University of Dhaka

Department of Accounting & Information Systems

Master of Professional Accounting (MPA) Program

Assignment No 01
Assignment on “Contract Act 1872”
Course “Corporate and Business Law”
Course Code “MPA 603”

Submitted To:
Professor Ms. Sadia Afroze
Department of Accounting & Information Systems
Master of Professional Accounting (MPA) Program

Submitted By:
Mohammad Aminul Islam Rubel
ID: MPA20011002
Program: Master of Professional Accounting ( MPA)
Department: Accounting
aminul.rubel995@gmail.com
Mob:01684317554, 01713239218

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Q-1. State, in brief, the grounds on the basis of which a contract is discharged under
the provisions of the Bangladesh Contract Act, 1872

Answer to the Question No 1

A contract creates certain obligations on one or all parties involved. The discharge of a
contract happens when these obligations come to an end. There are many ways in which a
contract is discharged. In this article it will look at various such scenarios under the
provisions of the Bangladesh Contract Act, 1872.

(a) Discharge by Performance:

When the parties to a contract fulfill the obligations arising under the contract within the
time and manner prescribed, then the contract is discharged by performance.
Example: “A” agrees to sell his cycle to “B” for an amount of Tk 12,000 to be paid by “B”
on the delivery of the cycle. While the cycle is delivered, “B” pays the promised amount.
Since both the parties to the contract fulfill their obligation arising under the contract, then it
is discharged by performance. Now, discharge by the performance of a contract can be by:

I. Actual performance
II. Attempted performance

As shown in the example above, actual performance is when all the parties to a contract do
what they had agreed for under the contract. On the other hand, it is possible that when the
promisor attempts to perform his promise, the promisee refuses to accept it. In such cases, it
is called attempted performance or tender

(b) Discharge by Mutual Agreement

If all parties to a contract mutually agree to replace the contract with a new one or annul or
remit or alter it, then it leads to a discharge of the original contract due to a mutual
agreement.
Example:
A owes Tk. 100,000 to B and agrees to repay it within one year. They document the debt
under a contract. Subsequently, he loses his job and requests B to accept Tk. 75,000 as a
final settlement of the Loan. B agrees and they make a contract to that effect. This
discharges the original contract due to mutual consent.

(c) Discharge by the Subsequent or supervening Impossibility of Performance:

If it is impossible for any of the parties to the contract to perform their obligations, then the
impossibility of performance leads to a discharge of the contract.

Pre- contractual Impossibility:If the impossibility exists from the start, and creates no
rights and obligations, then it is Pre- contractual Impossibility

Post contractual Impossibility: However, the impossibility might also arise later due to:

An unforeseen change in the law:

Destruction of the subject-matter essential to the performance:

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Failure of Pre- conditions: When a contract is entered into on the basis of the continued
existence of a certain state of things, the contract is discharged if the state of things changes
Examples: A &: B contract to marry each other. Before the time fixed for the marriage, A
goes mad. The contract becomes void.

A declaration of war: A contract entered into during war with an alien enemy is void
abinitio. A contract entered into before the war commenced between citizens of countries
subsequently at war, remains suspended during the pendency of the war. After the termination
of the war, the contract revives and may be enforced.

Death or Incapacity for personal services: Where the personal qualification of a party is
the basis of the contract the contract is discharged in cases of death or personal incapacity.
Example: A enters into a contract with B to marry his sister C within one year. However, A
meets with an accident and becomes insane. The impossibility of performance leads to a
discharge of the contract.

(d) Discharge of a Contract by Lapse of Time:

The Limitation Act 1963 prescribes a specified period for performance of a contract. If the
promisor fails to perform and the promisee fails to take action within this specified period,
then the latter cannot seek remedy through law. It discharges the contract due to the lapse of
time.

Example: “A” takes a loan from “B” and agrees to pay installments every month for the
next five years. However, he does not pay even a single installment. “B” calls him a few
times but then gets busy and takes no action. Three years later, he approaches the court to
help him recover his money. However, the court rejects his suit since he has crossed the
time-limit of three years to recover his debts.

(e) Discharge of a Contract by Operation of Law:

A contract can be discharged by operation of law which includes insolvency or death of the
promisor.

