from our purchasing manager, not from the company".

In one line

Three short sections that create a higher grade of electronic record and signature, and the reason they exist is what a court will presume about them.

In the words a student can write in an exam: section 14 provides that where a security procedure has been applied to an electronic record at a specific point of time, that record is deemed to be a secure electronic record from that point until the time of verification. Section 15, as substituted by the 2008 amendment, provides that an electronic signature is deemed a secure electronic signature if the signature creation data were, at the time of affixing, under the exclusive control of the signatory and no other person, and were stored and affixed in such exclusive manner as may be prescribed. Section 16 empowers the Central Government to prescribe the security procedures and practices for the purposes of sections 14 and 15, having regard to the commercial circumstances, the nature of the transactions and other relevant factors.

These three sections close MU's printed range at section 16.

Why a second grade of record and signature

Sections 4 and 5 recognised electronic records and electronic signatures generally. That solves the problem of admissibility and form. It does not solve the problem of proof.

A party who produces an email in court still has to persuade the court that it is genuine, that it has not been altered, and that the person it appears to come from actually sent it. In a paper world that work is done by handwriting, letterheads and witnesses. In an electronic world it has to be done by technology.

So the Act creates a higher category. A record or signature that meets the statutory security conditions is "secure", and being secure carries evidentiary consequences under the Indian Evidence Act, which was amended by this Act's own Schedule. In broad terms the law presumes, in respect of a secure electronic record, that it has not been altered since the point of time to which the secure status relates; and in respect of a secure electronic signature, that it was affixed by the subscriber with the intention of signing or approving the record.

That presumption is the whole point of sections 14 to 16. Everything else in them is machinery.

Section 14: secure electronic record

"Where any security procedure has been applied to an electronic record at a specific point of time, then such record shall be deemed to be a secure electronic record from such point of time to the time of verification."

Three features:

1. It is time bounded at both ends. The record is secure from the point at which the procedure was applied, and only to the time of verification. It is not a permanent quality of the file. This is a sensible design: what the procedure demonstrates is that the record has not changed between those two moments.
2. It depends entirely on the security procedure. The section supplies no test of its own; it points to section 16.
3. It says nothing about who created the record. Authorship is section 11's job, and integrity is section 14's. The two must not be confused.

In one line

Three ways of presenting terms to someone who will not read them, and the law's willingness to enforce each depends on how clearly the user was asked to agree.

In the words a student can write in an exam: MU names clickwrap and shrink wrap contracts expressly. A clickwrap contract is one where the user is shown the terms and must take a positive act, usually clicking a button marked "I agree", before proceeding. A shrink wrap contract is one where the terms are inside or on the packaging of a product, and the user is told that opening the package or using the product signifies acceptance. A third form, browsewrap, places the terms behind a link and asserts that continued use of the site amounts to acceptance. They are all standard form agreements, so the four protections in [Standard Form Agreements] apply; and they are all electronic or product contracts, so section 10A of the Information Technology Act 2000 prevents them being attacked merely for the medium.

Why the three forms are treated differently

The Contract Act's requirements are the same in all three cases: there must be a proposal, an acceptance that is absolute and communicated, and consideration. What differs is the strength of the evidence that the user assented to the terms, and that difference is what the law responds to.

Rank them by how positively the user acted:

That table is the answer to most questions on this topic, and the rest of the chapter is the reasoning behind it.

Clickwrap

The user is presented with the terms, or with a scrollable box containing them, and cannot proceed until clicking a button. Sometimes a checkbox must be ticked first.

Why it is the strongest form. The click is an unambiguous act, it is done after the terms have been made available, and it is done in response to a request to agree to them. In the Act's own vocabulary, the site's presentation is a proposal or an invitation, and the click is the signifying of assent required by sections 2(b) and 3. It also satisfies section 7's requirement that the acceptance be absolute, because the user has no facility to vary anything.

The weaknesses that remain. Clickwrap does not answer everything:

• Reasonable notice. Terms hidden behind a link the user need not open are less well notified than terms displayed in the box. The more onerous the term, the stronger this argument.
• Unconscionability. A clickwrap term is still subject to section 23 of the Contract Act, and an exclusion of all liability in a contract of adhesion may fall.
• The Consumer Protection Act 2019. If the user is a consumer, the unfair contract provisions apply whatever he clicked.

In one line

A contingent contract is a live contract whose performance waits on something that may or may not happen, and every insurance policy and every guarantee is one.

In the words a student can write in an exam: section 31 of the Indian Contract Act 1872 defines a contingent contract as "a contract to do or not to do something, if some event, collateral to such contract, does or does not happen". Sections 32 to 36 then supply the rules for enforcing it: a contract contingent on an uncertain future event happening cannot be enforced unless and until that event happens, and becomes void if the event becomes impossible (section 32); one contingent on an event not happening can be enforced when the happening of that event becomes impossible (section 33); where the event is the future conduct of a living person, it is deemed impossible when that person does anything making it impossible that he should so act (section 34); where a time is fixed, sections 35 supplies the rules for both forms; and an agreement contingent on an impossible event is void whether or not the parties knew of the impossibility (section 36).

Why the law has a separate set of rules

Most contracts are to be performed straight away or on a date. Some are not: they depend on something outside the contract happening. An insurer promises to pay if the house burns; a surety promises to pay if the principal debtor defaults; a buyer agrees to purchase land if the title is cleared.

The difficulty is that such a promise is real from the moment it is made, but nothing is yet due under it. The law needs to say: is there a contract now? Can either party sue now? What happens if the event becomes impossible? Sections 31 to 36 answer exactly those questions, and the answer to the first is the important one.

A contingent contract is a valid contract from the outset. It is not an agreement to make a contract later and it is not void for uncertainty. Only its performance is suspended.

The provision itself

"31. 'Contingent contract' defined. 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.

Illustration. A contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract."

Broken down: the essentials

Three elements, and the third is the one that decides most problems.

1. There is a contract to do or not to do something. So all the requirements of section 10 must already be satisfied. A contingent contract is a contract, not a preliminary.
2. Performance depends on an event. The event must be uncertain, in the sense that it may or may not happen. An event certain to happen is not a contingency; it is merely a future date, and such a contract is absolute, not contingent.
3. The event is COLLATERAL to the contract. This is the essential and the examinable one. The event must be incidental to the contract and must not itself form part of the consideration or of the reciprocal promises.

In one line

Five obligations the law imposes where there is no agreement at all, because it would be unjust to let one person keep what belongs to another.

In the words a student can write in an exam: sections 68 to 72 of the Indian Contract Act 1872 fall under the heading "Of certain relations resembling those created by contract". They are commonly called quasi contracts. There is no offer, no acceptance and no consideration; the obligation is imposed by law and rests on the principle of unjust enrichment, that a person should not be allowed to enrich himself at another's expense. The five are: section 68, necessaries supplied to a person incapable of contracting; section 69, reimbursement of a person who pays money another is bound by law to pay; section 70, obligation of a person enjoying the benefit of a non-gratuitous act; section 71, responsibility of a finder of goods; and section 72, liability of a person to whom money is paid or a thing delivered by mistake or under coercion.

MU names quasi contracts as a type of contract in topic 1.3 and prints sections 68 to 72 in the Module I range.

Why the law does this

The Act is about promises. These five sections are not.

Suppose a tradesman leaves goods at the wrong house and the occupier uses them. Suppose you pay a debt twice by mistake. Suppose a shopkeeper supplies food to a man who cannot understand what he is agreeing to. In each case there is no agreement, so on the ordinary rules there is nothing to enforce, and one person is out of pocket while another has the benefit.

The law's answer is to impose an obligation that looks like a contractual one, so that the ordinary machinery of a civil suit can be used, without pretending that the parties agreed to anything. That is why the Act's heading says these relations resemble those created by contract. The older name, implied contract, is misleading and the Act does not use it.

The underlying principle is unjust enrichment, and it has three ingredients worth naming in an answer: the defendant has been enriched, the enrichment is at the plaintiff's expense, and it would be unjust to let him retain it.

Section 68: necessaries supplied to a person incapable of contracting

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

In one line

Section 10 is the gate every agreement must pass through to become a contract, and the whole of this module is that one section opened out.

In the words a student can write in an exam: section 10 of the Indian Contract Act 1872 provides that "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." Five requirements sit in that sentence, and sections 11 to 30 are nothing but the Act's own definitions of them.

Why the law has this at all

By the end of Module I a student knows how an agreement is made: a proposal under section 2(a), an acceptance under section 2(b), and the two together producing a promise and then an agreement under section 2(e). What Module I never asked is whether the law will do anything about it.

That is a separate question, and it has to be. People agree to all sorts of things. A fourteen year old agrees to buy a motorcycle. A frightened man agrees at knifepoint to sell his shop. Two traders agree to fix prices unlawfully. Every one of those is an agreement in the section 2(e) sense: there is a proposal, there is an acceptance, and there are two consenting minds.

If the law enforced all of them it would be lending the courts, and ultimately the police, to a child, to a robber and to a conspiracy. So the Act draws a line, and section 10 is where the line is drawn. An agreement is the raw material. A contract is an agreement the law has agreed to back.

The provision itself

"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."

The section then adds a saving clause that students routinely miss:

"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."

Broken down: the requirements

Read section 10 with section 2(h), which defines a contract as "an agreement enforceable by law", and the structure becomes visible. There must first be an agreement, and that agreement must then answer to each of the remaining four.

1. An agreement. Section 2(e): "Every promise and every set of promises, forming the consideration for each other." Without a proposal and an acceptance there is nothing for section 10 to work on. This is Module I's ground, taken up in [Agreement, Contract, and the Difference that Decides Cases].
2. Free consent of the parties. Consent is defined in section 13 and freedom of consent in section 14. The five things that destroy freedom are coercion, undue influence, fraud, misrepresentation and mistake, and sections 15 to 22 define each.
3. Parties competent to contract. Section 11 supplies the test: age of majority, soundness of mind, and not disqualified by any law.
4. A lawful consideration and a lawful object. Consideration is defined in section 2(d); section 23 says when a consideration or an object is unlawful.
5. Not expressly declared void by the Act. Sections 24 to 30 are the express declarations, and section 56 adds another.

In one line

Competency is the law's answer to the question of who is allowed to bind themselves by a promise, and section 11 answers it with three tests that must all be passed.

In the words a student can write in an exam: section 11 of the Indian Contract Act 1872 provides that "Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject." Competency therefore requires majority, soundness of mind, and the absence of any statutory disqualification, and a person who fails any one of the three is incompetent.

Why the law has this at all

Section 10 requires free consent. Free consent presupposes a mind that can weigh a bargain and decide. Some people, for reasons the law can state in advance, cannot do that: a child of nine has no way to judge whether a mortgage is a good idea, and a man in the grip of a delirium cannot judge anything at all.

The law could deal with each case individually, asking in every dispute whether this particular person understood this particular bargain. It does not, because that would make every contract with a young person or an ill person a lawsuit waiting to happen, and no one could safely trade.

Instead the Act draws bright lines. Below eighteen you cannot contract, whatever your actual intelligence. That is rough justice, and it is deliberate: the rule protects the class, not the individual, and it is worth more as a rule that everyone can apply in advance than as a standard that a court applies afterwards.

The provision itself

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

Notice the drafting. The section is phrased positively, saying who is competent, and the three requirements are joined by "and". So all three must be satisfied together, and a person who fails any one of them is not competent.

Broken down: the three tests

Test 1: the age of majority

Section 11 does not itself state an age. It says "the age of majority according to the law to which he is subject", and sends the reader to another statute.

That statute is the Majority Act 1875, and its section 3 provides:

"(1) Every person domiciled in India shall attain the age of majority on his completing the age of eighteen years and not before.

(2) In computing the age of any person, the day on which he was born is to be included as a whole day and he shall be deemed to have attained majority at the beginning of the eighteenth anniversary of that day."

In one line

An agreement made by a person below eighteen is not a weak contract that the minor may escape from: in the eye of the law it never became a contract at all.

In the words a student can write in an exam: section 11 of the Indian Contract Act 1872 requires a party to be of the age of majority, and section 10 requires competent parties, so an agreement by a minor fails at the threshold and is void ab initio, meaning void from the very beginning. This was settled for India by the Privy Council in Mohori Bibee v. Dharmodas Ghose, (1903) 30 IA 114, and the consequence is that no suit lies on such an agreement against the minor, that it cannot be ratified on attaining majority, and that estoppel cannot be used to hold the minor to it.

Why this question needed deciding at all

The Act nowhere says in terms what happens to a minor's agreement. Section 11 says a minor is not competent; it does not say the agreement is void. That silence produced a genuine and long running dispute in the Indian courts before 1903.

Two readings were possible, and each had support.

Reading one: voidable. Section 11 protects the minor, so let the minor decide. On this view the agreement binds the other party and the minor may enforce or repudiate it. That is broadly the English position for many minors' contracts, and it is the reading Maclean CJ was prepared to assume in the Calcutta appeal in this very litigation.

Reading two: void. Competency is a condition of the contract's existence under section 10, not a personal privilege. If a party is not competent, the section is simply not satisfied and there is nothing there.

The difference is not academic. If the agreement is voidable, the minor who repudiates must restore what was received. If it is void, there is nothing to restore under the contract, because there was no contract.

The provisions

Section 11, so far as it matters here:

"Every person is competent to contract who is of the age of majority according to the law to which he is subject."

Section 10, which supplies the consequence:

"All agreements are contracts if they are made by the free consent of parties competent to contract."

Section 2(g) supplies the label:

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

Read together the chain is short and it is worth being able to write it out: section 11 makes the minor incompetent; section 10 makes competency a condition of a contract; so the agreement is not a contract; and section 2(g) calls such an agreement void.

In one line

The rule that a minor's agreement is void protects the minor, and this chapter is about the four places where the law had to stop that protection turning into a licence to cheat.

In the words a student can write in an exam: although a minor's agreement is void, section 68 of the Indian Contract Act 1872 makes the minor's property liable for necessaries supplied to him; a minor may be a transferee, payee or beneficiary, because section 11 bars him from binding himself and not from receiving; a void agreement cannot be ratified on attaining majority; and restitution is confined to restoring identifiable property, a money decree being refused because it would enforce the very liability the law makes void.

Why the law needed these four rules

A rule that says "nothing a minor agrees to counts" is easy to state and impossible to live with. Four practical problems arise at once.

Who will feed a minor who has no guardian at hand? If no supplier can ever be paid, none will supply. What if the bargain is entirely in the minor's favour? A rule meant to protect him would then stop him receiving a gift or enforcing a mortgage he paid for. What if he confirms the deal the day he turns eighteen? And what if he has the other party's money in his pocket and simply keeps it?

The Act and the courts answer each of these separately, and the answers do not all run the same way. Two of them soften the rule and two of them hold the line.

Necessaries: section 68

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

Four things in that sentence decide every problem question on it.

1. The supply must be of necessaries. Not luxuries, and not merely useful things.
2. They must be suited to his condition in life. What is necessary is relative: a set of law books may be a necessary for a law student and not for a nine year old.
3. The claim lies against the minor's PROPERTY, not against the minor personally. If the minor has no property, the supplier recovers nothing. He cannot be made bankrupt, and no decree runs against his future earnings.
4. It extends to those the minor is legally bound to support, so necessaries supplied to the minor's dependants also charge his estate.

The liability is quasi contractual, meaning an obligation the law imposes rather than one the parties created. Section 68 sits in Chapter V of the Act, which is headed "Of certain relations resembling those created by contract", and the whole of that chapter is taken up in [Quasi Contracts: Obligations Resembling Those Created by Contract].

In one line

A person is of sound mind for contracting if, at the moment of making the contract, they can understand it and judge what it will do to their own interests, and the law asks about that moment and not about a diagnosis.

In the words a student can write in an exam: section 12 of the Indian Contract Act 1872 provides that "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 judgment as to its effect upon his interests." A person usually of unsound mind but occasionally of sound mind may contract when he is of sound mind, and a person usually of sound mind but occasionally of unsound mind may not contract when he is of unsound mind.

Why the law has this at all

Section 11 makes soundness of mind a condition of competency but does not say what it means. Without a definition the courts would be left to decide whether "unsound mind" meant a medical condition, a legal status, or something else, and each answer would produce a different and unsatisfactory rule.

