BLS LLB 5 Years Sem 5 Contract I 2025-26 - 75/25 Question Paper with Solutions

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."

Communication of an acceptance is complete as against the proposer, under Section 4, when the acceptance is put in a course of transmission to him, so as to be out of the power of the acceptor. So the offeror may withdraw at any time up to the moment the letter of acceptance is posted, and not after.

Section 6 lists the modes by which a proposal is revoked: by notice of revocation communicated to the other party; by the lapse of the time prescribed, or of a reasonable time if none is prescribed; by the failure of the acceptor to fulfil a condition precedent; and by the death or insanity of the proposer, if that fact comes to the knowledge of the acceptor before acceptance.

A tender or attempted performance is an offer by the promisor to perform his obligation. Section 38 provides that where a promisor offers to perform and the offer is not accepted, the promisor is not responsible for non performance, and does not thereby lose his rights under the contract.

Section 38 requires that every such offer must fulfil the following conditions. Two essentials are:

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.

Clayton's Rule, from Devaynes v. Noble (1816), applies where a debtor and creditor have one running or current account, such as a bank account, and payments are made without any appropriation. The rule is "first in, first out": the payments in are applied to the debts in the order in which the debts were incurred, so that the first item on the debit side is discharged by the first item on the credit side.

In the Indian Contract Act, the subject is governed by Sections 59 to 61: the debtor may appropriate expressly or by implication (Section 59); failing that, the creditor may apply the payment to any lawful debt actually due, including a time barred debt (Section 60); and if neither appropriates, the payment is applied in order of time, and rateably if the debts are of equal standing (Section 61).

An injunction is an order of a court directing a person to do, or more usually to refrain from doing, a particular act. It is the principal form of preventive relief under the Specific Relief Act, 1963.

Section 36: "Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual."

Section 37 defines the two: a temporary injunction continues until a specified time or until further order of the court, and is regulated by the Code of Civil Procedure, 1908; a perpetual injunction is granted by the decree made at the hearing and upon the merits of the suit, and thereby perpetually enjoins the defendant from asserting a right, or committing an act, which would be contrary to the plaintiff's rights.

Injunctions are also classified as prohibitory, which forbid an act, and mandatory under Section 39, which compel the doing of a positive act to prevent the breach of an obligation.

• No ratification on attaining majority: Suraj Narain v. Sukhu Aheer (1928).
• No estoppel against a minor who misrepresented his age, though restitution of property still traceable may be ordered, and Section 33 of the Specific Relief Act, 1963 allows the court to require restoration of benefits.
• Section 68: a person who supplies necessaries suited to the minor's condition in life is entitled to be reimbursed from the minor's property, not from the minor personally.
• A minor may be a promisee or beneficiary, may be an agent, and may be admitted to the benefits of a partnership under Section 30 of the Indian Partnership Act, 1932, but cannot be a partner.

2. Soundness of mind

Section 12: "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 make a contract when he is of sound mind.

• Insolvents, whose property vests in the official assignee until discharge.
• Corporations and companies, whose capacity is limited by the memorandum of association and by statute; an act beyond it is ultra vires and void.

The danger. Because one side drafts the terms, they usually favour that side, they include exemption or exclusion clauses limiting liability, and the other party frequently does not read them and could not change them if he did. The classical assumption of equal bargaining power fails.

Safeguards developed by the courts

1. Reasonable notice of the terms. The party relying on printed conditions must show he took reasonable steps to bring them to the notice of the other party before or at the time of contracting.

• Parker v. South Eastern Railway (1877) laid down the test.
• Henderson v. Stevenson (1875): a condition printed on the back of a steamer ticket, with nothing on the face to draw attention to it, did not bind the passenger.
• Thornton v. Shoe Lane Parking (1971): a condition inside a car park, referred to on a ticket issued by a machine, was too late and insufficiently prominent; the more unusual the clause, the greater the notice required.
• Olley v. Marlborough Court (1949): a notice in a hotel bedroom came after the contract was concluded at the reception desk, and was ineffective.

