1

Chapter Analysis:

25% to 30% of Total Marks

Mark Weightage

Question Type Direct And case study

2
1. Kashish was running a business of artificial jewellery since long. He sold his business to
Naman and promises, not to carry on the business of artificial jewellery and real diamond
jewellery in that area for a period of next one year. After two months, Kashish opened a
show room for real diamond jewellery. Naman filed a suit against Kashish for closing the
business of real diamond jewellery business as it was against the agreement. Whether
Kashish is liable to close his business of real diamond jewellery following the provisions
of Indian Contract Act, 1872?

Answer
According to Section 27 of Indian Contract Act, 1872, an agreement by which any person
is restrained from exercising a lawful profession, trade or business of any kind, is to that
extent void. But this rule is subject to the following exceptions,
Namely-
➢ where a person sells the goodwill of a business and agrees with the buyer to
refrain from carrying on a similar business, within specified local limits, so
long as the buyer or his successor in interest carries on a like business therein,
such an agreement is valid.
➢ The local limits within which the seller of the goodwill agrees not to carry on
similar business must be reasonable.

In the instant case, Kashish sold his running business of artificial jewellery to Naman
and promises, not to carry on the business of artificial jewellery and real diamond
jewellery in that area and for a period of next one year but just after two months, Kashish
opened a show room of real diamond jewellery. Naman sued Kashish for closing the
business of real diamond business as it was against the agreement.

As exceptions to section 27 is applicable to similar business only, agreement between

Naman and Kashish will not be applicable on business of real diamond jewellery. Hence,
Kashish can continue his business of real diamond jewellery.

2. “An anticipatory breach of contract is a breach of contract occurring before the time fixed
for performance has arrived”. Discuss stating also the effect of anticipatory breach on
contracts.
Answer
An anticipatory breach of contract is a breach of contract occurring before the time
fixed for performance has arrived. When the promisor refuses altogether to perform his
promise and signifies his unwillingness even before the time for performance has arrived,
it is called Anticipatory Breach. The law in this regard has very well summed up in Frost
v. Knight and Hochster v. DelaTour.
Section 39 of the Indian Contract Act, 1872 deals with anticipatory breach of contract
and provides as follows: “When a party to a contract has refused to perform or disable
himself from performing, his promise in its entirety, the promisee may put an end to
the contract, unless he has signified, but words or conduct, his acquiescence in its
continuance.”

3
 Effect of anticipatory breach: The promisee is excused from performance or from
further performance. Further he gets an option:

• To either treat the contract as “rescinded and sue the other party for damages
from breach of contract immediately without waiting until the due date of
performance; or
• He may elect not to rescind but to treat the contract as still operative, and wait
for the time of performance and then hold the other party responsible for the
consequences .

3. Nitesh Gupta is constructing his house. For this purpose, he entered in a contract with M/s
Baba Brick House to supply of 10,000 bricks on 12th August 2023. M/s Baba Brick
House has two Lorries of 5,000 brick capacity. On 12th August 2023, one of the Lorries
was not in working condition so M/s Baba Brick House supplied only 5,000 bricks and
promised Nitesh Gupta to supply rest 5,000 bricks on next day. Nitesh Gupta wants to
cancel the contract, as M/s Baba Brick House did not supply the bricks as per the contract.
M/s Baba Brick House gave the plea that no fault has been made from its part, hence
contract should not be cancelled. In this situation, whether Nitesh Gupta can avoid the
contract under Indian Contract Act, 1872?

Answer
“Performance of Contract” means fulfilment of obligations to the contract. According to
Section 37 of Indian Contract Act, 1872, 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 the Contract Act or of any other law. Further, the
performance should be for whole obligations. Part delivery cannot be considered as valid
performance.

In the instant case, Nitesh Gupta contracted with M/s Baba Brick House to supply of
10,000 bricks on 12th August 2023. M/s Baba Brick House had only two Lorries of
5,000 brick capacity. But on the agreed date one lorry was not in working condition
so only 5,000 bricks were supplied on 12th August 2023 and promised to supply rest
5,000 bricks on next day.

After taking into account the above provisions and facts, Plea of M/s Baba Brick
House cannot be considered. Performance should be for whole obligation. Hence, part
performance by M/s Baba Brick House cannot be taken as valid performance. Nitesh
Gupta is right in avoiding the contract.

4
 4. Rahul, a transporter was entrusted with the duty of transporting tomatoes from a rural
farm to a city by Aswin. Due to heavy rains, Rahul was stranded for more than two
days. Rahul sold the tomatoes below the market rate in the nearby market where he
was stranded fearing that the tomatoes may perish. Can Aswin recover the loss from
Rahul on the ground that Rahul had acted beyond his authority taking into account
the provisions of the Indian Contract Act, 1872?

Answer
Agent's authority in an emergency (Section 189 of the Indian Contract Act, 1872):
An agent has authority, in an emergency, to do all such acts for the purpose of protecting
his principal from loss as would be done by a person of ordinary prudence, in his own
case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable goods like ‘tomatoes’ and
can decide the time, date and place of sale, not necessarily as per instructions of the
Aswin, the principal, with the intention of protecting Aswin from losses.

Here, Rahul acts in an emergency as a man of ordinary prudence, so Aswin will not
succeed against him for recovering the loss.

5. State the essential elements of a contract of bailment.

Answer
Essential elements of a contract of bailment: Section 148 of the Indian Contract Act,
1872 defines the term ‘Bailment’. A ‘bailment’ is the delivery of goods by one person to
another for some purpose upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of according to the directions of the
person delivering them. The essential elements of the contract of the bailment are:

(i) Delivery of goods—The essence of bailment is delivery of goods by one person to

another.
(ii) Bailment is a contract—In bailment, the delivery of goods is upon a contract that
when the purpose is accomplished, the goods shall be returned to the bailor.
(iii) Return of goods in specific—The goods are delivered for some purpose and it is
agreed that the specific goods shall be returned.
(iv) Ownership of goods—In a bailment, it is only the possession of goods which is
transferred, and the bailor continues to be the owner of the goods.
(v) Property must be movable—Bailment is only for movable goods and never for
immovable goods or money.

6. Mr. Y aged 21 years, lost his mental balance after the death of his parents in an
accident. He was left with his grandmother aged 85 years, incapable of walking and
dependent upon him. Mr. M, their neighbour, out of pity, started supplying food and
other necessaries to both of them. Mr. Y and his grandmother used to live in the house
built by his parents. Mr. M also provided grandmother with some financial assistance
for her emergency medical treatment. After supplying necessaries to Mr. Y for four

5
 years, Mr. M approached the former asking him to payback ` 15 Lakhs inclusive of
` 7 Lakhs incurred for the medical treatment of the lady (grandmother). Mr. Y
pleaded that he has got his parents’ jewellery to sell to a maximum value of ` 4
Lakhs, which may be adjusted against the dues. Mr. M refused and threatened Mr. Y
with a legal suit to be brought against for recovering the money.
Now, you are to decide upon based on the provisions of the Indian Contract Act, 1872:
a. Will Mr. M succeed in filing the suit to recover money?
b. What is the maximum amount of money that can be recovered by Mr.
c. Shall the provisions of the above Act also apply to the medical treatment given
to the grandmother?

Answer
( A ) Claim for necessaries supplied to persons incapable of contracting (Section 68
of the Indian Contract Act, 1872):
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.

In the instant case, Mr. M supplied the food and other necessaries to Mr. Y (who lost his
mental balance) and Mr. Y’s grandmother (incapable of walking and dependent upon Mr.
Y), hence, Mr. M will succeed in filing the suit to recover money.
(b) Supplier is entitled to be reimbursed from the property of such incapable person.
Hence, the maximum amount of money that can be recovered by Mr. M is ` 15 Lakhs
and this amount can be recovered from Mr. Y’s parent’s jewellery amounting to `
4 Lakhs and rest from the house of Y’s Parents. (Assumption: Y has inherited the
house property on the death of his parents)
(c) Necessaries will include emergency medical treatment. Hence, the above provisions
will also apply to the medical treatment given to the grandmother as Y is legally
bound to support his grandmother.

7. As per the general rule, "Stranger to a contract cannot file a suit in case of breach of
contract". Comment and explain the exceptions to this rule as per the provisions of the
Indian Contract Act, 1872.

Answer
Under the Indian Contract Act, 1872, the consideration for an agreement may proceed
from a third party; but the third party cannot sue on contract. Only a person who is party
to a contract can sue on it. The aforesaid rule, that stranger to a contract cannot sue
is known as a “doctrine of privity of contract”, is however, subject to certain
exceptions.

In other words, even a stranger to a contract may enforce a claim in the following cases:

6
 (1) In the case of trust, a beneficiary can enforce his right under the trust, though he was
not a party to the contract between the settler and the trustee.
(2) In the case of a family settlement, if the terms of the settlement are reduced into
writing, the members of family who originally had not been parties to the settlement,
may enforce the agreement.
(3) In the case of certain marriage contracts/arrangements, a provision may be made
for the benefit of a person, who may file a suit though he is not a party to the
agreement.
(4) In the case of assignment of a contract, when the benefit under a contract has been
assigned, the assignee can enforce the contract but such assignment should not involve
any personal skill.
(5) Acknowledgement or estoppel – Where the promisor by his conduct acknowledges
himself as an agent of the third party, it would result into a binding obligation towards
third party.
(6) In the case of covenant running with the land, the person who purchases land with
notice that the owner of land is bound by certain duties affecting land, the covenant
affecting the land may be enforced by the successor of the seller.
(7) Contracts entered into through an agent: The principal can enforce the contracts
entered by his agent where the agent has acted within the scope of his authority and
in the name of the principal.

8. Answer the Followings

• Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each surety executed a
bond with varying penalty amounts, X with a penalty of` 10,000, Y with ` 20,000
and Z with ` 40,000, in the event of Mr. D's failure to repay the borrowed money to
Mr. R. Examine the liabilities of the sureties in accordance with the Indian Contract
Act, 1872, when Mr. D defaults to the tune of ` 42,000. Additionally, assess the
situation, if there is no contractual arrangement among the sureties.
• X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows
1,00,000 from W, who is also aware of the purpose of the loan. Y kills Z but X refuses
to pay. X also to repay the loan to W. Explain the validity of the contract.
• Between X and Y
• Between X and W

Answer
As per section 146 of the Indian Contract Act, 1872, when two or more persons are co-
sureties for the same debt either jointly, or severally and whether under the same or
different contracts and whether with or without the knowledge of each other, the co-
sureties in the absence of any contract to the contrary, are liable, as between themselves,
to pay each an equal share of the whole debt, or of that part of it which remains unpaid
by the principal debtor.
Section 147 provides that the principle of equal contribution is, however, subject to
the maximum limit fixed by a surety to his liability. Co-sureties who are bound in
different sums are liable to pay equally as far as the limits of their respective
obligations permit.

7
 In the given question, Mr. D makes a default of ` 42,000, and X, Y and Z as sureties
have executed the bond with varying penalty amounts. Hence, X is liable to pay `
10,000, and Y and Z ` 16,000 each.

In the given case, if there is no contractual arrangement among the sureties, they would
be liable for equal contribution. Hence, X, Y and Z will be liable to pay ` 14,000 each.

(b) Illegal Agreement: It is an agreement which the law forbids to be made. As an

essential condition, lawful consideration and object is a must to make the agreement
valid. (Section 10 of the Indian Contract Act, 1872). As per Section 23, an agreement is
illegal and void, if the consideration and object is unlawful/contrary to law i.e. if
forbidden by law. Such an agreement is void and is not enforceable by law. Even the
connected agreements or collateral transactions to illegal agreements are also void.

In the present case,

• X agrees to give ` 1,00,000 to Y if Y kills Z. Thus, the agreement between X and Y is
void agreement being illegal in nature.
• X borrows ` 1,00,000 from W and W is also aware of the purpose of the loan. Thus,
the agreement between X and W is void as the connected agreements of an illegal
agreements are also void.

9. Answer The Followings

(a) Both a sub-agent and a substituted agent are appointed by the agent. But, however,
there are some points of distinction between the two. Explain any three points under
the Indian Contract Act, 1872.
(b) Differentiate between Novation and Alteration as per the Indian Contract Act,
1872.

Answer:
(a) Following are the points of distinction between a sub-agent and a substituted
agent:

S. No. Sub Agent Substituted Agent

1. A sub-agent does his work under A substituted agent works under the
the control and directions of instructions of the principal.
agent.

2. The agent not only appoints a sub- The agent does not delegate any part of
agent but also delegates to him a his task to a substituted agent.
part of his own duties.

8
 3. There is no privity of contract Privity of contract is established
between the principal and the between a principal and a substituted
sub- agent. agent.

4. The sub-agent is responsible to A substituted agent is responsible to

the agent alone and is not the principal and not to the original
generally responsible to the agent who appointed him.
principal.

5. The agent is responsible to the The agent is not responsible to the

principal for the acts of the sub- principal for the acts of the substituted
agent. agent.

6. The sub-agent has no right of The substituted agent can sue the
action against the principal for principal for remuneration due to
remuneration due to him. him.

7. Sub-agents may be Substituted agents can never be

improperly appointed. improperly appointed.

8. The agent remains liable for The agent's duty ends once he has
the acts of the sub- agent as named the substituted agent.
long as the sub- agency
continues.

(b) Novation and Alteration: The law pertaining to novation and alteration is contained
in Sections 62 to 67 of the Indian Contract Act, 1872. In both these cases, the original
contract need not be performed. Still there is a difference between these two.
1. Meaning: Novation means substitution of an existing contract with a new one. But

9
 in case of alteration the terms of the contract may be altered by mutual agreement by
the contracting parties.
2. Change in terms and conditions and parties: Novation may be made by changing
in the terms of the contract or there may be a change in the contracting parties.
But in case of alteration the terms of the contract may be altered by mutual
agreement by the contracting parties but the parties to the contract will remain the
same.
3. Substitution of new contract: In case of novation, there is altogether a substitution
of new contract in place of the old contract. But in case of alteration, it is not
essential to substitute a new contract in place of the old contract. In alteration, there
may be a change in some of the terms and conditions of the original agreement.

10. Explain the following statements in the light of provisions of the Indian Contract
Act1872:
(a) "Agreements made out of love and affection are valid agreements."
(b) "Promise to pay a time barred debt cannot be enforced."

Answer
(a) Agreements made out of love and affection are valid agreements: A written and
registered agreement based out of natural love and affection between the parties
standing in near relation (e.g., husband and wife) to each other is enforceable even
without consideration. The various conditions to be fulfilled as per Section 25(1) of
the Indian Contract Act, 1872:
(A) It must be made out of natural love and affection between the
parties.
(B) Parties must stand in near relationship to each other.
(C) It must be in writing.
(D) It must also be registered under the law.

Hence, the agreements made out of love and affection, without consideration,
shall be valid, if the above conditions are fulfilled.
Promise to pay a time barred debt cannot be enforced: According to Section 25(3)
of the Indian Contract Act, 1872, where a promise in writing signed by the person making
it or by his authorised agent, is made to pay a debt barred by limitation is valid without
consideration.
Hence, this statement is not correct.

10
 11. State the essential elements of a contract of bailment.
Answer
Essential elements of a contract of bailment: Section 148 of the Indian Contract
Act, 1872 defines the term ‘Bailment’.
A ‘bailment’ is the delivery of goods by one person to another for some purpose upon a
contract that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them. The essential
elements of the contract of the bailment are:
(a) Delivery of goods—The essence of bailment is delivery of goods by one person to
another.
(b) Bailment is a contract—In bailment, the delivery of goods is upon a contract that
when the purpose is accomplished, the goods shall be returned to the bailor.
(c) Return of goods in specific—The goods are delivered for some purpose, and it is
agreed that the specific goods shall be returned.
(d) Ownership of goods—In a bailment, it is only the possession of goods which is
transferred, and the bailor continues to be the owner of the goods.

12. In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper cup manufacture
machine to Mr. R and to receive payment on delivery. On the delivery date, Mr. R did
not pay the agreed price. Decide whether Mr. S is bound to fulfil his promise at
the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000. Mr. G defaulted the loan on due date
and debt became time barred. After the time barred debt, Mr. G agreed to settle the
full amount to Mr. Y. Whether acceptance of time barred debt Contract is enforceable
as per the Indian Contract Act, 1872?
(iii) A & B entered into a contract to supply unique item, alternate of which is not
available in the market. A refused to supply the agreed unique item to B. What
directions could be given by the court for breach of such contract?

Answer
(i) As per Section 51 of the Indian Contract Act, 1872, when a contract consists of
reciprocal promises to be simultaneously performed, no promisor needs to perform his
promise unless the promisee is ready and willing to perform his reciprocal promise. Such
promises constitute concurrent conditions and the performance of one of the promise is
conditional on the performance of the other. If one of the promises is not performed, the
other too need not be performed.
Referring to the above provisions, in the given case, Mr. S is not bound to deliver goods
to Mr. R since payment was not made by him at the time of delivery of goods.

(ii) Promise to pay time-barred debts - Section 25 (3): Where a promise in writing
signed by the person making it or by his authorised agent, is made to pay a debt barred
by limitation it is valid without consideration [Section 25(3)].
In the given case, the loan given by Mr. Y to Mr. G has become time barred. Thereafter,
Mr. G agreed to make payment of full amount to Mr. Y.
Referring to above provisions of the Indian Contract Act, 1872 contract entered

11
 between parties post time barred debt is valid so, Mr. G is bound to pay the agreed
amount to Mr. Y provided the above mentioned conditions of section 25 (3) are
fulfilled.
(iii) Where there is a breach of contract for supply of a unique item, mere monetary
damages may not be an adequate remedy for the other party. In such a case, the court
may give order for specific performance and direct the party in breach to carry out his
promise according to the terms of contract. Here, in this case, the court may direct A
to supply the item to B because the refusal to supply the agreed unique item cannot be
compensated through money.

13. Define Misrepresentation and Fraud. Explain the difference between Fraud and
Misrepresentation as per the Indian Contract Act, 1872.
Answer
Definition of Fraud under Section 17 of the Indian Contract Act, 1872:
'Fraud' means and includes any of the following acts committed by a party to a contract,
or with his connivance, or by his agent, with an intent to deceive another party thereto
or his agent, or to induce him to enter into the contract:
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
Any such act or omission as the law specially declares to be fraudulent.
According to Section 18, there is misrepresentation:
(1) Statement of fact, which of false, would constitute misrepresentation if the maker
believes it to be true but which is not justified by the information he possesses;
(2) When there is a breach of duty by a person without any intention to deceive which
brings an advantage to him;
(3) When a party causes, even though done innocently, the other party to the agreement to
make a mistake as to the subject matter.

Basis of Fraud Misrepresentation

difference

Intention To deceive the other party There is no such intention to

by hiding the truth. deceive the other party.

Knowledge of The person making the The person making the

truth suggestion believes that the statement believes it to be true,
statement as untrue. although it is not true.

12
 Rescission of the The injured party can The injured party is entitled to
contract and repudiate the contract and repudiate the contract or sue for
claim for claim damages. restitution but cannot claim the
damages damages.

Means to discover The party using the Party can always plead that the
the truth fraudulent act cannot injured party had the means to
secure or protect himself by discover the truth.
saying that the injured
party had means to
discover the truth.

14. M Ltd. contract with Shanti Traders to make and deliver certain machinery to them
by 30th June 2023 for ` 11.50 lakhs. Due to labour strike, M Ltd. could not
manufacture and deliver the machinery to Shanti Traders. Later, Shanti Traders
procured the machinery from another manufacturer for 12.75 lakhs. Due to this, Shanti
Traders was also prevented from performing a contract which it had made with Zenith
Traders at the time of their contract with M Ltd. and were compelled to pay compensation
for breach of contract. Advise Shanti Traders the amount of compensation which it can
claim from M Ltd., referring to the legal provisions of the Indian Contract Act, 1872.

Answer
Section 73 of the Indian Contract Act, 1872 provides for consequences of breach
of contract. According to it, when a contract has been broken, the party who suffers by
such breach is entitled to receive from the party who has broken the contract,
compensation for any loss or damage caused to him there by which naturally arose in the
usual course of things from such breach or which the parties knew when they made the
contract, to be likely to result from the breach of it. Such compensation is not given for
any remote and indirect loss or damage sustained by reason of the breach. It is further
provided in the explanation to the section that in estimating the loss or damage from a
breach of contract, the means which existed of remedying the inconvenience caused
by the non - performance of the contract must be taken into account.
Applying the above principle of law to the given case, M Ltd. is obliged to compensate
for the loss of ` 1.25 lakh (i.e. ` 12.75 minus ` 11.50 =` 1.25 lakh) which had
naturally arisen due to default in performing the contract by the specified date.
Regarding the amount of compensation which Shanti Traders were compelled to make
to Zenith Traders, it depends upon the fact whether M Ltd., knew about the
contract of Shanti Traders for supply of the contracted machinery to Zenith Traders on
the specified date. If so, M Ltd is also obliged to reimburse the compensation which
Shanti Traders had to pay to Zenith Traders for breach of contract. Otherwise, M Ltd
is not liable

15. Explain whether the agency shall be terminated in the following cases under
the provisions of the Indian Contract Act, 1872:

13
(i) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts
due to him from A. Afterwards, A becomes insane.
(ii) A appoints B as A's agent to sell A's land. B, under the authority of A, appoints C as
agent of B. Afterwards, A revokes the authority of B but not of C. What is the status of
agency of C.

Answer
According to section 202 of the Indian Contract Act, 1872, where the agent has himself an
interest in the property which forms the subject matter of the agency, the agency cannot,
in the absence of an express contract, be terminated to the prejudice of such interest.
In other words, when the agent is personally interested in the subject matter of agency,
the agency becomes irrevocable.