A medical test would be too wide and too narrow at once. Many people with a diagnosed illness manage their affairs perfectly well, and many people with no diagnosis at all are, on a given evening, incapable of understanding anything.

A status test, under which a person once declared of unsound mind is permanently disabled, would be worse: it would strip the person of the ability to deal with their own property for life.

So the Act chose a functional and momentary test. It asks what this person could do at the time of this contract. That protects those who genuinely cannot judge, without disabling anyone permanently.

The provision itself

"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 judgment as to its effect upon his interests.

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

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

The Act's own illustrations:

"(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.

(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts."

In one line

Consent means the parties agreed on the same thing in the same sense, and free consent means nothing bent their agreement out of shape, and the two are separate questions asked in that order.

In the words a student can write in an exam: section 13 of the Indian Contract Act 1872 provides that "Two or more persons are said to consent when they agree upon the same thing in the same sense", which is the Latin consensus ad idem, agreement on the same thing. Section 14 provides that consent is free when it is not caused by coercion (s.15), undue influence (s.16), fraud (s.17), misrepresentation (s.18), or mistake (subject to ss.20, 21 and 22), and adds that consent is said to be so caused when it would not have been given but for the existence of that factor.

Why the law asks two questions and not one

It would be simpler to have one rule: the parties must genuinely agree. The Act splits it, and the split is the key to the whole module.

The first question is whether there was any meeting of minds at all. If Ravi is selling his Nashik vineyard and Meera thinks she is buying his Pune flat, they have not agreed on anything. There is no consent, and so there is no agreement at all under section 2(e), because a proposal and an acceptance must meet.

The second question is whether the agreement that was reached was reached freely. Here the minds did meet. Both know exactly what is being sold and for how much. The problem is that one of them agreed because of a threat, or a lie, or a relationship they could not resist.

The two questions have different answers, and that is why they are separate:

• No consent at all: the agreement is VOID. There is nothing to enforce.
• Consent, but not free: the contract is VOIDABLE at the option of the injured party under section 19 or section 19A. It is a real contract, and it binds until that party sets it aside.

Getting this the wrong way round is the single most expensive error in this module, and it is why section 13 and section 14 are taught before any of the five vitiating factors.

The provisions

Section 13:

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

Section 14:

"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

(3) fraud, as defined in section 17, or

(4) misrepresentation, as defined in section 18, or

(5) mistake, subject to the provisions of sections 20, 21 and 22.

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

In one line

Coercion is getting someone's agreement by doing or threatening something the criminal law forbids, or by unlawfully holding on to their property.

In the words a student can write in an exam: section 15 of the Indian Contract Act 1872 defines coercion as "the committing, or threatening to commit, any act forbidden by the Indian Penal Code, 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." The Explanation adds that it is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed, and consent so caused makes the contract voidable at the option of the party coerced under section 19.

Why the law has this at all

An agreement extracted at knifepoint is still, in a bare sense, an agreement: a proposal was made and accepted. What is missing is not the form of consent but its reality.

The law could simply say that consent must be voluntary and leave courts to judge each case. The Act instead defines coercion by reference to an external and objective standard: the criminal law. If what was done or threatened is an offence, it is coercion; if it is not, it is not, whatever pressure it applied.

That has a cost and a benefit. The cost is that some very severe economic pressure falls outside section 15. The benefit is certainty: a party knows in advance where the line is, and a court is not asked to grade the acceptability of commercial hard bargaining. Where the pressure is severe but lawful, the answer, if there is one, lies in section 16 or in section 23, not here.

The provision itself

"'Coercion' is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, 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.

Explanation. It is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed."

The Act's illustration:

"A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code. 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 was not in force at the time when or place where the act was done."

In one line

Undue influence is what happens when one person's hold over another is strong enough that the weaker one's agreement is really the stronger one's decision.

In the words a student can write in an exam: section 16(1) of the Indian Contract Act 1872 provides that a contract is induced by undue influence "where the relations 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." Section 16(2) lists when a person is deemed to be in such a position, and section 16(3) shifts the burden of proof onto the dominant party where the transaction appears unconscionable.

Why the law has this at all

Coercion under section 15 needs an act forbidden by the criminal law. That leaves untouched the case where nobody threatens anything, and yet the agreement is plainly not the product of a free mind: the frail patient and the doctor, the elderly parent and the son who manages everything, the disciple and the spiritual adviser.

In those relationships pressure does not need to be applied. It is already there, built into the relationship itself, and the weaker party may agree without any sense of being forced at all. Section 15 cannot reach that, because nothing forbidden by the penal law has been done.

Section 16 reaches it by asking a different question. Not "what was done to this person?" but "what was the relationship, and was it used?" That is why the section is drafted around a position to dominate the will rather than around any act of the dominant party.

The provision itself

"(1) A contract is said to be induced by 'undue influence' where the relations 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.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another

(a) where he holds 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 lie upon the person in a position to dominate the will of the other.

Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872."

In one line

Section 19A is the remedy half of undue influence: it makes the contract voidable, and it gives the court a power it has nowhere else in this part of the Act, to set the contract aside on whatever terms are just.

In the words a student can write in an exam: section 19A of the Indian Contract Act 1872 provides that "When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused", and that any such contract "may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just."

Why undue influence has its own section

Section 19 deals with coercion, fraud and misrepresentation, and makes contracts induced by them voidable. Undue influence was originally in that list and was taken out of it: section 19 now reads "coercion, fraud or misrepresentation", with a footnote recording the omission, and section 19A was inserted to deal with undue influence separately.

The reason is the second half of section 19A, which has no counterpart in section 19. Where coercion or fraud is proved, the injured party simply avoids the contract and section 64 requires benefits to be restored. Undue influence is different in a practical way: it typically arises inside a continuing relationship, often a family or a lending relationship, and the party seeking relief has usually received something real, a loan, maintenance, years of care, that cannot simply be handed back.

So the Act gave the court a discretion: it may set the contract aside absolutely, or it may set it aside on terms. That is an equitable power, and it exists so that relief from an unfair bargain does not become a windfall.

The provision itself

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

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just."

Broken down

First limb: voidable, at one party's option only

1. Voidable, not void. The contract is fully valid until avoided. Obligations under it are live, and a third party who acquires rights for value before avoidance is protected.
2. At the option of the party whose consent was so caused. Only the influenced party may avoid. The dominant party is bound throughout and cannot escape by pointing to his own conduct.
3. The option may be waived. A party who, with knowledge of the facts and free of the influence, affirms the contract, expressly or by conduct such as continuing to take its benefits, loses the right to avoid. Delay after the influence has ceased tells against relief.

In one line

Fraud is a lie, or something as good as a lie, told to a contracting party in order to get them to contract, by someone who knows it is not true.

In the words a student can write in an exam: section 17 of the Indian Contract Act 1872 provides that "'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", and then lists five acts. The Explanation provides that mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances are such that it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.

Why the law has this at all

Every contract rests on information, and the parties rarely have the same information. The seller of a machine knows things the buyer cannot discover. The law has to decide how much of that imbalance it will tolerate.

Its answer is neither of the two simple ones. It does not require each party to tell the other everything they know, which would make ordinary trade impossible and would destroy the value of doing your own research. Nor does it let a party say anything at all.

The line it draws is deliberate untruth. You need not speak, but if you speak you must not lie; and you must not do things designed to stop the other side finding out. That is why the Explanation begins by saying silence is not fraud, and then carves out the two cases where silence becomes as culpable as speech.

The provision itself

"'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;

(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 act fitted to deceive;

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

Explanation. 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, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech."

In one line

Misrepresentation is an untrue statement made honestly: the speaker believed it, and it was still wrong, and it still drew the other party into the contract.

In the words a student can write in an exam: section 18 of the Indian Contract Act 1872 provides that "'Misrepresentation' means and includes" three things: 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; any breach of duty which, without an intent to deceive, gains an advantage to the person committing it by misleading another to his prejudice; and causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Why the law has this at all

If the law dealt only with fraud, a party who was misled would have to prove dishonesty, and dishonesty is hard to prove and often absent. People repeat what they were told. A dealer passes on the previous owner's word about the mileage. A seller describes land by the area written in an old document.

In each case the speaker is honest and the listener is still misled, and the listener's position is exactly the same as if he had been lied to: he has bought something other than what he was promised.

So the Act gives relief without requiring dishonesty, but it gives less relief. The contract can be undone, because it should never have been made on those terms. Damages are not given, because the speaker did no wrong beyond being mistaken. That is the whole architecture of section 18, and it explains every difference from section 17.

The provision itself

"'Misrepresentation' 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 any one 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 the subject of the agreement."

Broken down: the three limbs

Limb one: an unwarranted positive assertion

Four elements.

1. A positive assertion, that is a definite statement of fact, not an expression of opinion and not a vague commendation.
2. Of something not true.
3. In a manner not warranted by the information of the person making it. This is the heart of the limb and it is regularly missed. The speaker must have asserted more confidently than his information justified. A person who has heard something at second hand, and states it flatly as a fact of his own knowledge, is within the clause even though he believes it.
4. Though he believes it to be true. Belief is what keeps it out of section 17.

In one line

Section 19 is where the four vitiating factors are turned into a remedy: the contract is real, it binds, and the injured party gets to choose whether to keep it or kill it.

In the words a student can write in an exam: section 19 of the Indian Contract Act 1872 provides that "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 whose consent was caused by fraud or misrepresentation may instead insist that the contract be performed and that he be put in the position in which he would have been if the representations made had been true. The Exception denies avoidance where the party had the means of discovering the truth with ordinary diligence, and the Explanation denies it where the fraud or misrepresentation did not cause the consent.

Why the Act made these contracts voidable and not void

The Act could have said that a contract obtained by fraud is a nullity. It did not, and the reason is that the wrong was done to one party, so the choice should be that party's.

Three consequences follow, and they are the practical value of the section.

The wrongdoer stays bound. He cannot escape a bargain that has turned out badly for him by pointing to his own fraud.

The injured party may prefer to keep the contract. A buyer who was lied to about a machine's output may still want the machine, especially if it has risen in value. Section 19 lets him keep it and be compensated within the contract.

Third parties are protected. Because the contract is valid until avoided, a person who buys from the fraudster for value and without notice, before avoidance, gets a good title. Had the contract been void, nothing would ever have passed and the innocent buyer would lose.

The provision itself

"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 a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.

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

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

In one line

Mistake is the odd one out among the five vitiating factors: where it works at all it makes the agreement void rather than voidable, and most of the time it does not work at all.

In the words a student can write in an exam: section 20 of the Indian Contract Act 1872 provides 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." Section 21 provides that a contract is not voidable because it was caused by a mistake as to any law in force in India, but that a mistake as to a law not in force in India has the same effect as a mistake of fact. Section 22 provides that a contract is not voidable merely because it was caused by one of the parties being under a mistake as to a matter of fact.

Why mistake is treated so differently

The other four vitiating factors all involve one party doing something to the other: threatening, dominating, lying, or misstating. Mistake involves nobody doing anything. The parties are simply wrong.

That changes what the law is trying to achieve. With fraud, the question is what remedy the victim should have against the wrongdoer, and giving him an option is sensible. With mistake there is no wrongdoer and no victim, only two people who have discovered that the thing they were bargaining about was not what they thought.

So the Act asks a different question: was there really an agreement at all? Where both parties are wrong about something essential, there was no genuine meeting of minds under section 13, and the agreement is simply void. Where only one is wrong, the other party has done nothing and has arranged his affairs on the footing of a contract, so the law leaves the contract standing.

That is also why the Act is so restrictive. If every mistaken party could escape, no bargain would be safe, and every buyer who paid too much would call it a mistake. Explanation to section 20 says so in terms: an erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not to be deemed a mistake as to a matter of fact.

The provisions

Section 20:

"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 of the agreement, is not to be deemed a mistake as to a matter of fact."

Its illustrations:

In one line

Consideration is the price of a promise: the something that the promisee, or somebody else, gives or does or promises at the promisor's request in return for it.

In the words a student can write in an exam: section 2(d) of the Indian Contract Act 1872 provides that "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." Section 10 makes a lawful consideration a condition of a contract, and section 25 declares that an agreement made without consideration is void save in the cases it names.

Why the law insists on it

The law does not enforce every promise. It has to sort the promises it will back with the machinery of the state from the promises it will leave to conscience.

Consideration is the sorting device English law arrived at and India adopted. Its logic is that a promise which is part of a bargain deserves enforcement in a way that a bare promise does not. Where each side has given something up, the promise was made in a commercial setting, both parties have thought about it, and neither can say the arrangement came out of nowhere.

There is a second and more practical function. Consideration is evidence of seriousness. A person who has taken money for a promise plainly meant it. A person who said something generous at a family lunch may not have.

India departs from English law in one important respect, and it flows directly from the wording of section 2(d): "the promisee or any other person". In India consideration may move from a third person. This is taken up in [Privity of Contract and Privity of Consideration].

The provision itself

"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."

Broken down: the four elements

Read the definition slowly and it separates into four parts, and each is a place where problems are set.

(a) It must move at the desire of the promisor

The act or abstinence must be done at the promisor's request. An act done voluntarily, or at the desire of a third party, is not consideration for the promise, however much it benefits the promisor.

So a person who puts out a fire in his neighbour's shop, and is then promised a reward, has no contract: he did not act at the promisor's desire. His claim, if any, lies elsewhere, and the Act's answer to exactly this problem is section 25(2), dealt with in the next chapter, and section 70, dealt with in [Quasi Contracts: Obligations Resembling Those Created by Contract].

In one line

The rule is that a promise given for nothing is worth nothing in law, and section 25 sets out the three situations in which the Act decided that was too harsh.

In the words a student can write in an exam: section 25 of the Indian Contract Act 1872 provides that "An agreement made without consideration is void, unless" it falls within one of three cases: it is expressed in writing and registered and made on account of natural love and affection between parties standing in a near relation to each other; or it is a promise to compensate a person who has already voluntarily done something for the promisor, or something the promisor was legally compellable to do; or it is a promise in writing and signed to pay a debt barred by the law of limitation. In any of these cases, such an agreement is a contract.

Why exceptions were needed

A rule that no promise without consideration binds is clean, and it produces three results the drafters were not willing to accept.

Family arrangements. A father who promises his daughter a sum on account of natural love has received nothing in return. Under the bare rule the promise is empty, and families do arrange their affairs this way.

Voluntary services already rendered. A person who has already helped, unasked, and is then promised payment, gets nothing under section 2(d), because the act was not at the promisor's desire. That is a harsh result for the very person the law would want to encourage.

Time barred debts. A debtor who acknowledges an old debt and promises to pay it is doing the honest thing. The bar of limitation extinguishes the remedy, not the debt, so the moral obligation survives, and there is no reason the law should refuse to back a fresh promise to honour it.

Each exception is drafted narrowly, with its own conditions, and the conditions are what problem questions turn on.

The provision itself

"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

(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 enforced payment but for the law for the limitation of suits.

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

Explanation 1. Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2. An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given."

In one line

Two different rules wear similar names: a stranger to the consideration may sue in India, and a stranger to the contract may not, and keeping them apart is the whole of this chapter.

In the words a student can write in an exam: privity of consideration is the rule that consideration must move from the promisee, and India does not follow it, because section 2(d) of the Indian Contract Act 1872 says consideration may be furnished by "the promisee or any other person". Privity of contract is the rule that only a party to a contract may sue on it, and India does follow it, as the Supreme Court confirmed in M.C. Chacko v. State Bank of Travancore, AIR 1970 SC 504, subject to a settled list of exceptions.

Why students confuse them, and how to stop

Both rules use the word privity, which means the relation between parties to a contract. Both are about strangers. The difference is which thing the person is a stranger to.

Ask two separate questions and the confusion disappears.

Question one: who paid? If the answer is "somebody other than the promisee", you are in the field of privity of consideration. In India that is no objection at all.

Question two: who is suing? If the answer is "somebody who is not a party to the contract", you are in the field of privity of contract. In India that is an objection, unless an exception applies.

A single set of facts can raise both, and the standard family settlement problem does exactly that, which is why the two get merged.

Privity of consideration: India departs from England

Section 2(d) is the whole answer, and the words are express:

"When, at the desire of the promisor, the promisee or any other person has done or abstained from doing ... such act or abstinence or promise is called a consideration for the promise."