7. Unreasonable and unconscionable terms. Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986): the Supreme Court struck down a service rule permitting termination on three months' notice or pay, holding that a court will not enforce an unfair and unreasonable clause in a contract between parties of unequal bargaining power, applying Section 23 of the Contract Act. LIC of India v. Consumer Education and Research Centre (1995) subjected a State insurer's standard policy terms to Article 14.

8. Statutory protection. The Consumer Protection Act, 2019 expressly recognises an "unfair contract" and empowers consumer commissions to declare such terms void. The Insurance Act and the Motor Vehicles Act contain similar controls, and Article 299 of the Constitution governs the form of government contracts.

The three kinds asked for

1. Nominal damages. A small, token sum awarded where the plaintiff proves a breach of his legal right but no actual loss. The award vindicates the right rather than compensating a loss. It is given, for example, where a buyer refuses to take delivery but the market price has risen, so the seller has lost nothing. The maxim is injuria sine damno: legal injury without actual damage.

2. Vindictive or exemplary damages. Damages awarded not to compensate the plaintiff but to punish the defendant for conduct that is high handed, oppressive or malicious. As a rule, exemplary damages are not awarded in contract, because the object of contract damages is compensation and not punishment. There are two recognised exceptions:

• breach of a promise to marry, where the injury is to the feelings and reputation of the plaintiff; and
• wrongful dishonour of a cheque by a banker when the customer has sufficient funds, where the injury is to the customer's credit and reputation. The rule here is that the damages are inversely proportionate to the size of the cheque: the smaller the cheque wrongfully dishonoured, the greater the damage to credit.

5. Liquidated damages and penalty. Section 74: 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 to have been caused. Indian law does not draw the English distinction between a genuine pre estimate and a penalty; it allows only reasonable compensation in either case. Fateh Chand v. Balkishan Das (1963) and Maula Bux v. Union of India (1969).

6. Damages for inconvenience, and for mental distress, awarded in limited categories.

Duty to mitigate. The Explanation to Section 73 imposes on the injured party a duty to take reasonable steps to minimise his loss. He cannot recover for a loss he could have avoided, though he may recover the reasonable expenses of mitigation.

So the plaintiff need not be the owner. A bailee, pawnee, finder or lessee, who has a special or temporary right to possession, may sue, and may sue even the true owner if the owner takes the goods from him before the special right ends.

Under Section 7 the relief is possession or its value, at the option of the defendant, because the ordinary decree in a suit for movables allows the defendant to deliver the goods or pay their assessed value.

Section 8. Liability of person in possession, not as owner, to deliver to persons entitled to immediate possession

"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;

So Section 7 gives the ordinary remedy, and Section 8 gives the specific remedy, where the article itself, and not its money value, is what the plaintiff must have. An idol, an heirloom, a family portrait, a rare manuscript and title deeds are the classic subjects of a Section 8 decree.

(ii) If both had handed over the money to Seema, to hand over the same to the winner, is there any remedy if Seema refuses to give the money?

For full marks, cover: that this is a wager, Section 30 in both its limbs, the answer that Minu has no remedy against Tinu, and then that the second limb of Section 30 defeats the claim against the stakeholder as well, with the Maharashtra position.

(i) Minu's remedy against Tinu

Minu has no remedy. He cannot sue Tinu for the Rs. 500.

The agreement is a wager. Its essentials are all present:

1. There is an uncertain future event, the result of the cricket match.

So Minu, as the winner, cannot sue Seema for the stakes, because that is a suit to recover something won on a wager.

But the position of the loser is different, and this is the part the question is really testing. A depositor may recover his own stake from the stakeholder, provided he demands it back before the stakeholder has paid it over to the winner. The reason is that as between the depositor and the stakeholder there is no wager at all: the stakeholder holds the money as an agent, the authority to pay it over is revocable, and a demand revokes it. If the stakeholder pays after the demand, he pays at his own risk and is liable to the depositor.

