BLS LLB 5 Years Sem 5 Contract I 2021-22 Question Paper with Solutions

The answer is (c) An uncertain event.

A wager is a promise to pay money or money's worth on the determination of an uncertain event, where each party stands to win or lose and neither has any interest in the event other than the stake. Section 30 declares such agreements void.

The event is usually future, but it need not be. A wager may be made on a past event whose result is not yet known to the parties, for example a bet on the result of a match already played but not yet reported. What matters is that the outcome is uncertain to the parties at the time of the bet, not that it lies in the future.

Why the others are wrong:

• (a) Future event only is too narrow, for the reason just given.
• (b) Past event only is plainly too narrow, since most wagers are on future events.
• (d) Past unascertained event is again only one of the possibilities, not the general rule.

Why the others are wrong:

• (a) Contingent contract is defined in Section 31 and is a real contract whose performance depends on a collateral event.
• (b) Equitable contract is not a term used by the Act at all.
• (d) Law of possession is not a category of the Contract Act.

The answer is (a) Proposal.

The Indian Contract Act, 1872, builds its definitions as a chain, and the proposal stands at the head of it:

• Section 2(a). Proposal: one person signifies to another his willingness to do or abstain from doing something, with a view to obtaining that other's assent.
• Section 2(b). Acceptance and promise: when the person to whom the proposal is made signifies his assent, the proposal is accepted, and a proposal when accepted becomes a promise.
• Section 2(e). Agreement: every promise and set of promises forming the consideration for each other.
• Section 2(h). Contract: an agreement enforceable by law.

So the sequence is Proposal, then Acceptance, then Promise, then Agreement, then Contract, and enforceability is the last quality to attach, not the first.

Why the others are wrong:

• (c) Acceptance presupposes a proposal to accept.

The answer is (a) As much as is earned.

Quantum meruit is Latin for "as much as he has earned" or "as much as he deserves". It is a claim for reasonable remuneration for work actually done or goods actually supplied, brought where there is no enforceable contract fixing the price, or where the contract has ended before completion.

Why the others are wrong:

• (b) "The fact in itself" is the meaning of res ipsa loquitur, "the thing speaks for itself", a doctrine of the law of torts.
• (c) "A contract for the sale" is not a translation of anything; it is a description of a kind of contract.
• (d) "As much as is gained" is the meaning of quantum valebat, "as much as it was worth", which is the corresponding claim for the value of goods supplied, and is a distractor deliberately close to the right answer.

• (a) An agent acts on behalf of a principal by authority; a finder has no authority from anybody.
• (b) A creditor and (d) a debtor describe money obligations, not the custody of goods.

The answer is (a) Void agreement.

Section 56, first paragraph, of the Indian Contract Act, 1872: "An agreement to do an act impossible in itself is void."

This is initial impossibility: the act is impossible at the moment the agreement is made, so no contract ever comes into existence. A promise to discover treasure by magic is the standard illustration.

Why the others are wrong:

• (b) Voidable at the option of the promisee is the effect of coercion, undue influence, fraud or misrepresentation under Sections 19 and 19A, not of impossibility.
• (c) Uncertain contract relates to Section 29, where the meaning of the agreement cannot be ascertained. Here the meaning is perfectly clear; it is the performance that cannot happen.
• (d) Specific contract is not a category of the Act at all.

The answer is (a) When through fraud or a mutual mistake the instrument does not express the real intention.

Section 26(1) of the Specific Relief Act, 1963: 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, does not express their real intention, either party may sue to have it rectified, or may claim rectification in his pleading, or a defendant may ask for it as part of his defence.

Why the others are wrong:

• (b) After the fraud comes to notice describes only when a party learns of the ground, not the ground itself.

The answer is (a) Meeting of the mind upon the same thing.

Consensus ad idem means "agreement upon the same thing". Section 13 of the Indian Contract Act, 1872, embodies it: "Two or more persons are said to consent when they agree upon the same thing in the same sense."

Why the others are wrong:

• (b) General consent and (c) express consent describe the form or breadth of consent, whereas consensus ad idem is about its content, namely that both parties are agreeing to the same thing.
• (d) None of the above is wrong because (a) is the accepted translation.

• (b) Scarf v. Jardine (1882) is about election between inconsistent rights, and about the liability of an incoming and outgoing partner on holding out.
• (d) Carlill v. Carbolic Smoke Ball Co. (1893) is about a general offer accepted by performance.

• (d) Granted at any time is wrong: the remedy is discretionary, is confined to acts the court is capable of enforcing, and may be refused for delay or acquiescence under Section 41(g) and 41(i).

