BCOM FA MATERIAL – COC 161 -1

Unit 1:Introduction to Indian Contract Act, 1872

1. Definition and Meaning of a Contract

Definition (Section 2(h) of the Indian Contract Act, 1872): A "contract" is an agreement
enforceable by law.

Explanation: A contract is formed when two or more parties enter into an agreement, and that
agreement is recognized by law as creating a legal obligation. Contracts are essential to daily
business operations and can be written, oral, or implied.

Example: If A agrees to sell a car to B for Rs. 2,00,000 and B agrees to buy it, this is an
agreement. When both sign the document and it's legally enforceable, it becomes a contract.

2. Agreement vs. Contract

Agreement (Section 2(e)): Every promise and every set of promises forming the consideration
for each other is an agreement.

Contract (Section 2(h)): An agreement enforceable by law is a contract.

Key Differences:

Basis Agreement Contract

Enforceability Not necessarily enforceable Enforceable by law

Legal
No legal obligation necessarily Creates legal obligation
Obligation

Wider (includes Narrower (only enforceable

Scope
social/personal) ones)

Example Promise to go for lunch Sale of a car for money

Conclusion: All contracts are agreements, but not all agreements are contracts.

3. Kinds of Agreements and Contracts

A. Based on Enforceability:
 1. Valid Contract: Legally enforceable.

2. Void Contract: Not enforceable by law.

3. Voidable Contract: Enforceable at the option of one party.

4. Illegal Contract: Forbidden by law.

5. Unenforceable Contract: Cannot be enforced due to technical defects.

B. Based on Formation:

1. Express Contracts: Terms are stated in words.

2. Implied Contracts: Inferred from conduct.

3. Quasi-Contracts: Not real contracts but enforced by law (Section 68–72).

C. Based on Performance:

1. Executed Contract: Both parties have fulfilled obligations.

2. Executory Contract: Performance is pending.

3. Unilateral Contract: One party has to perform.

4. Bilateral Contract: Both parties have obligations.

Examples:

 A agrees to pay B Rs. 500 if B delivers groceries: Unilateral, Executory Contract

 Lease signed and paid for: Executed, Express Contract

4. Essentials of a Valid Contract (Section 10)

A contract is valid only if it satisfies:

1. Offer and Acceptance: Must be lawful and clearly communicated.

2. Free Consent: Consent must be free from coercion, undue influence, fraud,
misrepresentation, or mistake.

3. Lawful Consideration: Something of value must be exchanged.

4. Capacity to Contract: Parties must be competent (above 18, sound mind, not
disqualified).

5. Lawful Object: The purpose must not be illegal or immoral.

 6. Intention to Create Legal Relationship: Must intend legal consequences.

7. Certainty: Terms must be clear and certain.

8. Possibility of Performance: Must be possible to perform.

9. Not declared void: Should not fall under any provision declaring agreements void.

Example: If A, a minor, signs an agreement to sell land, it is not valid—capacity to contract is

absent.

5. Case Laws and Practical Examples

Case 1: Mohori Bibee v. Dharmodas Ghose (1903)

Held: A contract with a minor is void ab initio.

Case 2: Carlill v. Carbolic Smoke Ball Co. (1893)

Held: Advertisement with reward is a valid unilateral contract.

Case 3: Lalman Shukla v. Gauri Dutt (1913)

Held: Knowledge of the offer is necessary to accept and claim reward.

Practical Example:

 Buying a train ticket is an implied contract between the passenger and the railways.

 Hiring an Uber is an express contract via app.

Introduction

Q1. What is the Indian Contract Act?

The Indian Contract Act, 1872 is the main law governing contracts in India. It provides the legal
framework for making, executing, and enforcing contracts. It defines the essentials of a valid
contract and the remedies available in case of breach.

Q2. When did the Indian Contract Act come into force?

The Indian Contract Act came into force on 1st September 1872.
Q3. Who introduced the Indian Contract Act?

The Act was drafted by the Third Law Commission under British rule and introduced by the
British Parliament for regulating commercial and contractual activities in India.

Q4. Why was the Indian Contract Act introduced?

Before 1872, there was no uniform law governing contracts in India. Different regions followed
different customs. The Act was introduced to bring uniformity, certainty, and fairness to
business agreements across British India.

Q5. What was the historical context behind this law?

In the 19th century, growing trade and industry in British India created the need for a common
legal framework. The British Government appointed Law Commissions to codify laws like the
Indian Penal Code, Evidence Act, and Contract Act.

Q6. Was the Indian Contract Act always as it is today?

No, originally the Act contained 11 chapters, but over time many chapters were repealed and
replaced by separate laws. Currently, the Act mainly includes:

 General Principles of the Law of Contracts (Sections 1 to 75)

 Special contracts like:

o Contract of Indemnity and Guarantee

o Bailment and Pledge

o Contract of Agency

Q7. Which parts of the original Act were separated later?

The following parts were removed and became standalone laws:

 Contracts relating to Partnership – Now covered under the Indian Partnership Act, 1932

 Contracts relating to Sale of Goods – Now governed by the Sale of Goods Act, 1930
Definition and meaning of a contract,

Q8. What is the meaning of the term ‘contract’?

A contract is a legally enforceable agreement between two or more parties where they agree to
perform (or not perform) certain actions in exchange for something of value.

Example:
If A agrees to sell his bike to B for 10,000 and B agrees to buy it, this is a contract.

Q9. What is the legal definition of a contract under the Indian Contract Act, 1872?

As per Section 2(h) of the Indian Contract Act, 1872:

“A contract is an agreement enforceable by law.”

Example:
A and B sign a rent agreement where A will give his flat on rent for 15,000/month. Since this
agreement is legally binding, it is a contract.

Q10. What is an ‘agreement’? How is it related to a contract?

According to Section 2(e):

“Every promise and every set of promises, forming the consideration for each other, is an
agreement.”

A contract is formed when an agreement is enforceable by law.

Example:
If X promises to deliver goods to Y and Y promises to pay 5,000, this is an agreement. Once it
is enforceable by law, it becomes a contract.

Q11. Are all agreements contracts?

No, only those agreements that are legally enforceable are contracts.

Famous phrase:

All contracts are agreements, but not all agreements are contracts.

Example:
If two friends agree to go on a picnic, it is a social agreement, not a contract, because it's not
legally enforceable.

Q12. What are the essential elements of a valid contract?

The key elements of a valid contract are:

1. Offer and acceptance

2. Intention to create legal relationship

3. Lawful consideration

4. Capacity to contract

5. Free consent

6. Lawful object

7. Certainty of terms

8. Possibility of performance

9. Not declared void

Example:
If A hires B to paint his house for 20,000 and B accepts, with both having legal capacity, this
satisfies all elements of a valid contract.

Q13. Give one example each of:

(a) A valid contract

A agrees to build a wall for B for 50,000. B agrees. This is a valid contract.

(b) An agreement that is not a contract

A promises to give B 5,000 as a gift. There is no consideration from B, so this is an agreement,

not a contract.

Agreement vs. Contract

Q14. What is an agreement?

As per Section 2(e) of the Indian Contract Act,

“Every promise and every set of promises, forming the consideration for each other, is an
agreement.”

Example:
A promises to sell his book to B for 200 and B agrees. This is an agreement.

Q15. What is a contract?

According to Section 2(h) of the Indian Contract Act,

“A contract is an agreement enforceable by law.”

Example:
A agrees to supply 50 chairs to B for 10,000, and both sign a written agreement. This is a
contract, because it is enforceable by law.

Q16. What is the difference between an agreement and a contract?

Basis Agreement Contract

A promise or a set of promises

Definition An agreement enforceable by law
forming consideration

Legal
Not necessarily enforceable Always legally enforceable
enforceability

Broader (includes all types: social, Narrower (only legally binding

Scope
moral, legal) agreements)

May or may not create a legal

Legal obligation Must create a legal obligation
obligation

Sale agreement for goods between

Example Promise to go for dinner with a friend
two companies

Q17. Are all agreements contracts?

No. Only those agreements which are legally enforceable are contracts.
Q18. Are all contracts agreements?

Yes. Every contract is based on an agreement that is enforceable by law.

Q19. Give examples to explain the difference.

 Agreement (Not a Contract): A agrees to gift B a car. B agrees. Since there is no

consideration from B, and gifting is voluntary, this is an agreement but not a contract.

 Contract: A signs a deal with B to supply raw materials for 1 lakh. Since it's enforceable
by law, this is a contract.

Case Study-Based Questions

Topic: Agreement vs. Contract

Q20. A and B are good friends. A promises to take B on a weekend trip to Manali and pay all
expenses. B agrees and makes arrangements accordingly. Later, A backs out of the plan. B
files a suit against A for breach of contract.

Answer:
Under the Indian Contract Act, 1872, a contract is defined under Section 2(h) as “an agreement
enforceable by law.” For any agreement to be legally binding, there must be an intention to
create legal obligations.

In this case, the promise made by A was a social agreement between friends. Such agreements
generally lack the intent to be legally binding and are made in a domestic or social context.
Courts have consistently held that mere promises between friends or family members are not
enforceable unless they clearly show an intent to create legal obligations.

A relevant case is Balfour v. Balfour (1919), where the court held that agreements between
spouses for personal matters (like maintenance) are not contracts unless there is legal intent.

Applying the law to the present case, although B relied on A’s promise, it was a social
understanding and not intended to create legal rights or duties. Therefore, it cannot be
enforced in a court of law.
Hence, the agreement between A and B is not a valid contract, and B’s suit for breach of
contract will not be successful.

Q21. C, aged 17, enters into an agreement with D to purchase a motorbike for 50,000 and
pays 5,000 in advance. Later, he refuses to pay the balance and return the bike. D files a case
for breach of contract.

Answer:
As per Section 11 of the Indian Contract Act, 1872, a person is competent to contract only if he
is of the age of majority, i.e., 18 years or above, of sound mind, and not disqualified by law.
Therefore, a minor is not competent to enter into a contract.

In the landmark case of Mohori Bibee v. Dharmodas Ghose (1903), the Privy Council held that
an agreement with a minor is “void ab initio” (void from the beginning), meaning it has no legal
effect from the outset.

In the present case, C is a minor (17 years old). Therefore, any agreement entered into by him is
void, regardless of the partial payment made. The law does not recognize such contracts as
valid or enforceable.

Accordingly, D cannot enforce the contract against C, and the case for breach of contract will
fail. The minor may also not be bound to return the 5,000, unless it can be recovered under
equity as unjust enrichment, depending on the facts.