In the given question, A gives authority to B to sell A’s land, and to pay himself, out of
the proceeds, the debts due to him from A.
As per the facts of the question and provision of law, A cannot revoke this authority,
nor it can be terminated by his insanity.
(ii) According to section 191 of the Indian Contract Act, 1872, a “Sub- agent” is a
person employed by, and acting under the control of, the original agent in the business of
the agency.
Section 210 provides that, the termination of the authority of an agent causes the
termination (subject to the rules regarding the termination of an agent’s authority) of
the authority of all sub-agents appointed by him.
In the given question, B is the agent of A, and C is the agent of B. Hence, C becomes a
sub- agent.
Thus, when A revokes the authority of B (agent), it results in termination of authority of
sub-agent appointed by B i.e. C (sub-agent).

16. (i) Rahul found a smart watch in a restaurant. He enquired about all the customers
present there but the true owner could not be found. He handed over the same to the
manager of the restaurant to keep till the true owner is found. After a week he went back
to the restaurant to enquire about the smart watch. The manager refused to return it to
Rahul, saying that it did not belong to Rahul. In the light of the Indian Contract Act,
1872, can Rahul recover it from the Manager?
(II) Mr. Vikas a businessman has been fighting a long-drawn litigation with Mr. Neeraj an
industrialist. To support his legal campaign, he enlists the services of Mr. Manoj a
Judicial officer stating that the amount of `10 lakhs would be paid to him if he
does not take up the brief of Mr. Neeraj Mr. Manoj agrees but, at the end of the
litigation Mr. Vikas refuses to pay to Mr. Manoj. Decide whether Mr. Manoj can
recover the amount promised by Mr. Vikas under the provisions of the Indian Contract
Act, 1872?

14
Answer

(i) Responsibility of finder of goods (Section 71 of the Indian

Contract Act, 1872):

A person who finds goods belonging to another and takes them into his custody is subject
to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
In the light of the above provisions, the manager must return the smart watch to Rahul,
since Rahul is entitled to retain the smart watch found against everybody except the true
owner.
(II) The problem as asked in the question is based on Section 10 of the Indian contract
Act, 1872. This Section says that all agreements are contracts if they are made by the
free consent of the parties competent to contract, for a lawful consideration and with a
lawful object and are not expressly declared to be void. Further, Section 23 also states
that every agreement of which the object is unlawful is void.
Accordingly, one of the essential elements of a valid contract in the light of the said
provision is that the agreement entered into must not be which the law declares to be
either illegal or void. An illegal agreement is an agreement expressly or impliedly
prohibited by law. A void agreement is one without any legal effects.

The given instance is a case of interference with the course of justice and results as
opposed to public policy. This can also be called an agreement in restraint of legal
proceedings. This agreement restricts one’s right to enforce his legal rights. Such an
agreement has been expressly declared to be void under section 28 of the Indian
Contract Act, 1872. Hence, Mr. Manoj in the given case cannot recover the amount of `
10 lakh promised by Mr. Vikas because it is a void agreement and cannot be enforced
by law.

17. Define consideration. What are the legal rules regarding consideration under the
Indian Contract Act, 1872?

Answer
Consideration [Section 2(d) of the Indian Contract Act, 1872]: When at the desire of
the promisor, the promisee or any other person has done or abstained from doing, or
does or abstains from doing or promises to do or abstain from doing something, such
an act or abstinence or promise is called consideration for the promise.

15
Legal Rules Regarding Consideration
I. Consideration must move at the desire of the promisor: Consideration must
be offered by the promisee or the third party at the desire or request of the
promisor. This implies “return” element of consideration.
II. Consideration may move from promisee or any other person: In India,
consideration may proceed from the promisee or any other person who is not a
party to the contract. In other words, there can be a stranger to a consideration
but not stranger to a contract.
III. Executed and executory consideration: A consideration which consists in the
performance of an act is said to be executed. When it consists in a promise, it is
said to be executory. The promise by one party may be the consideration for an
act by some other party, and vice versa.
IV. Consideration may be past, present or future: It is a general principle that
consideration is given and accepted in exchange for the promise. The
consideration, if past, may be the motive but cannot be the real consideration of
a subsequent promise. But in the event of the services being rendered in the past
at the request or the desire of the promisor, the subsequent promise is regarded
as an admission that the past consideration was not gratuitous.
V. Performance of what one is legally bound to perform: The performance of an
act by a person who is legally bound to perform the same cannot be consideration
for a contract. Hence, a promise to pay money to a witness is void, for it is without
consideration. Hence, such a contract is void for want of consideration.

VI. Consideration must be real and not illusory: Consideration must be real and
must not be illusory. It must be something to which the law attaches some value.
If it is legally or physically impossible it is not considered valid consideration.
VII. Consideration must not be unlawful, immoral, or opposed to public policy:
Only presence of consideration is not sufficient it must be lawful. Anything which
is immoral or opposed to public policy also cannot be valued as valid
consideration.

1 8 . (i) Mr. A, the employer induced his employee Mr. B to sell his one room flat
to him at less than the market value to secure promotion. Mr. B sold the flat to Mr.
A. Later on, Mr. B changed his mind and decided to sue Mr. A. Examine the
validity of the contract as per the provisions of the Indian Contract Act, 1872.

(ii ) Mr. S promises Mr. M to paint a family picture for ` 20,000 and assures to
complete his assignment by 15th March, 2023. Unfortunately, Mr. S died in a
road accident on 1st March, 2023 and his assignment remains undone. Can Mr.
M bind the legal representative of Mr. S for the promise made by Mr. S?
Suppose Mr. S had promised to deliver some photographs to Mr. M on
15th March, 2023 against a payment of ` 10,000 but he dies before that day.
Will his representative be bound to deliver the photographs in this situation?
Decide as per the provisions of the Indian Contract Act, 1872.

16
Answer
(i) According to section 16 of the Indian Contract Act, 1872, a contract is said to be
induced by ‘undue influence’ where the relations subsisting between the parties are such
that one of the parties is in a position to dominate the will of the other and he uses that
position to obtain an unfair advantage over the other.
When consent to an agreement is caused by undue influence, the contract is voidable at
the option of the party, whose consent was so caused.
Hence, the contract between Mr. A and Mr. B is voidable at the option of Mr. B as it was
induced by undue influence by Mr. A and therefore Mr. B can sue Mr. A.

(ii) The parties to a contract must either perform, or offer to perform, their respective
promises, unless such performance is dispensed with or excused under the provisions of
this Act, or of any other law.
Promises to bind the representatives of the promisors in case of the death of such
promisors before performance, unless a contrary intention appears from the contract.
(Section 37 of the Indian Contract Act, 1872).
As per the provisions of Section 40 of the Indian Contract Act, 1872, if it appears from
the nature of the case that it was the intention of the parties to any contract that any
promise contained in it should be performed by the promisor himself, such promise must
be performed by the promisor. In other cases, the promisor or his representative may
employ a competent person to perform it.
In terms of the provisions of Section 40 stated above, in case where Mr. S has to
paint a family picture for Mr. M, Mr. M cannot ask the legal representative of Mr. S to
complete the painting work on Mr. S’s death, since painting involves the use of personal
skill.
In terms of the provisions of Section 37 stated above, in case where Mr. S had
promised to deliver some photographs to Mr. M, the legal representatives of Mr. S shall
be bound to deliver the photographs in this situation.

17
19. State the essential elements of a contract of bailment.

Answer
Essential elements of a contract of bailment: Section 148 of the Indian Contract Act,
1872 defines the term ‘Bailment’. A ‘bailment’ is the delivery of goods by one person to
another for some purpose upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of according to the directions of the
person delivering them. The essential elements of the contract of the bailment are:
a. Contract: Bailment is based upon a contract. The contract may be express or implied.
No consideration is necessary to create a valid contract of bailment.
b. Delivery of goods: It involves the delivery of goods from one person to another for
some purposes. Bailment is only for moveable goods and never for immovable goods
or money.
c. Purpose: The goods are delivered for some purpose. The purpose may be express or
implied.
d. Possession: In bailment, possession of goods changes. Change of possession can
happen by physical delivery or by any action which has the effect of placing the goods
in the possession of bailee. The change of possession does not lead to change of
ownership. In bailment, bailor continues to be the owner of goods.
e. Return of goods: Bailee is obliged to return the goods physically to the bailor. The
goods should be returned in the same form as given or may be altered as per bailor’s
direction.

20. (i) Mr. Chetan was travelling to Manali with his wife by bus of Himalayan
Travels Pvt. Ltd. Due to some technical default in the bus, the driver has to stop the bus
in a mid-way in cold night. The driver advised the passengers to get to the shelter in the
nearest hotel which was at a distance of only one kilometer from that place. The wife
of Mr. Chetan caught cold and fell ill due to being asked to get down and she had
to walk in cold night to reach hotel. Mr. Chetan filed the suit against Himalayan
Travels Pvt. Ltd. for damages for the personal inconvenience, hotel charges and
medical treatment for his wife. Explain, whether Mr. Chetan would get compensation
for which he filed the suit under the Indian Contract Act, 1872?

(ii) Sahil sells by auction to Rohan a horse which Sahil knows to be unsound. The horse
appears to be sound, but Sahil knows about the unsoundness of the horse. Is this contract
valid in the following circumstances under the Indian Contract Act, 1872:
i. If Sahil says nothing about the unsoundness of the horse to Rohan.
ii. If Sahil says nothing about it to Rohan who is Sahil’s son.
iii. If Rohan says to Sahil “If you do not deny it, I shall assume that the horse is sound.”
Sahil says nothing.

Answer
(i) Section 73 of Indian Contract Act, 1872 provides that when a contract has been

18
broken, the party who suffers by such breach is entitled to receive, from the party who
has broken the contract, compensation for any loss or damage caused to him thereby,
which naturally arose in the usual course of things from such breach, or which the parties
knew, when they made the contract, to be likely to result from the breach of it. But
such compensation is not to be given for any remote and indirect loss or damage sustained
by reason of the breach.
In the instant case, Mr. Chetan filed the suit against Himalayan Travels Pvt. Ltd. for
damages for the personal inconvenience, hotel charges and medical treatment for his wife.
On the basis of above provisions and facts of the case, it can be said that Mr. Chetan can
claim damages for the personal inconvenience and hotel charges but not for medical
treatment for his wife because it is a remote or indirect loss.
(ii) According to section 17 of the Indian Contract Act, 1872, mere silence as to facts
likely to affect the willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard being had to them, it is
the duty of the person keeping silence to speak, or unless his silence is, in itself,
equivalent to speech. Hence, in the instant case,
(A) This contract is valid since as per section 17, mere silence as to the facts likely to
affect the willingness of a person to enter into a contract is not fraud. Here, it is not
the duty of the seller to disclose defects.
(B) This contract is not valid since as per section 17, it becomes Sahil’s duty to tell
Rohan about the unsoundness of the horse because a fiduciary relationship exists
between Sahil and his son Rohan. Here, Sahil’s silence is equivalent to speech and
hence amounts to fraud.
(C) This contract is not valid since as per section 17, Sahil’s silence is equivalent to
speech and hence amounts to fraud.

21. Who is considered as an agent under the Indian Contract Act, 1872, and what are
the duties and obligations associated with this role?
Answer
Duty not to make secret profits: It is the duty of an agent not to make any secret profit
in the business of agency The Indian Contract Act, 1872 does not define the word
‘Agency’. However, section 182 of the Indian Contract Act, 1872 defines Agent and
Principal as:
Agent means a person employed to do any act for another or to represent another in
dealing with the third persons and
The principal means a person for whom such act is done or who is so represented.
Duties and obligations of an Agent
(i) Duty to follow instructions or customs: According to Section 211, an agent is
bound to conduct the business of his principal according to the direction given by
the principal, or, in the absence of any such directions, according to the customs
which prevails in doing business of the same kind at the place where the agent
conducts such business. When the agent acts otherwise and any loss is sustained by

19
 the Principal, he must indemnify him, and, if any profit accrues, he must account
for it.
(ii) Duty of reasonable care and skill: According to section 212, an agent is bound to
conduct the business of the principal with as much skill as is generally possessed
by persons engaged in similar business, unless the principal has notice of his want
of skill. The agent is always bound to act with reasonable diligence, and to use such
skill as he possesses; and to make compensation to his principal in respect of the
direct consequences of his own neglect, want of skill or misconduct, but not in
respect of loss of damage which are indirectly or remotely caused by such neglect,
want of skill or misconduct.
(iii) Duty to render proper accounts [Section 213]: An agent is bound to render
proper accounts to his principal on demand. Rendering accounts does not mean
showing the accounts but the accounts supported by vouchers. (Anandprasad vs.
Dwarkanath)
(iv) Agent’s duty to communicate with principal [Section 214]: It is the duty of an
agent, in cases of difficulty, to use all reasonable diligence in communicating with
his principal, and in seeking to obtain his instructions.
(v) Duty not to deal on his own account: Agent should not deal on his own account
without first obtaining the consent of the principal, otherwise the principal may—
repudiate the transaction, (Section 215)
(vi) claim from the agent any benefit which may have resulted to him from the
transaction. (Section 216)
(vii) His relationship with the principal is of fiduciary nature and this requires absolute
good faith in the conduct of agency.
Secret Profit means any advantage obtained by the agent over and above his
agreed remuneration and which he would not have been able to make but for his
position as agent.
(viii) Duty not to delegate: According to section 190, an agent cannot lawfully employ
to perform acts which he has expressly or impliedly undertaken to perform
personally, unless by the ordinary custom of trade a sub-agent may, or, from the
nature of agency, a sub- agent, must be employed.
(ix) Agent’s duty to pay sums received for principal [Section 218]: Subject to such
deductions, the agent is bound to pay to his principal all sums received on his
account.
(x) Duty not to use any confidential information received in the course of agency
against the principal.

22. (i) Mr. Om Kashyap was a big businessman of Pune City having two sons and one
married daughter. He decided to gift his house to his daughter. For this purpose, he
called his lawyer at his house and made a written document for such gift. The lawyer
advised him to get the transfer document properly registered. When they both were
going for registration of document, they met with an accident, and both of them died.
Later, the daughter found the document and claimed the house on the basis of that
document. Explain, whether she can get the house as gift under the Indian Contract
Act, 1872

20
 (ii)Due to urgent need of money amounting to ` 3,00,000, Pawan approached Raman
and asked him for the money. Raman lent the money on the guarantee of Suraj and
Tarun. Pawan makes default in payment and Suraj pays full amount to Raman. Suraj,
afterwards, claimed contribution from Tarun but Tarun refused to contribute on the
basis that there is no contract between Suraj and him. Examine referring to the
provisions of the Indian Contract Act, 1872, whether Tarun can escape from his
liability.

Answer
(i) Section 25 of Indian Contract Act, 1872 provides that 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. In other
words, a written and registered agreement based on natural love and affection between
the parties standing in near relation to each other is enforceable even without
consideration.
In the instant case, the transfer of house made by Mr. Om Kashyap on account of natural
love and affection between the parties standing in near relation to each other is written
but not registered. Hence, this transfer is not enforceable.

(ii) Equality of burden is the basis of Co-suretyship. This is contained in section

146 of the Indian Contract Act, 1872, which states that “unless otherwise agreed, each
surety is liable to contribute equally for discharge of whole debt or part of the debt
remains unpaid by debtor.

Accordingly, on the default of Pawan in payment, Tarun cannot escape from his liability.
Both the sureties Suraj and Tarun are liable to pay equally, in absence of any contract
between them.

23. How is a contract is discharged under the Indian Contract Act, 1872 and what are the
different ways in which the obligations created by a contract can come to an end?

Answer
A contract is discharged when the obligations created by it come to an end. A contract
may be discharged in any one of the following ways:
(i) Discharge by performance: It takes place when the parties to the contract fulfil their
obligations arising under the contract within the time and in the manner prescribed.
Discharge by performance may be
(1) Actual performance; or
(2) Attempted performance.
Actual performance is said to have taken place, when each of the parties has done what
he had agreed to do under the agreement. When the promisor offers to perform his

21
 obligation, but the promisee refuses to accept the performance, it amounts to attempted
performance or tender.
(ii) Discharge by mutual agreement: Section 62 of the Indian Contract Act provides
if the parties to a contract agree to substitute
a new contract for it, or to rescind or remit or alter it, the original contract need not
be performed.
(iii) Discharge by impossibility of performance: The impossibility may exist from the
very start. In that case, it would be impossibility ab initio. Alternatively, it may
supervene. Supervening impossibility may take place owing to:
(a) an unforeseen change in law;
(b) the destruction of the subject-matter essential to that performance;
(c) the non-existence or non-occurrence of particular state of things, which was
naturally contemplated for performing the contract, as a result of some personal
incapacity like dangerous malady;
(d) the declaration of a war (Section 56).
(iv) Discharge by lapse of time: A contract should be performed within a specified
period as prescribed by the Limitation Act, 1963. If it is not performed and if no
action is taken by the promisee within the specified period of limitation, he is
deprived of remedy at law.
(v) Discharge by operation of law: A contract may be discharged by operation of law
which includes by death of the promisor, by insolvency etc.
(vi) Discharge by breach of contract: Breach of contract may be actual breach of
contract or anticipatory breach of contract. If one party defaults in performing his
part of the contract on the due date, he is said to have committed breach thereof.

(vii) When on the other hand, a person repudiates a contract before the stipulated time for
its performance has arrived, he is deemed to have committed anticipatory breach. If
one of the parties to a contract breaks the promise the party injured thereby, has not
only a right of action for damages but he is also discharged from performing his part
of the contract.
(viii) Promisee may waive or remit performance of promise: Every promisee may
dispense with or remit, wholly or in part, the performance of the promise made to
him, or may extend the time for such performance or may accept instead of it any
satisfaction which he thinks fit. In other words, a contract may be discharged by
remission. (Section 63)
(ix) Effects of neglect of promisee to afford promisor reasonable facilities for
performance: If any promisee neglects or refuses to afford the promisor reasonable
facilities for the performance of his promise, the promisor is excused by such neglect
or refusal as to any non-performance caused thereby. (Section 67)
(x) Merger of rights: Sometimes, the inferior rights and the superior rights coincide
and meet in one and the same person. In such cases, the inferior rights merge
into the superior rights. On merger, the inferior rights vanish and are not required
to be enforced.

22
 24. What constitutes a contingent contract under the Indian Contract Act, 1872, and what
are its essential elements?
Answer
Definition of ‘Contingent Contract’ (Section 31 of the Indian Contract Act, 1872)
“A contract to do or not to do something, if some event, collateral to such contract, does
or does not happen”.
Contracts of Insurance, indemnity and guarantee fall under this category.
Meaning of collateral Event: Collateral event is “an event which is neither a
performance directly promised as part of the contract, nor the whole of the consideration
for a promise”.
Essentials of a contingent contract
(a) The performance of a contingent contract would depend upon the happening
or non-happening of some event or condition. The condition may be precedent or
subsequent.
(b) The event referred to as collateral to the contract. The event is not part of the
contract. The event should be neither performance promised nor a consideration for
a promise.
(c) The contingent event should not be a mere ‘will’ of the promisor. The event
should be contingent in addition to being the will of the promisor.
(d) The event must be uncertain. Where the event is certain or bound to happen, the
contract is due to be performed, then it is a not contingent.

25. (i) Ashok goes to super market to buy a Air Conditioner. He selects a branded Air
Conditioner having a price tag of ` 40,000 after a discount of ` 3000. Ashok reaches at
cash counter for making the payment, but cashier says, “Sorry sir, the discount was upto
yesterday. There is no discount from today. Hence you have to pay` 43,000.” Ashok
got angry and insists for ` 40,000. State with reasons whether under Indian Contract
Act, 1872, Ashok can enforce the cashier to sell at discounted price i.e. ` 40,000.

(II) Rahul, a transporter was entrusted with the duty of transporting tomatoes from a rural
farm to a city by Aswin. Due to heavy rains, Rahul was stranded for more than two days.
Rahul sold the tomatoes below the market rate in the nearby market where he was
stranded fearing that the tomatoes may perish. Can Aswin recover the loss from Rahul
on the ground that Rahul had acted beyond his authority? agent has authority, in an
emergency, to do all such acts for the purpose.

Answer(i) An invitation to offer is different from offer. Quotations, menu cards,

price tags, advertisements in newspaper for sale are not offer. These are merely invitations
to public to make an offer. An invitation to offer is an act precedent to making an offer.
Acceptance of an invitation to an offer does not result in the contract and only an offer
emerges in the process of negotiation.
In the instant case, Ashok reaches to super market and selects a Air Conditioner with
a discounted price tag of ` 40,000 but cashier denied to sell at discounted price by saying
that discount is closed from today and request to make full payment. But Ashok insists to
purchase at discounted price.

23
 On the basis of above provisions and facts, the price tag with Air Conditioner was not
offer. It is merely an invitation to offer. Hence, it is the Ashok who is making the offer
not the super market. Cashier has right to reject the Ashok’s offer. Therefore, Ashok
cannot enforce cashier to sell at discounted price.
(ii) Agent's authority in an emergency (Section 189 of the Indian Contract Act,
1872): of protecting his principal from loss as would be done by a person of
ordinary prudence, in his own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable goods like ‘tomatoes’ and
can decide the time, date and place of sale, not necessarily as per instructions of the
Aswin, the principal, with the intention of protecting Aswin from losses.