(f) Discharge by Breach of Contract:

If a party to a contract fails to perform his obligation according to the time and place
specified, then he is said to have committed a breach of contract. Also, if a party repudiates
a contract before the agreed time of performance of a contract, then he is said to have
committed an anticipatory breach of contract.
In both cases, the breach discharges the contract. In the case of:

➢ An actual breach, the promisee retains his right of action for damages.
➢ A anticipatory breach of contract, the promisee cannot file a suit for damages. It also
discharges the promisor from performing his part of the contract.

(g) Discharge of a Contract by Remission:

A promisee can waive or remit the performance of promise of a contract, wholly or in part.
He can also extend the time agreed for the performance of the same.
In example 3 above, “A” only repays a part of the money he owes to “B”. However, J”B”
agrees to accept it as a final settlement of the debt. B’s act of remission discharges the
contract.

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(h) Discharge by Non-Provisioning of Facilities:
In many contracts, the promisee agrees to offer reasonable facilities to the promisor for the
performance of the contract. If the promisee fails to do so, then the promisor is discharged of
all liabilities arising due to non-performance of the contract.
Example: “A” agrees to fix “B”’s garage floor provided he keeps his car out for at least 6
hours. “A” approaches him a few times but “B” is reluctant to get his car out. “B” fails to
provide reasonable facilities to Peter (an empty floor). This discharges him of all obligations
arising under the contract.

(i) Discharge of a Contract due to the Merger of Rights:

In some situations, it is possible that inferior and superior right coincides in the same person.
In such cases, both the rights combine leading to a discharge of the contract governing the
inferior rights.

Example: “A” rents “B”’s apartment for two years. One year into the contract, he offers to
buy the property from “B”, who agrees. The enter a sale contract and Peter becomes the
owner of the apartment. Here Peter has two rights; one accorded by the lease agreement
making him the renter and second by the sale agreement making him the owner. The former
being an inferior right merges with the superior one and discharges the lease contract.

Q-2. What do you understand by the term 'Consideration'? Are there any
circumstances under which a contract, under the provisions of the Bangladesh
Contract Act, 1872, without consideration is valid? Explain

Answer to the Question No 2

The term 'Consideration: The term consideration which is the benefit of the contract for
one party (say, receiving money) is the burden of the other (say, paying money)
Subject to certain exceptions, an agreement is not enforceable unless each party to the
agreement gets something. This "something" is called consideration.’

Section 2( d) of the Contract Act defines consideration as follows: "When at the desire of the
promisor, the promisee or any other person has done or abstained (from doing, or does or
abstains from doing, or promises to do or to abstain from doing something. Such act or
abstinence or promise is called a consideration for the promise.“
Example: A agrees to sell a Cycle to B for Tk. 15,000. For A’s promise, the consideration is
Tk. 15,000 For B's promise, the consideration is the Cycle
There are three types of Considerations

1. Past consideration: When the consideration of one party was given before
the date of the promise, it is said to be past.
2. Present consideration : Consideration which moves simultaneously with the
promise is called Present Consideration
3. Future consideration: When the consideration is to move at a future date, it is
called Future Consideration or Thus a promise to pay
money at a future date for goods to be delivered at a
future date is a valid contract.eg online delivery service

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A contract is valid without consideration (exceptions):

Consideration is essential for validity of a contract. A promise without consideration cannot create a
legal obligation. So consideration is essential for a contract Therefore as exceptions there are some
circumstances, under the provisions of the Bangladesh Contract Act, 1872, A contract without
consideration is valid which are explain as follow

There are some exceptional circumstances a contract is enforceable even though there is no
consideration. They are as follows:

Natural love and affection:

An agreement made without consideration is valid, if
(1) it is expressed in writing and registered under the law for the time being in force for the
registration of [documents], and is made on account of natural love and affection between
parties standing in a near relation to each other; or

(2) In order to rely upon 25(1), the existence of the factor of natural love and affection
between parties standing in a near relation to each other is a condition precedent-Sec 25( I) .
An agreement without consideration is valid under Section 25 (1) only if the following
requirements are complied with :

➢ The agreement is made by a written document.

➢ The document is registered according to the law relating to registration in force at the
time.
➢ The agreement is made on account of natural love and affection.
➢ The parties to the agreement stand in a near relation to each other.