Q22. X agrees to pay Y 1 lakh if Y kills Z. Y accepts the offer but later X refuses to pay. Y files
a suit for breach of contract.

Answer:
Under the Indian Contract Act, 1872, a contract must have a lawful object as per Section 23.
Any agreement whose object or consideration is unlawful is void and not enforceable.

In this case, the agreement involves an unlawful act—murdering Z. Such an agreement is illegal
and against public policy.

Therefore, the agreement between X and Y is void and cannot be enforced by law. Y cannot sue
X for breach of contract.

This principle is supported by Section 23 of the Act and established legal doctrine that contracts
involving illegal acts are void.

Thus, the suit filed by Y will not be successful.

Q23. P promises to sell his house to Q for 50 lakhs. Both sign a written agreement. Later, Q
refuses to pay, claiming he was joking when he agreed.

Answer:
A contract requires an agreement with the intention to create legal relations. When parties sign
a written contract, it typically demonstrates clear intention to be legally bound.

Under Section 10 of the Indian Contract Act, an agreement is not valid unless the parties are
competent and the agreement is made with free consent.

Here, both P and Q signed a formal agreement indicating they intended to create legal
obligations.

Q’s claim of joking is irrelevant once a formal signed contract exists.

Therefore, the agreement between P and Q is a valid contract.

P can enforce the contract in court to compel Q to pay the agreed price or seek damages for
breach.

Q24. R offers to marry S, and S agrees. Later, R breaks off the engagement. S files a suit
claiming breach of contract.

Answer:
Generally, promises of marriage are considered social or moral agreements rather than
contracts under the Indian Contract Act.

Since such promises do not create legal obligations enforceable by law, courts usually do not
entertain breach of contract claims relating to marriage agreements.

Unless there is a separate enforceable contract involving dowry or financial obligations, the
promise to marry itself is not a contract.

Hence, S’s suit for breach of contract will fail as the agreement lacks legal enforceability.

Q25. A promises to gift his car to B. B agrees and takes possession. Later, A changes his mind
and demands the car back.

Answer:
For a valid contract under the Indian Contract Act, consideration is essential (Section 25).

A gift is a voluntary transfer without consideration and is treated differently from a contract.
While the promise to gift is an agreement, it is generally not enforceable as a contract due to
absence of consideration.

However, once the gift is delivered and accepted, the donor cannot revoke it.

If the gift was not delivered, A may withdraw the promise.

Therefore, if B already has possession, A cannot reclaim the car.

If not, B cannot enforce the gift as a contract.

Kinds of agreements and contracts

Q26: What is a Valid Contract? Explain with definition and examples.

Answer:
A valid contract is an agreement enforceable by law.

Legal Definition [Section 2(h)]:

“A contract is an agreement enforceable by law.”

As per Section 10, a contract becomes valid when it contains:

 Offer and acceptance

 Lawful consideration

 Capacity of parties

 Free consent

 Lawful object

 Legal intention

 Not declared void by law

Examples:

1. A agrees to sell his mobile to B for 10,000. Both agree and exchange the goods and
money — valid contract.

2. X contracts with Y to provide digital marketing services for 25,000, both sign and
consent — valid.
Q27: What is a Void Agreement? Give definition and examples.

Answer:
A void agreement is not enforceable by law from the beginning.

Legal Definition [Section 2(g)]:

“An agreement not enforceable by law is said to be void.”

It creates no legal rights or duties and is considered invalid.

Examples:

1. An agreement to marry a minor.

2. An agreement to sell a property that doesn't exist.

Q28: What is a Voidable Contract? Explain with definition and examples.

Answer:
A voidable contract is one that is valid and enforceable unless the aggrieved party chooses to
void it due to lack of free consent.

Legal Definition [Section 2(i)]:

“An agreement which is enforceable by law at the option of one or more of the parties thereto,
but not at the option of the other or others.”

Examples:

1. A signs a contract under threat from B — A can cancel it.

2. B enters into a contract due to fraud by C — B may void it.

Q29: What is an Illegal Agreement? Define and provide examples.

Answer:
An illegal agreement is one where the object or consideration is unlawful or against public
policy.

As per Section 23, an agreement is illegal if:

 It is forbidden by law

 It defeats the provision of any law

  It is fraudulent

 It involves injury to person or property

 It is immoral or opposed to public policy

Examples:

1. A contracts with B to smuggle narcotics.

2. A promises to pay B 10,000 for bribing a government officer.

Q30: What is a Contingent Contract? Explain with definition and examples.

Answer:
A contingent contract depends upon the happening or non-happening of a future uncertain
event.

Legal Definition [Section 31]:

“A contract to do or not to do something, if some event, collateral to such contract, does or

does not happen.”

Examples:

1. A agrees to pay B 50,000 if B’s house catches fire.

2. X agrees to buy Y’s land if the government allots permission.

Q31: What is a Quasi Contract? Define and provide examples.

Answer:
A quasi contract is not a real contract, but an obligation imposed by law to prevent unjust
enrichment.

Sections 68 to 72 of the Indian Contract Act deal with quasi-contractual obligations.

Examples:

1. A supplies food to B's minor child — A can recover expenses from B.

2. A mistakenly pays 5,000 to B — B is bound to return it.

Q32: What is the difference between a Void and a Voidable Contract?

Answer:

Basis Void Contract Voidable Contract

Enforceabilit Enforceable at the option of one

Cannot be enforced by law
y party

Legal Status Invalid from beginning Initially valid

Consent Not relevant Affected by coercion, fraud, etc.

Agreement to smuggle
Examples Contract signed under threat or fraud
goods

Q33: What is the difference between Express and Implied Contracts? Give examples.

Answer:

 Express Contract [Section 9]: Clearly stated in words, written or spoken.

Example: A written agreement to lease a house.

 Implied Contract: Formed through conduct or actions of parties.

Example: Boarding a bus and paying fare implies contract of service.

Q34: What is an Executed and an Executory Contract? Explain with examples.

Answer:

 Executed Contract: Both parties have completed their obligations.

Example: A buys a book from a store and pays cash — contract complete.

 Executory Contract: Some or all obligations are yet to be performed.

Example: A agrees to sell goods to B next week — performance pending.

Q35: List and define all types of contracts under Indian law.

Answer:
Based on enforceability and performance, the types are:
 1. Valid Contract – Enforceable by law

2. Void Contract – Not enforceable

3. Voidable Contract – Enforceable by one party

4. Illegal Contract – Prohibited by law

5. Contingent Contract – Conditional upon a future event

6. Quasi Contract – Obligation imposed by law

7. Executed Contract – Already completed

8. Executory Contract – Pending performance

9. Express Contract – Declared in words

10. Implied Contract – Inferred from conduct

Case study based questions

Case Study 1: Void Agreement due to Impossibility

Q36. Mr. Raj contracts with Mr. Amir to supply mangoes from Kerala by the 15th of April.
However, due to an unexpected cyclone and government ban on transportation in that region,
Raj is unable to procure and deliver the goods. Amir sues Raj for breach of contract. Explain the
legal consequences.

Answer:
As per Section 56 of the Indian Contract Act, if the performance of a contract becomes
impossible due to reasons beyond the control of the parties, the contract becomes void. This is
known as supervening impossibility.

The cyclone and government ban qualify as a force majeure event. Therefore, Mr. Raj is not
liable for breach of contract. The agreement is void by law due to impossibility of performance.

Case Study 2: Voidable Contract due to Misrepresentation

Q37. Ms. Priya agrees to buy a flat after the builder falsely tells her it faces a park and is loan-
approved. Later, she finds that the flat faces a garbage dump and has no loan approval. She
wants to cancel the agreement. Explain the legal consequences.

Answer:
As per Section 18, misrepresentation is a false statement made without intent to deceive.
Section 19 states that contracts based on misrepresentation are voidable at the option of the
misled party.

Since Priya’s consent was obtained by misrepresentation, she can legally cancel the agreement.
She may also seek refund or damages as per law.

Case Study 3: Quasi Contract – Supply of Necessaries

Q38. A minor, Arjun, is staying at a boarding school. A store supplies him clothes and food on
credit. Later, the supplier demands payment from Arjun’s guardian. Explain the legal
consequences.

Answer:
According to Section 68, when necessaries are supplied to a minor, the supplier can recover the
cost from the minor’s property. This is a quasi-contractual obligation, not based on mutual
agreement but imposed by law to prevent unjust enrichment.
Thus, the guardian managing Arjun’s estate is legally bound to make the payment.

Case Study 4: Contingent Contract – Event Not Happening

Q39. A agrees to sell goods to B if a specific cargo ship arrives by 1st June. The ship does not
arrive. B demands delivery or compensation. Explain the legal consequences.

Answer:
Under Section 32, contingent contracts are enforceable only when the specified event occurs.
Since the ship’s arrival was a condition and it did not happen, the contract is void.
A is not bound to perform or compensate. The contract ends automatically due to the event
not occurring.

Case Study 5: Illegal Agreement – Against Public Policy

Q40. Mr. Nitin agrees to pay 50,000 to Mr. Dinesh to impersonate him in an exam. Dinesh
writes the exam but doesn’t get paid, and sues Nitin. Explain the legal consequences.

Answer:
As per Section 23, agreements with unlawful objects are void and unenforceable.
Impersonating in an exam is fraudulent and against public policy.
Since the agreement itself is illegal, the court will not assist in recovery. Dinesh cannot claim
any money as the contract is void and punishable by law.
Essentials of a valid contract

1. Free Consent and Coercion

Case:
Q41. Ravi was threatened with physical harm unless he sold his land at half its market value to
Shyam. He signs the agreement under pressure. Explain the legal consequences.

Answer:
Under Section 10 of the Indian Contract Act, 1872, a contract is valid only if there is free
consent of the parties involved. Section 14 defines free consent as consent not caused by
coercion, undue influence, fraud, misrepresentation, or mistake.
In this case, Ravi’s consent was obtained through a threat of physical harm, which constitutes
coercion under Section 15, defined as committing or threatening to commit any act forbidden
by the Indian Penal Code to obtain consent.

Since coercion was used, Ravi's consent was not free, and the contract is voidable at his option
under Section 19.

He may choose to rescind the contract and need not go through with the sale.
Thus, the essential element of “free consent” is missing, and the contract is not valid.

2. Undue Influence by a Trusted Person

Q42. A bedridden father transfers his property to his spiritual guru without receiving any
consideration. His children later challenge the transfer. Explain the legal consequences.