Applying this to the facts:

• Minu cannot compel Seema to hand over the winnings. His claim is a claim for money won on a wager, barred by Section 30.
• Minu can demand back his own Rs. 500, which he deposited, if he does so before Seema pays it to Tinu.
• Tinu can likewise demand back his own Rs. 500, and having refused to pay, he presumably will.
• If Seema simply keeps both deposits, each depositor may recover his own stake from her, but neither can recover the other's.

(ii) If the bank were to apply a pre-condition to employing Ali that Ali could not join any bank in India for a period of 10 years after quitting ABC Bank, would the pre-condition be valid?

For full marks, cover: that a restraint operating during employment is valid while one operating after it is void under Section 27, the bond as a Section 74 question of reasonable compensation, Niranjan Shankar Golikari and Superintendence Company v. Krishan Murgai, and the conclusion on each part.

(i) Is the bank's condition tenable?

The condition is valid in principle, but the sum of Rs. 2 lakh is recoverable only to the extent that it is reasonable compensation.

Two separate questions arise, and they must be kept apart.

• In Fateh Chand v. Balkishan Das (1963) the Supreme Court held that Section 74 abolishes the English distinction between penalty and liquidated damages and entitles the aggrieved party only to reasonable compensation. The named sum is a ceiling, not an entitlement.
• In Maula Bux v. Union of India (1969) the Court held that where the loss can be proved, the party must prove it; a named sum does not dispense with proof unless the loss is of a kind that cannot be measured.
• In Kailash Nath Associates v. Delhi Development Authority (2015) the Court restated that compensation under Section 74 is payable only where damage or loss is caused by the breach.

Conclusion on (i): the two year service condition is tenable and enforceable. The bank may sue on the bond, but it will recover only reasonable compensation, which a court will assess by reference to what the bank actually spent on recruiting and training Ali and what it lost by his leaving. If Rs. 2 lakh bears no relation to that, the court will scale it down. If the amount is so large as to be oppressive, it may also be attacked as unconscionable in a contract of unequal bargaining power, following Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986).

2. A restraint operating after the employment ends is void. Superintendence Company of India (P) Ltd. v. Krishan Murgai (1980): a post service restraint on a former employee was held void under Section 27. The Supreme Court reaffirmed the position in Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan (2006), holding that a negative covenant operating after the term of the contract is void, and that the doctrine of restraint of trade does not apply during the currency of a contract but does apply after it.
3. Even if a reasonableness test applied, this restraint would fail it: ten years, the whole of India, and the entire banking industry would leave Ali no way to earn a living in his trade at all.

Conclusion on (ii): the pre-condition is void under Section 27. It is void even though Ali agreed to it, because Section 27 is a rule of public policy and consent cannot cure it. What the bank can lawfully protect, even after Ali leaves, is its confidential information and trade secrets, and a covenant limited to that is enforceable, since preventing the misuse of confidential information is not a restraint on exercising a trade.

Step 1. The loan agreement itself is void. Chotu is a minor, and by Section 11 he is not competent to contract. Following Mohori Bibee v. Dharmodas Ghose (1903), a minor's agreement is void ab initio. So there is no contract of loan, and Daya has no action on the contract. Chotu's plea of minority is, so far, correct.

Step 2. But Section 68 gives an independent, statutory claim.

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."

Section 68 lies in Chapter V, "Of certain relations resembling those created by contract". The obligation is imposed by law and does not depend on any agreement, so the minor's incapacity is no answer to it.

(ii) The position if Chotu has no jewellery and no other property

Daya has no remedy at all. He cannot recover anything.

Section 68 fastens on the property and not on the person. The words are "entitled to be reimbursed from the property of such incapable person". If there is no property, there is nothing out of which reimbursement can be made, and the claim simply fails.