26. “An anticipatory breach of contract is a breach of contract occurring before the time
fixed for performance has arrived”. Also, discuss the effect of anticipatory breach of
contracts under the Indian Contract Act, 1872.
Answer:
An anticipatory breach of contract is a breach of contract occurring before the time
fixed for performance has arrived. When the promisor refuses altogether to perform his
promise and signifies his unwillingness even before the time for performance has
arrived, it is called Anticipatory Breach.
Effect of Anticipatory Breach: The promisee is excused from performance or from
further performance. Further he gets an option:
(1) To either treat the contract as rescinded and sue the other party for damages for
breach of contract immediately without waiting until the due date of performance;
or
(2) He may elect not to rescind but to treat the contract as still operative, and wait for
the time of performance and then hold the other party responsible for the
consequences of non-performance. But in this case, he will keep the contract alive
for the benefit of the other party as well as his own, and the guilty party, if he so
decides on re-consideration, may still perform his part of the contract and can also
take advantage of any supervening impossibility which may have the effect of
discharging the contract.

27. Define consideration. State the characteristics of a valid consideration under the
Indian Contract Act, 1872.

Answer :
Consideration [Section 2(d) of the Indian Contract Act, 1872]
“When at the desire of the promisor, the promise or any other person has done, or
does or abstains from doing of promises to do or abstain from doing something, such an
act or abstinence or promise is called consideration for the promise”.
The essential characteristics of a valid consideration are as follows:
(1) Consideration must move at the desire of the promisor.

24
 (2) It may proceed from the promisee or any other person on his behalf.
(3) It may be executed or executory. It may be past, present or future.
(4) It must be real and have some value in the eyes of law.
(5) It must not be something which the promisor is already legally bound to do.
(6) It must not be unlawful, immoral or opposed to public policy.
(7) Inadequacy of consideration does not invalidate the contract. Thus, it need not
be proportionate to the value of the promise of the other.

28. Explain the terms “Trafficking relating to public offices and titles” and “Stifling
prosecution” as per the Indian Contract Act, 1872.

Answer:
Trafficking relating to Public Offices and titles: An agreement to trafficking in public
office is opposed to public policy, as it interferes with the appointment of a person
best qualified for the service of the public. Public policy requires that there should be no
money consideration for the appointment to an office in which the public is interested.
The following are the examples of agreements that are void since they are tantamount to
sale of public offices.
(1) An agreement to pay money to a public servant in order to induce him to retire from
his office so that another person may secure the appointment is void.
(2) An agreement to procure a public recognition like Padma Vibhushan for reward
is void.
Stifling Prosecution: An agreement to stifle prosecution i.e. “an agreement to present
proceedings already instituted from running their normal course using force” tends to be
a perversion or an abuse of justice, therefore, such an agreement is void. The principle is
that one should not make a trade of felony. The compromise of any public offence is
generally illegal.
For example, when a party agrees to pay some consideration to the other party in
exchange for the later promising to forgo criminal charges against the former is an
agreement to stifle prosecution and therefore is void.
Under the Code of Criminal Procedure, there is however, a statutory list of
compoundable offences and an agreement to drop proceeding relating to such offences
with or without the permission of the Court, as the case may be, in consideration the
accused promising to do something for the complainant, is not opposed to public
policy.

29. Rahul owns an electronics store. Pankaj visited the store to buy a water purifier priced
at ` 54,000/-. He specifically requested Rahul for a purifier with a copper filter. As
Pankaj wanted to buy the purifier on credit, with the intention of paying in 9 equal
monthly instalments, Rahul demands a guarantor for the transaction. Sooraj (a friend
of Pankaj) came forward and gave the guarantee for payment of water purifier. Rahul
sold Pankaj, a water purifier of a specific brand. Pankaj made payment for 4 monthly
instalments and after that became insolvent. Explain with reference to the Indian

25
 Contract Act, 1872, the liability of Sooraj as a guarantor to pay the balance price of
water purifier to Rahul.

What will be your answer, if Rahul sold the water purifier misrepresenting it as having
a copper filter, while it actually has a normal filter? Neither Pankaj nor Sooraj was
aware of this fact and upon discovering the truth, Pankaj refused to pay the price. In
response to Pankaj 's refusal, Rahul filed the suit against Sooraj, the guarantor. Explain
with reference to the Indian Contract Act, 1872, whether Sooraj is liable to pay the
balance price of water purifier to Rahul?

Answer:
As per section 126 of the Indian Contract Act, 1872, the contract of guarantee is
defined as a contract to perform the promise or discharge the liability of a third person
in case of his default.
In this case, Sooraj has given a guarantee for Pankaj 's payment obligation towards
Rahul. When Pankaj defaulted after making four monthly instalments and became
insolvent, Sooraj 's liability as a guarantor will come into existence.
According to Section 128 of the Act, the liability of the surety is co- extensive with
that of the principal debtor, unless it is otherwise provided by the contract.
Since Pankaj failed to pay the remaining instalments due to insolvency, Sooraj, as the
guarantor, is liable to pay the balance price of the water purifier to Rahul. In the given
situation, Sooraj will have to pay the balance amount of ` 30,000 to Rahul. [54,000-
(4x6,000)]
In the second situation, Rahul sold the water purifier misrepresenting it as having
a copper filter, while it actually has a normal filter; this changes the situation
significantly.
According to Section 142 of the Act, any guarantee which has been obtained by means
of misrepresentation made by the creditor, or with his knowledge and assent,
concerning a material part of the transaction, is invalid. Here, guarantee is obtained
by means of misrepresentation made by the creditor (Rahul), and therefore the
guarantee is invalid.
Furthermore, under Section 143, any guarantee which the creditor has obtained by
means of keeping silence as to material circumstances, is invalid.
Here Rahul misrepresented the filter type and both Pankaj and Sooraj were unaware
of this fact. The creditor (Rahul) has obtained the guarantee by remaining silent as to
material circumstances.
Therefore, the guarantee obtained from Sooraj will be considered to be invalid.
Consequently, Sooraj cannot be held liable to pay the balance price of the water purifier
to Rahul.

30. Explain the term Wagering agreement in the light of the Indian Contract Act, 1872.
Also, explain some transactions resembling wagering transaction but which are not
void.
Answer
Wagering agreement (Section 30 of the Indian Contract Act, 1872): An agreement

26
by way of a wager is void. It is an agreement involving payment of a sum of money upon
the determination of an uncertain event. The essence of a wager is that each side should
stand to win or lose, depending on the way an uncertain event takes place in reference to
which the chance is taken and in the occurrence of which neither of the parties has
legitimate interest.
Transactions resembling with wagering transaction but are not void
(i) Chit fund: Chit fund does not come within the scope of wager (Section 30). In case
of a chit fund, a certain number of persons decide to contribute a fixed sum for a
specified period and at the end of a month, the amount so contributed is paid to the
lucky winner of the lucky draw.
(ii) Commercial transactions or share market transactions: In these transactions
in which delivery of goods or shares is intended to be given or taken, do not amount
to wagers.
(iii) Games of skill and Athletic Competition: Crossword puzzles, picture
competitions and athletic competitions where prizes are awarded on the basis of
skill and intelligence are the games of skill and hence such competitions are valid.
(iv) A contract of insurance: A contract of insurance is a type of contingent contract
and is valid under law and these contracts are different from wage.

31. (i) Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each surety
executed a bond with varying penalty amounts, X with a penalty of ` 10,000, Y with
` 20,000 and Z with ` 40,000, in the event of Mr. D's failure to repay the borrowed
money to Mr. R. Examine the liabilities of the sureties in accordance with the Indian
Contract Act, 1872, when Mr. D defaults to the tune of ` 42,000. Additionally,
assess the situation, if there is no contractual arrangement among the sureties.
(ii) X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows
1,00,000 from W, who is also aware of the purpose of the loan. Y kills Z but
X refuses to pay. X also to repay the loan to W. Explain the validity of the
contract.
(A) Between X and Y
(B) Between X and W

Answer :
(i) As per section 146 of the Indian Contract Act, 1872, when two or more persons are
co-sureties for the same debt either jointly, or severally and whether under the same or
different contracts and whether with or without the knowledge of each other, the co-
sureties in the absence of any contract to the contrary, are liable, as between themselves,
to pay each an equal share of the whole debt, or of that part of it which remains unpaid
by the principal debtor.
Section 147 provides that the principle of equal contribution is, however, subject to the
maximum limit fixed by a surety to his liability. Co-sureties who are bound in different
sums are liable to pay equally as far as the limits of their respective obligations permit.
In the given question, Mr. D makes a default of ` 42,000, and X, Y and Z as sureties
have executed the bond with varying penalty amounts. Hence, X is liable to pay `

27
 10,000, and Y and Z ` 16,000 each.
(ii) In the given case, if there is no contractual arrangement among the sureties, they
would be liable for equal contribution. Hence, X, Y and Z will be liable to pay `
14,000 each. Illegal Agreement: It is an agreement which the law forbids to be
made. As an essential condition, lawful consideration and object is a must to
make the agreement valid. (Section 10 of the Indian Contract Act, 1872). As per
Section 23, an agreement is illegal and void, if the consideration and object is
unlawful/contrary to law i.e. if forbidden by law. Such an agreement is void and
is not enforceable by law. Even the connected agreements or collateral
transactions to illegal agreements are also void.
In the present case,
(A) X agrees to give ` 1,00,000 to Y if Y kills Z. Thus, the agreement between X
and Y is void agreement being illegal in nature.
(B) X borrows ` 1,00,000 from W and W is also aware of the purpose of the loan.
Thus, the agreement between X and W is void as the connected agreements of
an illegal agreements are also void.

32. (i) In case of breach of contract, the court may award compensation or damages.
Explain the circumstances when court may award ordinary damages, special damages
and liquidated damages under the provisions of the Indian Contract Act, 1872.
(II)What are the conditions need to be fulfilled to make the following agreements
valid without consideration as per the provisions of the Indian Contract Act, 1872?
a. Agreement made based on natural love and affection
b. Promise to pay time-barred debts

Answer
(i) Ordinary damages: When a contract has been broken, the party who suffers by such
breach is entitled to receive, from the party who has broken the contract, compensation
for any loss or damage cause to him thereby, which naturally arose in the usual course of
things from such breach, or which the parties know, when they made the contract, to be
likely to result from the breach of it.
Special damages: Where a party to a contract receives a notice of special circumstances
affecting the contract, he will be liable not only for damages arising naturally and directly
from the breach but also for special damages.
(i) Liquidated damage is a genuine pre-estimate of compensation of damages for
certain anticipated breach of contract. This estimate is agreed to between parties
to avoid at a later date detailed calculation and the necessity to convince outside
parties.
(ii) (A) Agreement made based on natural love and affection: Conditions to be
fulfilled under section 25(1) of the Indian Contract Act, 1872
(i) It must be made out of natural love and affection between the parties.
(ii) Parties must stand in near relationship to each other.
(iii) It must be in writing.

28
(iv) It must also be registered under the law.
A written and registered agreement based on natural love and affection between the
parties standing in near relation (e.g., husband and wife) to each other is enforceable
even without consideration.

(B)Promise to pay time barred debts: Where a promise in writing signed by the
person making it or by his authorised agent, is made to pay a debt barred by limitation it
is valid without consideration [Section 25(3)].

33. Explain the term ‘Quasi Contracts’ and state their characteristics.

Answer
Quasi Contracts: Under certain special circumstances, obligations resembling those
created by a contract are imposed by law although the parties have never entered into a
contract. Such obligations imposed by law are referred to as ‘Quasi-contracts’. Such a
contract resembles a contract so far as result or effect is concerned but it has little or no
affinity with a contract in respect of mode of creation. These contracts are based on the
doctrine that a person shall not be allowed to enrich himself unjustly at the expense of
another. The salient features of a quasi- contract are:
1. It does not arise from any agreement of the parties concerned but is imposed by
law.
2. Duty and not promise is the basis of such contract.
3. The right under it is always a right to money and generally though not always to a
liquidated sum of money.
4. Such a right is available against specific person(s) and not against the whole world.
5. A suit for its breach may be filed in the same way as in case of a complete
contract.

34. (i) Mr. A was running an orphanage. His friend Mr. S, a philanthropist agreed to
donate ` 2 lakh for treatment of a child, who was suffering from cancer. On
emergency, Mr. A incurred ` 1.5 lakh on treatment of child. Now, Mr. S refused to
pay. Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to provisions of
the Indian Contract Act, 1872
(II) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a period of one
year. According to the Rent agreement, electricity bill will be paid by Mr. L. But
Mr. L could not pay electricity dues up to 5 months, due to his financial hardships.
The Electricity Board sent the notice of disconnection, if it is not paid within a week's
time. To avoid all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later
on, L refused to reimburse ` 50,000 and argued that he has paid bill voluntarily
because of his own interest. Decide with reference to provisions of the Indian
Contract Act, 1872 whether Mr. M is entitled to be reimbursed by Mr. L?

29
Answer:
(i) The general rule is that an agreement made without consideration is void (Section
25 of the Indian Contract Act, 1872).
However, in the following case, the agreement though made without
consideration, will be valid and enforceable.
Charity:
If a promisee undertakes the liability on the promise of the person to contribute to
charity, there the contract shall be valid.
In the instant case, Mr. A can claim 1.5 lakh from Mr. S.

(ii) According to Section 69 of the Indian Contract Act, 1872, a person who is
interested in the payment of money which another is bound by law to pay, and
who therefore pays it, is entitled to be reimbursed by the other.
In the instant case, Mr. M paid the electricity bill to avoid the disconnection
that was pending due to Mr. L's failure to fulfil his contractual obligation.
Hence, Mr. M is entitled to be reimbursed ₹ 50,000 from Mr. L.

35. Explain in brief with reference to the provisions of the Indian Contract Act, 1872,
what are the rights enjoyed by Surety against the Creditor, the Principal Debtor and
Co-Sureties?

Answer:
In terms of the provisions of the Indian Contract Act, 1872, the surety enjoys the
following rights:
(a) Rights against the creditor;
(b) Rights against the principal debtor;
(c) Rights against co-sureties.

Right against the Creditor

(a) Surety’s right to benefit of creditor’s securities [Section 141]: A surety is
entitled to the benefit of every security which the creditor has against the principal
debtor at the time when the contract of suretyship is entered into, whether the surety
knows of the existence of such security or not; and, if the creditor loses, or, without
the consent of the surety, parts with such security, the surety is discharged to the
extent of the value of the security.
(b) Right to set off: If the creditor sues the surety, for payment of principal debtor’s
liability, the surety may have the benefit of the set off, if any, that the principal
debtor had against the creditor.
Right to share reduction: The surety has right to claim proportionate reduction in his
liability if the principal debtor becomes insolvent.
Right against the principal debtor

30
 Rights of subrogation [Section 140 of the Indian Contract Act, 1872]: Where, a
guaranteed debt has become due, or default of the principal debtor to perform a
guaranteed duty has taken place, the surety, upon payment or performance of all that he
is liable for,is invsted with all the rights which the creditor had against the principal
debtor.
This right is known as right of subrogation. It means that on payment of the guaranteed
debt, or performance of the guaranteed duty, the surety steps into the shoes of the
creditor.
(a) Implied promise to indemnify surety [Section 145]: In every contract of
guarantee there is an implied promise by the principal debtor to indemnify the
surety. The surety is entitled to recover from the principal debtor whatever sum he
has rightfully paid under the guarantee, but not sums which he paid wrongfully.
Rights against co-sureties
“Co-sureties (meaning)- When the same debt or duty is guaranteed by two or more
persons, such persons are called co-sureties”.
a. Co-sureties liable to contribute equally (Section 146): Unless otherwise
agreed, each surety is liable to contribute equally for discharge of whole debt or
part of the debt remains unpaid by debtor.
b. Liability of co-sureties bound in different sums (Section 147): The principal
of equal contribution is, however, subject to the maximum limit fixed by a surety
to his liability. Co-sureties who are bound in different sums are liable to pay
equally as far as the limits of their respective obligations permit.

36. (i) Mr. J entered into an agreement with Mr. S to purchase his house for ` 20 lakh,
within three months. He also paid ` 50,000/- as token money. In the meanwhile, in an
anti-encroachment drive of the local administration, Mr. S's house was demolished. When
Mr. J was informed about the incident he asked for the refund of token money Referring
to the relevant provisions of the Indian Contract Act, 1872 state whether Mr. J is entitled
to the refund of the amount paid.

(II) Rama directs Shyam to sell laptops for him and agrees to give Shyam eleven percent
(11%) commission on the sale price fixed by Rama for each laptop. As Government
of India put restrictions on import of Laptops, Rama thought that the prices of
laptops might go up in near future and he revokes Shyam's authority for any further
sale. Shyam, before receiving the letter at his end sold 5 laptops at the price fixed by
Rama. Shyam asked for 11% commission on the sale of 5 Laptops for ` 1 lakh each.
Explain under the provisions of the Indian Contract Act, 1872:

(1) Whether sale of laptops after revoking Shyam's authority is binding on Rama?
(2) Whether Shyam will be able to recover his commission from Rama, if yes, what
will be the amount of such commission?

Answer
(i) According to section 56 of the Indian Contract Act, 1872, an agreement to do an
act impossible in itself is void.

31
 Contract to do act afterwards becoming impossible or unlawful: A contract to do an
act which, after the contract is made, becomes impossible, or, by reason of some event
which the promisor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful.
According to section 65 of the Indian Contract Act, 1872, when an agreement is
discovered to be void, or when a contract becomes void, any person who has received
any advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.
In the instant case, Mr. J entered into a contract with Mr. S to purchase his house for ` 20
lakh, with a token payment of ` 50,000. The agreement included a condition that the sale
would be completed within three months. Before the completion of the sale, the house
was demolished by the local administration. This event made it impossible for Mr. S to
sell the house to Mr. J as agreed.
In this situation, Mr. J is required to refund ` 50,000 token money paid to Mr. S, as the
contract to sell the house has become void due to the demolition of the house by the
local administration, as a result of which it becomes impossible to sell the house on the
part of S.
(ii) When termination of agent’s authority takes effect as to agent, and as to third
persons [Section 208 of the Indian Contract Act, 1872]: The termination of the
authority of an agent does not, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known
to them.
In the instant case,
(1) The revocation of Shyam's authority becomes effective only when it is
communicated to and received by Shyam. Since Shyam had not received the
revocation letter at the time of selling the laptops, his authority to sell on behalf of
Rama was still valid. Hence, the sale of laptops conducted by Shyam is binding on
Rama.
(2) Shyam is entitled to receive his commission for the sales made while he still had
the authority to sell. Since he sold the laptops before receiving the revocation, he is
entitled to his commission as per the initial agreement with Rama.
Amount of Commission: Shyam sold 5 laptops at the price fixed by Rama,
which is `1 lakh each. The total sales amount to ` 5 lakh. The agreed commission
rate is 11% i.e. ` 55,000.

37. In accordance with the provisions of the Indian Contract Act, 1872, answer the
following:
a. Rights of Bailor against any wrong doer (Third Party)
b. Duties of the Pawnee
Answer
(i) Suit by bailor & bailee against wrong doers [Section 180 of the Indian Contract
Act, 1872]: If a third person wrongfully deprives the bailee of the use or possession of
the goods bailed, or does them any injury, the bailee is entitled to use such remedies as
the owner might have used in the like case if no bailment had been made; and either the
bailor or the bailee may bring a suit against a third person for such deprivation or injury.

32
(ii) Duties of the Pawnee
Pawnee has the following duties:
a. Duty to take reasonable care of the pledged goods.
b. Duty not to make unauthorized use of pledged goods.
c. Duty to return the goods when the debt has been repaid or the promise has been
performed.
d. Duty not to mix his own goods with goods pledged.
e. Duty not to do any act which is inconsistent with the terms of the pledge.
f. Duty to return accretion to the goods, if any.

38. Answer the following as per the provisions of the Indian Contract Act, 1872:
a. 'Agent cannot personally enforce, nor be personally bound by, contracts on behalf
of the principal' however there are some exceptions to this general rule, explain
b. State the rights of Indemnity-holder when sued.

Answer
(i) Agent cannot personally enforce, nor be bound by, contracts on behalf of
principal.
EXCEPTIONS:
In the following exceptional cases, the agent is presumed to have agreed to be
personally bound:
(1) Where the contract is made by an agent for the sale or purchase of goods for
a merchant resident abroad/foreign principal: – When an agent has entered
into a contract for the sale or purchase of goods on behalf of a principal resident
abroad, the presumption is that the agent undertakes to be personally liable for the
performances of such contract.
(2) Where the agent does not disclose the name of his principal or undisclosed
principal; (Principal unnamed): when the agent does not disclose the name of the
principal then there arises a presumption that he himself undertakes to be personally
liable.
(3) Non-existent or incompetent principal: Where the principal, though disclosed,
cannot be sued, the agent is presumed to be personally liable.
(4) Pretended agent – if the agent pretends but is not an actual agent, and the
principal does not rectify the act but disowns it, the pretended agent will be
himself liable.
(5) When agent exceeds authority- When the agent exceeds his authority, misleads
the third person in believing that the agent he has the requisite authority in doing
the act, then the agent can be made liable personally for the breach of warranty of
authority.
(ii) Rights of Indemnity-holder when sued (Section 125 of the Indian Contract
Act, 1872): The promisee in a contract of indemnity, acting within the scope of his
authority, is entitled to recover from the promisor/indemnifier—

33
(a) all damages which he may be compelled to pay in any suit
(b) all costs which he may have been compelled to pay in bringing/ defending the suit
and
(c) All sums which he may have paid under the terms of any compromise of suit.

