BLS LLB 5 Years Sem 5 Contract I 2024-25 Question Paper with Solutions

Section 26(3) adds that a contract in writing may first be rectified and then specifically enforced in the same suit, if the party has so prayed.

The doctrine of privity of contract means that only a person who is a party to a contract can sue or be sued upon it. A stranger to the contract acquires no rights under it and incurs no liabilities, even if the contract was made for his benefit.

Its essential features are:

1. Only the parties are bound and entitled. Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge and Co. Ltd. (1915): Lord Haldane said that only a person who is a party to a contract can sue on it. In India, M.C. Chacko v. State Bank of Travancore (1970 SC).
2. A stranger cannot enforce the contract, even where it expressly confers a benefit on him. Tweddle v. Atkinson (1861).
3. A contract cannot impose a burden on a stranger without his consent.

Novation is the substitution of a new contract for an existing one, by which the old contract is discharged. The substitution may be between the same parties, or may involve the substitution of a new party.

Section 62 of the Indian Contract Act, 1872: "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 essentials are:

1. The original contract must be subsisting and enforceable;
2. All the parties must consent, including any incoming party;
3. The new agreement must be valid and capable of enforcement; and
4. The substitution must take place before breach of the original contract.

Offer or proposal. Section 2(a) of the Indian Contract Act, 1872: "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."

Invitation to offer is a statement by which a person invites others to make proposals to him. It is not a proposal, and cannot be accepted into a contract.

An immoral contract is one whose consideration or object the court regards as immoral. Section 23 of the Indian Contract Act, 1872, provides that the consideration or object of an agreement is unlawful where "the Court regards it as immoral, or opposed to public policy", and that "every agreement of which the object or consideration is unlawful is void".

The recognised instances are agreements founded on sexual immorality, such as a promise to pay for past or future cohabitation, an agreement to let premises to a prostitute for the purpose of her trade, and agreements interfering with the marital relation, for example an agreement to procure a divorce or to pay a person to desert a spouse.

Legal consequences:

1. The agreement is void and unenforceable by either party;
2. No suit lies on it, and money paid under it is irrecoverable, on the principle in pari delicto potior est conditio defendentis, that where both parties are equally at fault the defendant is in the stronger position;

Both are forms of standard form electronic contract, in which the terms are settled in advance by one party and the other accepts them by conduct rather than by signature.

Clickwrap agreement. The terms are displayed on a screen and the user signifies acceptance by clicking a button marked "I agree" or "I accept", usually before installing software or completing an online transaction. The click is the acceptance, and because the user must act affirmatively, and has an opportunity to read the terms first, clickwrap agreements are generally held enforceable.

Shrinkwrap agreement. The terms are contained inside the packaging of a software product, or under the plastic shrink wrapping, and the buyer is told that opening the package or using the product amounts to acceptance. Enforceability is more doubtful, because the buyer cannot read the terms until after he has bought. In the United States such an agreement was upheld in ProCD Inc. v. Zeidenberg (1996), where the buyer had an opportunity to return the product if he did not accept the terms.

Liquidated damages are a sum named in the contract itself as the amount payable in case of breach, being a genuine pre estimate by the parties of the loss that a breach would cause.

Section 74 of the Indian Contract Act, 1872: "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."

The Indian position is distinctive. Section 74 abolishes the English distinction between liquidated damages and a penalty. Whatever the clause is called, the court awards only reasonable compensation, and the named sum operates as a ceiling and not as an entitlement.

Illustration: A promises to deliver goods at B's warehouse on the first of January. On that day A brings the goods to B's warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.

Section 48. Application for performance on a certain day to be at a proper time and place. When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the promisee's duty to apply for performance at a proper place and within the usual hours of business. The Explanation again makes "what is a proper time and place" a question of fact.

Section 49. Place for performance of promise where no application is to be made and no place fixed for performance. When a promise is to be performed without application by the promisee, and no place is fixed for its performance, it is the promisor's duty to apply to the promisee to appoint a reasonable place for the performance, and to perform it at such place.