In English law consideration must move from the promisee. If A promises B something, and C provides the consideration, B cannot sue, because B has given nothing.

In India the words "or any other person" make the promise good. The doctrine this produces is sometimes called constructive consideration: the consideration furnished by the third person is treated as furnished for the promise, whoever supplied it.

The classic illustration in Indian textbooks is the old Madras case of a sister who sued on a deed by which her brother agreed to pay her an annuity, the consideration for that promise having been furnished by their mother, who had settled property on the brother on that footing. The sister had given nothing, and she succeeded, because in India she did not have to.

In one line

Section 23 is the point at which the law refuses to lend its courts to a bargain, and it lists five reasons for refusing, of which the last is deliberately left open.

In the words a student can write in an exam: section 23 of the Indian Contract Act 1872 provides that "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 is unlawful, and every agreement of which the object or consideration is unlawful is void.

Why the law has this at all

Section 10 requires a lawful consideration and a lawful object. Section 23 says what those words mean, and the section is doing something different from everything before it in this module.

Competency, free consent and consideration all protect the parties. Section 23 protects everyone else. It is where the law stops asking whether this bargain is fair between these two people and starts asking whether the state should be enforcing it at all.

That is why the consequence is different. An agreement caught by section 23 is void, and neither party can enforce it. Neither can complain, because neither is being protected: the court is declining, for the public's sake, to be used.

Object and consideration are separate. The consideration is what each side gives. The object is the purpose the agreement is meant to achieve. Either being unlawful is enough. A loan of money is a perfectly lawful consideration; a loan made for the express purpose of funding a smuggling voyage has an unlawful object.

The provision itself

"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."

Broken down: the five heads

(a) Forbidden by law

Where the act the agreement contemplates is prohibited by a statute, or by rules or orders having the force of law, or is an offence. An agreement to sell a drug whose sale is banned, or to trade without a licence a statute requires, falls here.

In one line

When part of a bargain is unlawful, section 24 asks whether the lawful part can be cut free and saved, and the answer usually depends on whether the price was quoted as one lump or item by item.

In the words a student can write in an exam: section 24 of the Indian Contract Act 1872 provides that "If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void." The rule is therefore that where the unlawful part cannot be separated, the whole agreement falls; where it can be separated, the lawful part may stand.

Why the law has to answer this

Section 23 tells you when a consideration or object is unlawful. It does not tell you what to do when only some of it is.

Real agreements are rarely all one thing. A person is hired to manage a business, part of which is lawful and part not. A single deed sells a shop and, in the same breath, promises to suppress a prosecution. Somebody has to decide whether the whole document collapses or only the offending part.

Two answers are possible, and each has a cost. Strike everything down, and a party who has done nothing wrong loses a perfectly good bargain because of one bad clause. Save what you can, and a party may draft an unlawful term into an otherwise lawful contract knowing that the worst that can happen is that the term is ignored.

Section 24 chooses the first as its rule and lets severability operate as the qualification, and the test it uses is whether the consideration is single or divisible.

The provision itself

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

Its illustration:

"A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A's promise, and the consideration for B's promise, being in part unlawful."

Broken down

The section covers two situations, and they are worth separating.

Situation one: a single consideration for one or more objects, part of which is unlawful. One payment is promised, and the things to be done for it are partly lawful and partly not. The illustration is exactly this: one salary of ten thousand rupees a year for superintending both a lawful manufacture and an illegal traffic. Because the salary is a single, undivided consideration, none of it can be attributed to the lawful half alone, and the whole agreement is void.

In one line

A promise not to marry, or to marry only on someone else's terms, is not a promise the courts will enforce against anybody except a minor.

In the words a student can write in an exam: section 26 of the Indian Contract Act 1872 provides that "Every agreement in restraint of the marriage of any person, other than a minor, is void." The restraint may be total or partial and it is void either way, the only exception on the face of the section being an agreement restraining the marriage of a minor.

Why the law has this at all

Marriage is treated by the law as a matter of personal status and personal choice, and the policy behind section 26 is that the choice should not be for sale.

Two harms follow if such agreements are enforced. The first is to the person restrained, whose freedom in the most personal decision of their life becomes a bargaining chip. The second is to the public: the law has always regarded marriage as a social institution it should encourage rather than obstruct, and a system of enforceable promises not to marry works against that.

Note how wide the section is compared with section 27, its neighbour. Section 27 makes an agreement in restraint of trade void "to that extent" and then supplies an exception for the sale of goodwill. Section 26 does neither. It voids the agreement whether the restraint is total or partial, and it admits no exception for reasonableness. The drafters treated freedom of marriage as less negotiable than freedom of trade.

The provision itself

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

Broken down

Four points, and the third and fourth are where the marks are.

1. The agreement must restrain marriage. It must operate on the freedom to marry: an outright promise not to marry, a promise not to marry a particular person or class of person, a promise not to marry for a stated number of years, or a penalty payable on marrying.
2. "Of any person." The restraint need not be on a party to the agreement. A promises B that C will not marry: that too is in restraint of the marriage of a person.
3. Total or partial makes no difference. The section does not say "absolutely", and the contrast with sections 27 and 28, which are drafted with qualifications, is deliberate. A promise not to marry anyone and a promise not to marry outside a particular community are both caught.
4. The exception is a minor. An agreement restraining the marriage of a minor is not void under this section. That fits the general policy of the law against child marriage, and it is why guardianship arrangements restraining a minor's marriage are unaffected.

In one line

Indian law will not let one person contract another out of earning a living, and unlike English law it does not soften that with a general test of reasonableness.

In the words a student can write in an exam: section 27 of the Indian Contract Act 1872 provides that "Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void." The only exception on the face of the section is Exception 1, saving an agreement by one who sells the goodwill of a business to refrain from carrying on a similar business within specified local limits, so long as the buyer carries on a like business there, provided the limits appear to the Court reasonable.

Why India took a stricter line than England

English law also disapproves of restraints of trade, but it asks whether the restraint is reasonable between the parties and in the public interest, and enforces it if it is.

The Indian drafters made a different choice, and the wording shows it. Section 27 declares every such agreement void "to that extent", and then supplies one statutory exception. There is no general reasonableness test written into the section, and the word "reasonable" appears only inside Exception 1, applied to the local limits of a goodwill covenant.

The reason usually given is the state of the economy the Act was written for. A general reasonableness test suits a mature commercial system with courts used to weighing competition; a flat rule suits a system where the parties are often unequal and the person restrained is usually the weaker.

The practical consequence, and it is the single most examinable point in this chapter: an Indian court does not ask whether a restraint is reasonable, except within Exception 1. It asks whether the agreement restrains a lawful profession, trade or business at all.

The provision itself

"Every agreement by which any one 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 good-will is sold. One who sells the good-will 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 good-will 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."

Exceptions 2 and 3 were repealed by the Indian Partnership Act 1932, section 73 and the Second Schedule. They dealt with restraints agreed between partners, and that ground is now covered by sections 11, 36 and 54 of the Partnership Act 1932, dealt with in section 6 below. A textbook printed before 1932 will still show three exceptions; the Act now has one.

In one line

You cannot contract away your right to go to court, and since 1997 you cannot achieve the same thing by drafting a clause that quietly extinguishes the right instead of barring the remedy.

In the words a student can write in an exam: section 28 of the Indian Contract Act 1872, as substituted in 1997, makes void every agreement (a) by which a party is restricted absolutely from enforcing his rights under a contract by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may enforce them, or (b) which extinguishes the rights of a party, or discharges a party from liability, on the expiry of a specified period so as to restrict him from enforcing his rights. There are three exceptions, all concerned with arbitration and with bank guarantees.

Why the section was amended, and why that matters

The section as originally enacted had only what is now clause (a): it struck down an agreement that absolutely restricted a party from enforcing his rights, or that limited the time for doing so.

Careful drafters found the way round. Instead of saying "you may not sue after six months", which limited the time and was void, an insurer or a bank would write "all rights under this policy shall stand extinguished unless a claim is made within six months". The clause did not bar the remedy; it destroyed the right, and a right that no longer exists cannot be enforced whatever the section says about remedies.

Section 28 was substituted by Act 1 of 1997 with effect from 8 January 1997 to close that gap, and clause (b) is what closes it. Any answer on section 28 should say that the section now has two limbs and that the second is the 1997 addition, because a textbook printed before 1997 shows only the first.

There is a second amendment that older books miss. Exception 3 was inserted by Act 4 of 2013, section 17 and the Schedule, with effect from 18 January 2013. So section 28 now carries three exceptions, not two.

The provision itself

"Every agreement,

(a) 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; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights,

is void to the extent."

Exception 1, saving of contract to refer to arbitration dispute that may arise. The section does 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.

In one line

A court can only enforce a promise it can understand, and section 29 voids the agreement whose meaning cannot be pinned down, but only after trying to pin it down.

In the words a student can write in an exam: section 29 of the Indian Contract Act 1872 provides that "Agreements, the meaning of which is not certain, or capable of being made certain, are void." The section therefore has two limbs and the second is the important one: an agreement is not void merely because its terms are unclear on their face, if the contract itself supplies the means of making them certain.

Why the law has this at all

Enforcement is the point of contract law, and enforcement is a practical business. A court asked to enforce an agreement has to decide what each party must do, and then, if they do not do it, what they must pay. It cannot do either if it does not know what was agreed.

There is a second reason, and it is about consent rather than about the court. Section 13 requires the parties to have agreed upon the same thing in the same sense. Where the words are so vague that two honest readers would take them differently, that is some evidence that the minds never met at all.

But the law does not use vagueness as an excuse to escape bargains. Commercial people write loosely and still mean something definite, and a court that struck down every imprecise contract would be useless to trade. So section 29 is drafted to save what can be saved: it voids only what is neither certain nor capable of being made certain.

The provision itself

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

The Act's illustrations, which are the best teaching material in the section:

"(a) A agrees to sell to B 'a hundred tons of oil'. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

(b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.

(c) A, who is a dealer in cocoanut-oil only, agrees to sell to B 'one hundred tons of oil'. The nature of A's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.

(d) A agrees to sell to B 'all the grain in my granary at Ramnagar'. There is no uncertainty here to make the agreement void."

In one line

A wager is a bet, the law will not help you collect on one, and yet it is not a crime and everything built around it stays perfectly good.

In the words a student can write in an exam: section 30 of the Indian Contract Act 1872 provides that "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 any wager is made." The section carries an exception in favour of certain prizes for horse racing of the value of five hundred rupees or upwards, and a saving that nothing in the section legalises a transaction connected with horse racing to which section 294A of the Indian Penal Code applies.

A note on placement. Section 30 sits inside two of MU's printed ranges: Module I's "Sections 1 to 9, 30 to 37 and 68 to 72" and Module II's "Section 10 to 30". It is taught here, with the void agreements of Module II, because that is where it belongs conceptually and where the examiner sets it. Its neighbour, the contingent contract, is at [Contingent Contracts].

Why the law voids a wager but does not forbid it

A wager creates no wealth. Whatever one party wins the other loses, and nothing is produced, carried, or improved. The law therefore has no reason to put the courts at the service of the winner.

But it does not follow that betting should be treated as a crime, or that everything touching it should be poisoned. People bet, they have always bet, and the state's interest in stopping them is limited. Regulating gambling is a matter for the criminal and the licensing law of each State, not for the general law of contract.

So section 30 makes a deliberately narrow intervention. It makes the wager void, which means the winner cannot sue for the stake. It does not make it unlawful under section 23. The difference is invisible in a two party bet and decisive everywhere else, and it is why the leading case in section 5 below matters so much.

The provision itself

"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 any wager is made.

Exception in 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 awarded to the winner or winners of any horse-race.

Section 294A of the Indian Penal Code not affected. Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code apply."

In one line

Section 37 is the opening rule of the whole of performance: do what you promised, or offer to, unless the law lets you off, and if you die your estate carries the promise on.

In the words a student can write in an exam: section 37 of the Indian Contract Act 1872 provides that "The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law", and that "Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract."

Why the Act opens this way

Modules I and II asked whether there is a contract. Module III asks what happens next, and it has to begin by stating the obvious, because everything after it is an exception to the obvious.

The obligation to perform is the default. Sections 38 to 67 then set out, one after another, the circumstances in which the default is displaced: performance is offered and refused, performance becomes impossible, the parties agree to something else, the promisee lets the promisor off, the promisee obstructs him. Every one of those is a way out, and section 37 is what they are ways out of.

The second paragraph does a different and very practical job. Contracts outlast people. If death ended every obligation, a creditor would lose his debt whenever his debtor died, and every long term contract would be a gamble on health. So the default is that the estate carries on, with an exception for promises that only the promisor could have kept.

The provision itself

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

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

Its illustrations:

"(a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A's representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A's representatives.

(b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A's representatives or by B."

Broken down

First paragraph: perform, or offer to perform

"Must either perform, or offer to perform." The alternative matters. A promisor who genuinely offers performance and is refused has done all the law asks of him, and section 38 spells out the consequences. See [Offer of Performance: Tender, and Its Effect].

In one line

If you turn up ready to perform and the other side will not take it, the law treats you as having performed for the purpose of blame, though not for the purpose of payment.

In the words a student can write in an exam: section 38 of the Indian Contract Act 1872 provides that "Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract." Every such offer must be unconditional; made at a proper time and place and in circumstances giving the promisee a reasonable opportunity of ascertaining that the promisor is able and willing there and then to do the whole of what he is bound to do; and, where it is an offer to deliver a thing, in circumstances giving the promisee a reasonable opportunity of seeing that the thing offered is the thing he is bound to deliver. An offer to one of several joint promisees has the same consequences as an offer to all.

Why the law has this at all

Performance usually needs two people. A seller cannot deliver to a buyer who shuts the gate; a debtor cannot pay a creditor who will not take the money.

Without a rule about tender, the party who was ready would be at the mercy of the party who was not. He would be in breach for a non performance the other side caused, and the other side could sit back, watch the date pass, and then sue.

Section 38 stops that. The technical name for the offer is a tender, and the effect of a valid tender that is refused is that the promisor is excused from the consequences of non performance while keeping his own rights intact.

The conditions in the section exist because a tender is a serious thing: it shifts the blame. So the law insists it be a real, complete and inspectable offer, and not a gesture.

The provision itself

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

Every such offer must fulfil the following conditions:

(1) it must be unconditional;

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

(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.

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

In one line

When one party makes plain that the whole of his side will not be done, the other need not wait for the date to arrive: he may end the contract at once, or carry on, and the choice is his and binding.

In the words a student can write in an exam: section 39 of the Indian Contract Act 1872 provides that "When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance." This is the section from which the doctrine of anticipatory breach is worked out in India.

Why the law lets the innocent party act early

Suppose a caterer contracts to serve a wedding in December and writes in August to say he will not be doing it. The bride has two options in fact: find another caterer now, or wait.

If the law made her wait until December to sue, she would be in an absurd position. She must keep herself ready to perform a contract she knows will not be performed, she cannot safely engage anyone else, and her loss grows the longer she waits. And the caterer, who caused all this, would be no worse off for having given her notice.

So the law lets the innocent party treat the refusal as itself a breach and act on it. That is the sense of section 39's words "may put an end to the contract".

The section is careful to make it an option and not an automatic result, and the reason is that the innocent party may prefer to keep the contract alive. The caterer may change his mind; the market may move. The law leaves the choice where it belongs.

The provision itself

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

Its illustrations:

"(a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each night's performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract.

(b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night, A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A's failure to sing on the sixth night."

In one line

Most promises can be kept by anyone competent, some can only be kept by the promisor himself, and a promisee who accepts performance from someone else cannot afterwards go back to the promisor.

In the words a student can write in an exam: section 40 of the Indian Contract Act 1872 provides that "If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it." Section 41 provides that "When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor."

Why these two sections sit together

Section 37 says the parties must perform. It does not say by whose hands.

For most contracts the question does not matter. A buyer who has contracted for a hundred bags of cement cares that they arrive, not who carries them. For some contracts it matters entirely: a client who has retained a particular advocate has not agreed to be represented by whoever that advocate sends.