(a) Who has obtained substituted performance of contract under section 20 (b) Who has become capable of performing the contract (c) Who does not fail to prove that he has performed the essential terms of the contract (d) Who has not obtained substituted performance

The answer is (a) Who has obtained substituted performance of contract under section 20.

Section 16(a) of the Specific Relief Act, 1963, as substituted by the 2018 Amendment: specific performance of a contract shall not be enforced in favour of a person who has obtained substituted performance of contract under section 20.

Why the others are wrong: each states the opposite of a statutory bar.

• (b) Who has become capable of performing is the reverse of Section 16(b), which bars a person who has become incapable of performing.

The answer is (c) Section 15 of the Specific Relief Act, 1963.

Section 15 is headed "Who may obtain specific performance", and lists, besides a party to the contract, his representative in interest or principal; a person beneficially entitled under a marriage settlement or family arrangement; a remainderman; a reversioner in possession or in remainder; the new company on an amalgamation; the company in a pre incorporation contract it has accepted; and a limited liability partnership after amalgamation.

Why the others are wrong, and what they actually contain:

• (a) Section 14 lists the contracts that cannot be specifically enforced.

The answer is (b) A is entitled to be reimbursed from B's property.

This is Illustration (b) to Section 68 of the Indian Contract Act, 1872, almost word for word.

Section 68. Claim for necessaries supplied to person incapable of contracting, or on his account. "If a person, incapable of entering into a contract, or anyone 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."

Illustration (b): A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B's property.

Why the others are wrong:

The answer is (b) Minor's agreement.

Mohori Bibee v. Dharmodas Ghose, (1903) 30 I.A. 114, decided by the Privy Council, is the leading authority on the effect of a minor's agreement.

Facts. Dharmodas Ghose, a minor, mortgaged his house to a moneylender to secure a loan. The moneylender's agent knew he was a minor. The minor, through his mother and guardian, sued to have the mortgage set aside.

Held. A minor's agreement is absolutely void, that is void ab initio, and not merely voidable. The moneylender's plea for a refund under Sections 64 and 65 failed, because Section 64 applies only to voidable contracts and Section 65 to agreements discovered to be void, which did not cover a lender who knew of the minority all along. The plea of estoppel also failed, since there can be no estoppel against a statute.

Why the others are wrong: contingent contracts are governed by Sections 31 to 36, wagering agreements by Section 30, and voidable contracts by Section 2(i) with Sections 19 and 19A. None is what this case decided.

• (b) Section 31 deals with cancellation of instruments.
• (d) Section 38 deals with when a perpetual injunction is granted.

For full marks, cover: Section 34 with its conditions and proviso, Section 35 on the effect, what "legal character" means, and the discretionary nature of the relief.

A declaratory decree is a decree by which the court declares the plaintiff's legal character, or his right to any property, without ordering any consequential relief. It is dealt with in Chapter VI of the Specific Relief Act, 1963, in Sections 34 and 35.

Section 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."

Conditions:

For full marks, cover: Section 26 in all four sub-sections, the conditions, what rectification is and is not, and the contrast with cancellation and rescission.

Rectification is the correction by the court of a written instrument which, through fraud or mutual mistake, does not express the real intention of the parties. It is governed by Section 26 of the Specific Relief Act, 1963.

Section 26(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, does not express their real intention, then (a) either party or his representative may sue for rectification; (b) the plaintiff may claim it in his pleading in any suit in which a right under the instrument is in issue; or (c) a defendant may ask for it in addition to any other defence.

Section 26(2). If the court finds that the instrument, through fraud or mistake, does not express the real intention, it 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.

For full marks, cover: Section 11 with its three limbs, then Mohori Bibee and each of the settled rules on a minor's agreement with its authority.

Competence to contract

Section 11 of the Indian Contract Act, 1872: "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."

1. Age of majority. 18 years under Section 3 of the Indian Majority Act, 1875, and 21 years where a guardian of the person or property has been appointed by a court or the property is under a Court of Wards.

2. Soundness of mind. Section 12: a person is 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; a person usually of sound mind but occasionally of unsound mind may not contract when he is of unsound mind.

4. But restitution may be ordered. Where the minor obtained property still traceable in his hands by falsely representing his age, the court may order it restored, under Khan Gul v. Lakha Singh (1928 Lahore FB) and Section 33 of the Specific Relief Act, 1963. Ajudhia Prasad v. Chandan Lal (1937 All FB) confines this to identifiable property. Restitution stops where it would amount to enforcing the void contract.