39. What is the meaning of contingent contract? Write briefly its essentials. Also, explain
any three rules relating to enforcement of a contingent contract.
Answer
Essentials of a Contingent Contract
(a) The performance of a contingent contract would depend upon the happening
or non-happening of some event or condition. The condition may be precedent
or subsequent.
(b) The event referred to as collateral to the contract. The event is not part of the
contract. The event should be neither performance promised nor a consideration for
a promise.
(c) The contingent event should not be a mere ‘will’ of the promisor. The event
should be contingent in addition to being the will of the promisor.
(d) The event must be uncertain. Where the event is certain or bound to happen, the
contract is due to be performed, then it is a not contingent contract.
Definition of ‘Contingent Contract’ (Section 31 of the Indian Contract Act, 1872)
“A contract to do or not to do something, if some event, collateral to such contract, does
or does not happen”.
Rules Relating to Enforcement of a contingent contract:
The rules relating to enforcement of a contingent contract are laid down in sections 32,
33, 34, 35 and 36 of the Act.
(a) Enforcement of contracts contingent on an event happening: Section 32 says
that “where a contingent contract is made to do or not to do anything if an
uncertain future event happens, it cannot be enforced by law unless and until that
event has happened. If the event becomes impossible, such contracts become void”.
(b) Enforcement of contracts contingent on an event not happening: Section 33
says that “Where a contingent contract is made to do or not do anything if an
uncertain future event does not happen, it can be enforced only when the happening
of that event becomes impossible and not before”.
(c) A contract would cease to be enforceable if it is contingent upon the conduct of
a living person when that living person does something to make the ‘event’ or
‘conduct’ as impossible of happening.
Section 34 says that “if a contract is contingent upon as to how a person will act at an
unspecified time, the event shall be considered to have become impossible when such
person does anything which renders it impossible that he should so act within any definite
time or otherwise than under further contingencies”.

(d) Contingent on happening of specified event within the fixed time: Section 35

34
 says that Contingent contracts to do or not to do anything, if a specified uncertain
event happens within a fixed time, becomes void if, at the expiration of time fixed,
such event has not happened, or if, before the time fixed, such event becomes
impossible.
(e) Contingent on specified event not happening within fixed time: Section 35 also
says that - “Contingent contracts to do or not to do anything, if a specified uncertain
event does not happen within a fixed time, may be enforced by law when the time
fixed has expired, and such event has not happened or before the time fixed has
expired, if it becomes certain that such event will not happen”.
(f) Contingent on an impossible event (Section 36): Contingent agreements to do or
not to do anything, if an impossible event happens are void, whether the
impossibility of the event is known or not to the parties to the agreement at the
time when it is made.

40. R owns an electronics store. P visited the store to buy a water purifier priced at
`54,000/-He specifically requested R for a purifier with a copper filter. As P wanted
to buy the purifier on credit, with the intention of paying in 9 equal monthly
instalments, R demands a guarantor for the transaction. S (a friend of P) came forward
and gave the guarantee for payment of water purifier. R sold P, a water purifier of a
specific brand. P made payment for 4 monthly instalments and after that became
insolvent. Explain with reference to the Indian Contract Act, 1872, the liability of S
as a guarantor to pay the balance price of water purifier to R.
What will be your answer, if R sold the water purifier misrepresenting it as having
a copper filter, while it actually has a normal filter? Neither P nor S was aware of
this fact and upon discovering the truth, P refused to pay the price. In response
to P's refusal, R filed the suit against S, the guarantor. Explain with reference to
the Indian Contract Act 1872, whether S is liable to pay the balance price of water
purifier to R?

Answer
Amount of Commission: Shyam sold 5 laptops at the price fixed by Rama,
which is `1 lakh each. The total sales amount to ` 5 lakh. The agreed commission
rate is 11% i.e. ` 55,000.
As per section 126 of the Indian Contract Act, 1872, the contract of guarantee is
defined as a contract to perform the promise or discharge the liability of a third person
in case of his default.
In this case, S has given a guarantee for P's payment obligation towards R. When
P defaulted after making four monthly instalments and became insolvent, S's
liability as a guarantor will come into existence.
According to Section 128 of the Act, the liability of the surety is co- extensive with
that of the principal debtor, unless it is otherwise provided by the contract.
Since P failed to pay the remaining instalments due to insolvency, S, as the
guarantor, is liable to pay the balance price of the water purifier to R. In the given
situation, S will have to pay the balance amount of
` 30,000 to R. [54,000-(4x6,000)]

35
 In the second situation, R sold the water purifier misrepresenting it as having a
copper filter, while it actually has a normal filter; this changes the situation
significantly.
According to Section 142 of the Act, any guarantee which has been obtained by means
of misrepresentation made by the creditor, or with his knowledge and assent,
concerning a material part of the transaction, is invalid. Here, guarantee is obtained
by means of misrepresentation made by the creditor (R), and therefore the guarantee
is invalid.
Furthermore, under Section 143, any guarantee which the creditor has obtained by
means of keeping silence as to material circumstances, is invalid.
Here R misrepresented the filter type and both P and S were unaware of this fact.
The creditor (R) has obtained the guarantee by remaining silent as to material
circumstances. Therefore, the guarantee obtained from S will be considered to be
invalid.
Consequently, S cannot be held liable to pay the balance price of the water purifier to
R.

41. Explain in brief with reference to the provisions of the Indian Contract Act, 1872,
what are the rights enjoyed by Surety against the Creditor, the Principal Debtor
and Co-Sureties?

Answer:
In terms of the provisions of the Indian Contract Act, 1872, the surety enjoys the
following rights:
a. Rights against the creditor;
b. Rights against the principal debtor;
c. Rights against co-sureties.
Right against the Creditor
(a) Surety’s right to benefit of creditor’s securities [Section 141]: A surety is
entitled to the benefit of every security which the creditor has against the principal
debtor at the time when the contract of suretyship is entered into, whether the surety
knows of the existence of such security or not; and, if the creditor loses, or, without
the consent of the surety, parts with such security, the surety is discharged to the
extent of the value of the security.
(b) Right to set off: If the creditor sues the surety, for payment of principal debtor’s
liability, the surety may have the benefit of the set off, if any, that the principal
debtor had against the creditor.
(c) Right to share reduction: The surety has right to claim proportionate reduction in
his liability if the principal debtor becomes insolvent.
Right against the principal debtor
Rights of subrogation [Section 140 of the Indian Contract Act, 1872]: Where, a
guaranteed debt has become due, or default of the principal debtor to perform a
guaranteed duty has taken place, the surety, upon payment or performance of all that

36
he is liable for, is invested with all the rights which the creditor had against the
principal debtor. This right is known as right of subrogation. It means that on payment
of the guaranteed debt, or performance of the guaranteed duty, the surety steps into
the shoes of the creditoR.
Implied promise to indemnify surety [Section 145]: In every contract of guarantee
there is an implied promise by the principal debtor to indemnify the surety. The surety
is entitled to recover from the principal debtor whatever sum he has rightfully paid
under the guarantee, but not sums which he paid wrongfully.
Rights against co-sureties
“Co-sureties (meaning)- When the same debt or duty is guaranteed by two or more
persons, such persons are called co- sureties”.
(a) Co-sureties liable to contribute equally (Section 146): Unless otherwise agreed,
each surety is liable to contribute equally for discharge of whole debt or part of the
debt remains unpaid by debtor.
(b) Liability of co-sureties bound in different sums (Section 147): The principal of
equal contribution is, however, subject to the maximum limit fixed by a surety to
his liability. Co-sureties who are bound in different sums are liable to pay equally
as far as the limits of their respective obligations permit.

42. (i) Mr. J entered into an agreement with Mr. S to purchase his house for ` 20
lakh, within three months. He also paid ` 50,000/- as token money. In the meanwhile,
in an anti-encroachment drive of the local administration, Mr. S's house was
demolished. When Mr. J was informed about the incident he asked for the refund of
token money. Referring to the relevant provisions of the Indian Contract Act,
1872 state whether Mr. J is entitled to the refund of the amount paid.

(II) Rama directs Shyam to sell laptops for him and agrees to give Shyam eleven
percent (11%) commission on the sale price fixed by Rama for each laptop.
As Government of India put restrictions on import of Laptops, Rama thought
that the prices of laptops might go up in near future and he revokes Shyam's
authority for any further sale. Shyam, before receiving the letter at his end
sold 5 laptops at the price fixed by Rama. Shyam asked for 11% commission on
the sale of 5 Laptops for ` 1 lakh each. Explain under the provisions of the
Indian Contract Act, 1872:
(1) Whether sale of laptops after revoking Shyam's authority is binding on Rama?
(2) Whether Shyam will be able to recover his commission from Rama, if yes, what
will be the amount of such commission?

Answer
(i) According to section 56 of the Indian Contract Act, 1872, an agreement to
do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or unlawful: A contract to do
an act which, after the contract is made, becomes impossible, or, by reason of some

37
 event which the promisor could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful.
According to section 65 of the Indian Contract Act, 1872, when an agreement is
discovered to be void, or when a contract becomes void, any person who has received
any advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.
In the instant case, Mr. J entered into a contract with Mr. S to purchase his house for
` 20 lakh, with a token payment of
` 50,000. The agreement included a condition that the sale would be completed within
three months. Before the completion of the sale, the house was demolished by the local
administration. This event made it impossible for Mr. S to sell the house to Mr. J as
agreed.
In this situation, Mr. J is required to refund ` 50,000 token money paid to Mr. S, as
the contract to sell the house has become void due to the demolition of the house
by the local administration, as a result of which it becomes impossible to sell the
house on the part of S.
(ii) When termination of agent’s authority takes effect as to agent, and as to
third persons [Section 208 of the Indian Contract Act, 1872]: The termination
of the authority of an agent does not, so far as regards the agent, take effect
before it becomes known to him, or, so far as regards third persons, before it
becomes known to them.
In the instant case,
(1) The revocation of Shyam's authority becomes effective only when it is
communicated to and received by Shyam. Since Shyam had not received the
revocation letter at the time of selling the laptops, his authority to sell on behalf of
Rama was still valid. Hence, the sale of laptops conducted by Shyam is binding
on Rama.
(2) Shyam is entitled to receive his commission for the sales made while he still had
the authority to sell. Since he sold the laptops before receiving the revocation, he
is entitled to his commission as per the initial agreement with Rama.
Amount of Commission: Shyam sold 5 laptops at the price fixed by Rama,
which is `1 lakh each. The total sales amount to `5 lakh. The agreed
commission rate is 11% i.e. ` 55,000.

43. Where a party to a contract refuses altogether to perform, or is disabled from

performing his part of it, the other party has a right to rescind it. Discuss this statement
and the effects of such refusal under the provisions of The Indian Contract Act,
1872.
Answer
An anticipatory breach of contract is a breach of contract occurring before the time
fixed for performance has arrived. When the promisor refuses altogether to perform his
promise and signifies his unwillingness even before the time for performance has
arrived, it is called Anticipatory Breach.
Anticipatory breach of a contract may take either of the following two ways:

38
 (a) Expressly by words spoken or written, and
(b) Impliedly by the conduct of one of the parties.
Section 39 of the Indian Contract Act deals with anticipatory breach of contract and
provides as follows:
“When a party to a contract has refused to perform or disable himself from performing,
his promise in its entirety, the promisee may put an end to the contract, unless he has
signified, but words or conduct, his acquiescence in its continuance.”
Effect of anticipatory breach: The promisee is excused from performance or from
further performance. Further he gets an option:
(1) To either treat the contract as “rescinded and sue the other party for damages
from breach of contract immediately without waiting until the due date of
performance;
(2) He may elect not to rescind but to treat the contract as still operative and wait
for the time of performance and then hold the other party responsible for the
consequences of non-performance. But in this case, he will keep the contract
alive for the benefit of the other party as well as his own, and the guilty party, if
he so decides on re-consideration, may still perform his part of the contract and
can also take advantage of any supervening impossibility which may have the
effect of discharging the contract.

44. Explain the term Wagering agreement in the light of the Indian Contract Act, 1872.
Also, explain some transactions resembling with wagering transaction but which are
not void.

Answer
Wagering agreement (Section 30 of the Indian Contract Act, 1872): An agreement
by way of a wager is void. It is an agreement involving payment of a sum of money upon
the determination of an uncertain event. The essence of a wager is that each side should
stand to win or lose, depending on the way an uncertain event takes place in reference to
which the chance is taken and in the occurrence of which neither of the parties has
legitimate interest.

Transactions resembling with wagering transaction but are not void

(i) Chit fund: Chit fund does not come within the scope of wager (Section 30). In
case of a chit fund, a certain number of persons decide to contribute a fixed sum
for a specified period and at the end of a month, the amount so contributed is paid
to the lucky winner of the lucky draw.
(ii) Commercial transactions or share market transactions: In these transactions
in which delivery of goods or shares is intended to be given or taken, do not
amount to wagers.
(iii) Games of skill and Athletic Competition: Crossword puzzles, picture
competitions and athletic competitions where prizes are awarded on the basis of
skill and intelligence are the games of skill and hence such competitions are

39
 valid.
(iv) A contract of insurance: A contract of insurance is a type of contingent contract
and is valid under law and these contracts are different from wagering agreements.

45. What is the meaning of contingent contract? Write briefly its essentials. Also, explain
any three rules relating to enforcement of a contingent contract.

Answer
Essentials of a contingent contract
(a) The performance of a contingent contract would depend upon the
happening or non-happening of some event or condition. The condition may
be precedent or subsequent.
(b) The event referred to as collateral to the contract. The event is not part of the
contract. The event should be neither performance promised nor a consideration
for a promise.
(c) The contingent event should not be a mere ‘will’ of the promisor. The event
should be contingent in addition to being the will of the promisor.
(d) The event must be uncertain. Where the event is certain or bound to happen,
the contract is due to be performed, then it is a not contingent contract.
Definition of ‘Contingent Contract’ (Section 31 of the Indian Contract Act,
1872)
“A contract to do or not to do something, if some event, collateral to such
contract, does or does not happen”.
Rules Relating to Enforcement of a contingent contract:
The rules relating to enforcement of a contingent contract are laid down in
sections 32, 33, 34, 35 and 36 of the Act.
(a) Enforcement of contracts contingent on an event happening: Section 32 says
that “where a contingent contract is made to do or not to do anything if an
uncertain future event happens, it cannot be enforced by law unless and until that
event has happened. If the event becomes impossible, such contracts become
void”.
(b) Enforcement of contracts contingent on an event not happening: Section 33
says that “Where a contingent contract is made to do or not do anything if an
uncertain future event does not happen, it can be enforced only when the
happening of that event becomes impossible and not before”.
(c) A contract would cease to be enforceable if it is contingent upon the conduct
of a living person when that living person does something to make the ‘event’
or ‘conduct’ as impossible of happening.
Section 34 says that “if a contract is contingent upon as to how a person will act
at an unspecified time, the event shall be considered to have become impossible
when such person does anything which renders it impossible that he should so act
within any definite time or otherwise than under further contingencies”.

40
(d) Contingent on happening of specified event within the fixed time: Section 35
says that Contingent contracts to do or not to do anything, if a specified uncertain
event happens within a fixed time, becomes void if, at the expiration of time
fixed, such event has not happened, or if, before the time fixed, such event
becomes impossible.
(e) Contingent on specified event not happening within fixed time: Section 35
also says that - “Contingent contracts to do or not to do anything, if a specified
uncertain event does not happen within a fixed time, may be enforced by law
when the time fixed has expired, and such event has not happened or before the
time fixed has expired, if it becomes certain that such event will not happen”.
(f) Contingent on an impossible event (Section 36): Contingent agreements to do or
not to do anything, if an impossible event happens are void, whether the
impossibility of the event is known or not to the parties to the agreement at the
time when it is made.
The contingent event should not be a mere ‘will’ of the promisor. The event
should be contingent in addition to being the will of the promisor.
(e) The event must be uncertain. Where the event is certain or bound to happen,
the contract is due to be performed, then it is a not contingent contract.

46. (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a period of one
year. According to the Rent agreement, electricity bill will be paid by Mr. L. But Mr.
L could not pay electricity dues up to 5 months, due to his financial hardships. The
Electricity Board sent the notice of disconnection, if it is not paid within a week's
time. To avoid all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later
on, L refused to reimburse ` 50,000 and argued that he has paid bill voluntarily
because of his own interest. Decide with reference to provisions of the Indian
Contract Act, 1872 whether Mr. M is entitled to be reimbursed by Mr. L?
(II) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 12.02.2024. A
promised B that he would keep the offer open till 15.02.2024. However, on
13.02.2024, he sold those chairs to Mr. C @ ` 1,700 per chair without the
knowledge of B. Mr. B communicated the acceptance of the above offer on
14.02.2024. Advise, with reference to provisions of the Indian Contract Act, 1872
whether Mr. B can claim damages from Mr. A?
(iii) Mr. A was running an orphanage. His friend Mr. S, a philanthropist agreed
to donate ` 2 lakh for treatment of a child, who was suffering from cancer.
On emergency, Mr. A incurred ` 1.5 lakh on treatment of child. Now, Mr.
S refused to pay. Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference
to provisions of the Indian Contract Act, 1872?

Answer
(i) According to Section 69 of the Indian Contract Act, 1872, a person who is
interested in the payment of money which another is bound by law to pay, and
who therefore pays it, is entitled to be reimbursed by the other.
In the instant case, Mr. M paid the electricity bill to avoid the disconnection that
was pending due to Mr. L's failure to fulfil his contractual obligation. Hence, Mr.
M is entitled to be reimbursed ₹ 50,000 from Mr. L.

41
 (ii) In terms of Section 5 of the Indian Contract Act, 1872, a proposal can be
revoked at any time before the communication of its acceptance is complete
as against the proposer.
Accordingly, an offer may be revoked by the offeror before its acceptance,
even though he had originally agreed to hold it open for a definite period
of time. So long as it is a mere offer, it can be withdrawn whenever the
offeror desires.
In the instant case, B cannot claim damages from A because the offer made
by A is a mere offer and it can be withdrawn whenever A desires.
(iii) The general rule is that an agreement made without consideration is void
(Section 25 of the Indian Contract Act, 1872).
However, in the following case, the agreement though made without
consideration, will be valid and enforceable.
Charity: If a promisee undertakes the liability on the promise of the
person to contribute to charity, there the contract shall be valid.
In the instant case, Mr. A can claim 1.5 lakh from Mr. S.

47. (i) In case of breach of contract, the court may award compensation or damages.
Explain the circumstances when court may award ordinary damages, special
damages and liquidated damages under the provisions of the Indian Contract Act,
1872.
a. What are the conditions need to be fulfilled to make the following agreements
valid without consideration as per the provisions of the Indian Contract Act,
1872?
b. Agreement made based on natural love and affection Promise to pay time-barred
debts.
Answer:
(i) Ordinary damages: When a contract has been broken, the party who suffers by
such breach is entitled to receive, from the party who has broken the contract,
compensation for any loss or damage cause to him thereby, which naturally arose in the
usual course of things from such breach, or which the parties know, when they made the
contract, to be likely to result from the breach of it.
Special damages: Where a party to a contract receives a notice of special circumstances
affecting the contract, he will be liable not only for damages arising naturally and
directly from the breach but also for special damages.
Liquidated damage is a genuine pre-estimate of compensation of damages for certain
anticipated breach of contract. This estimate is agreed to between parties to avoid at a
later date detailed calculation and the necessity to convince outside parties.
Agreement made based on natural love and affection: Conditions to be fulfilled
under section 25(1) of the Indian Contract Act, 1872
(i) It must be made out of natural love and affection between the parties.
(ii) Parties must stand in near relationship to each other.
(iii) It must be in writing.
(iv) It must also be registered under the law.

42
A written and registered agreement based on natural love and affection between the
parties standing in near relation (e.g., husband and wife) to each other is enforceable
even without consideration.

48. (i) Raghav found gold and diamond studded wristwatch value approximately `
1,00,000/- on the roadside. He picked it up and then advertised in the newspaper that
the true owner thereof can take the watch after showing proper evidence. After
waiting for a certain period of time, when the true owner did not tum up, he gifted
that wristwatch to his son Mahesh. A few days later, Madhav, the true owner of
watch, somehow noticed his watch on wrist of Mahesh. He approached him to collect
the same, but Mahesh refused. In the evening, Raghav called Madhav and told
him that he incurred ` 20,000 to find the true owner if he fails to reimburse him
the lawful expenses incurred on finding out the true owner, he will sue him for
recovery thereof or retain the possession of the watch with him till recovery. Even
he can sell the watch for recovery of expenses. Advise whether the following actions
of Raghav were lawful according to provisions of The Indian Contract Act, 1872:
(A) Gifting the wristwatch to his son.
(B) Warning Madhav to sue for recovery of lawful expenses incurred in finding true
owner.
(C) Retaining the possession of wristwatch till recovery of lawful expenses.
(D) Selling of wristwatch for recovery of expenses.
(ii) Woollen Garments Limited entered into a contract with a group of women in
July, 2023 to supply various woollen clothes for men, women and kids like
sweaters, monkey caps, mufflers; woollen coats, hand gloves etc. before the
commencement of the winter season. The agreement expressly provides that
the woollen clothes shall be supplied by the end of October, 2023 before
starting of winter season. However, due to the prolonged strike, women group
could tender the supplies in March, 2024 when the winter season was almost
over.
(iii) Analysing the situation and answer the following questions in light of the
provisions of the Indian Contract Act, 1872:
(A) Whether company can reject the total supply by women group?
(B) Whether company can accept the total supply on request of women group?

Answer:
(i) Responsibility of finder of goods (Section 71 of the Indian Contract Act, 1872):
A person who finds goods belonging to another and takes them into his custody is
subject to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would
take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.