Three consequences follow, and stating them is what earns the marks:

1. Chotu is under no personal liability, then or later. The obligation is a charge on the estate, not a debt of the minor.
2. No liability arises on his attaining majority. He cannot ratify the void agreement (Suraj Narain v. Sukhu Aheer, 1928), and Section 68 does not convert into a personal debt when he turns 18. Property he acquires afterwards is not reached by the section either, because the reimbursement is out of the property of the incapable person as such.
3. No estoppel and no restitution. Chotu did not misrepresent anything, so there is no question of restitution under Section 33 of the Specific Relief Act, 1963, and in any event money spent cannot be traced.

Basu is also shocked to see that Vasu while renovating his house is building a compound wall outside his house which reduces the width of the common lane. (i) What is the remedy available for Basu against Ramu?

(ii) What is the remedy available for Basu against Vasu?

For full marks, cover: against Ramu, that a servant's possession is the master's so Basu is not out of possession, with Sections 5 and 6 as the routes; against Vasu, a mandatory injunction under Section 39 to pull the wall down, with the easement of right of way and Section 38.

(i) Basu's remedy against Ramu

Basu should sue for recovery of possession of the house, and may also apply for a mandatory injunction and damages for wrongful occupation.

3. A mandatory injunction under Section 39, and a temporary injunction under Order XXXIX of the Code of Civil Procedure, to restrain Ramu from creating third party rights, parting with possession or damaging the property during the suit.
4. Damages or mesne profits for the period of wrongful occupation.

What Basu must not do is throw Ramu out by force. Even a true owner may not take the law into his own hands against a person in settled possession, and if he does, the occupant can invoke Section 6 against him. This is the practical significance of Section 6 and is worth stating.

(ii) Basu's remedy against Vasu

Basu should sue for a mandatory injunction under Section 39 of the Specific Relief Act, 1963, directing Vasu to pull down so much of the wall as encroaches on the lane, together with a perpetual injunction under Section 38 restraining further construction.

Step 3. Mandatory injunction, Section 39. "When, 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 complained of, and also to compel performance of the requisite acts." Since the wall is already built, a prohibitory injunction alone is useless; Basu needs a mandatory injunction to have it removed.

Step 4. Interim relief. Because the construction is continuing, Basu should immediately apply for a temporary injunction under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, showing a prima facie case, that the balance of convenience is in his favour, and that he will suffer irreparable injury. Delay is fatal here: a plaintiff who watches a wall go up and complains only when it is finished may be met with acquiescence, which is a ground for refusing an injunction under Section 41(j).

Step 5. Damages. Under Section 40, the court may award damages in addition to, or in substitution for, an injunction, if the plaintiff claims them in his plaint.

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."

1. Coercion (Section 15)

"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."

The Explanation makes clear that it is immaterial whether or not the Indian Penal Code was in force where the coercion was employed.

Essentials: an act forbidden by the Penal Code, or unlawful detention of property; committed or threatened; against any person whatever, so a threat to a stranger is enough; with the intention of causing the other to enter into the agreement.

• (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.

16(3). Burden of proof. Where a person 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 the contract was not induced by undue influence lies upon the person in a position to dominate the will of the other.

Relationships raising a presumption: parent and child, guardian and ward, trustee and beneficiary, solicitor and client, doctor and patient, spiritual adviser and disciple. No presumption arises between husband and wife (except in the case of a pardanashin lady), landlord and tenant, or creditor and debtor, where it must be proved.

Cases: Mannu Singh v. Umadat Pande (1890 All), gift by a disciple to his spiritual adviser set aside. Wajid Khan v. Raja Ewaz Ali Khan, an old illiterate woman conferring a large benefit on her confidential agent. Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib (1967 SC), holding that undue influence must be pleaded and proved, and that mere relationship is not enough. Lakshmi Amma v. Telengala Narayana Bhatta (1970 SC).

Explanation. Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless (a) 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 (b) his silence is, in itself, equivalent to speech.

Duty to speak arises in contracts uberrimae fidei (insurance, family settlements, contracts of guarantee), in fiduciary relationships, and where there is a half truth or a change of circumstances after a statement was made (With v. O'Flanagan, 1936).