Section 40 sorts contracts into those two classes. Section 41 then deals with the practical consequence of the sorting going the promisee's way: if a stranger performs and the promisee takes the performance, that is the end of it.

The provisions

Section 40:

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

Its illustrations:

"(a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so.

(b) A promises to paint a picture for B. A must perform this promise personally."

Section 41:

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

Broken down

Section 40: the test, and the default

The test is what appears from the nature of the case to have been the intention of the parties. Not what the promisor would prefer, and not what is convenient. Two questions answer it in practice.

In one line

When several people promise together, the creditor may take the whole from any one of them, that one may make the others contribute, and releasing one does not let the rest off.

In the words a student can write in an exam: section 42 of the Indian Contract Act 1872 makes joint promisors and, on death, their representatives jointly bound to fulfil the promise; section 43 allows the promisee to compel any one or more of the joint promisors to perform the whole, allows each joint promisor to compel contribution equally from the others, and makes the rest share the loss of a defaulter's share equally; section 44 provides that a release of one joint promisor does not discharge the others; and section 45 vests joint rights in the promisees jointly and, on death, in the representative of the deceased jointly with the survivors.

Why Indian law differs from English law here

This is one of the clean India versus England comparisons in the paper, and MU sets it.

In English law a joint promise was, historically, joint only. The creditor had to sue all the joint promisors together, and a release of one released all, because there was a single obligation shared among them.

The Indian Act rejected both rules. Section 43 makes the liability joint and several, so the promisee may go against any one of them for the whole; and section 44 says in terms that a release of one does not discharge the others.

The reason is practical. A rule requiring all to be sued lets one absent or untraceable promisor stall the whole claim, and a rule that a release of one releases all makes it impossible for a creditor to settle with a willing debtor without losing the rest. Indian law puts the burden of sorting out the shares on the promisors, who know their own arrangement, rather than on the promisee, who does not.

The provisions

Section 42, devolution of joint liabilities:

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

Section 43, any one of joint promisors may be compelled to perform:

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

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

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

Explanation. Nothing in this section shall prevent a surety from recovering from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal."

In one line

Five short sections fill in the when and the where that contracts routinely leave out, and they are almost always examined together as a single problem.

In the words a student can write in an exam: where no time is specified and no application by the promisee is required, performance must be within a reasonable time (section 46); where a day is fixed and no application is required, the promisor may perform at any time during the usual hours of business on that day and at the proper place (section 47); where a day is fixed and the promisee must apply, he must apply at a proper place and within the usual hours of business (section 48); where no place is fixed and no application is required, the promisor must apply to the promisee to appoint a reasonable place and perform there (section 49); and performance may be made in any manner or at any time which the promisee prescribes or sanctions (section 50).

Why these sections exist

Contracts are written by people in a hurry. They say what is to be delivered and for how much, and they very often leave out when, and almost always leave out where.

A court cannot decide whether a party has performed without knowing both. So the Act supplies default rules, and it does it by asking two questions, which is the key to the whole group.

Question one: is a time fixed? Question two: must the promisee apply for performance, or is the promisor to perform without being asked?

Those two questions, each with two answers, produce four situations, and sections 46 to 49 are those four situations. Section 50 then sits above all of them and lets the promisee vary the arrangement.

The grid

This table is the fastest way to hold the group, and it is worth reproducing in an answer.

And on place:

The provisions, one by one

Section 46: no time fixed, no application needed

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

Explanation. The question 'what is a reasonable time' is, in each particular case, a question of fact."

In one line

In a two sided bargain somebody has to go first, and these four sections decide who, what happens if he does not, and what happens if the other side stops him.

In the words a student can write in an exam: section 2(f) of the Indian Contract Act 1872 defines reciprocal promises as promises which form the consideration or part of the consideration for each other. Section 51 provides that where they are to be simultaneously performed, no promisor need perform unless the promisee is ready and willing to perform his; section 52 fixes the order of performance, by the contract where it is expressly fixed and otherwise as the nature of the transaction requires; section 53 makes the contract voidable at the option of a party who is prevented from performing, with compensation; and section 54 says that a party who fails to perform the promise that must come first cannot claim performance of the other and must make compensation.

Why these sections exist

Almost every contract is a set of reciprocal promises. The seller promises goods, the buyer promises money, and each promise is the consideration for the other.

That produces a practical problem the parties rarely address. If the seller says "pay me first" and the buyer says "deliver first", both are refusing to perform and neither is obviously in the wrong. Somebody has to be told to move.

Sections 51 to 54 are the Act's answer, and they work through three questions in order.

1. Are the promises to be performed at the same time? If so, neither can demand performance without being ready himself. That is section 51.
2. If not, in what order? As the contract fixes, or as the nature of the transaction requires. That is section 52.
3. What if somebody defaults or obstructs? Sections 53 and 54.

Section 51: simultaneous performance, and readiness

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

Its illustrations:

"(a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless A is ready and willing to deliver them on payment.

(b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery. A need not deliver, unless B is ready and willing to pay the first instalment on delivery. B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment."

In one line

Missing a deadline sometimes ends the contract and sometimes only costs money, and section 55 decides which by asking what the parties intended the deadline to be for.

In the words a student can write in an exam: section 55 of the Indian Contract Act 1872 provides that where a party fails to do a thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract; that if it was not, the contract does not become voidable but the promisee is entitled to compensation for the loss; and that if the promisee accepts performance at another time, he cannot claim compensation unless, at the time of acceptance, he gives notice of his intention to do so.

Why the section is needed

Every contract with a date raises the same question the moment the date is missed: is the contract over, or is it merely late?

The consequences are very far apart. If time was of the essence, the innocent party may walk away, refuse the late performance, and treat himself as discharged. If it was not, he must accept the late performance and is confined to damages for the delay.

The Act could have picked one answer, and it did not, because commercial reality does not. A shipment of Diwali sweets delivered a week after Diwali is worthless; a plot of land conveyed a month late is still the plot. Section 55 therefore makes the answer turn on what the parties intended, and then supplies the consequences for each answer.

The provision itself

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

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

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

In one line

Section 56 covers two different things in one section: a promise that was impossible from the start, which is void, and a promise that becomes impossible afterwards, which kills the contract from that moment.

In the words a student can write in an exam: section 56 of the Indian Contract Act 1872 provides that "An agreement to do an act impossible in itself is void"; that "A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful"; and that a promisor who knew, or with reasonable diligence might have known, of an impossibility or unlawfulness which the promisee did not know, must make compensation to the promisee for the loss sustained through the non performance.

Why the law discharges a contract nobody can perform

A contract is a promise the law will enforce. Enforcement means either compelling performance or making the promisor pay for not performing.

Where performance has become genuinely impossible through no one's fault, neither makes sense. Compelling the impossible is futile, and making a party pay for failing to do what nobody could do is punishment rather than compensation. The law's answer is to discharge both parties.

But the doctrine has to be kept narrow, and this is the part students underweight. Every contract allocates risk. A seller who agrees a fixed price is taking the risk that his costs rise; a builder who agrees a completion date is taking the risk that labour is short. If a party could escape whenever performance became difficult, expensive or unprofitable, the whole point of fixing terms in advance would be lost.

So section 56 discharges the contract only where performance becomes impossible or unlawful, and the courts have consistently refused to extend it to performance that has merely become onerous.

The provision itself

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

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

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

In one line

England reasons that the parties must have meant the contract to end; India does not reason at all, because a statute says it ends, and that single difference decides several examination questions.

In the words a student can write in an exam: in India the doctrine of frustration is an aspect of the law of discharge by supervening impossibility or illegality and comes within section 56 of the Indian Contract Act 1872, which lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. That was settled by the Supreme Court in Satyabrata Ghose v. Mugneeram Bangur and Co., AIR 1954 SC 44, which also held that English cases have persuasive value only.

Why the theoretical basis matters in practice

It is tempting to treat this as a debate for textbooks. It is not, and the reason is worth stating at the top of any answer.

If frustration rests on an implied term, as English law long held, then the court's question is: what would these parties have agreed, had they thought about this event? That makes the doctrine part of the construction of the contract, and it means a court can be argued out of it by pointing to what the parties would probably have said.

If frustration rests on a rule of positive law, as section 56 does, the court's question is simply: has the act become impossible or unlawful? The parties' probable intention is beside the point.

Three consequences follow from the Indian position and each is examinable.

1. The court does not search for an implied term.
2. A party cannot resist discharge by arguing about what the parties would have wanted.
3. The consequences of frustration are governed by section 65, and not by any judge made rules of restitution.

The leading case

Satyabrata Ghose v. Mugneeram Bangur and Co., AIR 1954 SC 44, decided 16 November 1953.

Facts. An agreement for the sale of land in a development scheme, under which the company had undertaken to construct roads and drains before calling for the balance of the price. Part of the land was requisitioned for military purposes during the war. The company claimed that the contract had become impossible of performance, and treated it as cancelled.

Held. The doctrine of frustration is an aspect of the law of discharge of contract by reason of supervening impossibility or illegality, and it comes within the purview of section 56. The view that section 56 applies only to cases of physical impossibility, and that where it does not apply the English principles of frustration may be resorted to, is not correct. English cases have persuasive value only. Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.

In one line

Two short sections that save the lawful half of a bargain where section 24 would have destroyed the whole of it, and the difference lies entirely in how the bargain was put together.

In the words a student can write in an exam: section 57 of the Indian Contract Act 1872 provides that where persons reciprocally promise, firstly to do certain things which are legal, and secondly, under specified circumstances, to do certain other things which are illegal, "the first set of promises is a contract, but the second is a void agreement". Section 58 provides that in the case of an alternative promise, one branch of which is legal and the other illegal, "the legal branch alone can be enforced".

Why these sections exist alongside section 24

Section 24 says that where any part of a single consideration is unlawful, the whole agreement is void. Applied without qualification that would be very destructive, because parties frequently record several arrangements in one document, and one bad arrangement would poison all of them.

Sections 57 and 58 identify the two structures in which the lawful part can be cut free with confidence.

Section 57 applies where there are two separate sets of reciprocal promises. Because they are separate, each has its own consideration, and the unlawful set can be struck out without touching the lawful one.

Section 58 applies where there is one promise with two branches, only one of which is unlawful. Because the promisor could always have chosen the lawful branch, holding him to it takes nothing from him that he did not agree to.

Section 24, by contrast, deals with the case where the lawful and the unlawful are paid for together, by one undivided consideration, and there nothing can be separated. See [Agreements Void in Part, and Severability].

Section 57: two sets of reciprocal promises

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

Its illustration:

"A and B agree that A shall sell B a house for 10,000 rupees, but that, if B uses it as a gambling house, he shall pay A 50,000 rupees for it.

The first set of reciprocal promises, namely, to sell the house and to pay 10,000 rupees for it, is a contract.

The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement."

What the illustration shows. There are two bargains inside one document. The sale at ten thousand rupees stands on its own and is enforceable. The arrangement about the gambling house has its own consideration, the extra forty thousand rupees, and its own object, which is unlawful, so it falls. Neither drags down the other.

In one line

Where a debtor owes several debts and pays less than the total, three rules decide which debt the money goes to, and they run in a fixed order: the debtor first, then the creditor, then the law.

In the words a student can write in an exam: sections 59 to 61 of the Indian Contract Act 1872 govern the appropriation of payments. Under section 59 a payment made with express intimation, or under circumstances implying, that it is to go to a particular debt must, if accepted, be applied accordingly. Under section 60, where the debtor has not intimated and no circumstances indicate, the creditor may apply it at his discretion to any lawful debt actually due, whether or not its recovery is barred by limitation. Under section 61, where neither party appropriates, the payment is applied to the debts in order of time, barred or not, and debts of equal standing are discharged proportionably.

Why the question matters

It looks like bookkeeping, and it decides real money, for three reasons.

Limitation. A debt whose recovery is time barred is still a debt: the Limitation Act 1963 bars the remedy and does not extinguish the obligation. So a creditor who can direct a payment to a time barred debt gets value he could never have sued for. Sections 60 and 61 both say expressly that appropriation may be made to such a debt.

Security. One debt may be secured and another not. Applying a payment to the secured debt frees the security; applying it to the unsecured debt leaves the security in place. The creditor's interest and the debtor's are opposite.

Interest and guarantees. One debt may carry a higher rate, or may be guaranteed by a surety who is discharged pro tanto as it is paid.

The Act resolves the conflict by a clear order of priority, and the order is the answer to almost every problem question on the topic.

The provisions

Section 59, where the debt to be discharged is indicated:

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

Section 60, where it is not indicated:

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

In one line

What the parties made by agreement they can unmake or remake by agreement, and section 62 names the three ways of doing it.

In the words a student can write in an exam: section 62 of the Indian Contract Act 1872 provides that "If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed." The three modes are novation, substituting a new contract or a new party; rescission, cancelling the contract without putting anything in its place; and alteration, changing one or more of its terms while the contract itself continues.

Why the section exists

A contract binds because the parties agreed to be bound. It follows that the same parties, by the same means, can release each other, and section 62 is that proposition in statutory form. The Latin tag is eodem modo quo quid constituitur, eodem modo destruitur, a thing is unmade in the same way it was made.

The section is placed in the group of provisions headed "Contracts which need not be performed", and that heading is the key to it. Section 62 does not say the contract was never good; it says the parties have agreed that it need not be performed.

The provision itself

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

Its illustrations:

"(a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.

(b) A owes B 10,000 rupees. A enters into an arrangement with B and gives B a mortgage of his estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.

(c) A owes B 1,000 rupees under a contract. B owes C 1,000 rupees. B orders A to credit C with 1,000 rupees in his books, but C does not assent to the arrangement. B still owes C 1,000 rupees, and no new contract has been entered into."

Illustration (c) is the one to learn, because it shows the requirement that decides most problems: every party must assent.

Broken down: the three modes

(a) Novation

Novation means substituting a new contract for an old one, and it takes two forms.

• Substitution of a new CONTRACT between the same parties. Illustration (b): a debt of ten thousand rupees replaced by a mortgage for five thousand. The new contract extinguishes the old.
• Substitution of a new PARTY. Illustration (a): B agrees to accept C as his debtor instead of A. A's debt ends and a new debt from C begins.

In one line

A promisee may let the promisor off, wholly or partly, and in India he need be given nothing in return for doing so.

In the words a student can write in an exam: section 63 of the Indian Contract Act 1872 provides that "Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit." No consideration is required for any of these, and the section is a deliberate departure from the English rule in Pinnel's Case.

Why India departed from English law

English law held, in the rule associated with Pinnel's Case, that payment of a smaller sum is not satisfaction of a larger. The reasoning was pure consideration doctrine: the creditor who accepts five thousand rupees for a debt of ten thousand receives nothing in return for giving up the other five thousand, so his promise to forgo it is unsupported and he may sue for the balance.

The result is unattractive and commercially useless. A creditor who has settled, and been paid, may turn round and sue for the rest. Businesses compound with their creditors all the time, and English law had to soften the rule with a series of exceptions.

The Indian Act cut through it. Section 63 lets a promisee give up part or all of his right without consideration, and it says so by simply not requiring any. Section 25's rule that an agreement without consideration is void does not touch it, because section 63 is not an agreement to do something: it is a release, and the Act treats it as effective on its own terms.

The provision itself

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

Its illustrations:

"(a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b) A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.

(c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.

(d) A owes B, under a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.

(e) A owes B 2,000 rupees, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B's demand."

In one line

When a contract is unwound, somebody is usually holding something they were given under it, and these two sections say who must give it back and on what footing.

In the words a student can write in an exam: section 64 of the Indian Contract Act 1872 provides that when a person at whose option a contract is voidable rescinds it, the other party need not perform, and the party rescinding must restore any benefit received under it, so far as may be, to the person from whom it was received. Section 65 provides that when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under it is bound to restore it, or to make compensation for it, to the person from whom he received it.

Why two sections and not one

The two sections deal with two different situations, and mixing them is the commonest error on this topic.

Section 64 is about a VOIDABLE contract that somebody chooses to rescind. There was a valid contract, one party had the option to escape it, and he has exercised it. The obligation to restore falls on the party rescinding, because he is the one asking to be let out.

Section 65 is about an agreement that is VOID, or a contract that BECOMES void. Nobody chose anything. The obligation falls on any person who has received an advantage, whichever of them that is, because neither party is asking for a favour and both must simply be put back.