Answer:
The Indian Contract Act, 1872, under Section 16, addresses undue influence. A contract is said
to be induced by undue influence where one party is in a position to dominate the will of
another and uses that position to obtain an unfair advantage.
In this case, the father is bedridden and possibly mentally or physically weak, while the spiritual
guru is in a position of trust and authority. The absence of consideration adds further suspicion.
Such relationships—spiritual guide and disciple—are presumed to involve undue influence,
especially when the transaction is one-sided or unfair.
Accordingly, the burden of proof shifts to the guru to prove that the agreement was made
voluntarily and without any influence.
If undue influence is proven, the contract is voidable at the option of the aggrieved party (i.e.,
the father or his legal heirs). Hence, the transfer can be set aside.

3. Consideration Must Be Lawful

Q43. Reena promises to pay 20,000 to Simran to publish fake reviews of her product online.
Simran does it, but Reena refuses to pay. Explain the legal consequences.

Answer:
As per Section 2(d) of the Indian Contract Act, consideration is a key element of a valid
contract. However, Section 23 mandates that consideration and object of the contract must be
lawful. If either is unlawful, immoral, or opposed to public policy, the agreement is void.

In this case, the purpose of the agreement is to deceive the public through fake reviews, which
is both fraudulent and unethical, making the object of the agreement unlawful.
Therefore, even though Simran performed her part, she cannot claim the payment through
legal enforcement because the court does not support unlawful objects.
The contract is void ab initio, and Reena is not legally bound to pay. This demonstrates that
even if all other conditions are fulfilled, a contract without lawful consideration or object is not
enforceable.

4. Mutual Consent – No Consensus ad Idem

Q44. A agrees to sell his "Jaguar" thinking of his car, while B thinks he’s buying A’s pet jaguar
(the animal). Both sign the agreement. Explain the legal consequences.

Answer:
A valid contract requires a meeting of minds or consensus ad idem, which means both parties
must agree to the same thing in the same sense, as stated in Section 13 of the Indian Contract
Act.
Here, A and B are operating under a mutual mistake of fact regarding the subject matter. A
intends to sell a car, whereas B believes he is buying an animal. This is not a valid agreement as
there is no true consent.

As per Section 20, an agreement is void if both parties are under a mistake of fact essential to
the agreement. Since the subject matter itself is misunderstood, the agreement lacks certainty
and true agreement, and thus is void.

The parties can walk away without obligations because no valid contract came into existence.
5. Capacity to Contract – Minor’s Agreement

Q45. 17-year-old Aarav buys a motorcycle on EMI and signs a contract with the dealership.
Explain the legal consequences.

Answer:
According to Section 11 of the Indian Contract Act, a person is competent to contract if they (i)
are of the age of majority, (ii) are of sound mind, and (iii) are not disqualified by law.
In India, a person becomes a major at 18 years, or 21 in special cases. Aarav, being 17, is legally
a minor, and hence incapable of contracting.

The law as interpreted in the landmark case of Mohori Bibee v. Dharmodas Ghose (1903) holds
that a minor’s contract is void ab initio, i.e., void from the very beginning.
Therefore, even though Aarav signed a written agreement and the dealership delivered the
motorcycle, the contract has no legal binding. The dealership cannot enforce the EMI
payments.
Minors are protected by law to prevent exploitation, and they cannot be made liable even if
they misrepresent their age.
Unit 2:Offer, Acceptance, and Consideration in Contracts

Offer

Q1. Explain the importance of an offer in the formation of a valid contract under the Indian
Contract Act, 1872, with suitable examples.

✅ Answer:
An offer (or proposal) is the first and most essential step in the formation of a valid contract.
According to Section 2(a) of the Indian Contract Act, 1872:

“When one person signifies to another his willingness to do or abstain from doing anything, with
a view to obtaining the assent of that other, he is said to make a proposal.”

An offer must be made with the intention to create legal obligations and becomes the basis for
acceptance and the formation of a binding contract.

Importance of an Offer with Examples:

1. Foundation of a Contract

A contract starts only when an offer is made and accepted.

✅ Example: A says to B, “I will sell you my car for 2,00,000.” This is a valid offer. If B accepts, a
contract is formed.

2. Creates Legal Intention

An offer must be made with an intention to be legally bound—not just casual talk.

✅ Example: If A jokingly says, “I’ll sell you my house for 10,” it’s not a valid offer, as there was
no intention to create legal relations.

3. Defines Terms and Conditions

The offer sets out the specific terms that will govern the contract.
✅ Example: A offers to deliver 100 bags of rice to B at 1,000 per bag, delivery in 7 days.
If B accepts, all the specified terms become binding contract terms.

4. Must be Communicated

An offer must be communicated to the offeree. No communication = no valid offer.

✅ Example: A writes an offer letter to B but doesn’t send it.

B cannot accept an offer he’s unaware of — so no contract is formed.

5. Essential under Section 10 (for a Valid Contract)

Section 10 of the Act states that a contract must be made with free consent, lawful
consideration, and lawful object—but it begins with an offer.

✅ Example: Without an offer from A to sell, and acceptance from B, there can be no mutual
consent—hence, no contract.

Conclusion:

An offer is critical because it begins the contractual process. It expresses the intention of one
party to enter into a legal agreement. Without an offer, no acceptance is possible, and no
contract can be formed under the Indian Contract Act, 1872.

Essentials of a valid offer

Q1. What is an offer under the Indian Contract Act, 1872? Explain with an example.

Answer:

An offer (also called a proposal) is defined under Section 2(a) of the Indian Contract Act, 1872:

"When one person signifies to another his willingness to do or abstain from doing anything, with
a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal."

This means a person (the offeror) expresses a willingness to enter into a contract, subject to the
acceptance of another person (the offeree).
✅ Example:
A says to B, “I will sell my laptop to you for 25,000.”
This is an offer because A is expressing his willingness to sell his laptop expecting B’s
acceptance.

Q2. What are the essentials of a valid offer under the Indian Contract Act, 1872? Explain in
detail with examples.

Answer:

The main essentials of a valid offer are as follows:

1. Intention to Create Legal Relations

The offer must be made with the intent to create a legal obligation. Offers made casually or
socially are not enforceable by law.

✅ Example: A husband promises to take his wife on vacation but cancels. The wife cannot sue
because there is no legal intention.
⛔ Not a valid offer. ‍⚖ Case: Balfour v. Balfour (1919) – The court held that domestic
arrangements do not amount to a contract.

2. Terms Must Be Definite and Unambiguous

The terms of the offer must be clear, certain, and not vague. If terms are too uncertain, it won’t
be enforceable.

✅ Example: “I offer to sell my Royal Enfield bike for 1,50,000” – valid, as it’s clear.

⛔ Invalid Example: “I will give you something good in return if you help me.” – too vague.

⚖
‍ Case: Guthing v. Lynn (1831) – “I’ll give you more money if the horse is lucky” – held to be
too vague.

3. Communication of Offer Is Mandatory

An offer must be communicated to the offeree. Without knowledge of the offer, it cannot be
accepted.
✅ Example: A announces a 5,000 reward for finding his lost phone. B, who sees the
advertisement and finds the phone, is entitled to the reward.

⛔ Invalid Example: If B finds the phone without knowing about the reward, he cannot claim it.

⚖
‍ Case: Lalman Shukla v. Gauri Dutt (1913) – A servant found the boy without knowing
about the reward. He could not claim the reward since the offer wasn’t communicated.

4. Offer Must Not Be Mere Expression of Intention

A mere statement of intention, price list, or general announcement is not an offer but an
invitation to offer.

✅ Example: “I am planning to sell my house for 80 lakhs” – Not an offer, just a statement of
future intention.

⚖
‍ Case: Harvey v. Facey (1893) – Quoting a minimum price was held to be an invitation to
offer, not a final offer.

5. Offer May Be General or Specific

 A general offer is made to the public and can be accepted by anyone who fulfills the
conditions.

 A specific offer is made to a specific person or group and can be accepted only by them.

✅ General Offer Example: An ad promises 1,000 for returning a lost dog. Anyone who finds
and returns it accepts the offer.

⚖
‍ Case: Carlill v. Carbolic Smoke Ball Co. (1893) – A woman accepted a general offer by using
the product as instructed and was entitled to the reward.

✅ Specific Offer Example: A offers to sell his car to B for 2 lakhs. Only B can accept this offer.

6. Offer Must Be Made With the Intention of Getting Consent

The offer must show that the offeror is waiting for the other party’s acceptance to conclude the
contract.

✅ Example: “I will sell my mobile phone to you for 10,000. Do you accept?” – Valid offer.
7. Offer Must Not Contain a Term the Non-Compliance of Which Amounts to Acceptance

An offeror cannot say that silence or failure to reject means acceptance.

⛔ Example: “If you do not reply by tomorrow, I will assume you have accepted the offer.”
➤ This is not valid under contract law.

‍⚖ Case: Felthouse v. Bindley (1862) – Silence does not constitute acceptance.

Q3. Can an offer be revoked or terminated? Explain with reasons and examples.

Answer:

Yes, an offer can be terminated in the following ways:

1. Revocation before acceptance

➤ The offeror can withdraw the offer before it is accepted.
✅ Example: A offers to sell his house to B. Before B accepts, A withdraws the offer.

2. Lapse of time
➤ If the offer is not accepted within the time specified, it lapses.
✅ Example: Offer is valid until June 5. B tries to accept it on June 7 – invalid.

3. Rejection by the offeree

➤ Once the offeree rejects the offer, it cannot be accepted later.

4. Counter-offer
➤ If the offeree makes a counter-offer, it amounts to rejection of the original offer.
✅ Example: A offers to sell a phone for 20,000. B says he will buy it for 18,000. This is
a counter-offer, not acceptance.

5. Death or insanity of offeror/offeree

➤ If the offeror dies before acceptance, and the offeree is aware of it, the offer ends.

Q4. What is the difference between an offer and an invitation to offer? Give examples.

Answer:

Offer Invitation to Offer

A definite proposal to enter into a An invitation to negotiate or make an

contract. offer.

Leads to a contract when accepted. Acceptance only leads to an offer.

Legally enforceable if accepted. Not enforceable.

✅ Examples:
 Offer: A says to B, “I will sell my bike for 40,000.”

 Invitation to Offer: Goods displayed in a shop window with price tags.

⚖
‍ Case: Pharmaceutical Society v. Boots Cash Chemists (1953) – Displaying goods was held
to be an invitation to offer.

Case Study based Questions

Case Study 1: The Social Invitation

Rahul, in a casual conversation with his friend Sameer, says, “If you visit me tomorrow, I will
give you my old laptop.” Sameer does not respond but visits Rahul the next day. Rahul refuses
to hand over the laptop, stating the statement was made in jest and was not a legally binding
offer.