Examples:

I. ‘A’ for natural love and affection, promises to give his son B. Tk.1000. A puts his
promise to B in writing and registers it. This is a contract.
II. In the case of Rajlukhy Dabee v. Bhootnath Mookerjee, the defendant promised to
pay his wife a certain amount every month as maintenance. The promise was made
in writing and the quarrels the husband and wife had were also mentioned. A case
was filed to recover the amount promised to be paid as maintenance. However, the
judge decided in favour of the defendant as although the two were in a near relation,
the court held that there was no natural love and affection between them.

Voluntary Compensation:

➢ A promise made without any consideration is valid if, "it is a promise to compensate
wholly or in part , a person who has already voluntarily done something for the
promisor, or something which the promisor was legally compellable to do “Sec.
25(2).
➢ Section 25(2) applies when there is a "Voluntary act by one party and there is a
subsequent promise (by the party benefited) to pay compensation to the former.

Example:D finds 8's purse and gives it to him. B promises to give Tk.50. This is a
contract

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Time-barred debt:
A promise to pay, wholly or in part, a debt which is barred by the law of limitation can be
enforced if the promise is in writing and is signed by the debtor or his authorized agent.-Sec.
25(3).
➢ A debt barred by limitation cannot be recovered. Therefore a promise to repay such a
debt is, strictly speaking, without any consideration can be enforced if the debtor or
his authorized agent makes written and signed promise to repay it.
➢ D owes B Tk.1000 but the debt is barred by the Limitation Act. Now, D signs a
written promise to pay B Tk.500 on account of the debt. This is a contract

Agency: No consideration is required to create an agency.- Sec. 185

Completed gift: The rule "no consideration, no contract“ does not apply to completed gifts.

Q-3. Explain what is meant by "Supervening Impossibility" as per the Indian Contract
Act, 1872 and also state the situations which would not constitute grounds of
impossibility.

Answer to the Question No 3

This doctrine constitutes the Indian Contract Act,1872, as Section 56 (Agreement to do

impossible act).

It speaks about two impossibilities i.e. Initial impossibility and Subsequent Impossibility.
Initial impossibility under girds the fundamental proposition that ‘’An agreement to do
something that is intrinsically impossible is void’’.
For example, an agreement to bring a person back to life who is dead, being impossible of
performance, is void.

Subsequent Impossibility as the term suggests something that happens later, i.e. after the
parties have got into a contract. Sometimes, it happens that at the time when the contract
was constructed, the performance of the contract wasn’t an issue, but subsequently, because
of the change in circumstances or factors, the performance becomes impossible or unlawful.
An example here would be where a contract is made for the import of goods, and the import
is thereafter forbidden by a Government Order.

Impossibility of performance is as a rule, not an excuse for non-performance of a contract

Section 56, of the contract Act; deals with the impossibility of performance. “An agreement
to do an act impossible in itself is void”

Impossibility of performance is, as a rule not an excuse for non-performance of a contract.

In the following cases, a contract is not discharged on the ground of supervening
impossibility or “Doctrine of supervening impossibility” does not apply.

1. Difficulty of performance: A contract is not discharged merely because that it has

become more difficult of performance due to some uncontemplated events or delays.
2. Commercial impossibility: A contract is not discharged merely because expectation of
higher profits is not realized, or the necessary raw material is available at a higher price
because of the outbreak of war, or there is a sudden depreciation of currency. Thus,
performance cannot be excused on the ground of commercial impossibility.

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3. Default of third person: when a contract could not be performed because of the default
of a third person on whole work the promisor relied in such a case impossibility of
performance cannot be excused. Thus it is not discharged.

4. Strikes, lock outs, and civil disturbances: A contract is not discharged by reason of
strike by the workers, or outbreak of some civil disturbances interrupting the performance of
promise. However, the parties to a contract may agree to the contrary by making an express
provision in this regard.

5. Failure of one of the object: if a contract is made for fulfillment of several objects, the
failure of one or more of them does not discharge the contract.

To be valid, impossibility must be legal or physical; it cannot be due to circumstances or

ability. Difficulty of performance due to unforeseen or extreme cost or lack of capacity to
perform does not constitute impossibility, and does not relieve a party from their obligation
to fulfill the contract.

Q.4. What circumstances are identified as quasi-contracts?