The difference in wording follows from that. Section 64 speaks of the party rescinding restoring a benefit; section 65 speaks of any person restoring an advantage or making compensation for it.

The provisions

Section 64:

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

Section 65:

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

Section 65's illustrations:

"(a) A pays B 1,000 rupees in consideration of B's promising to marry C, A's daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees.

(b) A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers 130 maunds only before that day, and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them.

(c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her a hundred rupees for each night's performance. On the sixth night, A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.

(d) A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 rupees paid in advance."

In one line

Two closing sections of Module III's range: how a rescission is actually communicated, and what happens when the promisee himself gets in the way of performance.

In the words a student can write in an exam: section 66 of the Indian Contract Act 1872 provides that "The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal." Section 67 provides that "If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby."

Section 66: rescission borrows the rules for a proposal

Why the Act did it this way

Rescission is an act that must reach the other party to have effect. So is a proposal, and so is the revocation of a proposal. Rather than write a second set of rules, the Act simply imports the first set.

That makes section 66 a signpost, and answering on it means going back to Module I. The rules it imports are:

• Section 3, the modes of communication: any act or omission of the party by which he intends to communicate, or which has the effect of communicating.
• Section 4, when communication is complete: as against the person who makes it, when it is put in a course of transmission so as to be out of his power; and as against the person to whom it is made, when it comes to his knowledge.
• Section 5, revocation: a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.

See [Communication of Proposal, Acceptance and Revocation] and [Revocation of Proposals and Acceptances].

What follows in practice

Rescission must be communicated. A party who privately decides to rescind has not rescinded. He must do some act by which he intends to communicate it, or which has that effect. Filing a suit for rescission communicates it; so does a letter, and so may conduct such as returning the goods.

The two dates differ. As against the party rescinding, the communication is complete when the letter is posted; as against the other party, when it reaches him. That matters where rights change hands in between.

Rescission may be revoked. This is the part students overlook, and it is why section 66 exists rather than a bare rule that rescission must be communicated. Applying section 5 by analogy, a rescission may be withdrawn before its communication is complete as against the other party. So a party who posts a rescission and telegraphs a withdrawal that arrives first has not rescinded.

In one line

Discharge means the contract is over and nobody owes anything further under it, and there are five ways it can happen.

In the words a student can write in an exam: a contract is discharged by performance (section 37), by agreement (sections 62 and 63), by impossibility or frustration (section 56), by breach (section 39, with the remedies in sections 73 to 75), and by operation of law. MU's syllabus names "Discharge of contract" as topic 3.2, and this chapter is the synthesis that topic asks for; each mode is worked in full in its own chapter.

What discharge means, and what it does not

Discharge means the contractual obligations come to an end and the parties are no longer bound to perform.

Two things it does not mean, and both are regularly misunderstood.

It does not always mean nobody owes anything. A contract discharged by breach leaves the guilty party liable in damages. A contract discharged by frustration leaves benefits to be restored under section 65. What ends is the obligation to perform, not necessarily every liability arising out of the contract.

It does not mean the contract was never good. A void agreement was never a contract; a discharged contract was one and has run its course.

The five modes

Mode one: discharge by performance

The normal way. Section 37 requires the parties to perform, or offer to perform, their respective promises, and when both have performed the contract is discharged.

Two variants sit here.

• Actual performance, where both parties do what they promised.
• Attempted performance, or tender. Section 38: where a promisor makes a valid offer of performance and it is not accepted, he is not responsible for the non performance and does not lose his rights. A tender of goods discharges the obligation to deliver; a tender of money does not discharge the debt.

The supporting sections are those on who must perform (40, 41), joint promises (42 to 45), time and place (46 to 50), reciprocal promises (51 to 54) and time as the essence (55). See [The Obligation to Perform, and Who Is Bound].

Mode two: discharge by agreement

What was made by agreement can be unmade by agreement. Three named modes in section 62 and four powers in section 63.

• Novation: a new contract or a new party substituted, section 62.
• Rescission by agreement: the contract cancelled, section 62.
• Alteration: terms changed, the contract continuing, section 62.
• Remission, waiver, extension of time, and accord and satisfaction: section 63, and no consideration is required.

Accord and satisfaction is the name for the last of section 63's powers: the accord is the agreement to accept something different, and the satisfaction is the thing actually accepted. See [Discharge by Agreement: Novation, Rescission and Alteration] and [Remission and Waiver of Performance].

In one line

A breach is a failure to keep the bargain, it comes in two shapes according to when it happens, and the innocent party's most important decision is the election he makes in response.

In the words a student can write in an exam: a breach of contract occurs when a party fails or refuses to perform his promise, or disables himself from performing it, without lawful excuse. Where it occurs at or after the time for performance it is an actual breach; where it occurs before that time it is an anticipatory breach, and section 39 of the Indian Contract Act 1872 provides that where a party has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified by words or conduct his acquiescence in its continuance.

Why the classification matters

The Act does not define breach and does not use the words actual or anticipatory. They are the names the courts give to the two situations, and they matter because they change three practical things.

When the innocent party may sue. On an actual breach he sues once the time has passed. On an anticipatory breach, if he accepts the repudiation, he may sue at once.

Whether he must stay ready. If he affirms, he must remain ready and willing to perform his side. If he accepts the repudiation, he is discharged.

How damages are measured. The date at which the loss is assessed shifts according to the election he makes.

Breach, and what is not a breach

A breach is a failure to perform without lawful excuse. So before calling anything a breach, eliminate the excuses the Act itself provides, and this is a useful checklist in a problem question.

• Performance was tendered and refused, section 38.
• Performance became impossible or unlawful, section 56.
• The parties agreed otherwise: novation, rescission, alteration, section 62; remission, waiver, extension, section 63.
• The promisee prevented performance, section 53, or neglected to afford reasonable facilities, section 67.
• The other party's reciprocal promise had to be performed first and was not, section 54.

Where none of these applies, the failure is a breach.

Actual breach

The ordinary case: the time for performance arrives and the party does not perform, or performs defectively.

Two forms.

• Failure at the time fixed. Whether it also ends the contract depends on section 55 and whether time was of the essence. See [Time as the Essence of the Contract].
• Failure during performance. A contract performed in stages may be broken part way through, and whether the innocent party may treat the whole as at an end depends on whether the failure goes to the root of the contract.

In one line

Section 73 is the section the whole paper leads to: it says what a broken contract is worth, and it draws the line between loss the law will pay for and loss it will not.

In the words a student can write in an exam: section 73 of the Indian Contract Act 1872 provides that when a contract has been broken, the party who suffers by the breach "is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it", and that "Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach." The section also extends to obligations resembling those created by contract, and its Explanation requires the means of remedying the inconvenience to be taken into account.

Why compensation and not punishment

The law's aim in awarding damages for breach of contract is compensatory, not punitive. The innocent party is to be put, so far as money can do it, in the position he would have been in had the contract been performed. He is not to be enriched, and the party in breach is not to be punished for breaking his word.

Two consequences flow from that single idea, and they explain most of the rules in this chapter and the next.

The claimant must have suffered a loss. Section 73 speaks of compensation for any loss or damage caused. Where the breach caused no loss, nothing is payable, however clear the breach.

The loss must be attributable to the breach. Not every misfortune that follows a breach was caused by it in the sense the law requires, which is why the section excludes remote and indirect loss.

The word the Act uses throughout is compensation, not damages. The two are used interchangeably in practice, and it is worth writing the Act's word when quoting the section.

The provision itself

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

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

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

Explanation. In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."

In one line

Two limits sit on every claim for damages: the loss must not be too remote, and the claimant must have done what he reasonably could to keep it down.

In the words a student can write in an exam: remoteness is governed by the two limbs of section 73 of the Indian Contract Act 1872, which enact the rules in Hadley v. Baxendale: recoverable loss is that which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from it, and "such compensation is not to be given for any remote and indirect loss or damage". Mitigation is governed by the Explanation to section 73, which requires "the means which existed of remedying the inconvenience caused by the non-performance of the contract" to be taken into account.

Why a line has to be drawn at all

Losses cascade. A carrier delivers a mill shaft a week late; the mill stands idle; its customers go elsewhere; the miller cannot pay his bank; the bank forecloses. Every one of those is, as a matter of fact, caused by the late delivery.

If the law made the carrier pay for all of it, no one would carry anything for a modest fee, because the potential liability would bear no relation to the price of the job. The parties would have to price for the worst customer they might ever have.

So the law fixes a point beyond which loss is not recoverable, and it chooses the point by asking what the parties can fairly be taken to have had in mind. A defendant is liable for what he could reasonably have contemplated, and not for what he could not.

Hadley v. Baxendale is the English decision in which that principle was stated in two rules, and section 73 enacts both. It is worth naming as the origin, and worth saying that in India the governing text is the section rather than the case.

Remoteness: the two limbs applied

Limb one: loss arising naturally, in the usual course of things

The loss any contract of this kind would ordinarily produce. No special knowledge is required, because the defendant is taken to have contemplated it from the nature of the transaction.

Examples: a buyer's loss on having to buy substitute goods at a higher market price; a seller's loss on reselling below the contract price; a printer's loss of ordinary printing work when his press is not delivered.

Limb two: loss the parties knew of at the time of contracting

Loss that is not ordinary, and is recoverable only if the parties knew, when they made the contract, that it was likely to result from a breach.

In one line

Where the contract names a sum payable on breach, India does not ask whether it was a genuine estimate or a threat: it awards reasonable compensation up to that sum either way.

In the words a student can write in an exam: section 74 of the Indian Contract Act 1872 provides that where a contract has been broken and "a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty", the party complaining of the breach is entitled, "whether or not actual damage or loss is proved to have been caused thereby", to receive "reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." India has therefore abolished the English distinction between liquidated damages and a penalty, and the named sum operates as a ceiling, not as an entitlement.

Why parties name a sum, and why the law does not simply enforce it

Parties fix a sum in advance because proving loss after a breach is slow, expensive and sometimes impossible. A contractor's delay on a public road causes real harm that nobody can quantify to the rupee.

But the same clause can be used as a threat: a sum out of all proportion to any conceivable loss, inserted to frighten the other side into performing. Enforcing that would turn damages into punishment, which is not what the law of contract is for.

English law answered by classifying the clause. If the sum was a genuine pre estimate of loss, it was liquidated damages and enforceable as it stood. If it was in terrorem, that is designed to frighten, it was a penalty and unenforceable, and the claimant had to prove his actual loss.

Indian law refused to classify. Section 74 applies to a sum named as the amount to be paid and to any other stipulation by way of penalty, and gives the same answer to both: reasonable compensation, not exceeding the sum named. The classification exercise, which produced a great deal of English litigation, is simply unnecessary here, and saying so is the first thing an answer on this section should do.

The provision itself

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

Explanation. A stipulation for increased interest from the date of default may be a stipulation by way of penalty.

Exception. When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.

Explanation. A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested."

In one line

Section 75 answers the question a party asks the moment he walks away from a broken contract: having ended it, may he still sue for what the breach cost him? He may.

In the words a student can write in an exam: section 75 of the Indian Contract Act 1872 provides that "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." It is the last section of Module III's printed range, and it is the bridge from the Contract Act's remedies to the Specific Relief Act 1963 taken up in Module IV.

Why the section is needed

Without it there would be a real argument, and it runs like this. Rescission ends the contract. If the contract is at an end, there is nothing left to sue on, so the party who rescinded has chosen his remedy and must live with it.

That argument is wrong, and section 75 says so, but it is wrong for a reason worth understanding. Rescission ends the obligation to perform; it does not undo the breach that had already happened. The innocent party's right to be compensated accrued when the other side broke the contract, and putting an end to future performance does not take that away.

The practical importance is large, because the alternative would force an impossible choice: either stay bound to a contract the other side has repudiated, in order to preserve a claim, or walk away and lose the claim. Section 75 lets the innocent party do the sensible thing, which is to end the contract, go into the market, and sue for the difference.

The provision itself

"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."

Its illustration:

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

This is the same fact pattern the Act uses three times, and following it across the three sections is the quickest way to see how they fit together.

• Section 39, illustration (a): the singer absents herself on the sixth night, and B is at liberty to put an end to the contract. That is the right to rescind.
• Section 65, illustration (c): B rescinds, and B must pay A for the five nights on which she had sung. That is the restitution he owes.
• Section 75: B rescinds, and B is entitled to compensation for the damage he has sustained. That is the claim he keeps.

In one line

MU's topic word is "Types", so this chapter names each kind of damages and each remedy, and says when a student should reach for which.

In the words a student can write in an exam: the remedies for breach of contract are damages under sections 73 and 74 of the Indian Contract Act 1872, compensation on rightful rescission under section 75, specific performance and injunction under the Specific Relief Act 1963, and a claim on a quantum meruit. Damages themselves are classified as ordinary or general, special, nominal, exemplary or vindictive, and liquidated, and the classification decides what has to be pleaded and proved in each case.

Why the classification is worth learning

Naming a kind of damages is not a labelling exercise. Each label carries a different requirement.

Ordinary damages need no special notice. Special damages need knowledge at the time of contracting. Nominal damages need a breach but no loss. Exemplary damages are almost never given in contract at all. Liquidated damages need a clause and are capped by it.

So a student who can classify the loss in a problem question has already decided what must be proved, and that is most of the answer.

The types of damages

(a) Ordinary or general damages

The loss that naturally arose in the usual course of things from the breach, under the first limb of section 73. It is presumed to have been in the parties' contemplation from the nature of the transaction and needs no special notice.

The usual measure in a sale is the difference between the contract price and the market price at the time and place of the breach.

(b) Special damages

Loss that is not ordinary, recoverable under the second limb of section 73 only where the parties knew, when they made the contract, that it was likely to result from a breach.

They must be pleaded and proved, and the knowledge must be brought home to the defendant at the time of contracting. See [Remoteness of Damage, and the Duty to Mitigate].

(c) Nominal damages

A small sum awarded where a breach is proved but no loss has been suffered. They vindicate the right without compensating anything, since there is nothing to compensate.

Do not confuse nominal damages with the position under section 74. On Kailash Nath Associates a section 74 claim where no loss at all was caused yields nothing, because that section compensates for loss or damage caused by the breach.

(d) Exemplary or vindictive damages

Damages awarded to punish rather than to compensate. Because the object of section 73 is compensation, they are not generally awarded in contract in India.

In one line

Sometimes money is not the answer, and specific relief is the law's name for giving the plaintiff the thing itself rather than its price.

In the words a student can write in an exam: specific relief is relief granted by ordering the defendant to do or to forbear from doing the very thing the plaintiff is entitled to, rather than by awarding compensation for its loss. It originated in the English courts of equity, which intervened where the common law's only remedy, damages, was inadequate; in India it is codified in the Specific Relief Act 1963 (Act 47 of 1963), which came into force on 1 March 1964. Since the Specific Relief (Amendment) Act 2018, in force 1 October 2018, specific performance in India is no longer discretionary, and section 10 provides that it "shall be enforced by the court".

Why a separate body of remedies grew up

The common law of England had one answer to a broken obligation: damages. That works whenever money can buy a substitute. It does not work at all in three situations, and those three situations are the whole justification for specific relief.

Where the thing is unique. A buyer of a particular piece of land, or of a specific painting, cannot go into the market and buy another. Damages give him the difference in price of something he never wanted.

Where the loss cannot be measured. What is the value of a right of way, or of an obligation not to publish a manuscript? A court that must put a figure on it will be guessing.

Where the wrong is continuing or threatened. Damages compensate for a wrong already done. They do nothing about one that is about to be done, or one that repeats every day.

Equity, administered by the Court of Chancery, developed remedies for these cases: specific performance, injunction, rectification, rescission, cancellation and the declaration. They came to be called equitable remedies, and two features followed from their origin, both of which matter to Indian law today.

They were discretionary. The Chancellor granted them where it was just to do so and refused them where it was not.

They were governed by maxims. "He who seeks equity must do equity." "He who comes into equity must come with clean hands." "Equity will not suffer a wrong to be without a remedy." "Delay defeats equity."

How the jurisdiction reached India

Equity as a separate system of courts never existed in India. What happened instead is that the principles were received and then codified.