Whether Rahul’s statement amounts to a valid offer enforceable under the Indian Contract Act,
1872? Discuss with legal reasoning.

Answer:
Rahul’s statement does not constitute a valid offer under the Indian Contract Act, 1872,
primarily due to the absence of an intention to create legal relations, which is a fundamental
element of a valid contract.

 As per Section 2(a) of the Indian Contract Act, an offer requires a willingness to be
legally bound on acceptance.

 The communication between Rahul and Sameer is a social promise, which, as per legal
jurisprudence, is presumed not to have legal intent.

 The presumption against legal intent in social/domestic arrangements is well-

established in cases such as Balfour v. Balfour (1919), where the court held that
domestic agreements lack enforceability due to the absence of intention to create legal
relations.

 Since Rahul’s promise was made in a social context without the intention to enter into a
legal contract, the statement is legally inaudible as an offer.
  Sameer’s visit does not amount to acceptance of a legally binding offer, as there was no
valid offer to accept.

Conclusion: Rahul’s statement is a mere social invitation, not an offer capable of acceptance
resulting in a contract.

Case Study 2: The Vague Proposal

Scenario:
Anil tells Bhavesh, “I might sell my car to you at a good price next month.” Bhavesh
immediately agrees and transfers 50,000 as advance payment. Later, Anil repudiates the
agreement, stating there was no valid offer.

Does Anil’s statement constitute a valid offer? Analyze the validity of the contract formed
based on the principles of offer and acceptance.

Answer:
Anil’s statement does not amount to a valid offer under Indian Contract law, as the terms are
uncertain and indefinite, which precludes the formation of a binding contract.

 A valid offer must be certain, definite, and clear in its terms so that the offeree can
understand what is being proposed.

 The language used by Anil, “might sell at a good price,” is expressive of an intention or
willingness but is too vague to be construed as a definite offer.

 As per Section 2(a) and judicial precedents, if an offer lacks certainty in essential terms
such as the price and time, it is incapable of acceptance.

 The doctrine of certainty is emphasized in Guthing v. Lynn (1831) where the court held
that vague promises contingent on uncertain conditions are not enforceable.

 Therefore, Anil’s statement is best regarded as a mere expression of intention or

negotiation, not an offer.

 Bhavesh’s payment of 50,000 does not convert the vague proposal into a contract in
the absence of a definite offer.

Conclusion: No valid offer existed; hence, no contract was formed. Anil is not legally bound to
sell the car.
Case Study 3: The Uncommunicated Reward

A company publicly announces a reward of 10,000 to anyone who returns their lost dog.
Vikram finds the dog but was unaware of the announcement and returns the dog to the
company. He later claims the reward.

Is Vikram entitled to claim the reward? Provide a detailed legal analysis.

Answer:
Vikram is not entitled to claim the reward because the essential requirement of
communication of the offer to the offeree was not fulfilled.

 Under contract law, for an acceptance to be valid, the offeree must have knowledge of
the offer at the time of acceptance or performance.

 The offer by the company, being a general offer, must be communicated to the
potential offerees before performance to constitute acceptance.

 The principle is established in Lalman Shukla v. Gauri Dutt (1913), wherein a servant
who found a lost boy without knowledge of the reward was held not entitled to claim it.

 The rationale is that the offer and acceptance are interdependent; acceptance cannot
take place without knowledge of the offer.

 Vikram’s lack of awareness of the reward offer means he did not accept the offer, and
thus, no contract was formed.

Conclusion: Since Vikram was unaware of the offer, he cannot validly accept it and claim the
reward.

Case Study 4: The Counter-Offer and Its Effect

Ramesh offers to sell his motorcycle to Suresh for 50,000. Suresh replies, “Would you accept
45,000?” Ramesh declines. Subsequently, Suresh attempts to accept the original offer of
50,000.

Can Suresh’s acceptance of the original offer be considered valid after making a counter-offer?
Explain with reference to Indian contract principles.

Answer:
Suresh’s attempted acceptance of the original offer after making a counter-offer is not valid
under Indian contract law.
  A counter-offer operates as a rejection of the original offer and simultaneously creates a
new offer from the offeree to the original offeror.

 The effect of a counter-offer is that the original offer lapses and cannot be
subsequently accepted unless renewed by the offeror.

 This principle is supported by Section 2(b) of the Indian Contract Act, which defines
acceptance as the final and unqualified assent to the terms of the offer.

 In Hyde v. Wrench (1840), it was held that a counter-offer nullifies the original offer.

 Since Suresh’s proposal of 45,000 was a counter-offer and was rejected by Ramesh, the
original offer of 50,000 no longer subsists.

 Hence, Suresh cannot accept the original offer later, as it ceased to exist.

Conclusion: The original offer was effectively terminated by the counter-offer; therefore, no
contract arises on Suresh’s belated acceptance.

Case Study 5: The Effect of Silence on Acceptance

P sends Q a letter offering to sell 100 bags of rice at 20,000. The letter states, “If I do not hear
from you by next week, I will assume you have accepted this offer.” Q remains silent. Later, P
insists that a contract has been formed.

Is the contract between P and Q enforceable based on Q’s silence? Discuss.

Answer:
The contract is not enforceable because silence cannot be construed as acceptance in Indian
contract law.

 The principle governing acceptance requires an express or implied positive act

signifying assent.

 The idea that silence or inaction can amount to acceptance is generally not recognized
except in very limited or specific cases.

 In Felthouse v. Bindley (1862), the court held that silence does not constitute acceptance
and that an offeror cannot impose a condition that silence will mean acceptance.

 Therefore, P cannot unilaterally treat Q’s silence as acceptance of the offer.

 Without express acceptance, no contract is formed.

Conclusion: There is no contract between P and Q due to lack of valid acceptance.

Case Study 6: Advertisement as an Offer or Invitation to Offer

A shopkeeper places an advertisement stating, “Selling iPhone 14 at 50,000 while stocks last.”
Ajay sees the advertisement and goes to the shop with 50,000, but the shopkeeper refuses to
sell, claiming the advertisement was not an offer but an invitation to offer.

Is the advertisement a valid offer capable of acceptance by Ajay? Explain the legal principles
involved.

Answer:
The advertisement by the shopkeeper is generally considered an invitation to offer and not a
legally binding offer under Indian contract law.

 Advertisements, price lists, and catalogues are normally classified as invitations to offer,
inviting customers to make an offer to buy.

 This principle is supported by Pharmaceutical Society of Great Britain v. Boots Cash

Chemists (1953), where the court held that the display of goods is an invitation to offer,
not an offer itself.

 The reason is that the seller may not have sufficient stock or may wish to refuse certain
buyers.

 Ajay’s visit with money constitutes an offer to buy, which the shopkeeper may accept or
reject.

 Only upon acceptance by the shopkeeper does a valid contract arise.

 However, in exceptional cases where an advertisement is clear, definite, and explicit,

leaving nothing open for negotiation, it may be treated as an offer, e.g., Carlill v.
Carbolic Smoke Ball Co. (1893).

Conclusion: The advertisement is an invitation to offer; no contract was formed when Ajay
arrived.

Case Study 7: Offer Made to a Group and Revocation

XYZ Ltd. issues an offer to all its employees promising a bonus of 50,000 if they complete a
project by the deadline. Before the deadline, XYZ Ltd. revokes the offer. Employees claim the
bonus.

Can XYZ Ltd. legally revoke the offer before acceptance? Discuss with reference to the
principles of general offers and revocation.

Answer:
Yes, XYZ Ltd. can revoke the offer before acceptance is made by the employees, subject to
proper communication of revocation.

 According to Indian Contract Act principles, an offer may be revoked at any time before
acceptance, as long as revocation is communicated to the offeree.

 A general offer made to the public or a group can be accepted by anyone who fulfills
the conditions.

 In Dickinson v. Dodds (1876), revocation of a general offer was held valid if the offeree
has notice of revocation before acceptance.

 Here, until the employees complete the project and accept the offer by performance,
the company is free to revoke.

 Revocation must be communicated or brought to the attention of the employees to be

effective.

Conclusion: If XYZ Ltd. properly communicated revocation before project completion, no

contract or obligation arises.

Case Study 8: Offer with a Time Limit

Rita offers to sell her car to Sameer for 3,00,000, valid until 30th June. Sameer accepts on 5th
July. Rita refuses to sell, stating the offer expired.

Is Sameer’s acceptance valid after the expiry date? Explain the legal implications.

Answer:
Sameer’s acceptance on 5th July is invalid as the offer expired on 30th June.

 An offer may be made subject to a time condition or validity period.

  According to the Indian Contract Act, if an offer is not accepted within the stipulated
time, it lapses automatically.

 Acceptance after expiry of the offer period cannot create a binding contract.

 In Ramsgate Victoria Hotel v. Montefiore (1866), an offer that was accepted after the
lapse of a reasonable time was held invalid.

Conclusion: Since Sameer’s acceptance was delayed beyond the offer’s validity, no contract
exists.

Case Study 9: Offer Made by Conduct

A railway company places luggage on a platform stating that it will pay 100 compensation for
every lost bag. Passengers continue to use the railway and deposit their luggage without signing
any agreement. One passenger’s bag is lost and claims compensation.

Does the railway company’s statement amount to a valid offer, and is the passenger entitled to
compensation?

Answer:
Yes, the railway company’s statement is a valid unilateral offer made by conduct, and the
passenger accepting by depositing luggage is entitled to compensation.

 A unilateral offer is an offer which is accepted by performing the condition stipulated by

the offeror.

 In Carlill v. Carbolic Smoke Ball Co. (1893), the court held that an advertisement
promising a reward on performance constituted a valid offer.

 Here, the railway company by posting the notice shows an intention to be bound upon
acceptance by conduct (depositing luggage).

 Passengers depositing luggage accept the offer by their conduct, forming a binding
contract.

 Therefore, the passenger who lost the bag is entitled to claim 100.

Conclusion: The railway company’s statement is a valid unilateral offer, and the passenger has a
contractual right to compensation.
Case Study 10: Revocation Without Communication

Mohan offers to sell his bike to Sohan and posts a letter of revocation before Sohan accepts.
However, the letter of revocation is delayed, and Sohan accepts the offer before receiving the
revocation.

Is the revocation effective? Is there a valid contract between Mohan and Sohan?

Answer:
The revocation is not effective until it is communicated to the offeree; hence, a valid contract
exists.

 As per contract principles, an offeror may revoke the offer only if the revocation is
communicated to the offeree before acceptance.