Illustration: A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place.

• If time was not of the essence, the contract does not become voidable, but the promisee is entitled to compensation for any loss occasioned by the failure.
• If the promisee accepts performance at a time other than that agreed, he cannot claim compensation for the loss occasioned by the delay, unless at the time of acceptance he gives notice to the promisor of his intention to do so.

3. The test is objective. The law asks what a reasonable person would infer from the parties' words and conduct, not what was secretly in either mind. An unexpressed reservation does not prevent agreement.
4. It must exist at the moment of contracting.

What destroys it

• Section 20. Bilateral mistake of fact. "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." This is the direct statutory consequence of a failure of consensus ad idem. The Explanation excludes an erroneous opinion as to value.
• Raffles v. Wichelhaus (1864), the classic case: a contract for cotton to arrive "ex Peerless from Bombay", where there were two ships named Peerless sailing at different times and each party meant a different one. There was no consensus ad idem, and the agreement failed.
• Couturier v. Hastie (1856): a contract to sell a cargo of corn which, unknown to both, had already been sold at an intermediate port because it had begun to spoil.

For full marks, cover: Sections 2(1)(p), 3, 5, 15 and 35 of the Information Technology Act, 2000, the mechanism of the key pair and hash function, the role of the Certifying Authority, the electronic signature introduced in 2008, and the link to contract law through Section 10A.

The authentication of electronic records by digital signature is governed by the Information Technology Act, 2000, and not by the Indian Contract Act.

Definition. Section 2(1)(p), IT Act, 2000: "digital signature" means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.

Section 3. Authentication of electronic records

1. Section 3(1): subject to the provisions of the section, any subscriber may authenticate an electronic record by affixing his digital signature.
2. Section 3(2): the authentication shall be effected by the use of an asymmetric crypto system and hash function which envelop and transform the initial electronic record into another electronic record.

3. The digest is encrypted with the private key, and the result is the digital signature, which is attached to the record.
4. The recipient decrypts the signature with the public key to recover the digest, hashes the received document himself, and compares the two. If they match, the record is authentic and unaltered.

Legal effect and the supporting machinery

• Section 5. Legal recognition of digital signatures. Where any law requires that information or any matter shall be authenticated by affixing the signature of a person, that requirement is deemed to be satisfied if it is authenticated by means of a digital signature affixed in the prescribed manner.
• Section 15. Secure digital signature, and the duty of the subscriber under Chapter VIII to exercise reasonable care to retain control of the private key and to inform the Certifying Authority without delay if it is compromised.
• Section 35. Certifying Authority to issue a Digital Signature Certificate, on application, which binds the public key to the identity of the subscriber. Chapter VI, Sections 17 to 34, establishes the Controller of Certifying Authorities and the licensing regime.

Exclusions

The First Schedule to the Act excludes certain documents from electronic execution, including a negotiable instrument other than a cheque, a power of attorney, a trust deed, a will, and a contract for the sale or conveyance of immovable property.

Section 41. When an injunction is refused. Among other grounds: to restrain a person from prosecuting a pending judicial proceeding, unless to prevent a multiplicity; to restrain proceedings in a court not subordinate to that from which the injunction is sought; to restrain an application to a legislative body; to restrain criminal proceedings; to prevent the breach of a contract which could not be specifically enforced; to prevent an act of which it is not reasonably clear that it will be a nuisance; where the plaintiff has acquiesced; where equally efficacious relief is available by another usual mode; where the plaintiff's conduct disentitles him to relief; where he has no personal interest; and, since 2018, where it would impede or delay an infrastructure project.

(ii) In the given case, are there any legal rights available to Aniketa and Ankita? If yes, elaborately discuss.

For full marks, cover: what rescission is under the Contract Act and Sections 27 to 30 of the Specific Relief Act, then that Aniket's concealment is fraud by silence under Section 17 because a seller of immovable property has a duty to disclose, and finally that Ankita's easement binds the land regardless of the sale.