The Indian courts applied equitable principles as rules of justice, equity and good conscience where no statute governed. Then the legislature enacted the Specific Relief Act 1877, which codified the subject, and that Act was replaced, on the recommendation of the Law Commission of India in its Ninth Report, by the Specific Relief Act 1963.

In one line

Four short opening sections set the frame for the whole Act: what it is called and where it applies, what its words mean, what it leaves untouched, and the one thing it may never be used for.

In the words a student can write in an exam: section 1 of the Specific Relief Act 1963 gives the short title and extent and provides for commencement by notification; section 2 defines obligation, settlement, trust and trustee, and imports every other defined expression from the Indian Contract Act 1872; section 3 saves rights to relief other than specific performance under any contract and the operation of the Indian Registration Act 1908; and section 4 provides that "Specific relief can be granted only for the purpose of enforcing individual civil rights and not for the mere purpose of enforcing a penal law."

Why a preliminary Part matters

It is tempting to skip the definitions. Two of them decide cases in this Module.

Section 2(e) imports the whole vocabulary of the Contract Act into this Act. So "contract", "agreement", "void", "voidable", "consideration" and "coercion" mean here exactly what Module II decided they mean. That is what joins the Specific Relief Act to the first three Modules, and it is why this paper sets them together.

Section 4 is the limit on the whole Act. Every remedy in it is subject to that one sentence.

The provisions

Section 1:

"(1) This Act may be called the Specific Relief Act, 1963.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint."

Two points from the Act's own footnotes. The words "except the State of Jammu and Kashmir" were omitted by Act 34 of 2019, so the Act now extends to the whole of India without qualification. And the date appointed under sub-section (3) was 1 March 1964, by notification S.O. 189 dated 13 January 1964.

Section 2:

"In this Act, unless the context otherwise requires,

(a) 'obligation' includes every duty enforceable by law;

(b) 'settlement' means an instrument (other than a will or codicil as defined by the Indian Succession Act, 1925) whereby the destination or devolution of successive interests in movable or immovable property is disposed of or is agreed to be disposed of;

(c) 'trust' has the same meaning as in section 3 of the Indian Trusts Act, 1882, and includes an obligation in the nature of a trust within the meaning of Chapter IX of that Act;

(d) 'trustee' includes every person holding property in trust;

(e) all other words and expressions used herein but not defined, and defined in the Indian Contract Act, 1872, have the meanings respectively assigned to them in that Act."

In one line

Two routes back to land you have lost: the long one where you prove you own it, and the short one where you prove only that you were thrown off it.

In the words a student can write in an exam: section 5 of the Specific Relief Act 1963 provides that "A person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure, 1908", which is a suit based on title. Section 6 provides a summary remedy: a person dispossessed without his consent of immovable property otherwise than in due course of law may recover possession by suit "notwithstanding any other title that may be set up in such suit", provided the suit is brought within six months of dispossession and not against the Government, and no appeal or review lies from the decree.

Why the law gives two remedies and not one

Section 5 is the ordinary remedy and it is the just one: the person with the better right to possess should have the land.

But it is slow. Title to land is proved by documents, mutations, revenue records and often by evidence going back decades, and a suit on title takes years. If that were the only route, a person who was strong enough to take possession by force would keep it for the length of the litigation, and the law would have given him the reward for his own wrong.

So section 6 offers a different bargain. Prove only that you were in possession and were thrown off without your consent and without due process, and you get the land back, and we will not even hear the defendant on his title. In exchange, the remedy is hedged with strict limits: six months, no suit against the Government, and no appeal.

The principle behind it, and the sentence to write: the object of section 6 is to discourage people from taking the law into their own hands, however good their title may be. Possession is to be changed by the court and not by force.

The provisions

Section 5:

"A person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure, 1908."

Section 6:

"(1) If any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person through whom he has been in possession or any person claiming through him may, by suit, recover possession thereof, notwithstanding any other title that may be set up in such suit.

(2) No suit under this section shall be brought

(a) after the expiry of six months from the date of dispossession; or

(b) against the Government.

(3) No appeal shall lie from any order or decree passed in any suit instituted under this section, nor shall any review of any such order or decree be allowed.

(4) Nothing in this section shall bar any person from suing to establish his title to such property and to recover possession thereof."

In one line

Section 7 lets the person entitled to a movable thing sue for it; section 8 goes further and lets him compel the very article to be handed over, in four defined cases.

In the words a student can write in an exam: section 7 of the Specific Relief Act 1963 provides that "A person entitled to the possession of specific movable property may recover it in the manner provided by the Code of Civil Procedure, 1908", with Explanations allowing a trustee to sue and treating a special or temporary right to present possession as sufficient. Section 8 provides that a person having possession or control of a particular article of movable property of which he is not the owner may be compelled specifically to deliver it to the person entitled to its immediate possession in four cases: where the thing is held as agent or trustee; where compensation in money would not afford adequate relief; where it would be extremely difficult to ascertain the actual damage; and where possession has been wrongfully transferred from the plaintiff.

Why two sections, and what each adds

Section 7 is about who may sue. It confirms that the ordinary machinery of the Code is available to recover a specific movable thing, and its two Explanations extend the class of plaintiffs.

Section 8 is about what the court may order. In an ordinary suit for a movable, a defendant may satisfy the decree by paying its value: goods have a market, and money buys a replacement. Section 8 identifies the cases where money is not good enough and the defendant may be compelled to deliver the thing itself.

The distinction to hold is therefore between the right to sue and the right to the specific article, and it is the answer to most problems on this topic.

The provisions

Section 7:

"A person entitled to the possession of specific movable property may recover it in the manner provided by the Code of Civil Procedure, 1908.

Explanation 1. A trustee may sue under this section for the possession of movable property to the beneficial interest in which the person for whom he is trustee is entitled.

Explanation 2. A special or temporary right to the present possession of movable property is sufficient to support a suit under this section."

Section 8:

"Any person having the possession or control of a particular article of movable property, of which he is not the owner, may be compelled specifically to deliver it to the person entitled to its immediate possession, in any of the following cases:

(a) when the thing claimed is held by the defendant as the agent or trustee of the plaintiff;

(b) when compensation in money would not afford the plaintiff adequate relief for the loss of the thing claimed;

(c) when it would be extremely difficult to ascertain the actual damage caused by its loss;

(d) when the possession of the thing claimed has been wrongfully transferred from the plaintiff.

Explanation. Unless and until the contrary is proved, the court shall, in respect of any article of movable property claimed under clause (b) or clause (c) of this section, presume

(a) that compensation in money would not afford the plaintiff adequate relief for the loss of the thing claimed, or, as the case may be;

(b) that it would be extremely difficult to ascertain the actual damage caused by its loss."

In one line

The single most important sentence in this Module: since 1 October 2018 specific performance is what a court must grant, not what it may grant if it feels the case deserves it.

In the words a student can write in an exam: section 10 of the Specific Relief Act 1963, as substituted by section 3 of the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, provides that "The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16." The old section 10 provided that specific performance "may, in the discretion of the court", be enforced, and it listed cases in which the court was to presume damages inadequate. That discretion is gone.

Why this chapter has to be read before any textbook

Almost every book on this subject opens Module IV with the proposition that specific performance is a discretionary equitable remedy, granted only where damages are an inadequate remedy. That proposition was correct until 30 September 2018 and has been wrong ever since.

The trap is worth naming plainly, because it costs marks. Books reprinted after 2018 without revision, coaching notes copied from older editions, and answers written from memory all still carry the discretion. A student who writes that specific performance is discretionary is writing the law that was repealed.

There is a second reason this chapter comes first. MU's own syllabus proves that the University is examining the amended Act, because topic 4.2.4 is "Substituted Performance of Contract", and substituted performance did not exist before 2018: section 20 used to be the discretion section and was replaced by it. So the syllabus is post 2018 even though it does not say so.

The provision, before and after

Section 10 as it now stands:

"The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16."

What it replaced. The old section 10 provided that, except as otherwise provided in the Chapter, the specific performance of any contract "may, in the discretion of the court", be enforced, and set out two cases in which the court was to presume that a breach could not be adequately relieved by compensation in money: where the act to be done was in the performance wholly or partly of a trust, and where there existed no standard for ascertaining the actual damage caused by non performance, or where money would not afford adequate relief.

The change in a sentence: "may, in the discretion of the court" became "shall".

In one line

Section 9 is the hinge between this Module and the first three: whatever a defendant could have said against a claim on the contract, he may say against a claim for specific performance of it.

In the words a student can write in an exam: section 9 of the Specific Relief Act 1963 provides that "Except as otherwise provided herein where any relief is claimed under this Chapter in respect of a contract, the person against whom the relief is claimed may plead by way of defence any ground which is available to him under any law relating to contracts."

Why the section is needed

A claim for specific performance is a claim on a contract, and a contract can be attacked in every way Modules I to III describe. Without section 9 there would be an argument that this Chapter is a self contained code, so that only the defences it names, principally sections 11(2), 14, 16, 17 and 18, are open.

Section 9 forecloses that argument. It makes the whole of the general law of contract available as a defence, and section 2(e) of this Act, which imports the Contract Act's definitions, is what makes the two fit together.

The practical value: a defendant in a specific performance suit does not have to find his defence inside the Specific Relief Act. He may say there was no contract at all.

The provision itself

"Except as otherwise provided herein where any relief is claimed under this Chapter in respect of a contract, the person against whom the relief is claimed may plead by way of defence any ground which is available to him under any law relating to contracts."

Three things to notice in the wording.

"Under this Chapter" means Chapter II, on specific performance of contracts.

"Any law relating to contracts" is wider than the Indian Contract Act 1872. It takes in the Transfer of Property Act 1882, the Sale of Goods Act 1930, the Registration Act 1908, the Indian Stamp Act 1899 and any other statute bearing on the contract.

"Except as otherwise provided herein" preserves the Act's own limits, so section 9 does not let a defendant escape a rule this Act imposes on him, such as section 19(b), which makes specific performance enforceable against a transferee who did not take for value in good faith and without notice.

The defences it lets in

The checklist below is the whole of Modules I to III turned into a defence, and it is what an answer on section 9 should set out.

No contract at all.

• No proposal or acceptance, or no consensus ad idem, sections 2 and 13 of the Contract Act.
• No consideration, section 25.
• No intention to create legal relations.
• Uncertainty, section 29.

In one line

Section 11 deals with contracts that carry out a trust, and with the trustee who exceeds his powers; section 12 answers the harder practical question of what a court does when only part of a contract can be performed.

In the words a student can write in an exam: section 11(1) of the Specific Relief Act 1963 provides that, except as otherwise provided in the Act, specific performance of a contract shall be enforced when the act agreed to be done is in the performance wholly or partly of a trust; and section 11(2) provides that "A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced." Section 12(1) lays down that the court shall not direct specific performance of a part of a contract, and sub-sections (2), (3) and (4) supply the exceptions.

Note the 2018 change in section 11(1). The words "contract shall" were substituted by section 4 of the Specific Relief (Amendment) Act 2018, with effect from 1 October 2018, for "contract may, in the discretion of the court". The same removal of discretion that section 10 underwent happened here.

Section 11: trusts

Sub-section (1): performance of a trust

Where the act agreed to be done is in performance, wholly or partly, of a trust, specific performance shall be enforced.

The reason is that a trust obligation is one the law particularly wants performed in kind. A beneficiary's interest is in the specific property, and money is a poor substitute.

This sub-section used to do more work than it now does. Under the old section 10, one of the two cases in which the court was to presume that damages were inadequate was where the act agreed to be done was in performance of a trust. Since section 10 no longer requires inadequacy at all, the presumption has gone, and section 11(1) now simply confirms that such contracts are enforceable.

"Trust" here has the meaning in section 3 of the Indian Trusts Act 1882 and, by section 2(c) of this Act, includes an obligation in the nature of a trust within Chapter IX of that Act, that is a constructive trust.

Sub-section (2): the trustee who exceeds his powers

"A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced."

This is one of the three limits section 10 preserves, and it is an absolute bar. The reason is protective: a trustee holds for others, and the court will not lend its process to complete a transaction that injures the beneficiaries.

Two situations: the trustee acted beyond the powers his instrument or the law gives him; or he acted within his powers but in breach of trust, for instance by selling at an undervalue to a connected person.

In one line

A seller who did not own what he sold cannot enforce the bargain, but the buyer can, and section 13 sets out four ways of holding him to it.

In the words a student can write in an exam: section 13(1) of the Specific Relief Act 1963 provides that where a person contracts to sell or let certain immovable property having no title or only an imperfect title, the purchaser or lessee has four rights: to compel him to make good the contract out of any interest subsequently acquired; to compel him to procure the concurrence or conveyance of others bound to concur at his request; where he professes to sell unencumbered property that is in fact mortgaged for an amount not exceeding the purchase money, to compel him to redeem the mortgage and obtain a valid discharge; and, where his suit is dismissed for want of title, to a return of the deposit with interest and costs, and a lien for them. Sub-section (2) applies the same provisions, as far as may be, to contracts for the sale or hire of movable property.

Why the section runs one way only

Sections 13 and 17 are a pair and they must be read together.

Section 17 says that a vendor or lessor with no title, or who cannot at the time fixed give a title free from reasonable doubt, cannot obtain specific performance.

Section 13 says that the purchaser or lessee in the same situation can, and gives him four routes.

The asymmetry is deliberate and it is the point of the section. The seller created the problem; he should not profit from it by escaping a bargain that has become inconvenient. The buyer did not create it, and if there is any way of giving him what he bargained for, the law will take it.

The sentence to write: want of title is a shield for the buyer and never a sword for the seller.

The provision itself

"(1) Where a person contracts to sell or let certain immovable property having no title or only an imperfect title, the purchaser or lessee (subject to the other provisions of this Chapter), has the following rights, namely:

(a) if the vendor or lessor has subsequently to the contract acquired any interest in the property, the purchaser or lessee may compel him to make good the contract out of such interest;

(b) where the concurrence of other persons is necessary for validating the title, and they are bound to concur at the request of the vendor or lessor, the purchaser or lessee may compel him to procure such concurrence, and when a conveyance by other persons is necessary to validate the title and they are bound to convey at the request of the vendor or lessor, the purchaser or lessee may compel him to procure such conveyance;

(c) where the vendor professes to sell unencumbered property, but the property is mortgaged for an amount not exceeding the purchase money and the vendor has in fact only a right to redeem it, the purchaser may compel him to redeem the mortgage and to obtain a valid discharge, and, where necessary, also a conveyance from the mortgagee;

(d) where the vendor or lessor sues for specific performance of the contract and the suit is dismissed on the ground of his want of title or imperfect title, the defendant has a right to a return of his deposit, if any, with interest thereon, to his costs of the suit, and to a lien for such deposit, interest and costs on the interest, if any, of the vendor or lessor in the property which is the subject-matter of the contract.

(2) The provisions of sub-section (1) shall also apply, as far as may be, to contracts for the sale or hire of movable property."

In one line

Four classes of contract the court will not order performed, and since 2018 the list is shorter and different from the one every older textbook prints.

In the words a student can write in an exam: section 14 of the Specific Relief Act 1963, as substituted by section 5 of the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, provides that the following contracts cannot be specifically enforced: (a) where a party has obtained substituted performance under section 20; (b) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise; (c) a contract so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and (d) a contract which is in its nature determinable.

Why there must be a list at all

Section 10 now says the court shall enforce. A rule as strong as that needs a boundary, and section 14 is one of the three boundaries section 10 names.

The four classes are not arbitrary. Each identifies a case in which a decree would either be futile, because the court cannot make it work, or wrong, because it would compel something the law should not compel.

Futile: a duty the court cannot supervise, and a contract that can be terminated the day after the decree.

Wrong: compelling a person to render personal service, which comes close to compelling labour.

Unnecessary: where the plaintiff has already taken substituted performance and been compensated for it.

The provision itself

"The following contracts cannot be specifically enforced, namely:

(a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20;

(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;

(c) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and

(d) a contract which is in its nature determinable."