Cases: Derry v. Peek (1889), fraud requires proof that the false statement was made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false. Peek v. Gurney (1873) on concealment in a prospectus. Shri Krishan v. The Kurukshetra University (1976 SC), where a candidate's failure to disclose his shortage of lectures was held not to be fraud, since the University had the means of discovering the truth with ordinary diligence.

Difference from fraud: the maker believes his statement to be true. There is no intention to deceive.

Effect: the contract is voidable at the option of the party misled (Section 19), subject to the proviso on means of discovery.

5. Mistake (Sections 20, 21 and 22)

• Section 20. Where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void. The Explanation excludes an erroneous opinion as to value.

2. The aggrieved party has an election. He may rescind the contract, or affirm it and insist on performance. Where he affirms after fraud or misrepresentation, he is entitled to be put in the position in which he would have been if the representation made had been true.
3. Rescission carries restitution. Section 64: the party rescinding a voidable contract must, if he has received any benefit under it, restore that benefit to the person from whom it was received. Section 75 allows a party who rightfully rescinds to claim compensation for damage sustained through the non fulfilment of the contract.
4. The right to rescind may be lost: by affirmation after knowledge of the truth, by lapse of time, where restitution has become impossible, and where a third party has acquired rights in good faith and for value before rescission.
5. Under Section 19A the court has the wider power, in undue influence cases, to set the contract aside absolutely or on terms.
6. Mistake stands apart. A bilateral mistake of essential fact makes the agreement void ab initio, with restitution under Section 65 and recovery of money under Section 72. A unilateral mistake has no effect on the contract (Section 22).

For full marks, cover: the meaning of the maxim, its statutory home in Section 25, the definition of consideration in Section 2(d) with its essentials, then all the exceptions in Section 25 and elsewhere in the Act, and finish with the rules on adequacy and privity.

The maxim and its meaning

Ex nudo pacto non oritur actio means "out of a bare or naked promise no action arises". A nudum pactum, a naked agreement, is one that is unsupported by consideration, and the common law refused to enforce it. The promise may be perfectly clear and perfectly serious, but if nothing is given in return for it, the law treats it as a gratuitous promise and leaves it to the conscience of the promisor.

The maxim is embodied in the opening words of Section 25 of the Indian Contract Act, 1872: "An agreement made without consideration is void", and in Section 10, which requires that an agreement, to be a contract, be made "for a lawful consideration".

3. It may be past, present or future. The words "has done", "does" and "promises to do" cover all three. Indian law recognises past consideration; English law does not.
4. It need not be adequate, but must be real. Explanation 2 to Section 25.
5. It must be something the promisor is not already legally bound to do. Performance of an existing legal duty is not consideration.
6. It must be lawful. Section 23.
7. It must be real and not illusory, and not physically or legally impossible.

The exceptions: agreements enforceable without consideration

Section 25 itself lays down three, and the Act contains several more.

1. Natural love and affection. Section 25(1). An agreement made without consideration is valid if 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.

3. Time barred debt. Section 25(3). A promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law of limitation of suits, is enforceable without consideration.

The promise must be express and must be to pay a specific debt; an acknowledgement alone is not enough.

4. Completed gift. Explanation 1 to Section 25. "Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made." A gift once delivered and, in the case of immovable property, registered, cannot be set aside for want of consideration.

5. Agency. Section 185. "No consideration is necessary to create an agency."

6. Contract of guarantee. Section 127. Anything done, or any promise made, for the benefit of the principal debtor, is sufficient consideration to the surety for giving the guarantee. The surety himself receives nothing, yet is bound.

Two rules that qualify the doctrine

1. Adequacy. Explanation 2 to Section 25. An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy may be taken into account by the court in determining whether the consent was freely given. So consideration must be sufficient in law but need not be equivalent in value.