Three people, and two of the names differ by one letter. Aniket is the seller, Aniketa is the buyer, and Ankita is the neighbour who holds the right of passage over the land. Keep them apart.

• Section 27(1): rescission may be adjudged where the contract is voidable or terminable by the plaintiff, or where it is unlawful for causes not apparent on its face and the defendant is more to blame.
• Section 27(2): rescission may be refused where the plaintiff has ratified the contract; where a change of circumstances makes substantial restoration impossible; where third parties have acquired rights in good faith, for value and without notice; and where only part of the contract is sought to be rescinded and that part is not severable.
• Section 30: the court may require the party rescinding to do equity, by restoring benefits or making compensation.

(ii) The rights of Aniketa

Aniketa can rescind the sale, or affirm it and claim compensation, because Aniket's non disclosure amounts to fraud.

Step 3. The consequences for Aniketa. Section 19 gives her an election:

1. Rescind the contract. She may avoid the sale, return the land and recover the price of Rs. 2,00,000, subject to Section 64, restoring any benefit she has received. She may also sue under Section 27(1)(a) of the Specific Relief Act to have the rescission adjudged, and under Sections 31 to 33 to have the sale deed cancelled and delivered up, with the cancellation noted by the registering officer under Section 31(2).
2. Or affirm the contract and insist on performance, in which case she is entitled, under the concluding words of Section 19, to be "put in the position in which she would have been if the representations made had been true", that is to compensation for the difference in value between land free of the right of passage and land subject to it.
3. Because this is fraud and not innocent misrepresentation, she may also sue in tort for deceit and recover damages. She may also claim under Section 55(2) of the Transfer of Property Act, on the seller's covenant for title.
4. Section 75 entitles her to compensation for any damage sustained through the non fulfilment of the contract if she rightfully rescinds.

3. If Aniketa obstructs the passage, Ankita may sue for a perpetual injunction under Section 38 of the Specific Relief Act, and for a mandatory injunction under Section 39 to remove any obstruction already made, together with damages under Section 40.
4. Her right may rest on an express grant, on prescription under Section 15 of the Indian Easements Act, 1882, that is twenty years of peaceable, open and uninterrupted enjoyment as of right, or on necessity under Section 13.

The point on which everything turns

The facts do not say whether GOA Stores had accepted the order for 2 kilograms before Mrs. Govandi telephoned again. That single fact decides the case, so a complete answer takes both alternatives.

(i) The legal position of the earlier order of 2 kilograms

Alternative A. If the store had not yet accepted the order.

Mrs. Govandi's order was a proposal under Section 2(a). Under 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". Under Section 6(1), a proposal is revoked "by the communication of notice of revocation by the proposer to the other party".

Her second telephone call, made "shortly after" the first, communicated a notice of revocation of the 2 kilogram order and substituted a fresh proposal. The earlier order therefore stands revoked, no contract for 2 kilograms ever came into existence, and neither party is bound by it. The store cannot deliver 2 kilograms and charge for them.

(ii) Discharge of contract, and its modes

Discharge of a contract means the termination of the contractual relation, so that the parties are freed from the obligations they undertook. There are six modes.

1. By performance (Sections 37 to 61). Actual performance, or attempted performance or tender under Section 38, where a promisor who offers to perform and is refused is not responsible for non performance and does not lose his rights.
2. By mutual agreement or consent (Sections 62 to 67). Novation, rescission and alteration (Section 62); remission (Section 63), which needs no consideration in India; waiver; merger; and Section 67, excusing a promisor whom the promisee has not afforded reasonable facilities for performance.
3. By impossibility of performance (Section 56). Initial impossibility makes the agreement void; supervening impossibility, that is frustration, makes the contract void. Restitution follows under Section 65.
4. By lapse of time, under the Limitation Act, 1963: three years for a suit on a breach of contract.