Answer to the Question No 4

A quasi contract is a retroactive arrangement between two parties who have no previous
obligations to one another. It is created by a judge to correct a circumstance in which one
party acquires something at the expense of the other.

When one person obtains a benefit at the expense of another and the circumstances are such
that he should equitably to pay for it the law will compel payment even though there
is no contract between the parties by which payment is promised.

➢ ‘Quasi’ means ‘almost’ or ‘apparently but not really’ or ‘as if it were’

➢ A quasi contract is a contract that exists by order of a court, not by
agreement of the parties
➢ In contracts consent of the contracting parties produces obligations.
➢ In quasi-contracts : no consent is required and the obligation arises from
the law or natural equity
➢ They are called quasi-contracts, because they bind the parties without being
contracts.
➢ Quasi-contract rests upon the equitable ‘doctrine of unjust enrichment’
which declares that a person shall not be allowed to enrich himself
unjustly at the expense of another.

Sections 68 to 72 deals with "certain relations resembling those created by contract"

under contract act, 1872

➢ Supply of necessaries (Sec 68): Necessaries: Includes articles without which an

individual cannot reasonably exist. According to sec 68 a minor is liable to pay out
of his property for ‘necessaries’ supplied to him or to anyone whom he is legally
bound to support. The significance of this is that it does not arise out of a contract.

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 The minor is not personally liable and ‘necessaries’ include food, clothing as well as
education, they also include watch bicycle etc.

Illustration:
A supplies B, lunatic with necessaries suitable to his condition of life. Is entitled to
be reimbursed from B’s property.

A minor studying at Cambridge was supplied with clothing, including eleven waist-
coats. He already had sufficient clothing with him. It was held that the waist-coats
were not necessary articles and so he was not liable to pay for them

➢ Section 69: Payment By A Interested Person

According to Sec 69 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. The essential elements center around [1] There must be a
person who is bound to make a payment by law. The person paying must himself not
be bound to pay. The payment should not be a voluntary one. The payment must be
made for the protection of one’s own interest

➢ Sec 70: OBLIGATION TO PAY FOR NON-GRATUITOUS Act

According to Sec 70 when a person lawfully does or delivers anything
for the other ,not intending to do so gratuitously, and the person derives any benefit
from it, he is liable to compensate, or restore the thing so done or delivered. Here
three conditions must satisfy
[1] The thing must have been done lawfully
[2] The person intending to do it must not have done it gratuitously
[3] The person must have derived benefit from the act

➢ Section 71 - Responsibility of finder of goods

According to Sec 71 a person who finds goods belonging to another and takes them
into his custody is subject to the same responsibility as the bailee is bound to take as
much care of the goods as a man of ordinary prudence would,

In addition to that he must make efforts to trace the owner and till the owner is found
out the property will vest with the finder, he can sell in case of

[1] goods are or perishable nature

[2] owner cannot be found out
[3] when owner refuses to pay for the lawful charges
[4] when the lawful charges amount to two thirds of thing

➢ Section 72 - Delivered By Mistake Or Coercion

A person to whom money has been paid, or anything delivered, by mistake or under
coercion, must repay or return it.’ Accordingly, if one party under a mistake pays to
another party money which is not due by contract or otherwise, that money must be
repaid. A and B jointly owe Tk.1,000 to C. A alone pays the amount to C and B not
knowing this fact, pays Tk1,000 over again to C. C is bound to repay to B.

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 A railway company refuses to deliver certain goods to the consignee except upon the
payment of an illegal charge for carriage. The consignee pays the sum charged in
order to obtain the goods. He is entitled to recover so much of the charge as was
illegally excessive

Q-5. In order that an offer may be made binding by acceptance, it must be made in
contemplation of legal consequences. Explain

Answer to the Question No 5

Law full offer, acceptance and consideration is the essential elements of a valid contract

Accepting an Offer to Form a Valid Contract. After an offer to enter into a contract has been
made, the other party must accept the offer before a contract is formed.

Most of the valid contracts must contain two elements: All parties must agree about an offer
made by one party and accepted by the other. Something of value must be exchanged for
something else of value, which is called consideration

Example: A offer to B " to buy his house for Tk 5,00,000. This is an offer. B agreed to buy
this house. The offer is accepted and a contract is formed.