43
 The right of finder of lost goods- may sue for specific reward offered [Section 168]:
The finder of goods has no right to sue the owner for compensation for trouble and
expense voluntarily incurred by him in finding the owner and preserving the goods
found. But he has a right to retain the goods against the owner until he receives
such compensation.
When finder of thing commonly on sale may sell it [Section 169]: When a thing
which is commonly the subject of sale if lost, if the owner cannot with reasonable
diligence be found, or if he refuses, upon demand, to pay the lawful charges of the
finder, the finder may sell it—
(1) when the thing is in danger of perishing or of losing the greater part of its
value, or
(2) when the lawful charges of the finder in respect of the thing found amount to two-
thirds of its value.
Hence, the answers are:
(A) Gifting the wristwatch to his son Mahesh is unlawful. Raghav had no
ownership rights over the watch and could not legally transfer it to someone
else.
(B) Warning Madhav to Sue for Recovery of Lawful Expenses: Raghav has no
right to sue Madhav for the expenses voluntarily incurred by Raghav in finding
the owner.
(C) Retaining Possession of the Wristwatch Until Recovery of Lawful Expenses:
Raghav’s action of retaining the wristwatch until Madhav reimburses him for
lawful expenses is valid.
(D) Selling of Wristwatch for Recovery of Expenses: the watch is not perishable,
and the expenses claimed (₹ 20,000) are far below two-thirds of the value of the
watch (₹ 1,00,000). Therefore, Raghav does not have the right to sell the watch
under these circumstances, and selling the watch would be unlawful.
(ii) According to section 55 of the Indian Contract Act, 1872, when a party to a
contract promises to do certain thing at or before the 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 essence of the contract.
Effect of acceptance of performance at time other than agreed upon -
if, in case of a contract voidable on account of the promisor’s failure to perform his
promise at the time agreed, the promisee accepts performance of such promise at any
time other than agreed, the promisee cannot claim compensation for any loss
occasioned by the non-performance of the promise at the time agreed, unless, at the time
of acceptance, he gives notice to the promisor of his intention to do so.
In the instant case,
(A) Woollen Garments Limited is legally entitled to reject the goods due to the failure
to meet the delivery deadline, as time was a crucial term of the contract.
(B) The company cannot accept the total supply on the request of woman group
but only when the company i.e. buyer elects to do so. In that case, the company
cannot claim compensation for any loss occasioned by the non- performance of
the promise (i.e. delay in supply) at the time agreed.

44
49. In accordance with the provisions of the Indian Contract Act, 1872, answer the
following:
1. Rights of Bailor against any wrong doer (Third Party)
2. Duties of the Pawnee

Answer
(i) Suit by bailor & bailee against wrong doers [Section 180 of the Indian Contract
Act, 1872]: If a third person wrongfully deprives the bailee of the use or possession of
the goods bailed, or does them any injury, the bailee is entitled to use such remedies as
the owner might have used in the like case if no bailment had been made; and either the
bailor or the bailee may bring a suit against a third person for such deprivation or injury.
(ii) Duties of the Pawnee
a. Duty to take reasonable care of the pledged goods.
b. Duty not to make unauthorized use of pledged goods.
c. Duty to return the goods when the debt has been repaid or the promise has been
performed.
d. Duty not to mix his own goods with goods pledged.
e. Duty not to do any act which is inconsistent with the terms of the pledge.
f. Duty to return accretion to the goods, if any.

50. Answer the following as per the provisions of the Indian Contract Act, 1872:
a. 'Agent cannot personally enforce, nor be personally bound by, contracts on behalf
of the principal' however there are some exceptions to this general rule, explain.
b. State the rights of Indemnity-holder when sued.
(i) Explain any four differences between Contract of Indemnity and Contract of
Guarantee.
(ii) Whether the threat to commit suicide is coercion?

Answer:
(I) Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.
EXCEPTIONS: In the following exceptional cases, the agent is presumed to have
agreed to be personally bound:
(1) Where the contract is made by an agent for the sale or purchase of goods for
a merchant resident abroad/foreign principal: – When an agent has entered
into a contract for the sale or purchase of goods on behalf of a principal resident
abroad, the presumption is that the agent undertakes to be personally liable for the
performances of such contract.
(2) Where the agent does not disclose the name of his principal or undisclosed
principal; (Principal unnamed): when the agent does not disclose the name of the
principal then there arises a presumption that he himself undertakes to be
personally liable.

45
(3) Non-existent or incompetent principal: Where the principal, though disclosed,
cannot be sued, the agent is presumed to be personally liable.
(4) Pretended agent – if the agent pretends but is not an actual agent, and the
principal does not rectify the act but disowns it, the pretended agent will be
himself liable.
(5) When agent exceeds authority- When the agent exceeds his authority, misleads
the third person in believing that the agent he has the requisite authority in doing
the act, then the agent can be made liable personally for the breach of warranty
of authority.
(ii) Rights of Indemnity-holder when sued (Section 125 of the Indian Contract
Act, 1872): The promisee in a contract of indemnity, acting within the scope of his
authority, is entitled to recover from the promisor/indemnifier—
(a) all damages which he may be compelled to pay in any suit
(b) all costs which he may have been compelled to pay in bringing/ defending the suit
and
(c) all sums which he may have paid under the terms .

46
 (b) (i) Distinction between a Contract of Indemnity and a Contract of Guarantee

Point of distinction Contract of Indemnity Contract of Guarantee

Number of party/ There are only two parties There are three parties-
parties to the contract namely the indemnifier creditor,
[promisor] and the principal debtor and surety.
indemnified [promisee]
Nature of liability The liability of the indemnifier The liability of the surety is
is primary and unconditional. secondary and conditional
as the primary liability is
that of the principal debtor.
Time of liability The liability of the indemnifier The liability arises only on
arises only on the happening of the non-performance of an
a contingency. existing promise or non-
payment of an existing
debt.
Time to Act The indemnifier need not act at The surety acts at the
the request of indemnity request of principal debtor.
holder.
Right to sue third Indemnifier cannot sue a third Surety can proceed against
party party for loss in his own name principal debtor in his own
as there is no privity of right because he gets all the
contract. Such a right would right of a creditor after
arise only if there is an discharging the debts.
assignment in his favour.
Purpose Reimbursement of loss For the security of the
creditor
Competency to All parties must be In the case of a contract of
contract competent to contract. guarantee, where a minor is
a principal debtor, the
contract is still valid.

.5
 Whether the threat to commit suicide is coercion?
Suicide though forbidden by Indian Penal Code is not punishable, as a dead man cannot
be punished. But Section 15 of the Indian Contract Act, 1872 declares that committing or
threatening to commit any act forbidden by Indian Penal Code is coercion. Hence, a
threat to commit suicide will be regarded as coercion. To restore the goods if the
owner is found.
The right of finder of lost goods- may sue for specific reward offered [Section 168]:
The finder of goods has no right to sue the owner for compensation for trouble and
expense voluntarily incurred by him in finding the owner and preserving the goods
found. But he has a right to retain the goods against the owner until he receives such
compensation.

51. [Link], a wealthy individual provided a loan of ` 80,000 to Mr. Mukesh

on 26th February, 2023. The borrower, Mr. Mukesh asked for a further loan of `
1,50,000. Mr. Sohan agreed but provided the loan in parts on different dates. He
provided ` 1,00,000 on 28th February, 2023 and remaining ` 50,000 on 3rd March,
2023. On 10th March, 2023 Mr. Mukesh while paying off part ` 75,000 to Mr. Sohan
insisted that the lender should adjust ` 50,000 towards the loan taken on 3rd March,
2023 and balance as against the loan on 26th February, 2023. Mr. Sohan objected
to this arrangement and asked the borrower to adjust in the order of date of borrowal
of funds.
Now you decide:
(i) Whether the contention of Mr. Mukesh correct or otherwise as per the provisions
of the Indian Contract Act, 1872?
(ii) What would be the answer in case the borrower does not insist on such order of
adjustment of repayment?
(iii) What would be the mode of adjustment/appropriation of such part payment in case
neither Mr. Sohan nor Mr. Mukesh insist on any order of adjustment on their part?

Answer
Appropriation of Payments: In case where a debtor owes several debts to the same
creditor and makes payment, which is not sufficient to discharge all the debts, the
payment shall be appropriated (i.e. adjusted against the debts) as per the provisions of
Section 59 to 61 of the Indian Contract Act, 1872.

I. As per the provisions of 59 of the Act, 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.
Therefore, the contention of Mr. Mukesh is correct, and he can specify the manner of
.5
 appropriation of repayment of debt.
(i) As per the provisions of 60 of the Act, where the debtor has omitted to intimate and
there are no other circumstances indicating to which debt the payment is to be applied,
the creditor may apply it at his discretion to any lawful debt actually due and payable to
him from the debtor, where its recovery is or is not barred by the law in force for the
time being as to the limitation of suits.
(ii) Hence in case Mr. Mukesh fails to specify the manner of appropriation of debt on
part repayment, Mr. Sohan the creditor, can appropriate the payment as per his
choice.
(iii) As per the provisions of 61 of the Act, where neither party makes any appropriation,
the payment shall be applied in discharge of the debts in order of time, whether they
are or are not barred by the law in force for the time being as to the limitation of suits.
If the debts are of equal standing, the payments shall be applied in discharge of each
proportionately.
Hence in case where neither Mr. Mukesh nor Mr. Sohan specifies the manner of
appropriation of debt on part repayment, the appropriation can be made in proportion
of debts.

52. Rama directs Shyam to sell laptops for him and agrees to give Shyam eleven percent
(11%) commission on the sale price fixed by Rama for each laptop. As Government
of India put restrictions on import of Laptops, Rama thought that the prices of laptops
might go up in near future and he revokes Shyam's authority for any further sale.
Shyam, before receiving the letter at his end sold 5 laptops at the price fixed by Rama.
Shyam asked for 11% commission on the sale of 5 Laptops for ` 1 lakh each. Explain
under the provisions of the Indian Contract Act, 1872:
(i) Whether sale of laptops after revoking Shyam's authority is binding on Rama?
(ii) Whether Shyam will be able to recover his commission from Rama, if yes, what
will be the amount of such commission?

Answer:
When termination of agent’s authority takes effect as to agent, and as to third
persons [Section 208 of the Indian Contract Act, 1872]: The termination of the
authority of an agent does not, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known
to them.
In the instant case,

(i) The revocation of Shyam's authority becomes effective only when it is communicated
to and received by Shyam. Since Shyam had not received the revocation letter at the
time of selling the laptops, his authority to sell on behalf of Rama was still valid. Hence,
the sale of laptops conducted by Shyam is binding on Rama.

.5
 (ii) Shyam is entitled to receive his commission for the sales made while he still had the
authority to sell. Since he sold the laptops before receiving the revocation, he is entitled
to his commission as per the initial agreement with Rama.
Amount of Commission: Shyam sold 5 laptops at the price fixed by Rama, which
is `1 lakh each. The total sales amount to `5 lakh. The agreed commission rate is
11% i.e. ` 55,000.

53. Mohan found a wallet in a restaurant. He enquired all the customers present there but
the true owner could not be found. He handed over the same to the manager of the
restaurant to keep the wallet till the true owner is found. After a week, Rohan went
back to the restaurant to enquire about the wallet. The manager refused to return it
to Rohan, saying that it did not belong to him. In the light of the Indian Contract
Act, 1872, can Rohan recover the wallet from the Manager?’

Answer:
Responsibility of finder of goods (Section 71 of the Indian Contract Act, 1872):
A person who find goods belonging to another and takes them into his custody is subject
to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
In the light of the above provisions, the manager must return the wallet to Rohan,
since Rohan is entitled to retain the wallet found against everybody except the true
owner.

54. Paridhee, a minor, falsely representing her age, enters into an agreement with an
authorised Laptop dealer Mr. Mittal, owner of MP Laptops, for purchase of Laptop on
credit amounting ` 60,000/- on 1st August 2022. She promised to pay back the
outstanding amount with interest @ 16% p.a. by 31st July 2023. She told him that in
case she won’t be able to pay the outstanding amount, her father Mr. Ram will pay back
on her behalf. After One year, when Paridhee was asked to pay the outstanding
amount with interest she refused to pay the amount and told the owner that she is minor
and now he can't recover a single penny from her. She will be a major on 1st January
2025 and only after that agreement can be ratified. Explain by which of the
following ways, Mr. Mittal will succeed in recovering the outstanding amount
with reference to the Indian Contract Act, 1872.
(i) By filing a case against Paridhee, a minor for recovery of outstanding amount with
interest?
.5
 (ii) By filing a case against Mr. Ram, father of Paridhee for recovery of outstanding
amount?
(iii) By filing a case against Paridhee, a minor for recovery of outstanding amount after
she attains majority?

Answer:
A contract made with or by a minor is void ab-initio: Pursuant to Section 11 of the
Indian Contract Act, 1872, a minor is not competent to contract and any agreement with
or by a minor is void from the very beginning.

(I) By following the above provision, Mr. Mittal will not succeed in recovering the
outstanding amount by filing a case against Paridhee, a minor.
(II) Minor cannot bind parent or guardian: In the absence of authority, express or
implied, a minor is not capable of binding his parent or guardian, even for necessaries.
The parents will be held liable only when the child is acting as an agent for parents.
In the instant case, Mr. Mittal will not succeed in recovering the outstanding amount
by filing a case against Mr. Ram, father of Paridhee.
(III) No ratification after attaining majority: A minor cannot ratify the agreement on
attaining majority as the original agreement is void ab initio and a void agreement
can never be ratified.
Hence, in this case also, Mr. Mittal will not succeed in recovering the outstanding
amount by filing a case against Paridhee, after she attains majority.

55. State with reason(s) whether the following agreements are valid or void as per the
Indian Contract Act, 1872:
a. Where two courts have jurisdiction to try a suit, an agreement between the parties
that the suit should be filed in one of those courts alone and not in the other.
b. X offers to sell his Maruti car to Y. Y believes that X has only Wagon R Car but
agrees to buy it.
c. X, a physician and surgeon, employs Y as an assistant on a salary of 75,000 per
month for a term of two years and Y agrees not to practice as a surgeon and physician
during these two years.

Answer:
(I) Reason: An agreement in restraint of legal proceeding is the one by which any party
thereto is restricted absolutely from enforcing his rights under a contract through a
Court (Section 28 of the Indian Contract Act, 1872). A contract of this nature is
void. However, in the given statement, no absolute restriction is marked on parties on
filing of suit. As per the agreement, suit may be filed in one of the courts having
jurisdiction.
.5
 (ii) The said agreement is void.
Reason: This agreement is void as the two parties are thinking about different subject
matters so that there is no real consent, and the agreement may be treated as void
because of mistake of fact as well as absence of consensus.
(iii) The said agreement is valid.
Reason: An agreement by which any person is restrained from exercising a lawful
profession, trade or business of any kind, is to that extent void (Section 27). But,
as an exception, agreement of service by which an employee binds himself,
during the term of his agreement, not to compete with his employer is not in
restraint of trade.

56. R owns an electronics store. P visited the store to buy a water purifier priced at `
54,000/. He specifically requested R for a purifier with a copper filter. As P wanted
to buy the purifier on credit, with the intention of paying in 9 equal monthly
instalments, R demands a guarantor for the transaction. S (a friend of P) came
forward and gave the guarantee for payment of water purifier. R sold P, a water
purifier of a specific brand. P made payment for 4 monthly instalments and after
that became insolvent. Explain with reference to the Indian Contract Act, 1872, the
liability of S as a guarantor to pay the balance price of water purifier to R. What will
be your answer, if R sold the water purifier misrepresenting it as having a copper
filter, while it actually has a normal filter? Neither P nor S was aware of this fact
and upon discovering the truth, P refused to pay the price. In response to P's refusal,
R filed the suit against S, the guarantor. Explain with reference to the Indian
Contract Act, 1872, whether S is liable to pay the balance price of water purifier
to R?

Answer:
As per section 126 of the Indian Contract Act, 1872, the contract of guarantee is
defined as a contract to perform the promise or discharge the liability of a third
person in case of his default.
In this case, S has given a guarantee for P's payment obligation towards R. When P
defaulted after making four monthly instalments and became insolvent, S's liability as a
guarantor will come into existence. According to Section 128 of the Act, the liability of
the surety is co- extensive with that of the principal debtor, unless it is otherwise
provided by the contract. Since P failed to pay the remaining instalments due to
insolvency, S, as the guarantor, is liable to pay the balance price of the water purifier
to R. In the given situation, S will have to pay the balance amount of` 30,000
to R. [54,000-(4x6,000)]

In the second situation, R sold the water purifier misrepresenting it as having a copper
filter, while it actually has a normal filter; this changes the situation significantly.
According to Section 142 of the Act, any guarantee which has been obtained by means
of misrepresentation made by the creditor, or with his knowledge and assent,
.5 concerning a material part of the transaction, is invalid. Here, guarantee is obtained
 by means of misrepresentation made by the creditor (R), and therefore the guarantee
is invalid.
Furthermore, under Section 143, any guarantee which the creditor has obtained by
means of keeping silence as to material circumstances, is invalid.
Here R misrepresented the filter type and both P and S were unaware of this fact. The
creditor (R) has obtained the guarantee by remaining silent as to material
circumstances. Therefore, the guarantee obtained from S will be considered to be
invalid.
Consequently, S cannot be held liable to pay the balance price of the water purifier
to R.

57. What are the conditions need to be fulfilled to make the following agreements valid
without consideration as per the provisions of the Indian Contract Act, 1872?
(A) Agreement made based on natural love and affection
(B) Promise to pay time-barred debts

Answer:
(A) Agreement made based on natural love and affection: Conditions to be fulfilled
under section 25(1) of the Indian Contract Act, 1872
(i) It must be made out of natural love and affection between the parties.
1. Parties must stand in near relationship to each other
2. It must be in writing.
3. It must also be registered under the law.
A written and registered agreement based on natural love and affection between the
parties standing in near relation (e.g., husband and wife) to each other is enforceable
even without consideration.
(B) Promise to pay time barred debts: Where a promise in writing signed by the
person making it or by his authorised agent, is made to pay a debt barred by limitation
it is valid without consideration [Section 25(3)].

58. Mr. Parth applied for a job as principal of a school. The school management decided
to appoint him. One member of the school management committee privately
informed Mr. Parth that he was appointed but official communication was not given
by the school. Later, the management of the school decided to appoint someone else
as a principal. Mr. Parth filed a suit against the school for cancellation of his
appointment and claimed damages for loss of salary. State with reasons, will Mr.
Parth be successful in suit filed against school under the Indian Contract Act, 1872?
.5
 Answer:
As per the rules of acceptance, the acceptance should be communicated to offeror by
offeree himself or by his authorized agent. Communication of acceptance by third
person cannot be concluded as valid acceptance.
In the instant case, Mr. Parth applied for a job as principal of a school and one
member of the school management committee privately informed Mr. Parth that he
was appointed. Later, the management of the school appointed someone else as a
principal.
On the basis of the above provisions and facts, communication of appointment of Mr.
Parth should be made by the school management committee or by any authorised agent.
Communication by third person cannot be termed as communication of acceptance.
Therefore, no valid contract was formed between Mr. Parth and the school and Mr. Parth
cannot file a suit against the school for cancellation of his appointment.

59. Sarthak is employed as a cashier on a monthly salary of ` 50,000 by ABC bank for a
period of three years. Mohit gave surety for Sarthak’s good conduct. After nine
months, the financial position of the bank deteriorates. Then Sarthak agrees to accept
a lower salary of ` 40,000 per month from the Bank. Two months later, it was
found that Sarthak had misappropriated cash from the time of his appointment.
What is the liability of Mohit taking into account the provisions of the Indian Contract
Act, 1872?

Answer:
According to section 133 of the Indian Contract Act, 1872, where there is any variance
in the terms of contract between the principal debtor and creditor without surety’s
consent, it would discharge the surety in respect of all transactions taking place
subsequent to such variance.
In the instant case, the creditor has made a variance (i.e. change in terms) without
the consent of surety. Thus, surety is discharged as to the transactions subsequent to the
change.
Hence, Mohit is liable as surety for the loss suffered by the bank due to misappropriation
of cash by Sarthak during the first nine months but not for misappropriations committed
after the reduction in salary.

60. Rahul was a Disk Jockey at a five-star hotel. As per the contract, he is supposed to
perform every weekend. (i.e. twice a week). Rahul will be paid ` 2,500 per day.
However, after a month, Rahul willfully absents himself from the performance.
Taking into account the provisions of the Indian Contract Act, 1872, answer the
following:
.5
 (i) Does the hotel have the right to end the contract?
(ii) If the hotel sends out a mail to Rahul that they are interested to continue the
contract and Rahul accepts, can the hotel rescind the contract after a month on this
ground subsequently?
(iii) In which of the case – (termination of contract or continuance of contract) can the
hotel claim damages that it had suffered as a result of this breach?

Answer:
By analysing Section 39 of the Indian Contract Act, 1872, it is understood that when a
party to a contract has refused to perform or disabled himself from performing his
promise entirely, the following two rights accrue to the aggrieved party (promise):
(a) To terminate the contract
(b) To indicate by words or by conduct that he is interested in its continuance.
In either of the two cases, the promisee would be able to claim damages that he
suffers.
In the given case,
(i) Yes, the hotel has the right to end the contract with Rahul, the DJ.
(ii) The hotel has the right to continue the contract with Rahul. But once this
right is exercised, it cannot subsequently rescind the contract on this ground
subsequently.
(iii) In both the cases, the hotel (promisee) is entitled to claim damages that has
been suffered as a result of breach.

61. Examine whether the following constitute a contract of ‘Bailment’ under

The provisions of the Indian Contract Act, 1872:
a. Vikas parks his car at a parking lot, locks it, and keeps the keys with himself.
b. Seizure of goods by customs authorities.

Answer:
Section 25 of the Indian Contract Act, 1872 provides that 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.
In the instant case, the transfer of house made by Mr. Sanjay Kothari on account of
natural love and affection between the parties standing in near relation to each other
is written but not registered. Hence, this transfer is not enforceable, and his daughter
cannot get the house as gift under the Indian Contract Act, 1872.

.5
 62. Mr. Sanjay Kothari was a big businessman having two sons and one married daughter.
He decided to gift his house to his daughter. For this purpose, he called his lawyer at his
house and made a written document for such gift. The lawyer advised him to get
the transfer document properly registered. When they both were going for registration
of document, they met an accident, and both died. Later, the daughter found the
document and claimed the house on the basis of that document. Explain, whether
she can get the house as gift under the Indian Contract Act, 1872?