• On Alternative B, the call is an offer to vary or to novate the existing contract under Section 62, and it likewise takes effect only on the store's assent.
• In either case, the communication is not a counter offer in the Hyde v. Wrench sense, because it is made by the same party who made the original proposal, and a proposer is free to withdraw and replace his own proposal. A counter offer is a reply by the offeree that varies the terms.

Step 1. The newspaper announcement is a general offer. An offer may be made to the world at large, and it is accepted by whoever performs its conditions. Section 8 provides that "the performance of the conditions of a proposal ... is an acceptance of the proposal". Carlill v. Carbolic Smoke Ball Co. (1893) is the foundation: an advertisement promising £100 to anyone who caught influenza after using the smoke ball as directed was held to be a proposal, accepted by performance, and the company was bound.

Step 2. But there can be no acceptance in ignorance of the offer. Acceptance under Section 2(b) requires a person to "signify his assent" to the proposal. A person who does not know that a proposal exists cannot assent to it. Under Section 4, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made, and until then there is nothing for him to accept.

A second ground may also apply. Lareena is described as "an employee of Laimur". If searching for the child fell within the scope of her existing duties, then performance of a pre existing obligation furnishes no consideration, which was the second ground in Lalman Shukla. If it did not fall within her duties, this ground does not apply, and the case rests on want of knowledge alone. Since the facts do not say, the safer course is to rest primarily on the first ground and mention the second as a possible additional one.

Laimur's position: he is under no contractual liability. Morally he may choose to pay, but Section 25 makes an agreement without consideration void, and a promise made now, after the act, would need to fall within Section 25(2), that is a promise to compensate a person who has already voluntarily done something for the promisor. If Laimur now promises to pay Lareena for what she did, that promise would be enforceable under Section 25(2) without any fresh consideration and without writing. That is the one route by which Lareena could still succeed, and it depends entirely on Laimur making such a promise.

2. Harbhajan Lal v. Harcharan Lal (1925 All) is the direct Indian authority on these facts and is the converse of Lalman Shukla. A father issued handbills offering a reward to anyone who found his absconding son. The plaintiff found the boy and sent a telegram to the father. It was held that the handbill was a general offer, that the plaintiff, having performed its conditions with knowledge of the offer, had accepted it, and that he was entitled to the reward.
3. Consideration. Lareena's act of tracing and returning the son, done at Laimur's desire as expressed in the advertisement, is good consideration under Section 2(d).
4. The employment point would still have to be met. If tracing the child was part of Lareena's existing duty to her employer, Laimur could argue that she gave no fresh consideration, following the second ground in Lalman Shukla. On the facts as given, nothing suggests that finding a missing child was within an employee's ordinary duties, so this defence would probably fail.
5. Laimur could not have revoked the offer once Lareena had begun performance and continued to completion, and in any event no revocation is suggested. A general offer, once accepted by performance, binds the offeror exactly as any other contract does.

• 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.

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."

The timeline.

1. Under Section 5, Amitabh could revoke only before the communication of the acceptance was complete as against him.
2. Under Section 4, that moment was Wednesday, when Hema put her acceptance in a course of transmission by posting it, so as to be out of her power. It does not matter that Amitabh knew nothing of it until Saturday.
3. Amitabh's revocation was posted on Friday, two days after that moment. Under Section 4 a revocation is complete as against the person to whom it is made only when it comes to his knowledge, so it could not in any event have reached Hema before Friday, and by then there was nothing left to revoke.
4. A valid contract was concluded on Wednesday. Amitabh is bound. If he refuses to perform, Hema may sue for breach and claim damages under Section 73, or specific performance under the Specific Relief Act, 1963, if the subject matter admits of it.

Byrne and Co. v. Van Tienhoven and Co. (1880) decides the same point in English law: a revocation posted before the acceptance was posted, but which arrived after it, was held ineffective, because a revocation takes effect only on receipt.