The contract is made by the process of a lawful offer by one party and the lawful acceptance
of the offer. The contact is contemplation of legal consequences .This is a valid contract.

An unenforceable contract is one which is valid in itself but is not capable of being enforced
in a court of law
Example: A offer B to murder C. A will give Tk.100,000 for this. B accept the offer and
agreement Form accordingly.
Here all the essential elements like offer, acceptance and agreement are present but is not
contemplation of legal consequences It is an illegal agreement, which is against a law in force
in Bangladesh. So contract is void.

Q-6. A stranger to the consideration may sue on a contract but not a stranger to the
contract. Explain.

Answer to the Question No 6

A Stranger to Consideration:
While discussing second rule regarding consideration, we have seen that consideration may
be given by the promisee or by a third party. When consideration is given by a third party
then the promisee is called stranger to consideration. Under Indian Law, a stranger to
consideration can file a suit to enforce the promise.

A Stranger To Contract:
If a person is not a party to a contract, he is called a stranger to contract. This is a cardinal
principle of law that only a party to a contract can sue. If a person is not a party to a
contract, he cannot sue even if the contract is for his benefit. To create legal relationship,

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 privity of contract (contractual relationship) is necessary. A contract cannot confer any right
nor impose any liability upon a person who is not a party to it.
For example, A agrees with B to give Tk. 50,000 to C. C cannot file a suit against A to
recover Tk. 50,000 as there is no contract between A and C (Contract is between A and B)
and C is a stranger to the contract.

Exception: There are three exceptions to this rule:

• Marriage settlements- When an agreement is made with regards to marriage, family

settlement or partition and is made in such a way that it benefits another person who
is not a party to the contract then he may sue for the enforcement of the contract.
• Covenants running with the land- in cases of the contract of property the purchaser
will be bound by all the conditions and covenants of the land, even though he was
not a party to the original contract.
• Acknowledgment of estoppel- in case the terms of the contract require that an
agreement has to be made with the third party, then this has to be acknowledged.
This acknowledgment could be expressed or implied. This exception covers the areas
where the promisor either expressly or by conduct has posed himself to be an agent.
If a contract is made under a family arrangement to benefit a stranger (person not a party to
the contract), then the stranger can sue in his own right as a beneficiary of the contract.

Example: A promised B’s father that he would marry B else would pay Tk. 50,000 as
damages. Eventually, he married someone else, thereby breaching the contract. B filed a
case against A which was held by the Court since the contract was a family arrangement
with B as the beneficiary.

R was living in a Hindu Undivided Family (HUF). The family had made a provision for her
marriage. Eventually, the family went through a partition and R filed a suit to claim her
marriage expenses. The Court held the case because R was the beneficiary of the provision
despite being a stranger to the contract

Q-7. “A promise in writing to pay wholly an ascertained amount which is barred by

limitation”. Is this agreement valid? Justify your answer

Answer to the Question No 7

This promise depends on various situation.

An agreement enforceable by law is a valid contract.

Therefore in a contract there must be An agreement which is enforceable by law.
Every promise and every set of promises, forming the consideration for each other, is an
agreement. So all contract is an agreement but every agreement is not contract.

There some agreements like an agreement to play cards or to go to a cinema, which cannot be
enforced through the courts of law, are not contract.
So an agreement, which can be enforced through the courts of law, is called a contract.

Example:
➢ An agreement to go to dinner is an agreement but not a contract
➢ An agreement to lease a flat for one year is an agreement and a contract enforceable by law.

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 Agreement without consideration void, unless it is in writing and registered, or is a promise
to compensate for something done, or is a promise to pay a debt barred by limitation law.

A promise in writing to pay wholly an ascertained amount which is barred by limitation”

This is a valid agreement according to Sec. 25(3)

➢ A promise to pay, wholly or in part, a debt which is barred by the law of limitation
can be enforced if the promise is in writing and is signed by the debtor or his
authorized agent.-.
➢ A debt barred by limitation cannot be recovered. Therefore a promise to repay such a
debt is, strictly speaking, without any consideration can be enforced if the debtor or
his authorized agent makes written and signed promise to repay it.
➢ A owes B Tk.1000 but the debt is barred by the Limitation Act. Now, A signs a
written promise to pay B Tk.500 on account of the debt. This is a contract

If the promise is legally enforceable by law than it is a valid agreement otherwise not. On the other
hand this agreement has also consideration. Consideration also need for an agreement.