Answer:
(i) According to section 16 of the Indian Contract Act, 1872, a contract is said to be
induced by ‘undue influence’ where the relations subsisting between the parties are such
that one of the parties is in a position to dominate the will of the other and he uses that
position to obtain an unfair advantage over the other.
When consent to an agreement is caused by undue influence, the contract is voidable
at the option of the party, whose consent was so caused.
Hence, the contract between Mr. Ayush and Mr. Bobby is voidable at the option of
Mr. Bobby as it was induced by undue influence by Mr. Ayush and therefore Mr.
Bobby can sue Mr. Ayush.

(II) The parties to a contract must either perform, or offer to perform, their respective
promises, unless such performance is dispensed with or excused under the provisions
of this Act, or of any other law.
Promises bind the representatives of the promisors in case of the death of such
promisors before performance, unless a contrary intention appears from the contract.
(Section 37 of the Indian Contract Act, 1872).
As per the provisions of Section 40 of the Indian Contract Act, 1872, if it appears
from the nature of the case that it was the intention of the parties to any contract that
any promise contained in it should be performed by the promisor himself, such promise
must be performed by the promisor. In other cases, the promisor or his representative
may employ a competent person to perform it
In terms of the provisions of Section 40 stated above, in case where Mr. Sooraj has
to paint a family picture for Mr. Manoj, Mr. Manoj cannot ask the legal representative
of Mr. Sooraj to complete the painting work on Mr. Sooraj’s death, since painting
involves the use of personal skill
In terms of the provisions of Section 37 stated above, in case where Mr. Sooraj
had promised to deliver some photographs to Mr. Manoj, the legal representatives
of Mr. Sooraj shall be bound to deliver the photographs in this situation

63. (i) Mr. Ayush, the employer induced his employee Mr. Bobby to sell his one room
flat to him at less than the market value to secure promotion. Mr. Bobby sold the flat
to Mr. Ayush. Later on, Mr. Bobby changed his mind and decided to sue Mr. Ayush.
Examine the validity of the contract as per the provisions of the Indian Contract
.5
 Act, 1872

(ii) Mr. Sooraj promises Mr. Manoj to paint a family picture for 20,000 and
assures to complete his assignment by 15th March, Unfortunately, Mr. Sooraj died
in a road accident on 1st March, 2023 and his assignment remains undone.
Can Mr. Manoj bind the legal representative of Mr. Sooraj for the promise made by
Mr. Sooraj? Suppose Mr. Sooraj had promised to deliver some photographs to Mr.
Manoj on 15th March, 2023 against a payment of ` 10,000 but he dies before that day.
Will his representative be bound to deliver the photographs in this situation? Decide
as per the provisions of the Indian Contract Act, 1872.
Decide as per the provisions of the Indian Contract Act, 1872.

Answer:
Quasi Contracts: Under certain special circumstances, obligations resembling those
created by a contract are imposed by law although the parties have never entered into a
contract. Such obligations imposed by law are referred to as ‘Quasi-contracts’. Such a
contract resembles a contract so far as result or effect is concerned but it has little
or no affinity with a contract in respect of mode of creation. These contracts are
based on the doctrine that a person shall not be allowed to enrich himself unjustly at
the expense of another. The salient features of a quasi-contract are:
1. It does not arise from any agreement of the parties concerned but is imposed
by law.
2. Duty and not promise is the basis of such contract.
3. The right under it is always a right to money and generally though not always to
a liquidated sum of money.
4. Such a right is available against specific person(s) and not against the whole
world.
5. A suit for its breach may be filed in the same way as in case of a complete contract.
virtue of provisions of S

64. Mr. Sooraj promises Mr. Manoj to paint a family picture for20,000 and assures
to complete his assignment by 15th March, 2023. Unfortunately, Mr. Sooraj died
in a road accident on 1st March, 2023 and his assignment remains undone.
Can Mr. Manoj bind the legal representative of Mr. Sooraj for the promise made by
Mr. Sooraj? Suppose Mr. Sooraj had promised to deliver some photographs to Mr.
Manoj on 15th March, 2023 against a payment of ` 10,000 but he dies before that day.
Will his representative be bound to deliver the photographs in this situation?

Answer:
Quasi Contracts: Under certain special circumstances, obligations resembling those
.5
 created by a contract are imposed by law although the parties have never entered into a
contract. Such obligations imposed by law are referred to as ‘Quasi-contracts’. Such a
contract resembles a contract so far as result or effect is concerned but it has little
or no affinity with a contract in respect of mode of creation. These contracts are
based on the doctrine that a person shall not be allowed to enrich himself unjustly at the
expense of another.
The salient features of a quasi-contract are:
1. It does not arise from any agreement of the parties concerned but is imposed by
law.
2. Duty and not promise is the basis of such contract.
3. The right under it is always a right to money and generally though not always to a
liquidated sum of money.
4. Such a right is available against specific person(s) and not against the whole world.
5. A suit for its breach may be filed in the same way as in case of a complete contract.

65. Shri Shivay Temple Trust decided to get renovation of the temple under trust. For this
purpose, the President of the trust discussed the budget with contractor. The contractor
provided the budget of ` 5,00,000. After gaining enough membership to support the
funds required renovating the temple, the committee entered in a contract with
contractor for renovation. The plans for the proposed structure were submitted and
passed. But as the membership list increased, the plans also expanded. Hence, the
expected cost of construction is increased from ` 5,00,000 to ` 7,00,000. Now,
increased amount of ` 7,00,000 stayed approved and obligated by the committee and
contractor. Renovation work was completed, and contractor demanded the payment
from committee. Meanwhile, new members who promised to contribute did not turnup.
President had filed the suit against the members who promised to contribute. Members
denied on the views that their contract with committee to contribute was without any
consideration hence invalid. State with reason whether committee will succeed under
the provisions of the Indian Contract Act, 1872?

Answer:
As per Section 25 of the Indian Contract Act, 1872, an agreement made without
consideration is void. However, there are certain exceptions to this rule. If a promisee
undertakes the liability on the promise of the person to contribute to charity, there the
contract shall be valid even without consideration. This was also confirmed in case of
Kedarnath vs. Gorie Mahommed.
In the instant case, the Committee of Shri Shivay Temple trust entered into contract
for renovation of temple for ` 5,00,000. Some members promised to contribute the
funds and on the basis of those promises, the committee has extended the work for
which cost was increased from 5,00,000 to ` 7,00,000.

New members who promised to contribute did not turn up. The committee had filed the
.5
 suit against the members who promised to contribute. But members denied the view that
their contract with the committee to contribute was without any consideration, hence
invalid.

Hence, on the basis of the above facts and provisions, the promise made by members to
contribute is perfectly valid even without consideration. Therefore, the committee will
succeed, and members have to pay the promised amount.

66. Sahil deals in pre-owned cars. Raju sold his accidental car to Sahil by fraud. Sahil
could not find that the car was accidental. Akshay, a customer visited the workshop
of Sahil with intention to purchase a pre- owned car. Akshay informed Sahil his
intention with the condition that car should be free from any accident. Sahil sold that
car to Akshay on erroneously believing that car did not face any accident. Afterward,
Akshay found that the car was actually an accidental case. He sued Sahil to avoid
the contract and also for damages for expenses suffered on car. Taking into account the
provisions of the Indian Contract Act, 1872, state whether Akshay was eligible to
avoid the contract and to claim damages from Sahil?

Answer:

According to Section 18 of the Indian Contract Act, 1872, there is misrepresentation:

(1) Statement of fact, which of false, would constitute misrepresentation if the maker
believes it to be true but which is not justified by the information he possesses;
(2) When there is a breach of duty by a person without any intention to deceive which
brings an advantage to him;
(3) When a party causes, even though done innocently, the other party to the
agreement to make a mistake as to the subject matter.
In other words, ‘Misrepresentation’ is wrong done without intention to deceive. Further,
the aggrieved party, in case of misrepresentation by the other party, can avoid or
rescind the contract; or accept the contract but insist that he shall be placed in the
position in which he would have been if the representation made had been true.
Damages can be claimed in case of fraud not for misrepresentation. In the instant case,
Raju sold his accidental car by fraud to Sahil, a dealer in pre-owned cars. Sahil was
innocent about the car. That car was sold by Sahil to Akshay on erroneously believing
that car did not face any accident. Afterward, when Akshay knew about car, he sued
Sahil to avoid the contract also for damages for expenses suffered on car.
On the basis of the facts of the case, Sahil had no idea that the car was an accidental
car, and sale of car by Sahil to Akshay is actually affected by misrepresentation not
by fraud. Contract is voidable at the intention of Akshay. Therefore, Akshay has the
right to avoid the contract, but he cannot claim damages.

67. Rahul is manufacturer of jute bags. He contracted with Sonia to supply raw jute for
the purpose of making bags. Rahul informed Sonia that production process of jute bags
would start from 27.06.2024 but Sonia must supply raw jute till 25.06.2024 so that
quality verifications can be done in next two days. Sonia supplied the jute on
.5
 27.06.2024 and informed Rahul that she couldn’t supply on 25.06.2024 due to some
unavoidable reasons and she also assured that quality measures were not anyway
compromised in supplies. But Rahul wanted to avoid the contract as he was not given
opportunity to examine the goods. In light of provisions of Indian Contract Act, 1872,
state whether Rahul can avoid the contract?

Answer:
“Performance of Contract” means fulfilment of obligations to the contract.
According to Section 37 of the Indian Contract Act, 1872, 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 the Contract Act or of any other
law. Further, the promisee should have a reasonable opportunity to see that the things
offered is the things contracted for otherwise performance cannot considered as valid
performance.
In the instant case, Rahul, a manufacturer of jute bags entered in a contract with
Sonia to supply raw jute with the instructions that he needs raw jute till 25.06.2024
so that quality verifications can be done in next two days. But Sonia supplied the jute on
27.06.2024 with the information that she couldn’t supply on 25.06.2024 due to some
unavoidable reasons.
On the basis of the facts of the case, Rahul was not given a proper opportunity to
examine the goods at the time of performance. This cannot be considered as valid
performance by Sonia. Hence, Rahul can avoid the contract entered with Sonia.

68. M/s Janta Machine Tools & Co. contracted with M/s Ruchi Traders to make and
deliver certain machinery by 31st July for ` 15 Lakhs. There was a labour strike in
the factory of M/s Janta Machine Tools & Co. and it could not manufacture and
deliver the machinery to M/s Ruchi Traders. Afterwards, M/s Ruchi Traders had to
purchase the machinery from another manufacturer for ` 18 Lakhs. M/s Ruchi Traders
was also prevented from performing a contract which was made with M/s Shiksha
Technologies at the time of its contract with M/s Janta Machine Tools & Co. and were
compelled to pay compensation of ` 2 Lakhs to M/s Shiksha Technologies. M/s Janta
Machine Tools & Co. was very well informed by M/s Ruchi Traders about its contract
with M/s Shiksha Technologies. M/s Ruchi Traders sued M/s Janta Machine Tools &
Co for recovery of compensation of ` 3 Lakhs (i.e. ` 18 Lakhs – ` 15 Lakhs) plus 2
Lakhs given to M/s Shiksha Technologies. Advise under the provisions of the Indian
Contract Act, 1872.

Answer:
Section 73 of the Indian Contract Act, 1872, has laid down the rules as to how the
amount of compensation is to be determined. On the breach of the contract, the party
who suffers from such a breach is entitled to receive, from the party who has broken
the contract, compensation for any loss or damage caused to him by breach.

.5
 Compensation can be claimed for any loss or damage which naturally arises in the usual
course of events. Further, compensation can also be claimed for any loss or damage
which the party knew when they entered into the contract, as likely to result from the
breach. That is to say, special damage can be claimed only on a previous notice. But
the party suffering from the breach is bound to take reasonable steps to minimise the
loss. No compensation is payable for any remote or indirect loss.

In the instant case, M/s Ruchi Traders sued M/s Janta Machine Tools & Co. for
recovery of compensation of ` 3 Lakhs (i.e. ` 18 Lakhs – ` 15 Lakhs) plus ` 2
Lakhs given to M/s Shiksha Technologies.
As M/s Ruchi Traders informed M/s Janta Machine Tools & Co. about its contract with
M/s Shiksha Technologies at the time of making the contract. Hence, ` 2 Lakhs is
a special damage which can be recovered with ordinary damages of ` 3 Lakhs,

.5
69. Ankit has taken a loan of ` 1,00,000 from Kishore on the guarantee of Sudeep at the
interest rate of 12% p.a.
SUGGESTED After some time, due to financial crises of Ankit and at his
ANSWER
request, Kishore reduced the interest rate to 8% and also extended the time for
repayment of loan without the consent of Sudeep. Ankit becomes insolvent. Whether
Kishore sue Sudeep for recovery of the amount under the provisions of the Indian
Contract Act, 1872?

Answer:
Section 133 of the Indian Contract Act, 1872 provides where there is any variance inthe
terms of contract between the principal debtor and creditor without surety’s consent,
it would discharge the surety in respect of all transactions taking place subsequent
to such variance.
Further, according to section 135, a contract between the creditor and the principal
debtor, by which the creditor makes a composition with, or promises to give time to, or
promises not to sue, the principal debtor discharges the surety, unless the surety assents
to such contract.
In the instant case, Kishore advances Ankit a loan on the guarantee of Sudeep.
At the request of Ankit, Kishore reduces the interest rate and also extended the time
for repayment without the knowledge of Sudeep.
On the basis of the above provisions and facts of the case, the surety Sudeep is
discharged as variation is made in a contract of guarantee and
creditor Kishore extends the time for repayment without obtaining the consent of
Sudeep.

70. Explain in brief with reference to the provisions of the Indian Contract Act, 1872,
what are the rights enjoyed by Surety against the Creditor, the Principal Debtor and Co-
Sureties?
Answer:
In terms of the provisions of the Indian Contract Act, 1872, the surety enjoys the
following rights:
(a) Rights against the creditor;
(b) Rights against the principal debtor;
(c) Rights against co-sureties.
Right against the Creditor
(a) Surety’s right to benefit of creditor’s securities [Section 141]: A surety is entitled
to the benefit of every security which the creditor has against the principal debtor at
the time when the contract of suretyship is entered into, whether the surety knows of
the existence of such security or not; and, if the creditor loses, or, without the consent
16
of the surety, parts with such security, the surety is discharged to the extent of the
value of the security.
(b) Right to set off: If the creditor sues the surety, for payment of principal debtor’s
liability, the surety may have the benefit of the set off, if any, that the principal debtor
 had against the creditor.
(c) Right to share reduction: The surety has right to claim proportionate reduction in
his liability if the principal
SUGGESTED ANSWER debtor becomes insolvent.

Right against the principal debtor

Rights of subrogation [Section 140 of the Indian Contract Act, 1872]: Where, a
guaranteed debt has become due, or default of the principal debtor to perform a
guaranteed duty has taken place, the surety, upon payment or performance of all that he
is liable for, is invested with all the rights which the creditor had against the principal
debtor. This right is known as right of subrogation. It means that on payment of the
guaranteed debt, or performance of the guaranteed duty, the surety steps into the shoes
of the creditor.
(a) Implied promise to indemnify surety [Section 145]: In every contract of guarantee
there is an implied promise by the principal debtor to indemnify the surety. The surety
is entitled to recover from the principal debtor whatever sum he has rightfully paid
under the guarantee but not sums which he paid wrongfully.
Rights against co-sureties
“Co-sureties- When the same debt or duty is guaranteed by two or more persons,
such persons are called co-sureties”
(a) Co-sureties liable to contribute equally (Section 146): Unless otherwise agreed,
each surety is liable to contribute equally for discharge of whole debt or part of the
debt remains unpaid by debtor.
(b) Liability of co-sureties bound in different sums (Section 147): The principal of
equal contribution is, however, subject to the maximum limit fixed by a surety to his
liability. Co-sureties who are bound in different sums are liable to pay equally as far
as the limits of their respective obligations permit.

71. Explain the type of contracts in the following agreements under the Indian Contract
Act, 1872:

(I) Rahul contracts with Bhanu (owner of the factory) for the supply of 10 tons of
sugar, but before the supply is effected, the factory catches fire and everything is
destroyed.

(II) A coolie in uniform picks up the luggage of Rohan to be carried out of the
railway station without being asked by Rohan and Rohan allows him to do so.
(III) Obligation of finder of lost goods to return them to the true owner.

Answer:
(i) It is a void contract Void Contract: Section 2 (j) of the Indian Contract Act, 1872 states
as follows: “A contract which ceases to be enforceable by law becomes void17when
it ceases to be enforceable”. Thus, a void contract is one which cannot be enforced
by a court of law.
It is an implied contract and Rohan must pay for the services of the coolie.
 Implied Contracts: Implied contracts come into existence by implication. Most often
the implication is by law and or by action. Section 9 of the Indian Contract Act, 1872
contemplates such implied contracts when it lays down that in so far as such proposal
or acceptance is madeANSWER
SUGGESTED otherwise than in words, Obligation of finder of lost goods to
return them to the true owner cannot be said to arise out of a contract even in its
remotest sense, as there is neither offer and acceptance nor consent. These are said to
be quasi-contracts.
Quasi-Contract: A quasi-contract is not an actual contract, but it resembles a contract.
It is created by law under certain circumstances. The law creates and enforces legal
rights and obligations when no real contract exists. Such obligations are known as
quasi-contracts. In other words, it is a contract in which there is no intention on the part
of either party to make a contract, but law imposes a contract upon the parties.

72. Amit, a minor was studying in a college. On 1st July, 2023 he took a loan of `
1,00,000 from Bhavesh for payment of his college fees and to purchase books and
agreed to repay by 31st December, 2023. Amit possesses assets worth ` 9 lakhs. On
due date, Amit fails to pay back the loan to Bhavesh. Bhavesh now wants to recover
the loan from Amit out of his (Amit’s) assets. Referring to the provisions of Indian
Contract Act, 1872 decide whether Bhavesh would succeed.

ANS: According to section 68 of Indian Contract Act, 1872, if a person, incapable

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

conditions in life of the minor, his assets can be sued to reimburse Bhavesh.
Hence, Bhavesh can proceed against the assets of Amit.

73. Mr. Shyam aged 58 years, was employed in a government department. He was
going to retire after two years. Mr. Dev made a proposal to
Mr. Shyam, to apply for voluntary retirement from his post so that Mr. Dev
can be appointed in his place. Mr. Dev offered a sum of ` 10 Lakhs as consideration
to Mr. Shyam to induce him to retire.
Mr. Shyam refused at first instance but when he evaluated the amount offered as
consideration is just double of his cumulative remuneration to be received during the
tenure of two years of employment, he agreed to receive the consideration and accepted
the above agreement to receive money to retire from his office.
18
Whether the above agreement is valid? Explain with reference to provision of the
Indian Contract Act, 1872?

ANS: Section 10 of the Indian Contract Act, 1872 provides for the legality of
 consideration and objects thereto. Section 23 of the said Act also states that every
agreement of which the object or consideration is unlawful is void.
The given problem talks about entering into an agreement for sale of public office,
which is SUGGESTED
opposed toANSWER
public policy. Public policy requires that there should be no
money consideration for the appointment to an office in which the public is interested.
Such consideration paid, being opposed to public policy, is unlawful.
In the given case, Mr. Shyam, who was going to be retired after two years was
proposed by Mr. Dev, to apply for voluntary retirement from his post, in order that
he can be appointed in his place. In lieu of that, Mr. Dev offered Mr. Shyam a
sum of ` 10 lakh as consideration. Mr. Shyam refused initially but later accepted
the said agreement to receive money to retire from his office.
Here, Mr. Shyam’s promise to sale for Mr. Dev, an employment in the public services
is the consideration for Mr. Dev’s promise to pay ` 10 lakh. Therefore, in terms of
the above provisions of the Indian Contract Act, the said agreement is not valid. It is
void, as the consideration being opposed to public policy, is unlawful.

74. What will be rights with the promisor in following cases under the Indian Contract Act,
1872? Explain with reasons:
(a) Sunil promised to bring back Jatin to life again.
(b) Aman agreed to sell 50 kgs of apples to Raman. The loaded truck left for delivery
on 15th March but due to riots in between reached Raman on 19th March due to which
the apples were rotten.
(c) An artist promised to paint on the fixed date for a fixed amount of remuneration but
met with an accident and lost his both hands.
(d) Abhishek entered into contract of import of toys from China. But due to disturbance
in the relation of both the countries, the imports from China were banned.

Answer:
(a) The contract is void because of its initial impossibility of performance.
(b) Time is essence of this contract. By the time apples reached Raman, they were
already rotten. The contract is discharged due to destruction of the subject matter
of contract.
(c) Such contract is of personal nature and hence cannot be performed due to
occurrence of an event resulting in impossibility of performance of contract.
(d) Such contract is discharged without performance because of subsequent illegality
nature of the contract.

75. Seema was running a boutique in New Delhi. She has to deliver some cloth to her
friend Kiran who was putting up an exhibition in Mumbai. Seema delivered the sewing19
machine and some cloth to a railway company to be delivered at a place where the
exhibition was to be held. Seema expected to earn an exceptional profit from the
sales made at this exhibition however she did not bring this fact to the notice of the
railway’s authorities. The goods were delivered to the place after the conclusion of the
exhibition. On account of such breach of contract by railways authorities, can Seema
 recover the loss of profits under the Indian Contract Act, 1872?