2. By lapse of time. "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." What is a reasonable time depends on the subject matter: an offer to sell perishable goods or shares in a volatile market lapses far sooner than an offer to sell land. Ramsgate Victoria Hotel Co. v. Montefiore (1866), where an offer to buy shares made in June could not be accepted in November.
3. By failure to fulfil a condition precedent. "By the failure of the acceptor to fulfil a condition precedent to acceptance."
4. By death or insanity of the proposer. "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." Note the qualification: an acceptance made in ignorance of the proposer's death is good, and binds his estate.

Other ways in which an offer comes to an end, not listed in Section 6 but well settled:

1. By rejection, express or implied, communicated to the proposer. Once rejected, an offer is dead and cannot be revived by the offeree.

The court's general discretion is therefore gone, and the only routes to refusal are the three provisions named in Section 10, together with Section 17. Those provisions are the subject of this question, and stating this framework in the opening lines is what makes the rest of the answer coherent.

1. Section 14. Contracts which cannot be specifically enforced

As substituted in 2018, the following contracts cannot be specifically enforced:

(a) Where a party has obtained substituted performance under Section 20.

Section 20, also substituted in 2018, permits an aggrieved party, after thirty days' written notice, to have the contract performed by a third party or by his own agency and to recover the cost from the party in breach. Clause (a) is the necessary consequence: having had the obligation performed elsewhere, he cannot also demand that the defaulting party perform it. He must elect, and he keeps his claim for the expense. Section 16(a) states the same bar from the other side.

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

A contract that either party may lawfully bring to an end at will cannot sensibly be specifically enforced, because the decree could be defeated the next day by a lawful termination. The standard illustrations are:

• a partnership at will, and a partnership of no specified duration;
• an agency, which is ordinarily revocable;
• a licence or a contract terminable on notice.

2. Section 11(2). Contracts by a trustee in breach of trust

Section 11(1) provides that a contract shall be specifically enforced where the act agreed to be done is in the performance, wholly or partly, of a trust. But 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. The reason is that the beneficiaries, who are not parties to the contract, would otherwise be deprived of trust property by an act the trustee had no authority to do.

3. Section 16. Personal bars to relief

These are bars on the person seeking the decree rather than on the contract. Specific performance shall not be enforced in favour of a person:

4. Section 17. Contract to sell property by one who has no title

A contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or lessor who, knowing himself not to have any title to the property, has contracted to sell or let it, or who, though he entered into the contract believing he had a good title, cannot at the time fixed by the parties or by the court give the purchaser or lessee a title free from reasonable doubt. The section applies, with necessary modifications, to contracts for the sale or hire of movable property.

5. The consequence for injunctions: Section 41(e)

Section 41(e) provides that an injunction cannot be granted "to prevent the breach of a contract the performance of which would not be specifically enforced". The two remedies march together, and a plaintiff cannot obtain by injunction what the Act denies him by specific performance.

For full marks, cover: all six modes with their sections, that is performance, agreement, impossibility, lapse of time, operation of law and breach, and finish with the remedies available for breach.

Discharge of a contract means the termination of the contractual relation between the parties, so that they are no longer bound by the obligations they undertook. There are six modes.

1. Discharge by performance (Sections 37 to 61)

Section 37: "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."

• Actual performance, which must be complete, precise and unconditional.

• Rescission (Section 62), cancelling without substituting.
• Alteration (Section 62), changing a material term, the parties remaining the same.
• Remission (Section 63), accepting less than is due, extending time, or accepting any satisfaction; no consideration is needed in India.
• Waiver, the intentional abandonment of a right.
• Merger, where an inferior right is absorbed into a superior one in the same person.
• Section 67: a promisee who neglects or refuses to afford reasonable facilities for performance excuses the promisor for non performance so caused.

3. Discharge by impossibility of performance (Section 56)

• Initial impossibility: an agreement to do an act impossible in itself is void.
• Supervening impossibility, or frustration: a contract which after its making becomes impossible, or by an event the promisor could not prevent becomes unlawful, becomes void.
• Compensation: a promisor who knew or might with reasonable diligence have known of the impossibility must compensate a promisee who did not.