5. Liability for necessaries. Section 68: a supplier of necessaries suited to the minor's condition in life is entitled to be reimbursed from the minor's property. The minor is not personally liable.

6. A minor may be a promisee or beneficiary. He may be the payee of a promissory note, a mortgagee, or a transferee, and may enforce such a contract.

7. A minor may be an agent and bind his principal, but incurs no personal liability.

8. A minor cannot be a partner, though he may be admitted to the benefits of partnership under Section 30 of the Indian Partnership Act, 1932, with the consent of all the partners, his share alone being liable.

9. A contract by a guardian, within his authority and for the minor's benefit, binds the minor and can be enforced by or against him.

For full marks, cover: what the problem is, Sections 59, 60 and 61 in order with their illustrations, Clayton's rule for a running account, and why it matters.

Appropriation of payments answers a single question: where a debtor owes several distinct debts to the same creditor and pays a sum insufficient to discharge them all, which debt is discharged? The Indian Contract Act, 1872, deals with it in Sections 59 to 61.

Section 59. Application of payment where 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."

Illustration: A owes B, among other debts, Rs. 1,000 upon a promissory note which falls due on 1 June. He owes B no other debt of that amount. On 1 June A pays B Rs. 1,000. The payment is to be applied to the discharge of the promissory note, because the circumstances imply it.

Illustration. A owes his banker Rs. 10,000 drawn on 1 January, Rs. 15,000 on 1 February and Rs. 20,000 on 1 March, on one running account. He pays in Rs. 12,000 on 1 April without appropriating it. The Rs. 10,000 of 1 January is wiped out entirely and Rs. 2,000 goes towards February.

1. A court cannot enforce what it cannot ascertain. Enforcement means ordering a party to do a particular thing, or awarding damages measured against a particular obligation. If the obligation itself cannot be identified, there is nothing to order and nothing against which to measure loss.
2. There is no consensus ad idem. Under Section 13 the parties must agree upon the same thing in the same sense. Where the terms are ambiguous, it cannot be said that they did.
3. The law will not make a contract for the parties. A court may interpret what the parties agreed; it may not supply an essential term they never settled.

Note the important qualification in the section: an agreement is void only if its meaning is not certain nor capable of being made certain. The maxim is id certum est quod certum reddi potest, that is certain which can be made certain. So an agreement is not void merely because a term is unstated, if it can be ascertained from the contract itself, the surrounding circumstances, the parties' course of dealing, or trade usage.

For full marks, cover: Sections 46 to 50 individually with their illustrations, then Section 55 on time as the essence, and the immovable property presumption.

Sections 46 to 50 of the Indian Contract Act, 1872, deal with the time and place for performance, and they apply only where the contract itself does not provide.

Section 46. Time for performance of promise where no application is to be made and no time is specified. Where a promisor is to perform without application by the promisee, and no time is specified, the engagement must be performed within a reasonable time. The Explanation makes "what is a reasonable time" a question of fact in each case.

Section 47. Time and place for performance of promise where time is specified and no application to be made. Where a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application, he may perform it at any time during the usual hours of business on such day, and at the place at which the promise ought to be performed.

Section 50. Performance in manner or at time prescribed or sanctioned by promisee. The performance of any promise may be made in any manner, or at any time, which the promisee prescribes or sanctions.

Illustration: B owes A Rs. 2,000. A desires B to pay the amount to A's account with C, a banker. B, who also banks with C, orders the amount to be transferred to A's credit, and this is done. Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B.

Section 55. Effect of failure to perform at a fixed time, in a contract in which time is essential.

• Where a party fails to perform at or before the specified time and time was of the essence, the contract, or so much of it as remains unperformed, becomes voidable at the option of the promisee.
• If time was not of the essence, the contract does not become voidable, but the promisee is entitled to compensation for any loss caused by the delay.
• If the promisee accepts performance at a time other than that agreed, he cannot claim compensation for the delay unless, at the time of acceptance, he gives notice of his intention to do so.

Issues

1. Is a minor's agreement void or voidable?
2. Is the minor estopped from pleading minority, having declared himself to be of full age?
3. Can the moneylender obtain a refund of the money advanced under Sections 64 and 65?

Decision and reasoning

1. The agreement is void ab initio.

The Privy Council held that Sections 10 and 11, read together, make an agreement by a person not competent to contract void. Section 11 says that a person of the age of majority is competent to contract, and Section 10 that agreements are contracts if made by parties competent to contract. Since a minor is not competent, his agreement is not merely unenforceable against him; it is no agreement at all in the eye of the law. The mortgage was therefore void.