Answer: SUGGESTED ANSWER

As per Section 73 to 75 of Indian Contract Act, 1872, damage means a sum of
money claimed or awarded in compensation for a loss or an injury. Whenever a
party commits a breach, the aggrieved party can claim the compensation for the loss
so suffered by him. General damages are those which arise naturally in the usual
course of things from the breach itself. (Hadley Vs Baxendale).
Therefore, when a breach is committed by a party, the defendant shall be held liable
for all such losses that naturally arise in the usual course of business. Such damages
are called ordinary damages. However,special damages are those which arise in
unusual circumstances affecting the aggrieved party and such damages are
recoverable only when the special circumstances were brought to the knowledge of the
defendant. If no special notice is given, then the aggrieved party can only claim the
ordinary damages.
In the given case, Seema was to earn an exceptional profit out of the sales made at
the exhibition, however she never informed about it to the railway authorities. Since
the goods were delivered after the conclusion of the exhibition,
therefore Seema can recover only the losses arising in the ordinary course of business.
Since no notice about special circumstances was given to railways authorities, she
could not recover the loss of profits.

76. Explain any five circumstances under which contracts need not be performed with the
consent of both the parties.
Answer:
Under following circumstances, the contracts need not be performed with the consent
of both the parties:
(i) Novation: Where the parties to a contract substitute a new contract for the old, it
is called novation. A contract in existence may be substituted by a new contract
either between the same parties or between different parties, the consideration
mutually being the discharge of old contract. Novation can take place only by
mutual agreement between the parties. On novation, the old contract is discharged and
consequently it need not be performed. (Section 62 of the Indian Contract Act, 1872)
(ii) Rescission: A contract is also discharged by recission. When the parties to a contract
agree to rescind it, the contract need not be performed. (Section 62)
(iii) Alteration: Where the parties to a contract agree to alter it, the original contract is
rescinded, with the result that it need not be performed. In other words, a contract is
also discharged by alteration. (Section 62)
(iv) Remission: Every promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for such
20
performance or may accept instead of it
any satisfaction which he thinks fit. In other words, a contract is discharged by
remission. (Section 63)
(v) Rescinds voidable contract: When a person at whose option a contract is voidable
rescinds it, the other party thereto need not perform any promise therein contained
 in which he is the promisor.
(vi) Neglect of promisee: If any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his promise, the promisor is excused
SUGGESTED ANSWER
by such neglect or refusal as to any non-performance caused thereby. (Section 67)

77. ‘Sooraj’ guarantees ‘Vikas’ for the transactions to be done between ‘Vikas’ &
‘Nikhil’ during the month of March 2023. ‘Vikas’ supplied goods of ` 30,000 on
01.03.2023 and of ` 20,000 on 03.03.2023 to ‘Nikhil’. On 05.03.2023, ‘Sooraj’ died
in a road accident. On 10.03.2023, being ignorant of the death of ‘Sooraj’, ‘Vikas’
further supplied goods of 40,000. On default in payment by ‘Nikhil’ on due date,
‘Vikas’ sued legal heirs of ‘Sooraj’ for recovery of ` 90,000. Describe, whether
legal heirs of ‘Sooraj’ are liable to pay ` 90,000 under the provisions of Indian Contract
Act, 1872.
What would be your answer, if the estate of ‘Sooraj’ is worth ` 45,000 only?
Answer:
According to section 131 of Indian Contract Act, 1872, in the absence of a contract
to contrary, a continuing guarantee is revoked by the death of the surety as to the future
transactions. The estate of deceased surety, however, liable for those transactions
which had already taken place during the lifetime of deceased. Surety’s estate will not
be liable for the transactions taken place after the death of surety even if the creditor
had no knowledge of surety’s death.
In this question, ‘Sooraj’ was surety for the transactions to be done between ‘Vikas’ &
‘Nikhil’ during the month of March, 2023. ‘Vikas’ supplied goods of ` 30,000, ` 20,000
and of ` 40,000 on 01.03.2023, 03.03.2023 and 10.03.02023 respectively. ‘Sooraj’ died
in a road accident, but this was not in the knowledge of ‘Vikas’. When ‘Nikhil’ defaulted
on payment, ‘Vikas’ filed suit against legal heirs of ‘Sooraj’ for recovery of full
amount i.e. ` 90,000.
are liable only for those transactions which were entered before 05.03.2023 i.e. for `
50,000. They are not liable for the transaction done on 10.03.2023 even though Vikas
had no knowledge of death of Sooraj.
Further, if the worth of the estate of deceased is only ` 45,000, the legal heirs are liable
for this amount only.

78. Mr. Stefen owns a chicken farm near Gurugram, where he breeds them and sells
eggs and live chicken to retail shops in Gurugram. Mr. Flemming also owns
a similar farm near Gurugram, doing the same business. Mr. Flemming had to go back
to his native place in Australia for one year. He needed money for travel, so he had
pledged his farm to Mr. Stefen for one year and received a deposit of ` 25 lakhs and
went away. At that point of time, the stock of live birds was 100,000 and eggs 10,000.
The condition was that when Flemming returns, he will repay the deposit and take
possession of his farm with live birds and eggs.
21
After one year Flemming came back and returned the deposit. At that time there
were 109,000 live birds (increase is due to hatching of eggs out of 10,000 eggs he
had left), and 15,000 eggs.
Mr. Stefen agreed to return 100,000 live birds and 10,000 eggs only.
 State the duties of Mr. Stefen as Pawnee and advise Mr. Flemming about his rights in the
Given case.
SUGGESTED ANSWER
Answer:

According to section 163 of the Indian Contract Act, 1872, in the absence of any
contract to the contrary, the bailee is bound to deliver to the bailor, or according to
his directions, any increase or profit which may have accrued from the goods bailed.
In the given question, when Mr. Flemming returned from Australia there were 1,09,000
live birds and 15,000 eggs (1,00,000 birds and 10,000 eggs were originally deposited by
Mr. Flemming). Mr. Stefen agreed to return 1,00,000 live birds and 10,000 eggs only
and not the increased number of live birds and eggs.

In the light of the provision of law and facts of the question, following are the
answers:
Duties of Mr. Stefen: Mr. Stefen (pawnee) is bound to deliver to Mr. Flemming
(pawnor), any increase or profit (9,000 live birds and 5,000 eggs) which has occurred
from the goods bailed (i.e. the live birds and eggs).
Right of Mr. Flemmimg: Mr. Flemming is entitled to recover from Pawnee any
increase in goods so pledged.

79. Albert obtained two loans of ` 3,00,000 and ` 4,00,000 respectively from a reputed
Bank. Out of these, loan of ` 3,00,000 was guaranteed by Robert. Albert sent `
2,00,000 to bank but did not intimate as to how it is to be appropriated towards
the loans. The Bank appropriated the whole of ` 2,00,000 to the loan of ` 4,00,000
(the loan not guaranteed). Robert objected on the decision of the Bank. He argued with
bank that repayment amount should be first adjusted to the guaranteed loan. State
with reasons, whether the Bank was correct in its decision under the Indian
Contract Act, 1872?

Answer:
Section 60 of the Indian Contract Act, 1872 provides, where the debtor does not
intimate and there are no circumstances indicating to which debt the payment is to
be applied, the creditor may apply it at his discretion to any lawful debt actually due
and payable to him from the debtor. However, it cannot be applied to a disputed debt.

In the instant case, Albert obtained two loans of ` 3,00,000 and

4,00,000 respectively from a reputed Bank of which loan of ` 3,00,000 was
guaranteed by Robert. Albert sent ` 2,00,000 to bank without intimating as to how it
is to be appropriated towards the loans. The Bank appropriated the whole of `
2,00,000 to the loan of 4,00,000 (the loan not guaranteed).
22
On the basis of the provisions and facts of the case, it can be said that in the absence
of clear intimation about the appropriation of payment, it is the sole discretion of the
Bank to which loan it can appropriate the amount. Hence, the Bank was correct in its
decision under the Indian Contract Act, 1872.
80. CA. Sarthak Jain had
SUGGESTED decided to get interior work for his new office. For this
ANSWER
purpose, he entered into a contract with M/s Sherry Fine Interiors. It was agreed that
M/s Sherry Fine Interiors will complete the interior work upto 31.01.2025. On
31.01.2025, CA. Sarthak Jain observed that only 20% to 30% work is completed.
He decided to cancel the contract with M/s Sherry Fine Interiors. M/s Sherry Fine
Interiors filed the suit against CA. Sarthak Jain for recovery of the cost which he
incurred on the interior work. CA. Sarthak Jain argued that M/s Sherry Fine Interiors
did not complete the work within the time as per contract and further the work
done till 31.01.2025 by M/s Sherry Fine Interiors was of no use to him as he has
to appoint new interior designer. Explain, whether CA. Sarthak Jain is liable to pay the
cost of work done by M/s Sherry Fine Interiors under the provisions of the Indian
Contract Act, 1872?

Answer:
Section 2(i) of the Indian Contract Act, 1872 provides that an agreement which is
enforceable by law at the option of one or more the parties but not at the option of the
other or others is a voidable contract. Further, when a party to a contract promise to
perform a work within a specified time, could not perform with in that time, the contract
is voidable at the option of the promisee. If promisee has received any benefit, he must
return to promisor.
In the instant case, CA Sarthak Jain contracted with M/s Sherry Fine Interiors for doing
interior work in his new office and 31.01.2025 was deadline. M/s Sherry Fine Interiors
could complete only 20% to 30% work upto 31.01.2025. CA Sarthak Jain cancelled
the contract, but M/s Sherry Fine Interiors filed the suit against CA Sarthak Jain for
recovery of the cost which he incurred on the interior work.
In the given problem, the contract is voidable at the option of CA Sarthak Jain as
work is not completed within the time agreed in the contract. Further, CA Sarthak Jain
is not liable to pay the cost incurred by M/s Sherry Fine Interiors as that cost did not
provide any benefit to him and he has to appoint a new interior designer.

81. Rohan of 17 years has purchased a mobile of ` 25,000 for his online classes from
Mobile Sales Centre on credit. On due date, he did not make the payment of mobile.
Mobile Sales Centre sued Rohan and his parents for the price of mobile. Rohan has `
15,000 as his cash balance but his father has enough money to pay the price of
mobile. Examine the given situation and answer who will be liable to pay the price
of mobile as per the provisions of the Indian Contract Act, 1872?

Answer:
Section 11 of the Indian Contract Act, 1872 provides that a minor is not capable to
enter into a contract. A contract with minor is void-ab-initio. A minor cannot 23 be
enforced to pay off his liabilities. Parents or guardians of minor are also not liable for
any contract entered by minor. However, a minor is liable for supplies of necessaries out
of his assets. Minor is not personally liable even for necessaries.
In the instant case, Rohan, a minor, purchased a mobile worth ` 25,000 for his
 studies on credit from Mobile Sales Centre. Mobile Sales Centre sued Rohan and his
parents for recovery of the price. Rohan has total 15,000 as his cash balance as his
assets.
SUGGESTED ANSWER
On the basis of the facts of the problem, parents of Rohan are not liable for the price
of mobile. Rohan’s assets are liable to make the payment of price. Hence, the Mobile
Sales Centre can recover only `15,000 from Rohan i.e. equal to his assets.

82. Akhil ordered 100 Kgs of wheat to M/s Sahil Kirana Store, and it promised to
supply the wheat by the evening. In the evening, the hawker of M/s Sahil Kirana
Store comes with 100 Kgs of wheat but mistakenly he delivered it at the house of
neighbor of Akhil. Referring to the provisions of the Indian Contract Act, 1872,
advice who will be liable to pay the price of wheat?

Answer:
By virtue of provisions of Section 72 of the Indian Contract Act, 1872, a person to
whom money has been paid or anything delivered by mistake or under coercion,
must repay or return it. Further, as per decision taken in case of Shivprasad Vs Sirish
Chandra, every kind of payment of money or delivery of goods for every type of
‘mistake’ is recoverable.
In the instant case, Akhil contracted M/s Sahil Kirana Store for supply of 100 Kgs of
wheat which to be delivered by the evening. In the evening, the hawker of M/s Sahil
Kirana Store mistakenly delivered 100 Kgs wheat at the house of neighbor of Akhil.
As the hawker of M/s Sahil Kirana Store mistakenly delivered 100 Kgs wheat at the
house of neighbor of Akhil and neighbor accepted the wheat, there is a quasi-contract
between M/s Sahil Kirana Store and neighbor. Hence, neighbor will be liable to pay
the price of wheat.

83. Rahul hired a car for 15 days from M/s Kushwah Travels. After five days,
M/s Kushwah Travels demanded back his car from Rahul. He was also agreed to
compensate for any loss suffered by Rahul due to such premature return of goods. But
Rahul refused to return the car before the period of bailment i.e. 15 days. M/s Kushwah
Travels sued Rahul for recovery of car. Referring to the provisions of the Indian
Contract Act, 1872, whether M/s Kushwah Travels can recover the car from the Rahul
before the time fixed for bailment?

Answer:
According to the Section 159 of the Indian Contract Act, 1872, when the goods are
lent gratuitously, the bailor can demand back the goods at any time even before
the expiry of the time fixed or the achievement of the object. However, due to
24the
premature return of the goods, if the bailee suffers any loss, which is more than
the benefit actually obtained by him from the use of the goods bailed, the bailor
has to compensate the bailee. In the given problem, Rahul hired a car for 15 days
from M/s Kushwah Travels but just after five days, M/s Kushwah Travels demanded
 back his car from Rahul. Rahul refused to return the car before the period of
bailment, i.e. 15 days. M/s Kushwah Travels filed suit against Rahul for recovery of
car.
SUGGESTED ANSWER
Premature recovery of goods bailed available only in case of gratuitous bailment. If
bailment is for hire, this right is not available to bailor even he is ready to
compensate for such premature return. Hence, M/s Kushwah Travels cannot
recover back the goods before 15 days.

84. Ajay appoints Vijay to sell his electronic goods lying in his godown. He also agrees
to give 10% commission on the sale price to Vijay. Afterwards, Ajay revokes Vijay’s
authority by sending the letter to Vijay. The letter was sent on 3rd March which was
received by Vijay on 7th March. On 5th March, Vijay sold the goods worth `1,20,000.
He claimed for commission from Ajay, but Ajay refused as he already revoked the
agency before sale of goods. Referring the provisions of the Indian Contract Act, 1872,
whether Ajay was liable to pay commission to Vijay?

ANS: According to section 208 of the Indian Contract Act, 1872, the termination of
the authority of an agent does not, so far as regards the agent, take effect before it
becomes known to him, or so far as regards third persons, before it becomes known to
them.
In the instant case, Vijay was appointed by Ajay to sell his electronic goods and
for which Vijay will be given 10% commission on the sale price. Subsequently,
Ajay revokes Vijay’s authority by sending the letter to Vijay on 3rd March which
was received by Vijay on 7th March. But on 5th March, Vijay already sold the goods
worth ` 1,20,000. He claimed for commission from Ajay, but Ajay refused.

Since, Vijay came to know about revocation of agency after selling the goods, and so
therefore, he has right to claim the commission from Ajay.
85. Explain the concept of Quantum Meruit with reference to the Indian Contract Act, 1872.
Under what circumstances can a party claim compensation under this doctrine?

Answer:
Quantum Meruit: Where one person has rendered service to another in circumstances
which indicate an understanding between them that it is to be paid for although no
particular remuneration has been fixed, the law will infer a promise to pay. Quantum
Meruit i.e. as much as the party doing the service has deserved. It covers a case where
the party injured by the breach had at the time of the breach done part but not all of the
work which he is bound to do under the contract and seeks to be compensated for the
value of the work done. For the application of this doctrine, two conditions must be
fulfilled:
It is only available if the original contract has been discharged. 25

The claim must be brought by a party not in default.

The object of allowing a claim on quantum meruit is to recompensate the party or
person for value of work which he has done. Damages are compensatory in nature while
 quantum merit is restitutory. It is but reasonable compensation awarded on implication
of a contract to remunerate.
The claim for quantum meruit arises in the following cases:
SUGGESTED ANSWER
(a) When an agreement is discovered to be void or when a contract becomes void.
(b) When something is done without any intention to do so gratuitously.
(c) Where there is an express or implied contract to render services but there is no
agreement as to remuneration.
(d) When one party abandons or refuses to perform the contract.
(e) Where a contract is divisible and the party not in default has enjoyed the benefit
of part performance.
(f) When an indivisible contract for a lump sum is completely performed but badly
the person who has performed the contract can claim the lump sum, but the other
party can make a deduction for bad work.

86. Define co-sureties. State the rights available to surety against the co-sureties
relating to contribution under the Indian Contract Act, 1872.

Answer:
Rights of Surety against co-sureties
“Co-sureties- When the same debt or duty is guaranteed by two or more persons,
such persons are called co-sureties”.
(a) Co-sureties liable to contribute equally (Section 146): Unless otherwise agreed,
each surety is liable to contribute equally for discharge of whole debt or part of the
debt remains unpaid by debtor.
(b) Liability of co-sureties bound in different sums (Section 147): The principal of
equal contribution is, however, subject to the maximum limit fixed by a surety to
his liability. Co-sureties who are bound in different sums are liable to pay equally as
far as the limits of their respective obligations permit.

88. Examine the validity of the following agreements under the provisions of the Indian
Contract Act, 1872 and justify your answer:
i. Mrs. Priya pays a sum of ` 10,000 to a marriage bureau to provide information
about the prospective grooms for her daughter's marriage.
ii. Bharat agrees with John to sell his white bull. Unknown to both the parties, the
bull was dead at the time of agreement.
iii. Rishabh sells the goodwill of his shop to Omkar for ` 10,00,000 and promises not
to carry on such similar business within the local limits so long as Omkar carries
on like business. 26
iv. A property worth ` 2,00,000 was agreed to be sold for just ` 25,000 by a
person of unsound mind.

Answer:
 (i) Under Section 10 of the Indian Contract Act, 1872, a valid contract requires free
consent, lawful consideration, and a lawful object.
In the instant case, the agreement to pay ` 10,000 in exchange for a service (providing
information about prospective
SUGGESTED ANSWER grooms) is lawful.
Hence, the agreement is valid.

(ii) According to section 20, where both the parties to an agreement are under a mistake
as to a matter of fact essential to the agreement, there is a bilateral mistake. In such a case,
the agreement is void.
In the instant case, the bull's death (unknown to both parties) constitutes a bilateral
mistake regarding the subject matter of the contract.
Hence, the agreement is void.

(iii) Under Section 27, agreements in restraint of trade are void. However, an exception
is provided for contracts involving the sale of goodwill. The local limits within which the
seller of the goodwill agrees not to carry on similar business must be reasonable.
In the instant case, the restriction is limited to the local area and does not extend
indefinitely. Hence, the agreement is valid.

(iv) According to section 12, a contract by a person who is not of sound mind is void.
In the instant case, a property worth ` 2,00,000 was agreed to be sold for just ` 25,000 by
a person of unsound mind.
Hence, the agreement is void.

89. What are the agreements which are held to be opposed to public policy under the Indian
Contract Act, 1872. Explain any 6 such agreements.

Answer:

Some of the agreements which are held to be opposed to public policy are-
(1) Trading with enemy: Any trade with person owing allegiance to a Government at
war with India without the licence of the Government of India is void, as the object is
opposed to public policy. Here, the agreement to trade offends against the public policy
by tending to prejudice the interest of the State in times of war.
(2) Stifling Prosecution: An agreement to stifle prosecution i.e. “an agreement to present
proceedings already instituted from running their normal course using force” tends to be
a perversion or an abuse of justice; therefore, such an agreement is void. The principle is
that one should not make a trade of felony. The compromise of any public offence is
generally illegal.
Under the Indian Criminal Procedure Code, there is, however, a statutory list of
compoundable offences and an agreement to drop proceeding relating to such offences
with or without the permission of the Court, as the case may be, in consideration the
accused promising to do something for the complainant, is not opposed to public policy.
(3) Maintenance and Champerty: Maintenance is an agreement in which a person
promises to maintain suit in which he has no interest.
Champerty is an agreement in which a person agrees to assist another in litigation 27 in-
exchange of a promise to hand over a portion of the proceeds of the action.
(a) It is unreasonable so as to be unjust to other party or
(b) It is made by a malicious motive like that of gambling in litigation or oppressing other
party by encouraging unrighteous suits and not with the bonafide object of assisting a
claim believed to be just.
(4) Trafficking relating
SUGGESTED to Public Offices and titles: An agreement to trafficking in
ANSWER
public office is opposed to public policy, as it interferes with the appointment of a person
best qualified for the service of the public. Public policy requires that there should be no
money consideration for the appointment to an office in which the public is interested.
The following are the examples of agreements that are void; since they are tantamount to
sale of public offices.
(1) An agreement to pay money to a public servant in order to induce him to retire from
his office so that another person may secure the appointment is void.
(2) An agreement to procure a public recognition like Padma Vibhushan for reward is
void.
(5) Agreements tending to create monopolies: Agreements having for their object the
establishment of monopolies are opposed to public policy and therefore void.
(6) Marriage brokerage agreements: An agreement to negotiate marriage for reward,
which is known as a marriage brokerage contract, is void, as it is opposed to public
policy.
(7) Interference with the course of justice: An agreement whose object is to induce any
judicial officer of the State to act partially or corruptly is void, as it is opposed to public
policy.
(8) Interest against obligation: The following are examples of agreement that are void
as they tend to create an interest against obligation. The object of such agreements is
opposed to public policy.
(1) An agreement by an agent to receive without his principal’s consent compensation
from another for the performance of his agency is invalid.
(2) A, who is the manager of a firm, agrees to pass a contract to X if X pays to A ` 200,000
privately; the agreement is void.
(9) Consideration Unlawful in Part: By virtue of Section 24, if any part of a single
consideration for one or more objects, or any one or any part of any one of several
considerations for a single object, is unlawful, the agreement is void.”
This section is an obvious consequence of the general principle of Section 23. There is no
promise for a lawful consideration if there is anything illegal in a consideration which
must be taken as a whole. The general rule is that where the legal part of a contract can
be severed from the illegal part, the bad part may be rejected and the good one can be
retained. But where the illegal part cannot be severed, the contract is altogether void.