5. Discharge by operation of law

Death, where personal skill is essential; insolvency; merger of rights; material alteration of a written contract by one party without the other's consent; and unauthorised cancellation of an instrument.

6. Discharge by breach (Sections 39, 73 to 75)

• Actual breach, on the due date or during performance.
• Anticipatory breach, before the due date, by repudiation or by disabling oneself.
• Section 39: 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 his acquiescence in its continuance.
• Hochster v. De La Tour (1853): the aggrieved party may sue at once on an anticipatory breach.

Remedies for breach: rescission with compensation under Section 75; damages under Sections 73 and 74 on the rule in Hadley v. Baxendale, subject to the duty to mitigate; quantum meruit; and specific performance or injunction under the Specific Relief Act, 1963.

Why they exist. They are a necessity of mass commerce. An enterprise dealing with lakhs of customers cannot negotiate with each one, and standardisation makes transactions fast, uniform and cheap. The law does not condemn them; it regulates them.

The issues

1. The absence of real consent. The classical model of contract assumes two parties bargaining at arm's length. Here one party dictates and the other adheres, so consent is formal rather than real. Illustration: a passenger buying a railway ticket cannot negotiate the carrier's liability clause, and would miss his train if he tried.

2. Inequality of bargaining power. The drafting party is usually an organisation with legal advice and monopoly or near monopoly power; the other is an individual. Illustration: a person seeking an electricity connection has no alternative supplier.

3. Exemption and exclusion clauses. The terms almost always limit or exclude the liability of the party who drafted them. Illustration: "The company shall not be liable for loss of or damage to luggage howsoever caused."

6. The document must be contractual in character. Chapelton v. Barry Urban District Council (1940): a ticket for a deck chair was a mere receipt, not a contractual document, and a condition printed on it did not bind the hirer.

7. Construction against the drafter, contra proferentem. Ambiguity in an exemption clause is resolved against the party who put it forward. Illustration: a clause excluding liability for "damage" is read as not covering total loss, if the wording admits that reading.

8. Fundamental breach. A party cannot rely on an exemption clause to escape liability for a breach going to the root of the contract, or where he has delivered something radically different from what was contracted for. Illustration: a warehouseman who agrees to store goods and instead sells them cannot shelter behind a clause excluding liability for loss. In England the doctrine was reduced to a rule of construction in Photo Production Ltd. v. Securicor Transport Ltd. (1980), but Indian courts continue to use it as a control on unfair standard terms.

• LIC of India v. Consumer Education and Research Centre (1995 SC): the standard terms of a State insurer were subjected to Article 14, and a policy term restricting eligibility was struck down as arbitrary.
• Bharathi Knitting Co. v. DHL Worldwide Express Courier (1996 SC), on the effect of a limitation of liability clause a customer had signed.

11. Statutory control.

• The Consumer Protection Act, 2019 expressly defines and prohibits an "unfair contract", including terms imposing excessive security deposits, disproportionate penalties, unilateral termination, and assignment to the consumer's detriment, and empowers the State and National Commissions to declare such terms null and void.
• Sectoral regulators such as IRDAI for insurance, the Reserve Bank of India for banking, and TRAI for telecommunications prescribe fair terms.
• Article 299 of the Constitution governs the form of contracts with the Government.

For full marks, cover: the meaning of breach, actual and anticipatory with Section 39 and Hochster v. De La Tour, then each of the five remedies in turn with its sections and cases, giving the most space to damages under Sections 73 and 74.

What breach of contract means

A breach of contract occurs when a party to a contract, without lawful excuse, fails or refuses to perform what he has promised, performs defectively, or disables himself from performing.

The obligation to perform is imposed by Section 37: the parties must either perform, or offer to perform, their respective promises, unless performance is dispensed with or excused. A failure that is excused, for example by frustration under Section 56 or by the promisee's refusal of a valid tender under Section 38, is not a breach.