What the old section 14 said, and why it matters

This is the single most important currency point in the chapter. The pre 2018 section 14 was longer and different, and a textbook printed before 2018 will set out a list that includes:

• a contract for the non performance of which compensation in money is an adequate relief;
• a contract running into such minute or numerous details, or so dependent on personal qualifications or volition, or otherwise of such a nature, that the court cannot enforce specific performance of its material terms;
• a contract which is in its nature determinable;
• a contract the performance of which involves the performance of a continuous duty which the court cannot supervise;

In one line

A new section, inserted in 2018, that lets the court hire its own expert, and it exists to make specific performance workable in exactly the contracts section 14(b) used to put out of reach.

In the words a student can write in an exam: section 14A of the Specific Relief Act 1963, inserted by section 5 of the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, empowers a court, in any suit under the Act, where it considers it necessary to get expert opinion to assist it on any specific issue, to engage one or more experts and direct them to report, and to secure their attendance to give evidence including the production of documents; to require any person to give relevant information to the expert or to produce, or provide access to, any relevant documents, goods or other property for inspection; and it provides that the opinion or report forms part of the record of the suit.

Why the section was inserted

Section 14(b) says a contract cannot be specifically enforced where its performance involves the performance of a continuous duty which the court cannot supervise.

The words "which the court cannot supervise" describe a practical difficulty, not a legal one. Courts have refused to decree construction contracts, maintenance obligations and the running of a business because a judge has no way of knowing, month after month, whether the work is being done properly, and would be dragged back into the case at every stage.

Section 14A attacks that difficulty directly. If the reason a court cannot supervise is that it lacks the technical means, then give it the means. An engineer can report on whether a structure meets specification; a surveyor can report on progress. The impossibility that justified clause (b) is much reduced.

The section sits with the rest of the 2018 scheme. Parliament made specific performance the rule in section 10; it then had to make the rule workable in the very contracts, chiefly infrastructure and construction, that the amendment was aimed at. Section 14A, sections 20A to 20C and the Schedule are all part of the same design.

The provision itself

"(1) Without prejudice to the generality of the provisions contained in the Code of Civil Procedure, 1908, in any suit under this Act, where the court considers it necessary to get expert opinion to assist it on any specific issue involved in the suit, it may engage one or more experts and direct to report to it on such issue and may secure attendance of the expert for providing evidence, including production of documents on the issue.

(2) The court may require or direct any person to give relevant information to the expert or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.

(3) The opinion or report given by the expert shall form part of the record of the suit; and the court, or with the permission of the court any of the parties to the suit, may examine the expert personally in open court on any of the matters referred to him or mentioned in his opinion or report, or as to his opinion or report, or as to the manner in which he has made the inspection.

(4) The expert shall be entitled to such fee, cost or expense as the court may fix, which shall be payable by the parties in such proportion, and at such time, as the court may direct."

In one line

Four sections that answer the two procedural questions every specific performance suit begins with: who can sue, and who can be sued, and two qualifications on each.

In the words a student can write in an exam: section 15 of the Specific Relief Act 1963 lists the persons who may obtain specific performance; section 19 lists the persons against whom it may be enforced; section 17 bars a vendor or lessor with no title or an imperfect title from obtaining it; and section 18 provides that where the defendant sets up a variation, the plaintiff cannot obtain performance except with that variation in three specified cases.

Section 15: who may obtain specific performance

The section opens "Except as otherwise provided by this Chapter", so the list is subject to the bars in sections 16, 17 and 18.

(a) Any party to the contract. The ordinary case.

(b) The representative in interest or the principal of any party. A legal representative, an assignee, or an undisclosed principal.

The proviso is the examinable part. Where the learning, skill, solvency or any personal quality of a party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative in interest or principal is not entitled to specific performance, unless that party has already performed his part, or performance by the representative or principal has been accepted by the other party. The reason is plain: the other side bargained for that person.

(c) A settlement on marriage, or a compromise of doubtful rights between members of the same family. Any person beneficially entitled under it may sue, although not a party. This is one of the recognised exceptions to privity of contract, and it should be cross referred. See [Privity of Contract and Privity of Consideration].

(d) A tenant for life exercising a power. The remainderman may sue.

(e) A reversioner in possession, where the agreement is a covenant entered into with his predecessor in title and he is entitled to its benefit.

(f) A reversioner in remainder, on the same footing, but with the extra requirement that he will sustain material injury by reason of the breach.

(fa) Amalgamated limited liability partnerships. Where an LLP has entered into a contract and afterwards amalgamates, the new LLP may sue. Clause (fa) was inserted by section 6 of the Specific Relief (Amendment) Act 2018, with effect from 1 October 2018, to put LLPs on the same footing as companies.

(g) Amalgamated companies. The same for a company.

(h) A company on a pre incorporation contract. Where promoters have, before incorporation, entered into a contract for the purposes of the company, and the contract is warranted by the terms of the incorporation, the company may sue, provided it has accepted the contract and communicated that acceptance to the other party.

In one line

Three bars that attach to the plaintiff himself rather than to the contract, and the third of them, readiness and willingness, is the defence most specific performance suits are actually lost on.

In the words a student can write in an exam: section 16 of the Specific Relief Act 1963 provides that specific performance of a contract cannot be enforced in favour of a person (a) who has obtained substituted performance of the contract under section 20; (b) who has become incapable of performing, or violates any essential term of the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by it; or (c) "who fails to prove" that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.

Why these bars survive the 2018 amendment

Section 10 makes specific performance the rule. Section 16 is one of the three limits it preserves, and it is the one that looks at the plaintiff.

The logic is straightforward. Specific performance compels the defendant to perform his side. It would be indefensible to compel him while the plaintiff has not performed his own, or cannot, or has behaved in a way that destroys the basis of the bargain. The remedy is mutual or it is nothing.

So although the discretion has gone, the requirement that the plaintiff come to court having done, and being ready to do, what he promised has not. If anything it matters more, because it is now one of only three ways a defendant can resist.

The provision itself

"Specific performance of a contract cannot be enforced in favour of a person

(a) who has obtained substituted performance of contract under section 20; or

(b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or

(c) who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.

Explanation. For the purposes of clause (c),

(i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court;

(ii) the plaintiff must prove performance of, or readiness and willingness to perform, the contract according to its true construction."

In one line

A remedy that did not exist before 2018: get the job done by somebody else and send the bill to the party who broke the contract.

In the words a student can write in an exam: section 20 of the Specific Relief Act 1963, substituted by section 10 of the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, provides that where a contract is broken by non performance, the party who suffers "shall have the option of substituted performance through a third party or by his own agency, and, recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach." It may be exercised only after written notice of not less than thirty days; the expenses are recoverable only if the contract has in fact been performed by the third party or his own agency; having taken this route he cannot claim specific performance; and nothing prevents him claiming compensation.

This is MU's topic 4.2.4 by name, and it is the clearest proof that the syllabus is built on the amended Act. Before 2018 section 20 was headed "Discretion as to decreeing specific performance"; it is now a wholly different remedy. The heading above the group of sections was changed too, from "Discretion and powers of Court" to "Substituted performance of contracts, etc.", by section 9 of the amending Act.

Why the remedy was created

Consider the ordinary commercial case. A contractor abandons a half built factory. The owner's remedies before 2018 were two, and neither was satisfactory.

Damages under section 73 of the Contract Act. He must finish the work himself, fund it, and then sue, proving his loss and meeting arguments about remoteness and mitigation. He carries the cost and the risk of the litigation.

Specific performance. Very likely barred by the old section 14, because performance involved a continuous duty the court could not supervise, and in any event discretionary and slow.

Section 20 gives a third route that matches what a commercial party actually does: finish the work, then recover what it cost. It converts a self help step that businesses take anyway into a statutory right with a defined procedure, which is what makes the expenses recoverable as such rather than as damages to be proved from scratch.

The provision itself

"(1) Without prejudice to the generality of the provisions contained in the Indian Contract Act, 1872, and, except as otherwise agreed upon by the parties, where the contract is broken due to non-performance of promise by any party, the party who suffers by such breach shall have the option of substituted performance through a third party or by his own agency, and, recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach.

(2) No substituted performance of contract under sub-section (1) shall be undertaken unless the party who suffers such breach has given a notice in writing, of not less than thirty days, to the party in breach calling upon him to perform the contract within such time as specified in the notice, and on his refusal or failure to do so, he may get the same performed by a third party or by his own agency:

Provided that the party who suffers such breach shall not be entitled to recover the expenses and costs under sub-section (1) unless he has got the contract performed through a third party or by his own agency.

(3) Where the party suffering breach of contract has got the contract performed through a third party or by his own agency after giving notice under sub-section (1), he shall not be entitled to claim relief of specific performance against the party in breach.

(4) Nothing in this section shall prevent the party who has suffered breach of contract from claiming compensation from the party in breach."

In one line

Three sections inserted in 2018 that treat infrastructure contracts as a special class: no injunction that would delay the project, designated courts to hear the disputes, and a twelve month deadline for every suit under the Act.

In the words a student can write in an exam: sections 20A, 20B and 20C were inserted in the Specific Relief Act 1963 by the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018. Section 20A provides that no injunction shall be granted by a court in a suit under the Act involving a contract relating to an infrastructure project specified in the Schedule, where granting it would cause impediment or delay in the progress or completion of the project. Section 20B requires the State Government, in consultation with the Chief Justice of the High Court, to designate one or more Civil Courts as Special Courts to try such suits. Section 20C requires every suit under the Act to be disposed of within twelve months from service of summons, extendable by not more than six months for reasons recorded in writing.

Why infrastructure was singled out

The 2018 amendment had one theme: contracts should be performed. Sections 10, 11(1), 14 and 20 all push in that direction.

Infrastructure raised a distinct problem, and it is worth stating because it explains all three sections. A large project, a road, a port, a power plant, is built under a chain of contracts. When one of them is disputed, an injunction can stop the whole project. The loss then falls not only on the parties but on the public, and it grows every day the site stands idle. Meanwhile a suit takes years.

Parliament's answer had three parts, and they map onto the three sections:

• stop the project being halted, section 20A;
• give the disputes to identified courts, section 20B;
• put every suit under the Act on a clock, section 20C.

Note the reach of the third. Section 20C is not confined to infrastructure. It applies to a suit filed under the provisions of this Act, so every suit for specific performance, injunction, declaration, rectification or cancellation is within it.

Section 20A: no injunction that would delay the project

"(1) No injunction shall be granted by a court in a suit under this Act involving a contract relating to an infrastructure project specified in the Schedule, where granting injunction would cause impediment or delay in the progress or completion of such infrastructure project.

Explanation. For the purposes of this section, section 20B and clause (ha) of section 41, the expression 'infrastructure project' means the category of projects and infrastructure Sub-Sectors specified in the Schedule.

(2) The Central Government may, depending upon the requirement for development of infrastructure projects, and if it considers necessary or expedient to do so, by notification in the Official Gazette, amend the Schedule relating to any Category of projects or Infrastructure Sub-Sectors.

(3) Every notification issued under this Act by the Central Government shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session, for a total period of thirty days."

In one line

Four sections about money in a specific performance suit: when the court may add compensation, what else may be asked for in the same suit, why a penalty clause is no answer, and the trap that closes the door on a second suit.

In the words a student can write in an exam: section 21 of the Specific Relief Act 1963 allows a plaintiff in a suit for specific performance to claim compensation in addition to performance, and empowers the court to award compensation where it decides that performance ought not to be granted, or where performance is granted but is not sufficient to satisfy the justice of the case, guided by section 73 of the Indian Contract Act 1872, and only if the compensation has been claimed in the plaint. Section 22 allows possession, partition and separate possession, and other reliefs including refund of earnest money, to be asked for in the same suit, again only if specifically claimed. Section 23 provides that a sum named for breach is no bar to specific performance where it was named only to secure performance. Section 24 provides that the dismissal of a suit for specific performance bars a later suit for compensation for the breach.

Section 21: compensation in addition to performance

The 2018 change, first

Section 11 of the Specific Relief (Amendment) Act 2018 substituted, in sub-section (1), the words "in addition to" for the words ", either in addition to, or in substitution of,", with effect from 1 October 2018.

The effect is real. A plaintiff can no longer frame a suit for specific performance and ask, in the alternative, for compensation in substitution of it. He may ask for compensation in addition to performance. That fits the rest of the 2018 scheme: performance is the remedy, and money is an add on rather than an alternative the plaintiff may elect.

Sub-sections (2) and (3) are untouched, so the court may still award compensation where it decides performance ought not to be granted. The change is to what the plaintiff may ask for, not to what the court may do.

The provision

"(1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach in addition to such performance.

(2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.

(3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

(4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872.

(5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint:

Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.

Explanation. The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section."

In one line

The closing section of the specific performance Chapter, which extends the whole of it to two things that are not contracts at all.

In the words a student can write in an exam: section 25 of the Specific Relief Act 1963 provides that "The provisions of this Chapter as to contracts shall apply to awards to which the Arbitration and Conciliation Act, 1996 does not apply and to directions in a will or codicil to execute a particular settlement."

The reference was updated in 2018. Section 12 of the Specific Relief (Amendment) Act 2018 substituted "the Arbitration and Conciliation Act, 1996 (26 of 1996)" for "the Arbitration Act, 1940 (10 of 1940)", with effect from 1 October 2018. A book printed before then still names the 1940 Act, which has been repealed.

Why the extension is needed

Chapter II is drafted throughout in the language of contracts: sections 9, 10, 14, 15, 16 and the rest all speak of a contract and of parties to it.

Two obligations that are not contracts nevertheless need the same machinery.

An arbitral award outside the Arbitration and Conciliation Act 1996. An award is not a contract. Where the 1996 Act applies, that Act supplies its own complete code for enforcement, and there is no need for this one. Where it does not apply, the award would otherwise fall between two stools: not enforceable as a decree under the 1996 Act and not a contract for the purposes of this Chapter.

A direction in a will or codicil to execute a particular settlement. A testator may direct his executor to settle property in a particular way. That is a duty imposed by the will, not a bargain, so nobody is a "party to the contract". Without section 25 the beneficiary would have no route to compel it under this Act.

What section 25 does in one line: it applies the whole Chapter, with all its conditions and all its bars, to these two obligations as if they were contracts.

Broken down

Limb one: awards to which the 1996 Act does not apply

The exclusion is the key. Where the Arbitration and Conciliation Act 1996 applies, section 25 does not. Under section 36 of that Act an award which has become final is enforced in the same manner as if it were a decree of the court, so it needs no help from the Specific Relief Act.

What remains for section 25 is the residue: awards falling outside the 1996 Act. That residue is narrow in modern practice, and the honest thing to say in an answer is that the limb matters less than it once did, precisely because the 1996 Act is so comprehensive.

In one line

Where the document says something the parties never agreed, rectification corrects the document to match the bargain, and then the corrected document can be enforced.

In the words a student can write in an exam: section 26 of the Specific Relief Act 1963 provides that where, through fraud or a mutual mistake of the parties, a contract or other instrument in writing does not express their real intention, either party or his representative in interest may sue to have it rectified, or may claim rectification in a suit in which a right under the instrument is in issue, and a defendant in such a suit may also ask for it. The court may, in its discretion, direct rectification so as to express that intention, so far as this can be done without prejudice to rights acquired by third persons in good faith and for value; a contract may be first rectified and then specifically enforced; and no relief shall be granted unless specifically claimed.

Why the remedy exists

Written contracts are drafted by people, and people make mistakes. The parties agree on one thing and the deed records another: a wrong survey number, an omitted right of way, an interest rate that reverses what was settled.

The law's starting position is that a signed document speaks for itself, and rightly so: commerce depends on being able to rely on the writing. But rigidly applied that rule lets a party take advantage of an error he knows about, or a fraud he committed.

Rectification resolves the tension by a narrow remedy. The court does not remake the bargain; it makes the document say what the bargain always was. That is why the grounds are only two, why the intention must have been common, and why third parties who relied on the document in good faith are protected.

The provision itself

"(1) When, through fraud or a mutual mistake of the parties, a contract or other instrument in writing (not being the articles of association of a company to which the Companies Act, 1956 applies) does not express their real intention, then

(a) either party or his representative in interest may institute a suit to have the instrument rectified;

(b) the plaintiff may, in any suit in which any right arising under the instrument is in issue, claim in his pleading that the instrument be rectified; or

(c) a defendant in any such suit as is referred to in clause (b), may, in addition to any other defence open to him, ask for rectification of the instrument.