2. There is no estoppel against a minor.

The rules that flow from the decision

1. A minor's agreement is void ab initio.
2. No ratification on attaining majority: Suraj Narain v. Sukhu Aheer (1928 All).
3. No estoppel against a minor who misrepresents his age.
4. Restitution may still be ordered where the property is traceable: Khan Gul v. Lakha Singh (1928 Lahore FB); Section 33 of the Specific Relief Act, 1963.
5. Section 68 makes the minor's estate, not his person, liable for necessaries.
6. A minor may be a promisee or beneficiary, and may be an agent, but cannot be a partner, though he may be admitted to the benefits of partnership.
7. No specific performance of a minor's agreement.

Contracts of personal service and employment, and contracts to sing, act, paint or write. Two reasons: the performance would be worthless if compelled, since a court cannot order a singer to sing well; and compelling personal service comes close to servitude.

3. A contract which is in its nature determinable. Section 14(d).

A partnership at will, or a partnership of no specified duration, since either partner may dissolve it at any moment under Section 43 of the Indian Partnership Act, 1932. Also an agency, which is ordinarily revocable, and any contract terminable on notice. A decree that could lawfully be undone the next morning is futile.

The fourth clause, for completeness. Section 14(a): a contract cannot be specifically enforced where a party has obtained substituted performance under Section 20.

Two further bars:

• Section 16 bars relief in favour of a person who has obtained substituted performance, who has become incapable of performing or has violated an essential term or acted in fraud of the contract, or who fails to prove readiness and willingness.

For full marks, cover: that time is of the essence because the purpose was communicated, Section 55 in its three limbs, then Mohan's remedies with Section 73 and the special damages point under Hadley v. Baxendale.

Was time of the essence?

Yes. This is the question on which the whole answer turns, and it should be settled first.

Section 55, first paragraph: "When a party to a contract promises to do a certain thing at or before a specified time ... 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."

Two facts make time essential here:

1. A specified date was fixed, namely 20 August 2021.

• Special damages: this is the heart of the answer. Because Mohan told Sohan the suit was for his wedding, the special circumstances were communicated at the time of contracting, and loss flowing from them is within the second rule in Hadley v. Baxendale (1854). Had Sohan not been told, that loss would have been too remote, exactly as the mill owner's lost profits were in Hadley, where the carrier was not told the mill stood idle.
• Damages for disappointment and inconvenience are recoverable in a narrow class of contracts whose very object is to provide enjoyment or peace of mind, and a contract for a wedding is the standard example of that class.

3. To claim compensation on rescission. Section 75: "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." So Mohan may both rescind and claim damages; the two are not alternatives.

So if Mohan takes delivery of the suit on 22 August and says nothing, he loses his claim for the delay. If he wants both the suit and his damages, he must accept it under protest and give notice at the time. That is a genuinely practical point and is often the mark that separates the best answers.

2. As between the principal and the minor agent, the minor is not responsible to his principal for negligence or breach of his duties as agent, because he lacks contractual capacity.

Section 183 deals with who may employ an agent: any person who is of the age of majority and of sound mind. So a minor cannot appoint an agent, even though he can be one.

The reason is that an agent is a conduit. He does not contract on his own behalf; he brings the principal and the third party into a contract with each other. Since the agent's own capacity is not engaged by the transaction, there is no reason to deny him the role. As it is often put, the agent's capacity is not in issue because he is not a party to the resulting contract.

The practical consequence is that a principal who employs a minor as an agent takes the risk: he is bound by what the minor does within the authority given, and has no remedy against the minor if the minor is careless or exceeds his instructions. Related provisions include Section 226, under which acts done by an agent have the same legal consequences as if done by the principal, and Section 238, on the effect of an agent's misrepresentation or fraud.

30(3). His share is liable for the acts of the firm, but he is not personally liable for any such act.

30(4). He may not sue the partners for an account or payment of his share except when severing his connection with the firm.

30(5). On attaining majority, or on obtaining knowledge that he had been admitted to the benefits of partnership, whichever is later, he must, within six months, give public notice electing whether to become a partner or not. If he gives no notice, he becomes a partner on the expiry of the six months.

30(7). Where he elects to become a partner, his rights and liabilities continue as before, and he becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership.

30(8). Where he elects not to become a partner, his rights and liabilities continue only up to the date of the notice, and his share is not liable for any acts after that date.