Kinds of breach

1. Actual breach. Occurs at the time when performance is due, or during performance.

• He may accept the repudiation, treat the contract as at an end, and sue immediately. Damages are then assessed as at the date of repudiation, and his duty to mitigate begins at once.
• Or he may keep the contract alive and wait for the due date. If he does, the contract remains alive for both parties, and if a frustrating event intervenes before the due date, the contract is discharged and he recovers nothing: Avery v. Bowden (1855).

The remedies

1. Rescission of the contract (Section 39, and Section 75)

The aggrieved party may put an end to the contract and is absolved from performing his own side. 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." He may also sue under Section 27 of the Specific Relief Act, 1963, to have the rescission adjudged.

2. Damages (Sections 73 and 74)

This is the ordinary remedy, and it should take the largest share of the answer.

• Vindictive or exemplary damages, not awarded in contract except for breach of a promise to marry and wrongful dishonour of a cheque by a banker, where the damages are inversely proportionate to the amount of the cheque.
• Damages for inconvenience and, in limited categories, mental distress.

Section 74. Liquidated damages and penalty. Where a sum is named in the contract as payable on breach, or the contract contains any other stipulation by way of penalty, the aggrieved party is entitled to reasonable compensation not exceeding the amount so named, whether or not actual damage is proved. Indian law abolishes the English distinction between liquidated damages and a penalty: Fateh Chand v. Balkishan Das (1963 SC); Maula Bux v. Union of India (1969 SC); Kailash Nath Associates v. Delhi Development Authority (2015 SC).

Duty to mitigate. The Explanation to Section 73 requires the court to take into account the means which existed of remedying the inconvenience caused. The injured party must take reasonable steps to minimise his loss, cannot recover for loss he could have avoided, and may recover the reasonable expenses of mitigation.

3. Suit upon quantum meruit

5. Suit for injunction

Under Sections 36 to 42 of the Specific Relief Act, an injunction, temporary or perpetual, may be granted to restrain a party from doing what he promised not to do. Its most important use in contract is Section 42, which allows the court to enforce a negative covenant by injunction even where the affirmative agreement cannot be specifically enforced. Lumley v. Wagner (1852); Niranjan Shankar Golikari v. The Century Spinning and Manufacturing Co. Ltd. (1967 SC).

• Perpetual, under Section 37(2), which can be granted only by the decree made at the hearing and upon the merits of the suit, and by which the defendant is perpetually enjoined from asserting a right or committing an act contrary to the plaintiff's rights.

By form:

• Prohibitory, forbidding an act; and
• Mandatory, under Section 39, compelling a positive act.

The three tests for a temporary injunction, applied cumulatively: a prima facie case; the balance of convenience in the applicant's favour; and irreparable injury not compensable in money.

Section 38. When a perpetual injunction is granted

38(1). To prevent the breach of an obligation existing in favour of the applicant, whether expressly or by implication.

38(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 law of specific performance.

A mandatory injunction is granted sparingly, because it is drastic and its execution must be capable of supervision. The court weighs the hardship to the defendant against the injury to the plaintiff, and delay by the plaintiff weighs heavily against him.

Section 40. Damages in lieu of, or in addition to, injunction

The plaintiff in a suit for a perpetual or mandatory injunction may claim damages either in addition to, or in substitution for, the injunction, and the court may award them if it thinks fit. The damages must be claimed in the plaint, though the court shall allow an amendment at any stage on just terms. The dismissal of a suit to prevent the breach of an obligation bars the plaintiff's right to sue for damages for that breach.

Section 42. Injunction to perform a negative agreement

Notwithstanding Section 41(e), 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 fact that the court cannot compel specific performance of the affirmative agreement does not preclude it from granting an injunction to perform the negative agreement, provided the plaintiff has not failed to perform the contract so far as it is binding on him.

• (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 a relevant facility related to such a project (inserted by the Specific Relief (Amendment) Act, 2018);
• (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.

Related bars outside Section 41