90. A, B and C jointly promised to pay D a sum of ` 6,000. Examine, considering the
provisions of the Indian Contract Act, 1872 -
(i) Can D compel any of three parties A, Band C to pay him ` 6,000?
(ii) C is compelled to pay the whole of the amount to D. Can he recover anything from A
and B, when -
(1) Both A and B were solvents.
(2) A is not in a position to pay anything.
28
Answer:
Section 42 of the Indian Contract Act, 1872 requires that when two or more persons have
made a joint promise, then, unless a contrary intention appears from the contract, all such
persons jointly must fulfil the promise. In the event of the death of any of them, his
 representative jointly with the survivors and in case of the death of all promisors, the
representatives of all jointly must fulfil the promise.

Section 43SUGGESTED
allows the ANSWER
promisee to seek performance from any of the joint promisors. The
liability of the joint promisors has thus been made not only joint but “joint and several”.
Section 43 provides that in the absence of express agreement to the contrary, the promisee
may compel any one or more of the joint promisors to perform the whole of the promise.
Section 43 deals with the contribution among joint promisors. The promisors, may
compel every joint promisor to contribute equally to the performance of the promise
(unless a contrary intention appears from the contract). If any one of the joint promisors
makes default in such contribution the remaining joint promisors must bear the loss
arising from such default in equal shares.

In the instant case,

(i) D can compel any of three parties A, B and C to pay him ` 6,000.
(ii) (1) C can recover the contribution from A and B because A, B and C are joint
promisors.
(2) A is unable to pay anything, C is compelled to pay the whole. C is entitled to receive
3,000 from B

91. What are the conditions to be satisfied for an "Agent's authority in an emergency"
under the provisions of The Indian Contract Act, 1872?

Answer:
Agent’s authority in an emergency [Section 189 of the Indian Contract Act, 1872]:
An agent has authority, in an emergency, to do all such acts for the purpose of protecting
his principal from loss as would be done by a person of ordinary prudence, in his own
case, under similar circumstances.

To constitute a valid agency in an emergency, following conditions must be satisfied:

i. Agent should not be in a position or have any opportunity to communicate
with his principal within the time available.
ii. There should have been actual and definite commercial necessity for the
agent to act promptly.
iii. the agent should have acted bonafide and for the benefit of the principal.
iv. the agent should have adopted the most reasonable and practicable course
under the circumstances, and
v. the agent must have been in possession of the goods belonging to his
principal and which are the subject of contract.

92. ABC Infrastructure Ltd. was running business successfully from several years. P
29
was the purchase manager of company. He authorized his agent Q to buy Raw
Material on his behalf for construction of Roads in Delhi. He instructed Q to buy only
Mazboot Brand of Cement @ ` 2,000 – 2,500 per ton to maintain quality of Roads in
Delhi. However, Q bought 1,000 tons of Mazboot Brand of cement from Mr. R a very
well-known vendor of ABC Infrastructure Ltd. @ `3,500/- per ton. Mr. Q has not
 disclosed the fact to R that he was buying cement for ABC Infrastructure Ltd. When
P discovered this aspect, he refused to pay Mr. R and rejects the cement bought by
Q on the ground that Q has exceeded the authority. Mr. R suffered a huge loss on
account ofSUGGESTED
this transaction.
ANSWER Give your opinion in accordance with provisions from the
Indian Contract Act, 1872:
a. Whether P was bound to pay Mr. R for cement purchased by his agent Mr. Q?
b. On the other hand, Q being agent refused to accept any liability to compensate R.
In this situation, Whether Mr. R can file a suit against Q?

Answer:
Principal’s liability when agent exceeds authority [Section 227 of the Indian
Contract Act, 1872]: When an agent does more than he is authorised to do, and when
the part of what he does, which is within his authority, can be separated from the part
which is beyond his authority, so much only of what he does as is within his authority
is binding as between him and his principal.
Principal not bound when excess of agent’s authority is not separable [Section
228]: Where an agent does more than he is authorized to do, and what he does
beyond the scope of his authority cannot be separated from what is within it, the
principal is not bound to recognize the transaction.
When the agent exceeds his authority, misleads the third person in believing that the
agent has the requisite authority in doing the act, then the agent can be made liable
personally for the breach of warranty of authority.
When the agent does not disclose the name of the principal then there arises a
presumption that he himself undertakes to be personally liable.
In the instant case, Q violated the instructions of P by buying cement at
Q did not disclose to R that he was buying cement for ABC Infrastructure Ltd.
Therefore, the answers are
(i) No, P was not bound to pay Mr. R, as the agent Q exceeded his authority, and the
deviation was inseparable from the authorized act.
(ii) Yes, Mr. R can file a suit against Q, as Q is personally liable for the contract made
without disclosing about the ABC Infrastructure Ltd. and exceeding the authority
given by the principal.

93. According to provisions of the Indian Contract Act, 1872, define the following terms
with reference to contract of guarantee:
a. Nature and extent of Surety's Liability
b. Discharge of a Contract of Surety by Invalidation of the Contract of Guarantee.

Answer: 30

(i) Nature and extent of Surety’s Liability [Section 128 of the Indian Contract Act,
1872]
A. The liability of the surety is co-extensive with that of the principal debtor unless
 it is otherwise provided by the contract.
B. Liability of surety is of secondary nature as he is liable only on default of
principal debtor.
SUGGESTED ANSWER
C. Where a debtor cannot be held liable on account of any defect in the document,
the liability of the surety also ceases.
D. A creditor may choose to proceed against a surety first, unless there is an
agreement to the contrary.

(ii) Discharge of a contract of Surety by the invalidation of the contract of guarantee.

(a) Guarantee obtained by misrepresentation [Section 142]: Any guarantee which has
been obtained by means of misrepresentation made by the creditor, or with his
knowledge and assent, concerning a material part of the transaction, is invalid.
(b) Guarantee obtained by concealment [Section 143]: Any guarantee which the
creditor has obtained by means of keeping silence as to material circumstances is
invalid.
(c) Guarantee on contract that creditor shall not act on it until co-surety joins
(Section 144): Where a person gives a guarantee upon a contract that the creditor
shall not act upon it until another person has joined in it as co-surety, the guarantee
is not valid if that other person does not join.

94. X was running a business of Car on lease. One fine day, Y came to hire a car for
10 days for his business tour from Delhi to Amritsar. X offered him a Honda city for `
50,000/- for 10 days on a condition that petrol and toll expenses will be borne by him.
During the journey, engine of car was choked. Y has to spend ` 10,000/- for repair
of engine. When he was coming back from Amritsar, brakes of car were not working
and a major accident of Y happened due to this. Y was admitted to hospital and paid
a bill of ` 50,000 on recovery. Y asked X to compensate him charges for car repair and
hospital expenses amounting ` 60,000/-. X denied for compensation by saying that he
was not aware about the engine and brakes fault. Y filed a suit against X for recovery
of damages. Give your opinion with reference to provisions of the Indian Contract
Act, 1872:

a. Whether Y can with held the amount of hire charges ` 50,000/- on account of non-
payment of damages?
b. Whether Mr. X was liable to pay Damage as he was not aware of the fact of faults
in car?

Answer:
Bailment: As per Section 148 of the Indian Contract Act, 1872, bailment is31the
delivery of goods by one person to another for some purpose, upon a contract, that the
goods shall, when the purpose is accomplished, be returned or otherwise disposed of
according to the directions of the person delivering them.
 Bailor’s duty to disclose faults in goods bailed in case of non- gratuitous bailment
(Section 150): If the goods are bailed for hire, the bailor is responsible for such
damage, whether he was or was not aware of the existence of such faults in the goods
bailed. SUGGESTED ANSWER
Duty to pay necessary expenses in case of non-gratuitous bailment [Section 158]:
The bailor is liable to pay the extraordinary expenses incurred by the bailee.
Bailor’s responsibility to indemnify losses [Section 164]: It is the duty of bailor
to indemnify all the losses and expenses, which bailee has to pay on account of defective
goods.
In the instant case, Y took a car on lease from X for 10 days for ` 50,000. During the
journey, Y has to spend ` 10,000 for repair of engine and paid
50,000 for hospital expenses due to accident because of fault in brakes of car. These
are the extraordinary expenses and losses and it is the bailor’s duty to bear such
expenses and losses.
Therefore, the answers are:
(i) Y can withhold the hire charges of ` 50,000 on account of non- payment of
damages and claim an additional `10,000, from X.

(ii) X is liable for the full ` 60,000 (`10,000 repair + ` 50,000 hospital) as it is the
bailor’s duty to supply a car fit for the purpose for which it was hired.

95. (i) Give your opinion with reference to provisions of the Indian Contract Act, 1872:
a. Whether Joint promisor and promisee voluntary discharge their obligation even
after death?
b. In case they won't be able to discharge their obligation, whether any of the joint
promisor may be compelled?
c. What would be the situation in case of default by any one of them?
What are the effects of Coercion? "Whether threat to commit suicide is coercion"?
Elaborate with reference to provisions of the Indian Contract Act, 1872.

Answer:
(i) According to section 42 of the Indian Contract Act, 1872, if two or more persons
have made a joint promise, ordinarily all of them during their life-time must jointly
fulfil the promise. After death of any one of them, his legal representative jointly
with the survivor or survivors should do so. After the death of the last
Survivor the legal representatives of all the original co-promisors must fulfil the
promise.
Hence, the legal representative can jointly discharge the obligations of joint promisor
and promisee, after their death.
32
As per section 43, each of two or more joint promisors may compel every other
joint promisor to contribute equally with himself to the performance of the promise,
unless a contrary intention appears from the contract.
Hence, the joint promisor may be compelled.
 If any one of two or more joint promisors makes default in such contribution, the
remaining joint promisors must bear the loss arising from such default in equal shares

SUGGESTED ANSWER
Effects of coercion under section 19 of the Indian Contract Act, 1872
(i) Contract induced by coercion is voidable at the option of the party whose consent
was so obtained.
(ii) A person to whom money has been paid or anything delivered under coercion must
repay or return it.
Threat to commit suicide – Whether it is coercion?
Suicide though forbidden by Indian Penal Code is not punishable, as a dead man
cannot be punished. But Section 15 declares that committing or threatening to commit
any act forbidden by Indian Penal Code is coercion. Hence, a threat to commit suicide
will be regarded as coercion.

96. (I) With reference to provisions of the Indian Contract Act, 1872 define the
following terms:
a. Quasi-contracts and its salient features
b. Responsibility of finder of goods
(II) Explain the following terms with reference to the Indian Contract Act, 1872:
c. Pledge by mercantile agent
Pledge by person in possession under voidable contract
Answer:
(i) Quasi- Contracts: A quasi-contract is not an actual contract, but it resembles a
contract. It is created by law under certain circumstances. The law creates and enforces
legal rights and obligations when no real contract exists. Such obligations are known
as quasi-contracts. In other words, it is a contract in which there is no intention on part of
either party to make a contract but law imposes a contract upon the parties. Salient
features of quasi contracts:
(a) In the first place, such a right is always a right to money and generally, though not
always, to a liquidated sum of money.
(b) Secondly, it does not arise from any agreement of the parties concerned, but is imposed
by the law; and
(c) Thirdly, it is a right which is available not against all the world, but against a
particular person or persons only, so that in this respect it resembles a contractual right.
(ii) Responsibility of finder of goods
As per section 71 of the Indian Contract Act, 1872, ‘A person who finds goods
belonging to another and takes them into his custody is subject to same responsibility
as if he were a bailee’.
33
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
 I) Pledge by mercantile agent: According to section 178 of the Indian Contract Act,
1872, a mercantile agent, who is in the possession of goods or document of title, with
the consent of owner, can pledge them while acting in the ordinary course of business
as a Mercantile Agent.
SUGGESTED ANSWER
Such Pledge shall be valid as if were made with the authority of the owner of goods.
Provided, Pawnee acted in good faith and had no notice that Pawnor has no authority
to pledge.
ii) Pledge by person in possession under voidable contract
According to section 178A of the Indian Contract Act, 1872, When the pawnor has
obtained possession of the goods pledged by him under a contract voidable under
section 19 or section 19A (contracts where consent has been obtained by fraud,
coercion, misrepresentation, undue influence), but the contract has not been rescinded
at the time.

97. (i) MR. L let out his residential house to Mr. M for ` 50,000 p.m. for a period of
one year. According to the Rent agreement, electricity bill will be paid by Mr. L.
But Mr. L could not pay electricity dues up to 5 months, due to his financial
hardships. The Electricity Board sent the notice of disconnection, if it is not paid
within a week's time. To avoid all this, Mr. M paid the electricity bill of ` 50,000
with penalty. Later on, L refused to reimburse ` 50,000 and argued that he has paid bill
voluntarily because of his own interest. Decide with reference to provisions of the
Indian Contract Act, 1872 whether Mr. M is entitled to be reimbursed by Mr. L?

(ii)Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 12.02.2024. A

promised B that he would keep the offer open till 15.02.2024. However, on 13.02.2024,
he sold those chairs to Mr. C @
1,700 per chair without the knowledge of B. Mr. B communicated the acceptance of the
above offer on 14.02.2024. Advise, with reference to provisions of the Indian Contract
Act, 1872 whether Mr. B can claim damages from Mr. A?
a. Mr. A was running an orphanage. His friend Mr. S, a philanthropist agreed to
donate ` 2 lakh for treatment of a child, who was suffering from cancer. On
emergency, Mr. A incurred ` 1.5 lakh on treatment of child. Now, Mr. S refused
to pay. Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to
provisions of the Indian Contract Act, 1872?

Answer:
(i) According to Section 69 of the Indian Contract Act, 1872, a person who is interested
in the payment of money which another is bound by law to pay, and who therefore pays
it, is entitled to be reimbursed by the other.
In the instant case, Mr. M paid the electricity bill to avoid the disconnection that 34was
pending due to Mr. L's failure to fulfil his contractual obligation. Hence, Mr. M
is entitled to be reimbursed
₹ 50,000 from Mr. L.
(ii) In terms of Section 5 of the Indian Contract Act, 1872, a proposal can be revoked
 at any time before the communication of its acceptance is complete as against the
proposer.
Accordingly, an offer may be revoked by the offeror before its acceptance, even
SUGGESTED ANSWER
though he had originally agreed to hold it open for a definite period of time. So
long as it is a mere offer, it can be withdrawn whenever the offeror desires.
In the instant case, B cannot claim damages from A because the offer made by A is
a mere offer and it can be withdrawn whenever A desires.
(iii) The general rule is that an agreement made without consideration is void (Section 25
of the Indian Contract Act, 1872).
However, in the following case, the agreement though made without consideration,
will be valid and enforceable.
Charity: If a promisee undertakes the liability on the promise of the person to
contribute to charity, there the contract shall be valid.
In the instant case, Mr. A can claim 1.5 lakh from Mr. S.

98. (i) In case of breach of contract, the court may award compensation or damages. Explain
the circumstances when court may award ordinary damages, special damages and
liquidated damages under the provisions of the Indian Contract Act, 1872.
(ii) What are the conditions need to be fulfilled to make the following agreements valid
without consideration as per the provisions of the Indian Contract Act, 1872?
(A) Agreement made based on natural love and affection
(B) Promise to pay time-barred debts

Answer:
(i) Ordinary damages: When a contract has been broken, the party who suffers by
such breach is entitled to receive, from the party who has broken the contract,
compensation for any loss or damage cause to him thereby, which naturally arose in the
usual course of things from such breach, or which the parties know, when they made the
contract, to be likely to result from the breach of it.
Special damages: Where a party to a contract receives a notice of special circumstances
affecting the contract, he will be liable not only for damages arising naturally and
directly from the breach but also for special damages.
Liquidated damage is a genuine pre-estimate of compensation of damages for certain
anticipated breach of contract. This estimate is agreed to between parties to avoid at a
later date detailed calculation and the necessity to convince outside parties.
(ii) (A) Agreement made based on natural love and affection: Conditions to be fulfilled
under section 25(1) of the Indian Contract Act, 1872
(i) It must be made out of natural love and affection between the parties.
(ii) Parties must stand in near relationship to each other. 35

(iii) It must be in writing.

(iv) It must also be registered under the law.
A written and registered agreement based on natural love and affection between the
 parties standing in near relation (e.g., husband and wife) to each other is --enforceable
even without consideration.

SUGGESTED ANSWER

99. (i) Raghav found gold and diamond studded wristwatch value approximately `
1,00,000/- on the roadside. He picked it up and then advertised in the newspaper that the
true owner thereof can take the watch after showing proper evidence. After waiting
for a certain period of time, when the true owner did not tum up, he gifted that
wristwatch to his son Mahesh. A few days later, Madhav, the true owner of watch,
somehow noticed his watch on wrist of Mahesh. He approached him to collect the same,
but Mahesh refused. In the evening, Raghav called Madhav and told him that he incurred
f 20,000 to find the true owner if he fails to reimburse him the lawful expenses
incurred on finding out the true owner, he will sue him for recovery thereof or retain
the possession of the watch with him till recovery. Even he can sell the watch for
recovery of expenses. Advise whether the following actions of Raghav were lawful
according to provisions of The Indian Contract Act, 1872:
a. Gifting the wristwatch to his son.
b. Warning Madhav to sue for recovery of lawful expenses incurred in finding true owner.
c. Retaining the possession of wristwatch till recovery of lawful expenses.
d. Selling of wristwatch for recovery of expenses.
(ii) Woollen Garments Limited entered into a contract with a group of women in July,
2023 to supply various woollen clothes for men, women and kids like sweaters,
monkey caps, mufflers; woollen coats, hand gloves etc. before the commencement of
the winter season. The agreement expressly provides that the woollen clothes shall be
supplied by the end of October, 2023 before starting of winter season. However, due
to the prolonged strike, women group could tender the supplies in March, 2024 when
the winter season was almost over. Analysing the
situation and answer the following questions in light of the provisions of the Indian
Contract Act, 1872:
(A) Whether company can reject the total supply by women group?
(B) Whether company can accept the total supply on request of women group?

Answer:
(i) Responsibility of finder of goods (Section 71 of the Indian Contract Act, 1872):
A person who finds goods belonging to another and takes them into his custody is subject
to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and 36
(iii) to restore the goods if the owner is found.
The right of finder of lost goods- may sue for specific reward offered [Section 168]:
The finder of goods has no right to sue the owner for compensation for trouble and
expense voluntarily incurred by him in finding the owner and preserving the goods
 found. But he has a right to retain the goods against the owner until he receives
such compensation.
When finder of thing
SUGGESTED commonly on sale may sell it [Section 169]: When a thing
ANSWER
which is commonly the subject of sale if lost, if the owner cannot with reasonable
diligence be found, or if he refuses, upon demand, to pay the lawful charges of the
finder, the finder may sell it—
(1) when the thing is in danger of perishing or of losing the greater part of its value, or
(2) when the lawful charges of the finder in respect of the thing found amount to
two-thirds of its value.
Hence, the answers are:
(A) Gifting the wristwatch to his son Mahesh is unlawful. Raghav had no ownership
rights over the watch and could not legally transfer it to someone else.
(B) Warning Madhav to Sue for Recovery of Lawful Expenses: Raghav has no right to
sue Madhav for the expenses voluntarily incurred by Raghav in finding the owner.
(C) Retaining Possession of the Wristwatch Until Recovery of Lawful Expenses:
Raghav’s action of retaining the wristwatch until Madhav reimburses him for lawful
expenses is valid.
(D) Selling of Wristwatch for Recovery of Expenses: the watch is not perishable, and
the expenses claimed (₹ 20,000) are far below two-thirds of the value of the watch (₹
1,00,000). Therefore, Raghav does not have the right to sell the watch under these
circumstances, and selling the watch would be unlawful.

(ii) According to section 55 of the Indian Contract Act, 1872, when a party to a contract
promises to do certain thing at or before the 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 essence of the contract.

Effect of acceptance of performance at time other than agreed upon -

If, in case of a contract voidable on account of the promisor’s failure to perform his
promise at the time agreed, the promisee accepts performance of such promise at any
time other than agreed, the promisee cannot claim compensation for any loss occasioned
by the non-performance of the promise at the time agreed, unless, at the time of
acceptance, he gives notice to the promisor of his intention to do so.
In the instant case,
(A) Woollen Garments Limited is legally entitled to reject the goods due to the failure
to meet the delivery deadline, as time was a crucial term of the contract.
(B) The company cannot accept the total supply on the request of woman group but only
when the company i.e. buyer elects to do so. In that case, the company cannot claim
compensation for any loss occasioned by the non-performance of the promise (i.e.
delay in supply) at the time agreed. 37
 100. In accordance with the provisions of the Indian Contract Act, 1872, answer
The following
(i) Rights of Bailor against
SUGGESTED ANSWERany wrong doer (Third Party)
(ii) Duties of the Pawnee

Answer:
(i) Suit by bailor & bailee against wrong doers [Section 180 of the Indian Contract
Act, 1872]: If a third person wrongfully deprives the bailee of the use or possession of
the goods bailed, or does them any injury, the bailee is entitled to use such remedies as
the owner might have used in the like case if no bailment had been made; and either the
bailor or the bailee may bring a suit against a third person for such deprivation or injury.
(ii) Duties of the Pawnee
Pawnee has the following duties:
1. Duty to take reasonable care of the pledged goods.
2. Duty not to make unauthorized use of pledged goods.
3. Duty to return the goods when the debt has been repaid or the promise has been
performed.
4. Duty not to mix his own goods with goods pledged.
5. Duty not to do any act which is inconsistent with the terms of the pledge.
6. Duty to return accretion to the goods, if any.

38