2. Privity of contract, and privity of consideration. Two different rules must be kept apart.

• Privity of consideration does not apply in India: Section 2(d) allows consideration to move from "any other person", and Chinnaya v. Ramayya is the authority.
• Privity of contract does apply: only a party to a contract can sue on it. Dunlop Pneumatic Tyre Co. v. Selfridge and Co. (1915) and, in India, M.C. Chacko v. State Bank of Travancore (1970 SC).
• The recognised exceptions to privity of contract are a beneficiary under a trust or a charge on immovable property (Khwaja Muhammad Khan v. Husaini Begum, 1910 PC), a marriage settlement or family arrangement, acknowledgement or estoppel, a covenant running with land, and an agency relationship.

• Attempted performance, or tender (Section 38). Where a promisor offers to perform and the offer is not accepted, he is not responsible for non performance and does not lose his rights under the contract. The tender must be unconditional, at a proper time and place, of the whole of what is due, and must give the promisee a reasonable opportunity to see that the promisor is able and willing to perform there and then, and to inspect goods offered.
• By whom (Sections 40 to 45). By the promisor himself where personal skill is intended, otherwise by his representatives or an agent. Section 41: acceptance of performance from a third person discharges the promisor. Sections 42 to 44 govern joint promises: any one or more of joint promisors may be compelled to perform the whole (Section 43), with a right of contribution among themselves, and the release of one joint promisor does not discharge the others (Section 44).
• Time and place (Sections 46 to 50), and time as the essence of the contract (Section 55).
• Reciprocal promises (Sections 51 to 54) and appropriation of payments (Sections 59 to 61).

• Initial impossibility. An agreement to do an act impossible in itself is void.
• Supervening impossibility, or frustration. 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 becomes unlawful, becomes void when the act becomes impossible or unlawful.
• Compensation. Where the promisor knew or might with reasonable diligence have known of the impossibility, and the promisee did not, the promisor must compensate the promisee.
• Grounds: destruction of the subject matter (Taylor v. Caldwell, 1863); death or personal incapacity (Robinson v. Davison, 1871); change of law or supervening illegality; non occurrence of the state of things forming the basis of the contract (Krell v. Henry, 1903); outbreak of war.
• Not grounds: commercial hardship or rise in price; difficulty short of impossibility; strikes and lockouts; default of a third party; self induced impossibility.

• Insolvency. On an order of adjudication, the insolvent's property vests in the official assignee, and on discharge he is released from his liabilities.
• Merger of rights.
• Material alteration of a written contract by one party, without the consent of the other, discharges the other party.
• Unauthorised cancellation of a written instrument.

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

• Actual breach, occurring on the due date or during performance.
• Anticipatory breach, occurring before the due date, where a party repudiates the contract or disables himself from performing.
• Section 39: "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."
• The rule in Hochster v. De La Tour (1853) allows the aggrieved party to sue immediately on an anticipatory breach, without waiting for the date of performance.

Remedies for breach:

For full marks, cover: what specific performance is, the reversal effected by the 2018 Amendment, Section 10 as it now stands, Sections 11 to 13, who may sue and against whom under Sections 15 and 19, substituted performance under Section 20, the bars in Sections 14, 16 and 17, and the ancillary reliefs in Sections 21 to 24.

The nature of the remedy

Specific performance is an equitable remedy by which the court directs a party to a contract to perform it according to its terms, instead of leaving the aggrieved party to a claim for damages. It is dealt with in Chapter II of the Specific Relief Act, 1963, Sections 9 to 25.

Its justification is that damages are not always an adequate substitute. Money will buy another consignment of wheat, but it will not buy the particular plot of land, the particular painting, or shares in a private company for which there is no market. Historically, therefore, the remedy was granted principally for contracts relating to immovable property and to goods with no available substitute.

When specific performance is enforced

Section 10. Specific performance of contract. Enforcement is mandatory, subject only to Sections 11(2), 14 and 16.

Section 11. Contracts connected with trusts.

• 11(1): a contract shall be specifically enforced where the act agreed to be done is in the performance, wholly or partly, of a trust.
• 11(2): a contract made by a trustee in excess of his powers, or in breach of trust, cannot be specifically enforced.

Section 12. Specific performance of part of a contract.