 Posting the letter does not amount to communication unless the offeree receives it.

 In Byrne v. Van Tienhoven (1880), the court held that revocation is only valid when the
offeree is aware of it.

 Since Sohan accepted the offer before receiving the revocation letter, a valid contract
has been formed.

Conclusion: Mohan’s revocation is ineffective, and the contract between Mohan and Sohan is
valid.

Types of Offers

Q1. Define and explain the term ‘Offer’ as per the Indian Contract Act, 1872. What are the
different types of offer?

Answer:
Under Section 2(a) of the Indian Contract Act, 1872:

“When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal.”

The term “offer” and “proposal” are used interchangeably.

The main types of offer under Indian law include:

 1. Express Offer

2. Implied Offer

3. General Offer

4. Specific Offer

5. Cross Offer

6. Counter Offer

7. Standing/Open/Continuing Offer

Q2. Differentiate between a General Offer and a Specific Offer. Support your answer with
legal cases.

Answer:

Basis General Offer Specific Offer

Audience Made to the public at large Made to a specific person or group

Acceptanc Can be accepted by anyone who fulfills Can be accepted only by the person to
e the conditions whom it is made

Example Reward for lost item Offer to sell goods to a particular buyer

Case Law Carlill v. Carbolic Smoke Ball Co. Boulton v. Jones

In Carlill v. Carbolic Smoke Ball Co. (1893), an advertisement promising a reward was held to
be a general offer.

Q3. What is an Express Offer and how is it different from an Implied Offer? Provide
examples.

Answer:

 Express Offer: An offer made through spoken or written words.

o Example: A offers in writing to sell his watch to B for 2,000.

 Implied Offer: An offer inferred from the conduct or circumstances.

 o Example: A bus company running its buses on a route invites the public to board.
This is an implied offer.

Legal Basis: The Indian Contract Act recognizes both express and implied contracts under
Section 9, which states that a proposal may be made by words or by conduct.

Q4. What is a Counter Offer? What is its effect on the original offer? Illustrate with a case.

Answer:
A counter offer occurs when the offeree responds to an offer with different terms, thereby
rejecting the original offer.

 Effect: It terminates the original offer and replaces it with a new offer.

‍⚖ Case: Hyde v. Wrench (1840)

 Wrench offered to sell a farm for £1,000.

 Hyde counter-offered £950.

 Later, Hyde tried to accept the original offer of £1,000.

 Held: Original offer had lapsed due to the counter-offer.

Q5. What is a Cross Offer? Does it result in a contract? Explain.

Answer:
Cross Offers occur when two parties make identical offers to each other without knowing the
other's offer.

 Result: No contract arises unless one party accepts the other's offer.

‍⚖ Case: Tinn v. Hoffman & Co. (1873)

 Both parties sent letters offering to buy/sell iron on same terms.

 Held: Cross offers are not acceptance; no contract formed unless accepted.

Q6. Define a Standing or Open Offer. How can it be accepted and revoked?

Answer:
A Standing/Open/Continuing Offer is an offer kept open for a specific period during which it
can be accepted multiple times.

 Common in tender contracts.

 Each order placed during the period constitutes a separate acceptance, forming
separate contracts.

‍⚖ Case: Great Northern Railway Co. v. Witham (1873)

 Supplier made an open offer to supply goods.

 Railway company placed orders during that period.

 Held: Each order was a separate contract.

Revocation: Can be revoked before acceptance unless there's a binding promise to keep it
open (option contract).

Q7. Case Study: Is the following a general or specific offer?

Scenario:
A company advertises: “ 5,000 reward to anyone who finds and returns our missing drone.”
Priya finds and returns it after seeing the ad.

Question:
What type of offer is this? Can Priya claim the reward?

Answer:

 This is a general offer, made to the public at large.

 Priya, having seen the offer and acted on it, has accepted the offer by performance.

 A contract is formed through unilateral acceptance.

‍⚖ Carlill v. Carbolic Smoke Ball Co. applies.

✅ Priya is legally entitled to the reward.

Q8. Scenario-Based MCQ:

Scenario:
X offers to sell 100 chairs to Y at 500 each. Y replies, “I accept the offer but only for 80 chairs.”
What type of offer is Y’s reply?

A. Cross Offer
B. Specific Offer
C. Counter Offer
D. Implied Offer

Answer: ✅ C. Counter Offer

Explanation: Y's reply modifies the terms and thus constitutes a counter offer, which legally
terminates the original offer.

Case Study–Based Questions & Answers

Topic: Types of Offer – Indian Contract Act, 1872

Case Study 1: General Offer

Scenario:
XYZ Pvt. Ltd. issues a newspaper advertisement stating:

“ 10,000 reward will be given to anyone who provides information leading to the recovery of
our stolen company laptop.”

Anil reads the advertisement and, without notifying the company, starts investigating. He finds
the stolen laptop and returns it to XYZ. The company refuses to pay the reward, stating that
Anil did not formally accept the offer.

Question:
Was XYZ’s advertisement a valid general offer? Is Anil entitled to the reward?

Answer:
Yes, XYZ’s advertisement constitutes a general offer to the public at large, and Anil is entitled to
the reward.

Legal Analysis:

 A general offer is one made to the public at large, which can be accepted by any person
who performs the conditions of the offer.
  As per Section 2(a) of the Indian Contract Act, 1872, a proposal becomes binding when
accepted.

 In Carlill v. Carbolic Smoke Ball Co. (1893), it was held that:

A general offer made to the public becomes a contract when a member of the public fulfills the
terms of the offer.

 In the present case:

o The advertisement was clear and definite.

o Anil acted upon the advertisement and performed the condition by recovering
the laptop.

o Though Anil did not formally communicate acceptance, in a unilateral contract,

performance of the act itself constitutes acceptance.

✅ Conclusion:
XYZ is bound by the general offer. Anil has accepted it by performance and is legally entitled to
the 10,000 reward.

Case Study 2: Specific Offer

Scenario:
Ravi sends an email to Meena offering to sell his camera for 20,000. Meena sees the message,
but before she replies, her friend, Neha, writes back accepting Ravi’s offer and demands
delivery.

Question:
Can Neha accept Ravi’s offer? What type of offer is involved?

Answer:
No, Neha cannot accept Ravi’s offer. The offer made by Ravi was a specific offer intended solely
for Meena.

Legal Analysis:

 A specific offer is one that is made to a particular person or group, and only that person
or group can legally accept the offer.

 Acceptance by any third party is not valid unless authorized.

  Refer to Boulton v. Jones (1857):

The defendant made an offer to purchase goods from a specific seller. A third party filled the
order without informing the defendant. It was held there was no contract, as the offer was not
accepted by the person to whom it was made.

 In the present case:

o The offer was clearly addressed to Meena.

o Neha’s acceptance is not valid, as she was not the addressee.

✅ Conclusion:
Ravi’s offer was a specific offer, and only Meena could accept it. Neha’s response does not
result in a valid contract.

Case Study 3: Counter Offer

Scenario:
Rahul offers to sell his antique painting to Kiran for 1,00,000. Kiran responds, “I’ll buy it for
90,000.” Rahul refuses. Later, Kiran says, “Okay, I accept your original offer of 1,00,000.”

Question:
Was there a valid acceptance by Kiran? Has a contract been formed?

Answer:
No, a contract has not been formed. Kiran’s reply of 90,000 was a counter offer, which legally
terminated Rahul’s original offer.

Legal Analysis:

 A counter offer is a response to an offer in which the terms are altered.

 It acts as a rejection of the original offer and presents a new offer.

 Cited case: Hyde v. Wrench (1840)

When the plaintiff made a counter offer, the original offer was terminated and could not later
be accepted.

 In the given scenario:

o Kiran’s reply of 90,000 constituted a counter offer.

 o It legally revoked Rahul’s 1,00,000 offer.

o Rahul is under no obligation to honor the original terms.

✅ Conclusion:
No valid contract exists, as the original offer was terminated by a counter offer.

Case Study 4: Implied Offer

Scenario:
A government bus arrives at a stop. Passengers board it and pay the fare. One passenger sues
the transport authority claiming no contract was formed since there was no signed agreement.

Question:
Is there a valid contract between the passenger and the bus service provider? Identify the type
of offer.

Answer:
Yes, there is a valid contract formed through an implied offer and implied acceptance.

Legal Analysis:

 An implied offer is not made through words but through conduct or circumstances.

 As per Section 9 of the Indian Contract Act, contracts can be express or implied.

 The arrival of the bus and opening of doors for boarding implies an offer to the public.

 The passenger’s boarding and payment constitute acceptance.

✅ Conclusion:
A valid contract exists through implied conduct. The bus service made an implied offer, and the
passenger accepted it.

Case Study 5: Cross Offer

Scenario:
On 1st May, A writes to B offering to sell his house for 50 lakhs. On the same day, B writes to A
offering to buy A’s house for 50 lakhs. The letters cross in the post and reach each other on
3rd May. Each party claims a contract was formed.
Question:
Is there a valid contract? What is the legal status of such identical, but independent offers?

Answer:
No, there is no valid contract. The offers made are cross offers, which do not constitute
acceptance of each other.

Legal Analysis:

 Cross offers occur when identical offers are made by two parties in ignorance of each
other’s offer.

 There is no acceptance in such cases — only two independent offers.

 Refer to Tinn v. Hoffman & Co. (1873):

Simultaneous identical offers do not result in a binding contract unless one is accepted by the
other.

✅ Conclusion:
A valid contract does not arise from cross offers unless one party accepts the other's offer after
receiving it.

Case Study 6: Standing or Open Offer

Scenario:
The Municipal Corporation floats a tender for supply of sanitary goods for the year. Ram
Traders submits the tender agreeing to supply as needed. Orders are placed periodically.
Midway through the year, Ram refuses to supply, claiming there was no binding contract.

Question:
Is Ram Traders legally bound to honor the orders? What type of offer is involved?

Answer:
Yes, Ram Traders is legally bound. This is a standing or continuing offer, accepted upon each
order placed.

Legal Analysis:
  A standing offer is one where the offeror agrees to supply goods/services as and when
required over a period.

 Each individual order placed by the offeree is a separate acceptance, creating distinct
contracts.

 Cited case: Great Northern Railway Co. v. Witham (1873)

✅ Conclusion:
Ram Traders is bound to fulfill accepted orders under the standing offer. Refusal amounts to
breach of contract.

Invitation to offer,

Q1. Define ‘Invitation to Offer’. How is it different from an ‘Offer’ under the Indian Contract
Act, 1872?