(2) If, in any suit in which a contract or other instrument is sought to be rectified under sub-section (1), the court finds that the instrument, through fraud or mistake, does not express the real intention of the parties, the court may, in its discretion, direct rectification of the instrument so as to express that intention, so far as this can be done without prejudice to rights acquired by third persons in good faith and for value.

(3) A contract in writing may first be rectified, and then if the party claiming rectification has so prayed in his pleading and the court thinks fit, may be specifically enforced.

(4) No relief for the rectification of an instrument shall be granted to any party under this section unless it has been specifically claimed:

Provided that where a party has not claimed any such relief in his pleading, the court shall, at any stage of the proceeding, allow him to amend the pleading on such terms as may be just for including such claim."

In one line

Rescission is the court undoing a contract, and Chapter IV says when it will, when it will refuse, what happens to a sale decree the buyer does not pay under, and the price the plaintiff pays for the relief.

In the words a student can write in an exam: section 27 of the Specific Relief Act 1963 provides that any person interested in a contract may sue to have it rescinded, and rescission may be adjudged where the contract is voidable or terminable by the plaintiff, or is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff; and it lists four cases in which the court may refuse. Section 28 deals with rescission of a decreed sale or lease of immovable property where the purchaser does not pay. Section 29 allows rescission to be prayed in the alternative in a suit for specific performance. Section 30 empowers the court to require the party rescinding to do equity.

A note on spelling. MU's syllabus prints topic 4.2.6 as "Recession of Contract". The Act, and the correct legal term, is rescission. The chapter uses the Act's word.

Rescission by act of party and rescission by the court

Two different things share the name, and separating them is the first step in any answer.

Rescission by the act of a party is what Module II describes. Under sections 19 and 19A of the Contract Act a party whose consent was caused by coercion, fraud, misrepresentation or undue influence may avoid the contract himself, communicating it under section 66, and must restore benefits under section 64. No court is needed.

Rescission adjudged by the court is what Chapter IV of this Act provides. The plaintiff comes to court and asks for a decree rescinding the contract.

Why anyone would want the second. A decree settles the matter against the world of the parties, removes any doubt about whether the avoidance was effective, allows the instrument to be delivered up and cancelled, and lets the court impose terms under section 30.

Section 27: when rescission may be adjudged or refused

"(1) Any person interested in a contract may sue to have it rescinded, and such rescission may be adjudged by the court in any of the following cases, namely:

(a) where the contract is voidable or terminable by the plaintiff;

(b) where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff.

(2) Notwithstanding anything contained in sub-section (1), the court may refuse to rescind the contract

(a) where the plaintiff has expressly or impliedly ratified the contract; or

(b) where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made; or

(c) where third parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value; or

(d) where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract.

Explanation. In this section 'contract' in relation to the territories to which the Transfer of Property Act, 1882 does not extend, means a contract in writing."

In one line

A document that is void against you can still hurt you while it exists, and cancellation is the order that has it delivered up and struck out of the register.

In the words a student can write in an exam: section 31 of the Specific Relief Act 1963 provides that any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding, may cause him serious injury, may sue to have it adjudged void or voidable, and the court may in its discretion so adjudge it and order it to be delivered up and cancelled; where the instrument is registered, the court shall send a copy of its decree to the registering officer, who shall note the cancellation. Section 32 allows partial cancellation. Section 33 empowers the court to require restoration of benefit or compensation, both when it cancels and when a defendant successfully resists an instrument.

Why a void document needs cancelling

The obvious objection is that if a document is void, it is already nothing, so why involve a court?

The answer is practical, and it is the whole justification for the remedy. A void instrument still exists as a piece of paper, and while it exists it can do harm:

• it appears in the register of documents, and a search discloses it;
• it clouds the plaintiff's title, so buyers and lenders take fright;
• somebody may rely on it, or sue on it years later when the evidence to answer it has gone;
• the plaintiff may be put to proving its invalidity repeatedly.

So the law lets the person threatened by it obtain a decree declaring it void or voidable and directing that it be delivered up and cancelled, and, where it was registered, that the register be marked.

The words "reasonable apprehension of serious injury" are the gate. The remedy is not for a document that is merely a nuisance.

Section 31: when cancellation may be ordered

"(1) Any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled.

(2) If the instrument has been registered under the Indian Registration Act, 1908, the court shall also send a copy of its decree to the officer in whose office the instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation."

In one line

A decree that orders nobody to do anything: it simply states what the plaintiff's status or right is, and its whole value lies in settling a question before it turns into a bigger dispute.

In the words a student can write in an exam: section 34 of the Specific Relief Act 1963 provides that any person entitled to any legal character, or to any right as to any property, may sue any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief; but the proviso bars a declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so. Section 35 provides that a declaration is binding only on the parties to the suit, persons claiming through them, and, where a party is a trustee, on those for whom he would be trustee.

Why a court would declare and order nothing

A declaration gives the plaintiff no money, no property and no injunction. Its value is different and it is real.

It settles a status before it matters. A man whose legitimacy is denied, or whose adoption is questioned, may need that settled long before any property falls in.

It prevents a cloud from hardening. Where somebody asserts a rival claim to property, the owner need not wait until he is dispossessed.

It is often all that is needed. Once the right is declared, most defendants act on it.

It binds by res judicata. Because the question has been decided between the parties, section 11 of the Code of Civil Procedure 1908 prevents it being litigated again by them.

The provision itself

"34. Discretion of court as to declaration of status or right. Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief:

Provided that no court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so.

Explanation. A trustee of property is a 'person interested to deny' a title adverse to the title of some one who is not in existence, and for whom, if in existence, he would be a trustee."

"35. Effect of declaration. A declaration made under this Chapter is binding only on the parties to the suit, persons claiming through them respectively, and, where any of the parties are trustees, on the persons for whom, if in existence at the date of the declaration, such parties would be trustees."

In one line

Part III of the Act is about stopping things rather than undoing them, and its first two sections say how preventive relief is granted and divide injunctions into the two kinds the rest of the Part is built on.

In the words a student can write in an exam: section 36 of the Specific Relief Act 1963 provides that "Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual." Section 37 provides that temporary injunctions are such as are to continue until a specific time, or until the further order of the court, may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure 1908; and that a perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit, the defendant being thereby perpetually enjoined from the assertion of a right, or from the commission of an act, contrary to the rights of the plaintiff.

What preventive relief is for

Every remedy so far has looked backwards. Damages compensate for a wrong done; specific performance compels a promise already broken; rescission and cancellation undo what has happened.

Preventive relief looks forward. Its object is to stop a wrong being done, or continued. That matters most where damages would be a poor substitute:

• the harm is continuing, so an award today is overtaken tomorrow;
• the harm is irreparable, as with the demolition of a heritage building or the disclosure of a secret;
• the harm is unquantifiable;
• a series of separate suits would otherwise be needed, so an injunction prevents a multiplicity of proceedings.

An injunction is a court order directing a person to refrain from doing something, or, in the mandatory form, to do something.

The provisions

"36. Preventive relief how granted. Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual."

"37. Temporary and perpetual injunctions. (1) Temporary injunctions are such as are to continue until a specific time, or until the further order of the court, and they may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure, 1908.

(2) A perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit; the defendant is thereby perpetually enjoined from the assertion of a right, or from the commission of an act, which would be contrary to the rights of the plaintiff."

Section 36: discretion

The word to notice is "discretion", and it should be contrasted at once with section 10.

The 2018 amendment removed the discretion from specific performance: section 10 now says the court shall enforce. It made no such change to section 36. Preventive relief remains discretionary, and a court may refuse an injunction even where a legal right is made out.

In one line

Section 38 says when the court will finally restrain a defendant, and section 39 says when it will go further and order him to undo what he has already done.

In the words a student can write in an exam: section 38 of the Specific Relief Act 1963 provides that a perpetual injunction may be granted to prevent the breach of an obligation existing in the plaintiff's favour, whether expressly or by implication; that where the obligation arises from contract the court shall be guided by Chapter II; and that where the defendant invades or threatens to invade the plaintiff's right to, or enjoyment of, property, an injunction may be granted in four cases. Section 39 provides that where, to prevent the breach of an obligation, it is necessary to compel the performance of certain acts which the court is capable of enforcing, the court may in its discretion grant an injunction to prevent the breach and also to compel performance of the requisite acts.

Section 38: perpetual injunctions

"(1) Subject to the other provisions contained in or referred to by this Chapter, a perpetual injunction may be granted to the plaintiff to prevent the breach of an obligation existing in his favour, whether expressly or by implication.

(2) When any such obligation arises from contract, the court shall be guided by the rules and provisions contained in Chapter II.

(3) When the defendant invades or threatens to invade the plaintiff's right to, or enjoyment of, property, the court may grant a perpetual injunction in the following cases, namely:

(a) where the defendant is trustee of the property for the plaintiff;

(b) where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion;

(c) where the invasion is such that compensation in money would not afford adequate relief;

(d) where the injunction is necessary to prevent a multiplicity of judicial proceedings."

Sub-section (1): an obligation existing in the plaintiff's favour

"Obligation" is defined in section 2(a) as every duty enforceable by law, so the source may be a contract, a trust, a statute, an easement or the general law of torts.

"Whether expressly or by implication", so a duty need not be spelt out.

"Subject to the other provisions contained in or referred to by this Chapter" points to section 41, which lists twelve cases in which an injunction cannot be granted, and to section 40 on damages.

Sub-section (2): where the obligation arises from contract

The court shall be guided by the rules and provisions contained in Chapter II, that is by the specific performance rules in sections 9 to 25.

In one line

A plaintiff who asks for an injunction may also ask for money, either as well as the order or instead of it, but only if he asks, and if his suit is dismissed he may not ask afterwards.

In the words a student can write in an exam: section 40 of the Specific Relief Act 1963 provides that a plaintiff in a suit for a perpetual injunction under section 38, or a mandatory injunction under section 39, may claim damages either in addition to, or in substitution for, such injunction, and the court may if it thinks fit award them; that no relief for damages shall be granted unless claimed in the plaint, with a proviso allowing amendment at any stage; and that "the dismissal of a suit to prevent the breach of an obligation existing in favour of the plaintiff shall bar his right to sue for damages for such breach."

Why the section is needed

An injunction is discretionary under section 36, so a plaintiff may prove his right and still be refused the order: the delay was too long, the cost of compliance out of all proportion, or the interference trivial.

Without section 40 he would leave court with nothing, and would then have to start a fresh suit for damages. The section lets the court dispose of the whole dispute in one proceeding by awarding money where the injunction is refused, or in addition to it where the injunction does not repair the harm already done.

The provision itself

"(1) The plaintiff in a suit for perpetual injunction under section 38, or mandatory injunction under section 39, may claim damages either in addition to, or in substitution for, such injunction and the court may, if it thinks fit, award such damages.

(2) No relief for damages shall be granted under this section unless the plaintiff has claimed such relief in his plaint:

Provided that where no such damages have been claimed in the plaint, the court shall, at any stage of the proceedings, allow the plaintiff to amend the plaint on such terms as may be just for including such claim.

(3) The dismissal of a suit to prevent the breach of an obligation existing in favour of the plaintiff shall bar his right to sue for damages for such breach."

Broken down

Sub-section (1): in addition to, or in substitution for

Note the contrast with section 21, and it is a clean comparison to draw.

Section 21(1), on specific performance, was amended in 2018 so that compensation may be claimed only "in addition to" performance, the words "or in substitution of" being removed.

Section 40(1) was NOT amended. It still allows damages "either in addition to, or in substitution for" the injunction. So a plaintiff seeking an injunction may still plead damages as a genuine alternative, while a plaintiff seeking specific performance may not.

In one line

Twelve situations in which the Act says an injunction cannot be granted, and they are regularly set as a list, so learn them as one.

In the words a student can write in an exam: section 41 of the Specific Relief Act 1963 provides that an injunction cannot be granted in twelve cases, running from restraining a pending judicial proceeding through to a plaintiff with no personal interest in the matter, and including clause (ha), inserted by the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, which forbids an injunction that would impede or delay the progress or completion of any infrastructure project.

The section is a bar and not a discretion. Section 36 makes preventive relief discretionary; section 41 says an injunction cannot be granted in these cases at all.

The provision itself

"An injunction cannot be granted

(a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings;

(b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought;

(c) to restrain any person from applying to any legislative body;

(d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter;

(e) to prevent the breach of a contract the performance of which would not be specifically enforced;

(f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance;

(g) to prevent a continuing breach in which the plaintiff has acquiesced;

(h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust;

(ha) if it would impede or delay the progress or completion of any infrastructure project or interfere with the continued provision of relevant facility related thereto or services being the subject matter of such project;

(i) when the conduct of the plaintiff or his agents has been such as to disentitle him to the assistance of the court;

(j) when the plaintiff has no personal interest in the matter."

The twelve clauses grouped

The list is easier to hold, and easier to reproduce, in four groups.

Group one: interference with other proceedings, clauses (a) to (d)

(a) A pending judicial proceeding, pending at the institution of the suit in which the injunction is sought. The exception: unless the restraint is necessary to prevent a multiplicity of proceedings. That is the only clause in the group with an exception.

(b) A proceeding in a court NOT SUBORDINATE to the one asked for the injunction. The words are important: a court may restrain a proceeding in a subordinate court. It may not reach sideways or upwards.

In one line

The court cannot make a singer sing, but it can stop her singing for somebody else, and section 42 is the provision that says so.

In the words a student can write in an exam: section 42 of the Specific Relief Act 1963 provides that "Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement", provided that the plaintiff has not failed to perform the contract so far as it is binding on him.

A numbering note. Older reports and textbooks cite this provision as section 57 of the Specific Relief Act 1877, and even judgments under the 1963 Act sometimes carry the old number in their catchwords. The current number is 42.

The problem the section solves

Two provisions, read together, would otherwise produce an unsatisfactory result.

Section 14(c) says a contract so dependent on the personal qualifications of the parties that the court cannot enforce its material terms cannot be specifically enforced. So a court cannot order a singer to sing or an employee to work.

Section 41(e) says an injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced. So, on the face of it, the court cannot even stop the singer performing elsewhere.

Put together, an employer or a promoter who has bargained for exclusivity would have no remedy but damages, which are hard to prove and often useless.

Section 42 breaks that chain. It begins with the words "Notwithstanding anything contained in clause (e) of section 41", and says that the inability to compel the affirmative promise is no obstacle to enjoining the negative one.

The distinction in a line: the court will not compel a person to work; it will hold him to his promise not to work for a rival.

The provision itself

"Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement:

Provided that the plaintiff has not failed to perform the contract so far as it is binding on him."

Broken down

The conditions

Four, and all are needed.

In one line

The Act's last two numbers are gone, and this chapter exists so that a reader who meets them knows they are gone rather than missing.

In the words a student can write in an exam: the operative provisions of the Specific Relief Act 1963 end at section 42. Sections 43 and 44 are repealed, and what follows in the current print is the Schedule, inserted by the Specific Relief (Amendment) Act 2018, which defines the infrastructure projects to which sections 20A, 20B and 41(ha) apply.

Why this chapter exists

A student reading the Act, or an index to it, meets the numbers 43 and 44 and finds nothing behind them. The natural conclusion is that something has been left out of the copy in front of them, and a student who is unsure whether their materials are complete cannot revise with confidence.

They are not missing. They are repealed, and the Act's own arrangement of sections says so.

What the bare Act does and does not tell us, stated exactly. The India Code consolidated print lists both section 43 and section 44, in its arrangement of sections, as repealed, each entry consisting of the word "Repealed" in square brackets and nothing else. The body of the Act carries no text and no footnote for either: it runs from section 42 straight to the Schedule. So the print records that they are repealed and does not record by which enactment. This chapter says only what the source says.

Where the Act actually ends

So the last operative section is 42, and every section from 1 to 42 has been covered in this Module.

The Schedule

The Schedule was inserted by section 14 of the Specific Relief (Amendment) Act 2018, with effect from 1 October 2018, and the footnote in the bare Act records the insertion.

What it does. The Explanation to section 20A provides that, for the purposes of section 20A, section 20B and clause (ha) of section 41, the expression "infrastructure project" means the category of projects and infrastructure sub sectors specified in the Schedule. The Schedule is therefore the definition on which all three provisions depend.