• 12(1): the general rule is that the court shall not direct specific performance of a part of a contract.
• 12(2): where the part left unperformed bears only a small proportion to the whole in value and admits of compensation in money, the court may direct performance of so much as can be performed and award compensation for the deficiency.

Who may obtain, and against whom

Section 15. Who may obtain specific performance. Besides a party to the contract, the following may sue:

• (a) the representative in interest, or the principal, of a party, unless the contract depends on the personal skill or volition of that party, or its performance by the representative would be materially different;
• (b) where the contract is a settlement on marriage or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;
• (c) a remainderman, where the contract was entered into by a tenant for life in due exercise of a power;
• (d) a reversioner in possession entitled to the benefit of a covenant;
• (e) a reversioner in remainder, where the covenant relates to the subject matter of the reversion and its breach would injure him;
• (f) where a company has amalgamated with another, the new company;

Substituted performance

Section 20 (as substituted in 2018). Substituted performance of contract. Where a contract is broken, the party who suffers is entitled to have the contract performed by a third party or by his own agency, and to recover the expenses and other costs actually incurred from the party in breach.

The section requires that:

• the aggrieved party must first give notice in writing of not less than thirty days to the party in breach, calling on him to perform within that time, and only on his refusal or failure may substituted performance be procured;
• once he has obtained substituted performance, he shall not be entitled to claim specific performance, though he may claim compensation.

When specific performance is refused

Section 14 (as substituted in 2018). Contracts not specifically enforceable. The following cannot be specifically enforced:

• (a) where a party has obtained substituted performance 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 the contract;
• (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 whose performance has been prevented or waived by the defendant.

Explanation (ii) to clause (c) provides that where the contract involves the payment of money, it is not essential for the plaintiff to actually tender the money to the defendant or to deposit it in court except when so directed by the court; but he must prove performance of, or readiness and willingness to perform, the contract according to its true construction, and he must aver it in his pleading.

Section 17. 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, has contracted to sell or let the property.

Ancillary reliefs

• Section 24. Bar of suit for compensation for breach after dismissal of suit for specific performance. The dismissal of a suit for specific performance bars the plaintiff's right to sue for compensation for the breach, though it does not bar his right to any other relief.
• Sections 20A, 20B and 20C, inserted in 2018, deal with infrastructure projects: no injunction may be granted where it would cause an impediment or delay in the progress of an infrastructure project, Special Courts are to be designated for such suits, and every suit under the Act is to be disposed of within twelve months from the date of service of summons, extendable by up to six months for reasons recorded.

• (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, may in addition to any other defence open to him, ask for rectification of the instrument.

Section 26(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 the rights acquired by third persons in good faith and for value.

Section 26(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.

Section 26(4). No relief for the rectification of an instrument shall be granted to any party unless it has been specifically claimed. Where a party has not claimed it in his pleading, the court shall at any stage allow him to amend the pleading on such terms as may be just for including such claim.

The standard of proof is high. Since the party is asking the court to depart from a signed document, he must produce clear and convincing evidence of what the common intention actually was and of how the writing came to depart from it.

Part B. Rescission of contracts (Sections 27 to 30)

Section 27. When rescission may be adjudged or refused

27(1). Rescission may be adjudged in the following cases, at the instance of any person interested in the contract:

• (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.

27(2). Rescission may be refused:

• (a) where the plaintiff has expressly or impliedly ratified the contract;

Section 28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, of which specific performance has been decreed

Where, in a suit for specific performance of a contract for the sale or lease of immovable property, a decree has been made and the purchaser or lessee does not pay the purchase money or other sum which the court has ordered him to pay within the period allowed by the decree, the vendor or lessor may apply in the same suit to have the contract rescinded, and the court may rescind the contract, either so far as regards the party in default or altogether as the justice of the case may require.

Where the contract is rescinded, the court shall direct the purchaser or lessee to restore possession if he has obtained it, and to pay rent for the period of possession; and where he pays within the extended period, the court shall order the vendor to execute the conveyance and deliver possession. The section applies to a decree passed before or after the commencement of the Act, and no separate suit is needed.