Answer:

An Invitation to Offer (also called an invitation to treat) is a preliminary communication that

invites others to make an offer. It is not an offer in itself, and hence cannot be accepted to
form a binding contract.

Definition of Offer (Section 2(a), Indian Contract Act, 1872):

"When one person signifies to another his willingness to do or to abstain from doing anything
with a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal."

However, an invitation to offer lacks this willingness to obtain final assent and merely seeks to
initiate negotiation.

Distinction between Offer and Invitation to Offer:

Basis Offer Invitation to Offer

Made with intent to create legal

Intent Only invites others to make an offer
obligation

Can be accepted to form a

Legal Status Cannot be accepted; only leads to offers
contract
 “I offer to sell my car for “This car is for sale at 5,00,000.”
Example
5,00,000.” (advert)

Contract Only if followed by an actual offer and

On acceptance
Formation acceptance

Q2. Explain with case laws whether an advertisement is an offer or an invitation to offer.

Answer:

In general, advertisements are treated as invitations to offer, not offers themselves.

Key Case 1: Partridge v. Crittenden (1968)

 A person placed an ad to sell birds.

 Held: The advertisement was merely an invitation to offer, not a binding offer.

Key Case 2: Carlill v. Carbolic Smoke Ball Co. (1893) – Exception

 Advertisement promised a reward of £100 for anyone who used their product and still
got flu.

 Company even deposited money in a bank to show seriousness.

 Held: This was a valid offer to the world at large, not just an invitation.

✅ Conclusion:

 Ordinary advertisements: Invitation to offer

 Specific, reward-based ads with clear intention: May constitute an offer

Q3. Is a price list or catalogue an offer? Explain.

Answer:

No, a price list or catalogue is generally an invitation to offer, not an offer.

Reason:
It does not indicate a willingness to be legally bound; it is merely an invitation to negotiate.
Example:
A store issues a price list for various mobile phones. A customer sees a phone listed for 20,000
and demands it at that price. The store refuses. The customer cannot legally enforce the price
list as an offer.

Case Reference: Grainger & Son v. Gough (1896)

 Distribution of wine catalogue was held to be an invitation to offer, not a binding offer.

Q4. Are goods displayed on shelves in a self-service shop an offer or an invitation to offer?

Answer:

Goods displayed in shops, including self-service shops, constitute an invitation to offer. The
offer is made by the customer when they take the goods to the checkout counter, and the
contract is formed when the cashier accepts the offer by processing the sale.

Key Case: Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953)

 Held: Display of goods on shelves was not an offer, but an invitation to offer.

 Offer is made by the customer, accepted by the shop when the cashier processes the
transaction.

✅ Conclusion:

 Display = Invitation

 Customer = Offeror

 Shop/Cashier = Offeree

Q5. What is the legal status of a tender notice? Is it an offer or invitation to offer?

Answer:

A tender notice is typically an invitation to offer.

 The government or company invites parties to submit tenders, i.e., offers.

 Each tender submitted is an offer, which the inviting party may accept or reject.
However, if the tender is for a definite quantity and it expressly states that the lowest bid will
be accepted, then it may become an offer.

Case: Haridwar Singh v. Bagun Sumbrui (1973)

 The Supreme Court held that an invitation to tender is not an offer, but a mere
invitation to negotiate.

Q6. Case-Based Question:

Scenario:
A garment retailer places a banner:

“Big Sale! Branded jeans starting at 999 only!”

Rajiv enters the store and sees a pair priced at 1,499. He insists on buying it for 999 citing the
advertisement. The store refuses.

Question:
Is the retailer legally obligated to sell the jeans at 999?

Answer:
No, the advertisement is merely an invitation to offer. It does not constitute a binding offer to
sell all jeans at 999.

 Rajiv’s act of offering 999 is an offer.

 The store is free to accept or reject the offer.

 There is no breach of contract, as no contract was formed.

✅ Conclusion:
The store’s advertisement does not create a legal obligation unless it was a clear offer with
terms, consideration, and intent to be bound.

Acceptance: Essentials and legal rules

Q1. What is 'Acceptance' under the Indian Contract Act, 1872?

Legal Provision:
According to Section 2(b) of the Act:
“When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a promise.”

Example:
A offers to sell his house to B for 50 lakhs. B replies, “I agree.”
➡ B's assent constitutes acceptance, and A’s proposal becomes a promise.

Q2. Essentials of a Valid Acceptance under the Act (with Examples)

1. Acceptance must be absolute and unqualified

Legal Basis: Section 7(1)

“In order to convert a proposal into a promise, the acceptance must be absolute and
unqualified.”

Example:
A offers to sell his car to B for 3 lakhs. B says, “I accept, but I’ll pay 2.5 lakhs.”
➡ This is not acceptance; it’s a counter-offer, which terminates the original offer.

2. Acceptance must be communicated to the offeror

Legal Basis: Sections 3 and 4

Acceptance is not complete unless it is communicated to the proposer.

Example:
A offers to sell a watch to B. B writes “I accept” on a piece of paper but does not send it to A.
➡ No valid acceptance; hence, no contract is formed.

3. Acceptance must be in the mode prescribed or usual

Legal Basis: Section 7(2)

If the proposer prescribes a manner of acceptance, it must be accepted in that manner.

Example:
A offers to sell goods to B and asks for acceptance by email. B sends a letter instead.
➡ If A does not object within a reasonable time, the acceptance is valid.
4. Acceptance must be made within the time prescribed or within a reasonable time

Legal Basis: Section 6 (revocation by lapse of time)

Example:
A makes an offer to B on 1st January, asking for acceptance by 5th January. B accepts on 10th
January.
➡ The acceptance is invalid as the offer has lapsed.

5. Acceptance must be by the person to whom the offer is made

Legal Basis: Inferred from Section 2(b)

Example:
A offers to sell a bike to B. C, without authority, accepts the offer.
➡ No valid contract arises, as only B can accept the offer.

6. Acceptance must be made with free consent

Legal Basis: Sections 13 to 22

Consent must be free from coercion, undue influence, fraud, misrepresentation, or mistake.

Example:
A forces B at gunpoint to accept an offer.
➡ B’s acceptance is made under coercion, and the contract is voidable.

Q3. When is the communication of acceptance complete?

Legal Provision: Section 4

 Against the proposer: When acceptance is posted (dispatched).

 Against the acceptor: When the proposer receives it.

Example:
A accepts B’s offer by posting a letter on 1st June. B receives it on 3rd June.
➡ Communication is complete:
  Against A (acceptor): 3rd June

 Against B (proposer): 1st June

Q4. Can silence be treated as acceptance?

Answer:
No, silence does not amount to acceptance. A person cannot be bound by a contract merely
because they did not reject the offer.

Case Reference: Felthouse v. Bindley (1862)

Example:
A writes to B, “If I don’t hear from you by Friday, I’ll take it as accepted.” B remains silent.
➡ No contract is formed.

Q5. Can acceptance be revoked?

Legal Provision: Section 5

Acceptance may be revoked at any time before the communication of acceptance is complete
against the acceptor, but not afterward.

Example:
A posts a letter accepting B’s offer but sends a telegram revoking the acceptance. If the
telegram reaches B before the letter, the revocation is valid.

Q6. What if acceptance is made after the offer is revoked or lapses?

Legal Provision: Section 6

An offer lapses when:

 Time expires,

 Offer is revoked,

 Offeree rejects it,

 Death/insanity of offeror before acceptance.

Example:
A offers to sell goods to B. A dies before B accepts.
➡ The offer lapses, and no contract arises.

✅ Summary Table – Essentials of Valid Acceptance under Indian Law

Relevant
Essential Rule Example
Provision

“I accept at a lower price” is a counter-

Must be absolute and unqualified Section 7(1)
offer.

Writing “I accept” and keeping it is not

Must be communicated Section 4
sufficient.

Must be in prescribed or If email is prescribed, a letter is valid only

Section 7(2)
reasonable mode if not objected to.

Must be made within prescribed

Section 6 Late acceptance after deadline is invalid.
or reasonable time

Section 2(b) A third party cannot accept on someone

Must be by the offeree
(inferred) else’s behalf without authority.

Acceptance under coercion makes the

Must be with free consent Sections 13–22
contract voidable.

Can be revoked before Revocation valid if it reaches before

Section 5
communicated acceptance is known to the offeror.

✅ Case Study 1: Acceptance Must Be Communicated

Case Study:

Mr. A sent an offer by post to Ms. B on 1st April, offering to sell his land for 20 lakhs. Ms. B
wrote a letter accepting the offer on 4th April but forgot to post it. Meanwhile, Mr. A, not
having heard from B, sold the land to Mr. C on 6th April. Later, Ms. B claimed that a valid
contract existed because she had accepted the offer on 4th April.

Question:
Was there a valid acceptance? Can Ms. B enforce the contract against Mr. A?

Answer:

No, Ms. B cannot enforce the contract because the acceptance was never communicated to
Mr. A.

Legal Analysis:

 Section 2(b) of the Indian Contract Act, 1872, defines acceptance as the assent to a
proposal, which must be signified.

 Section 4 clarifies that acceptance is complete against the proposer when it is put into
a course of transmission (e.g., posted) so as to be out of the power of the acceptor.

 In this case, B’s letter of acceptance was never posted, so there was no communication
of acceptance.

Relevant Principle:

A mere mental decision or even writing an acceptance without communication does not form a
contract. (Felthouse v. Bindley, 1862) also supports this principle.

✅ Conclusion:
There was no valid acceptance, and hence no enforceable contract under the Indian Contract
Act, 1872.

✅ Case Study 2: Acceptance Must Be Absolute and Unqualified

Case Study:

Mr. X offers to sell his car to Mr. Y for 5 lakhs. Mr. Y responds, “I agree to buy the car, but I will
pay 4.8 lakhs.” Mr. X does not respond. A week later, Mr. Y sends a letter agreeing to pay the
full 5 lakhs. Mr. X refuses to sell the car.

Question:

Is Mr. X legally bound to sell the car after Mr. Y’s second acceptance?

Answer:

No, Mr. X is not legally bound to sell the car to Mr. Y.

Legal Reasoning:
  Under Section 7(1) of the Indian Contract Act, acceptance must be absolute and
unqualified.

 Mr. Y’s first response was a counter-offer, which terminates the original offer.

 Once an offer is rejected or modified, the offeree cannot later accept it unless it is
renewed by the offeror.

Legal Principle:

A counter-offer amounts to rejection of the original offer. (Hyde v. Wrench, 1840)

✅ Conclusion:
Mr. X’s original offer was terminated by Y’s counter-offer. Therefore, no contract arose.