The situation above stated we can say that this is a valid agreement because of by some limitation and a
law full consideration make this agreement become valid.

Q-8. Why should minors be protected?

Answer to the Question 8

Generally it is assumed that mental faculties of a minor are in developing stage. He is not
mature enough to understand what is good and what its implications on his interest are. In
the light of it, law protects a minor, so that any person by making an agreement with him
cannot exploit him.

The contract Act, 1872, has also granted privileged position to a minor with regard to
agreements made by him. In any agreement he does not incur personal liability. He is
allowed to get benefit in an agreement entered into by him. Not only this, but entire judicial
mechanism helps him, judges are their counselors, jury are their servants and law is their
guardian. But at the same time, it is ensured that while protecting interest of minor,
unnecessary hardships should not be created for the persons who deal with a minor.
According to modernization theory solution to underdevelopment was simple; following
western model the underdeveloped will go through the same steps and will become
developed.

According to Article 27 of our constitution “all citizens are equal before law and are entitles
to equal protection of law.”

Everyone has the right to the protection of the law against such interference or attacks.
All human beings are born with equal and inalienable rights and fundamental freedoms

No estoppel against a minor

The problem of estoppel against the minor created legal problems between the authorities.
But the responsible authority has decided that there is no such estoppel against a juvenile.

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Estoppel means that if a person makes a comment that misleads another person, he or she
cannot refute the same statement in the future as his or her duty to make a statement occurs.
The theory of estoppel forbids a group from saying anything that violates its prior claims. As
a consequence, the minor is not prohibited from providing child protection.
The explanation is that there should be no stumbling block against the legislative rule set
down in the statute. But in the case of Mohiri Bibi, the defendant misinterpreted his age in
order to mortgage his house, but the money-lender was already aware that the defendant was
a minor. Accordingly, the Privy Council did not recognize the doctrine of estoppel since the
appellant was not deceived or misled by the argument of the minor.
In the light of the various rulings of the different High Courts of India, it should be noted
that a minor can plead a minority as mitigation even if, at the time of the arrangement, he
wrongly declared that he was not a minor.
The position is – even though a minor has entered into a contract by distorting his age, he
can, at any later stage, plead “minority” and escape a contract. Minority in India is a fact and
not a right (as in England) and this can be found at any point of the proceedings, irrespective
of the circumstances surrounding it.

Mohiri Bibi v. Ghosh Dharmodas

The case dates back to the year 1903, in which, for the first time, the Privy Council ruled
that the marriage of a minor was void-ab-initio and that the contract was void from the start.
The appellant, Dharmodas Ghosh, mortgaged his house to the defendant, the moneylender
when he was a minor. At this point, the defendant’s counsel knew the age of the
complainant. Later, the complainant paid only Rs 8000 but declined to pay the remainder of
the revenue. The mother of the complainant was his legal guardian at the time, so he started
an action against the claimant, claiming that he was a minor at the time of the contract, so
that the contract, being void, is not bound by the same.
The Court ruled that, unless the parties have authority under Section 11 of the Act, no
arrangement is a contract.

The legislation on minor deals is based on two concepts:

➢ That the law must shield a minor from his or her own inexperience, which could
allow an adult to take undue advantage of him or to compel him or her to enter into a
contract which, while reasonable in itself, is clearly imprudent (e.g. whether a minor
buys anything that he or she cannot afford at a fair price); and
➢ That the statute does not bring undue suffering to parents who treat juveniles equally.

Q-9. Can An agreement under which a minor has received a benefit be enforced as
against the other party? Explain

Answer to the question No 9

An agreement under the Provision of marriage settlement of a minor “a minor has

received a benefit be enforced as against the other party. The situation has explained by a
case study as follows:

In Khwaja Muhammad Khan v. Husaini Begum, the father of the bridegroom had contracted
with the father of the bride to make the daughter an allowance if she married the son. After
the marriage the daughter sued her father-in-law to recover arrears of the allowance. Held
that though she was no party to the contract yet, she was entitled to proceed to enforce her
claim.

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