✅ Case Study 3: Prescribed Mode of Acceptance

Case Study:

Mr. K sent an offer to sell goods to Ms. R, stating that acceptance must be sent “via email only.”
Ms. R posted a letter of acceptance instead. Mr. K received the letter and did not object. Later,
he refused to honour the contract, claiming acceptance was invalid.

Question:

Is the acceptance valid despite the deviation from the prescribed mode?

Answer:

Yes, the acceptance is valid.

Legal Justification:

 Section 7(2) of the Indian Contract Act provides that if the proposer prescribes a mode
of acceptance, and the acceptor uses a different method, the proposer may insist on
compliance, but only if he communicates his objection within a reasonable time.

 Since Mr. K did not object upon receiving the letter, he is deemed to have waived the
mode requirement.

Relevant Doctrine:

Silence or inaction on the part of the proposer after receiving acceptance in an alternative
manner results in a valid contract.
✅ Conclusion:
The acceptance by post is valid due to Mr. K’s inaction, and a contract exists.

✅ Case Study 4: Acceptance Must Be Made by the Offeree

Case Study:

Company A sent a proposal to Mr. P to become their regional distributor. Mr. P’s friend, Mr. Q,
knowing about the proposal, sent a letter of acceptance on behalf of Mr. P without authority.
Later, Mr. P wanted to enforce the contract.

Question:

Can Mr. P enforce the contract based on Mr. Q’s acceptance?

Answer:

No, Mr. P cannot enforce the contract.

Legal Reasoning:

 As per Section 2(b), the proposal must be accepted by the person to whom it is made.

 Acceptance by an unauthorized person is not valid unless subsequently ratified.

 There is no indication that Mr. Q had authority or that Mr. P ratified the acceptance
before it was revoked.

Principle:

A stranger to the proposal cannot accept the offer unless legally authorized.

✅ Conclusion:
There is no valid acceptance, and hence no contract.

✅ Case Study 5: Revocation of Acceptance

Case Study:

A sends an acceptance letter to B by post on 1st July. On 2nd July, A changes his mind and
sends a telegram revoking his acceptance. B receives the telegram on 3rd July and the
acceptance letter on 4th July. B insists that a contract was already formed.
Question:

Is the revocation of acceptance valid? Is a contract formed?

Answer:

The revocation is valid and no contract is formed.

Legal Provision:

 Under Section 5 of the Indian Contract Act, 1872:

An acceptance may be revoked at any time before the communication of acceptance is

complete as against the acceptor, but not afterward.

Application:

 Communication is complete against the acceptor (A) when B receives the letter — 4th
July.

 Revocation telegram reached on 3rd July, i.e., before acceptance was communicated to
the proposer.

✅ Conclusion:
The revocation was timely. Therefore, no contract came into existence.

✅ Case Study 6: Silence as Acceptance

Case Study:

A sent an offer to B stating, “If I do not receive a reply from you within 7 days, I will assume you
have accepted the offer.” B remained silent.

Question:

Is B’s silence a valid acceptance under Indian law?

Answer:

No, silence does not amount to acceptance under the Indian Contract Act.

Legal Principle:

 Acceptance must be communicated.

  As per Felthouse v. Bindley (1862), which is persuasive in Indian law, “You cannot
impose a contract on another by stating that silence shall be deemed as consent.”

✅ Conclusion:
Since B did not communicate acceptance, no contract exists.

Communication of offer, acceptance, and revocation

Part A: Theoretical Questions

Q1. What is meant by communication of an offer under the Indian Contract Act, 1872?

Answer:
According to Section 4 of the Indian Contract Act, 1872,

"The communication of a proposal is complete when it comes to the knowledge of the person to
whom it is made."

This means that merely sending an offer is not sufficient; the offeree must receive and
understand it for the communication to be complete.

Example:
A writes a letter to B offering to sell his car. The letter reaches B on 3rd June.
➡ The communication of the offer is complete on 3rd June, when B receives the letter.

Q2. When is the communication of acceptance complete?

Answer:
As per Section 4, the communication of acceptance is deemed complete:

 As against the proposer: when it is put in a course of transmission to him so as to be

out of the power of the acceptor.

 As against the acceptor: when it comes to the knowledge of the proposer.

Example:
A offers to sell a house to B. B posts a letter of acceptance on 5th May. A receives the letter on
8th May.

 Against A (proposer): acceptance is complete on 5th May (when B posted it).

  Against B (acceptor): it is complete on 8th May (when A received it).

Q3. When is the communication of revocation complete?

Answer:
According to Section 4:

 For the person making the revocation: when it is put into a course of transmission.

 For the person to whom it is made: when it comes to his knowledge.

Example:
A sends an offer to B. Later, A sends a revocation letter on 1st August. B receives it on 4th
August.
➡ The revocation is complete against A on 1st August and against B on 4th August.

Q4. Can acceptance or revocation be revoked? If yes, under what conditions?

Answer:
Yes, Section 5 allows revocation of acceptance or offer:

 Offer can be revoked any time before the communication of acceptance is complete
against the offeror.

 Acceptance can be revoked any time before the communication is complete against the
acceptor.

Example:
A offers to sell goods to B. B posts a letter of acceptance on 1st June but sends a telegram
revoking his acceptance on 2nd June. If the telegram reaches A before the acceptance letter,
the revocation is valid.

Q5. Can silence be considered acceptance?

Answer:
No. Silence does not constitute acceptance unless there is a prior course of dealing or special
circumstances implying consent.

This is supported by the English case Felthouse v. Bindley (1862), which has persuasive value in
Indian law.
Example:
A says to B, “If I don’t hear from you by Friday, I’ll assume you accepted my offer.” B remains
silent.
➡ No contract is formed. Silence is not acceptance.

✅ Part B: Case Study-Based Questions (With Legal Analysis)

Q6. Case Study – Communication of Offer

Facts:
Mr. X sends a letter on 1st January offering to sell land to Mr. Y. The letter is delayed and
reaches Y on 10th January. Y accepts on 11th January. X refuses to honour the contract claiming
the offer had expired.

Legal Issue:
When is communication of offer complete?

Answer:
Under Section 4, the communication of an offer is complete only when it comes to the
knowledge of the offeree.

 Here, Mr. Y received the offer on 10th January, so that is the relevant date.

 If there was no time limit specified, the offer is valid for a reasonable time.

 Y accepted it on 11th January, which is within a reasonable period.

➡ The contract is valid and binding.

Q7. Case Study – Revocation of Acceptance

Facts:
Mr. A offers to sell a plot to B. B posts a letter of acceptance on 1st July. On 2nd July, B sends a
fax revoking the acceptance. A receives the fax on 3rd July and the letter on 4th July.

Legal Issue:
Can an acceptance be revoked after it is posted?

Answer:
Yes, as per Section 5, an acceptance can be revoked before it is communicated to the proposer.
  B posted the letter on 1st July → Acceptance complete against A.

 But A received the revocation (fax) on 3rd July, before receiving the letter on 4th July.

 Hence, revocation is valid.

➡ No contract exists.

Q8. Case Study – Communication of Revocation

Facts:
Company A offered to supply goods to Company B. On 5th October, A sent a revocation of offer
by email. However, B had already sent a letter of acceptance on 4th October, which A received
on 6th October.

Legal Issue:
Was the revocation valid?

Answer:

 Revocation of an offer must reach the offeree before acceptance is posted (Section 5).

 In this case, B posted acceptance on 4th October, while revocation was sent on 5th
October.

➡ Since the offer was accepted before revocation was communicated, revocation is
ineffective, and the contract is valid.

Q9. Case Study – Acceptance Not Communicated

Facts:
Mr. M offers to sell his gold chain to Ms. N. Ms. N writes "I accept" on the letter and puts it in
her drawer but does not inform Mr. M. Later, she claims there was a valid contract.

Legal Issue:
Is there a valid acceptance?

Answer:
No. Under Section 4, acceptance must be communicated to the proposer.
Ms. N merely wrote her acceptance but did not communicate it to Mr. M.

➡ No contract exists.
Q10. Case Study – Silence as Acceptance

Facts:
A offered to sell 100 chairs to B, stating: "If I don’t hear from you within 3 days, I will consider
the deal final." B did not respond. A delivered the chairs and demanded payment.

Legal Issue:
Can silence be considered as acceptance?

Answer:
No. Acceptance must be express or implied through conduct—not through silence, unless prior
dealings justify it.

As per the ruling in Felthouse v. Bindley, silence does not amount to acceptance.

➡ No contract exists, and B is not liable to pay.

Free consent

✅ PART A: Theoretical Questions

Q1. What is ‘Free Consent’ under the Indian Contract Act, 1872?

Legal Reference: Section 13 & 14, Indian Contract Act, 1872

Explanation:

 Consent means both parties agree upon the same thing in the same sense (Section 13 –
Consensus ad idem).

 Free Consent (Section 14) implies such consent must not be caused by:

1. Coercion

2. Undue influence

3. Fraud

4. Misrepresentation

5. Mistake
Example: A signs a contract to sell his land to B, believing it’s a rental agreement. There's no
meeting of minds – consent is not free.

Case Law:
⚖
‍ Raffles v. Wichelhaus (1864) – Confusion over “Peerless” ship led to no consensus ad idem
→ no contract.

Q2. What is consent and how does it differ from free consent?

Explanation:

 Consent: Agreement to the same thing in the same sense.

 Free Consent: Consent not induced by force, fraud, or mistake.

Example: A consents to sell his car to B, but does so under B's threat. Consent exists, but it is
not free.

Case Law:
⚖
‍ Chikham Ammiraju v. Chikham Seshamma (1917) – Consent obtained through suicide
threat was not free.

Q3. Define Coercion.

Legal Reference: Section 15

Explanation:
Coercion means:

 Committing/threatening an act forbidden by IPC.

 Unlawful detaining of property.

 Intent to induce a party to enter a contract.

Example: A threatens to file a false police complaint unless B sells his shop.

Case Law:
⚖
‍ Ranganayakamma v. Alwar Setti (1889) – Widow forced to adopt under threat; consent
held as coerced.

Q4. What is the legal effect of coercion?

Legal Reference: Section 19

Explanation:
Contract is voidable at the option of the party coerced. The party can:

 Rescind the contract.

 Seek restitution.

Case Law:
⚖
‍ Chikham Ammiraju v. Chikham Seshamma – Contract set aside for coercion via suicide
threat.

Q5. Define Undue Influence.

Legal Reference: Section 16

Explanation:
Occurs when:

1. One party is in a position to dominate the will of the other.

2. Uses that position to gain unfair advantage.

Presumed in fiduciary relationships.

Example: A sick person gifts property to his doctor during treatment.

Case Law:
⚖
‍ Mannu Singh v. Umadat Pande (1890) – Gift by sick man to spiritual guru held under
undue influence.

Q6. What is presumed undue influence?

Explanation:
The court presumes undue influence when:

 Parties share fiduciary ties.

 One has real or apparent authority.

Example: Parent-child, solicitor-client.

Case Law:
 ‍⚖ Ranee Annapurni v. Swaminatha – Gift to spiritual advisor presumed influenced.

Q7. Define Fraud.

Legal Reference: Section 17

Explanation:
Fraud includes:

 False statements known to be false.

 Active concealment.

 False promises.

 Any act to deceive.

Example: A sells a TV hiding that it doesn't work.

Case Law:
‍⚖ Derry v. Peek (1889) – False claim in prospectus known to be untrue held as fraud.

Q8. Difference between fraud and misrepresentation.

Criteria Fraud Misrepresentation

Intentio
Intent to deceive Innocent or negligent
n

Remedy Rescission + Damages Rescission only

Selling a dead horse as Believing horse is alive but it’s

Example
alive dead

Case Law:
⚖
‍ Peek v. Gurney (1873)

Q9. What remedies are available in fraud?

Answer:

 Contract is voidable.
  Aggrieved party may rescind.

 Can claim damages.

Example: Sale of car with a hidden engine fault.

Case Law:
‍⚖ Derry v. Peek – Damages allowed when intent to deceive is proved.

Q10. What is misrepresentation?

Legal Reference: Section 18

Explanation:
Innocent or negligent misstatement of fact that induces a party to enter a contract.

Example: A wrongly claims the land is free from encumbrance.

Case Law:
‍⚖ Peek v. Gurney – Misrepresentation in prospectus led to investor losses.

Q11. What is mistake in contract law?

Explanation:

 Unilateral mistake – only one party mistaken: contract valid.

 Bilateral mistake – both parties mistaken about essential fact: contract void (Sec. 20).

Example: Sale of a horse both believe is alive, but it died yesterday.

Q12. What is mistake of law vs mistake of fact?

Type Effect

Mistake of Indian law No excuse (Sec. 21)

Mistake of foreign Treated as mistake of fact → contract

law void

Example: A contract void if parties mistakenly believe foreign law permits sale.
Q13. Is silence fraud?

Explanation:
Silence is not fraud unless:

 Duty to speak exists.

 Silence is equivalent to speech.

Case Law:
‍⚖ Smith v. Hughes (1871) – Mere silence ≠ fraud unless obligation to disclose.

Q14. Can coercion from third party invalidate contract?

Explanation:
Yes. Coercion by anyone, not necessarily a contracting party, affects consent.

Case Law:
‍⚖ Ranganayakamma v. Alwar Setti – Third-party pressure invalidated adoption deed.

Q15. What if a party affirms contract after fraud?

Explanation:
If a party discovers the fraud and:

 Still acts on the contract,

 Uses the benefit,

They waive their right to rescind.

Case Law:
‍⚖ Long v. Lloyd (1958) – Continued use after discovering fraud barred rescission.

Q16. What is the burden of proof in undue influence?

Explanation:
Once the transaction appears unconscionable, burden shifts to stronger party to prove:

 No dominance.

 Free consent.
Case Law:
‍⚖ Mannu Singh v. Umadat Pande

Q17. Can a contract be void due to mistake of identity?

Answer:
Yes, if identity is material to contract and mistaken.

Case Law:
‍⚖ Cundy v. Lindsay (1878) – Seller deceived about buyer’s identity → void contract.

Q18. Can emotional pressure be undue influence?

Explanation:
Yes. If it overrides independent judgment, especially in fiduciary or family relationships.

Case Law:
‍⚖ Ranee Annapurni v. Swaminatha

Q19. Is a gift deed affected by undue influence?

Answer:
Yes. If a gift is made under influence, it can be challenged.

Case Law:
‍⚖ Mannu Singh v. Umadat Pande

Q20. Can a minor give free consent?

Legal Reference: Section 11

Explanation:
A minor lacks legal capacity to contract. So any consent by minor is void ab initio.

Case Law:
‍⚖ Mohori Bibee v. Dharmodas Ghose (1903) – Minor's contract is void.
✅ PART B – CASE STUDY-BASED QUESTIONS
Q21. Coercion: Forced Adoption

Facts: A young widow was forced by her in-laws to adopt a child before they allowed her
husband's funeral rites.

Legal Issue: Was the consent for adoption obtained under coercion?

Legal Analysis:
Under Section 15, coercion includes compelling a person by unlawful threats. The denial of last
rites to compel adoption constitutes coercion.

Case Law:
⚖
‍ Ranganayakamma v. Alwar Setti (1889) – Adoption held invalid due to coercion.

Q22. Coercion by Threat of Suicide

Facts: A threatened to commit suicide if his wife and son did not transfer property to him.

Legal Issue: Does threat of suicide amount to coercion?

Legal Analysis:
Yes. Threat to commit suicide is illegal under IPC and qualifies as coercion.

Case Law:
‍⚖ Chikham Ammiraju v. Chikham Seshamma (1917) – Contract voidable due to coercion.

Q23. Undue Influence by Religious Guru

Facts: A religious guru persuades a dying disciple to donate all his property to the ashram.

Legal Issue: Is consent valid under spiritual or fiduciary pressure?

Legal Analysis:
The guru dominated the disciple’s will. Such transactions are presumed under undue influence
unless proved otherwise.

Case Law:
⚖
‍ Mannu Singh v. Umadat Pande (1890) – Gift void due to spiritual dominance.
Q24. Misrepresentation of Property Title

Facts: A sold a house to B, stating it was free from encumbrance. It later turned out the
property was under litigation.

Legal Issue: Is this misrepresentation?

Legal Analysis:
Yes. An incorrect statement made innocently but inducing consent is misrepresentation under
Section 18.

Case Law:
‍⚖ Peek v. Gurney (1873) – Investor misled by false claims in a prospectus.

Q25. Fraud through Concealment

Facts: A sells a used car to B, knowing the engine has defects but doesn’t disclose.

Legal Issue: Is this fraud?

Legal Analysis:
Yes. Active concealment of a material fact is fraud under Section 17.

Case Law:
‍⚖ Derry v. Peek (1889) – False statement made knowingly is fraud.

Q26. Silence as Fraud in Fiduciary Relationship

Facts: An agent knows about structural defects in a property and does not inform the buyer.

Legal Issue: Can silence amount to fraud?

Legal Analysis:
Yes. Fiduciary relationships create a duty to speak. Non-disclosure = fraud.

Case Law:
⚖
‍ Smith v. Hughes (1871) – Generally silence isn’t fraud, but not in fiduciary cases.

Q27. Contract with a Minor under Influence

Facts: A landlord induces a minor tenant to sign a contract waiving legal rights.
Legal Issue: Is the contract valid?

Legal Analysis:
Contracts with minors are void (Sec. 11). Any induced consent is irrelevant.

Case Law:
‍⚖ Mohori Bibee v. Dharmodas Ghose (1903) – Minor’s agreement is void ab initio.

Q28. Unilateral Mistake about Subject Matter

Facts: A agrees to buy a painting thinking it is by a famous artist, but B makes no such claim.

Legal Issue: Is contract void due to mistake?

Legal Analysis:
Unilateral mistake doesn’t affect validity unless induced by fraud or misrepresentation.

Case Law:
‍⚖ Smith v. Hughes – Buyer’s wrong assumption is not seller’s fault.

Q29. Bilateral Mistake about Existence

Facts: A agrees to sell a ship to B, unaware that it already sank.

Legal Issue: Is the contract valid?

Legal Analysis:
No. Under Section 20, mistake as to existence of subject matter renders contract void.

Case Law:
‍⚖ Couturier v. Hastie (1856) – Contract void when subject no longer existed.

Q30. Mistake of Identity

Facts: A sells goods to a person assuming he is a reputed trader, but he was a fraudster.

Legal Issue: Is this void for mistake?

Legal Analysis:
Yes. If identity was material, and mistaken, contract is void.

Case Law:
 ‍⚖ Cundy v. Lindsay (1878) – Void contract due to mistake in buyer’s identity.

Q31. Influence by Doctor

Facts: A patient gifts entire property to her doctor in gratitude.

Legal Issue: Is consent influenced by fiduciary relationship?

Legal Analysis:
Doctor–patient relationship presumes undue influence if benefit appears unfair.

Case Law:
‍⚖ Ranee Annapurni v. Swaminatha – Presumption of undue influence upheld.

Q32. Pressure from Employer

Facts: An employee is told to sign a bond or lose job.

Legal Issue: Is employer pressure undue influence?

Legal Analysis:
Yes, if employer misuses dominance unfairly. Consent obtained is voidable.

Case Law:
‍⚖ Sundaram Finance v. State of Kerala – Employer’s dominant position considered.

Q33. Mistake about Legal Effect of Document

Facts: A signs a guarantee form thinking it’s just a recommendation letter.

Legal Issue: Does mistake of document nature void the contract?

Legal Analysis:
Yes, if mistaken belief affects the very nature of agreement.

Case Law:
‍⚖ Foster v. Mackinnon (1869) – Signature obtained under false impression is void.

Q34. Sale of Defective Goods with False Assurance

Facts: A assures B a vehicle is "as good as new" though it has hidden defects.

Legal Issue: Is it fraud or misrepresentation?

Legal Analysis:
Knowingly false statement is fraud. B can rescind and claim damages.

Case Law:
‍⚖ Horsefall v. Thomas (1862) – Fraud requires inducement and reliance.

Q35. Contract Signed Under Alcohol Influence

Facts: A signs agreement while intoxicated and under pressure from friend.

Legal Issue: Is consent free?

Legal Analysis:
Consent given without understanding and under influence is not free.

Case Law:
⚖
‍ Raghunath Prasad v. Sarju Prasad (1924) – Consent requires mental capacity and no
domination.

Q36. Wife Influencing Husband’s Will

Facts: Husband leaves entire property to wife due to her constant pressure.

Legal Issue: Is it undue influence?

Legal Analysis:
Marital relationships don’t automatically presume influence, but proof of domination is
needed.

Case Law:
‍⚖ Wingrove v. Wingrove (1885) – Will made under pressure invalidated.

Q37. Innocent Misrepresentation in Advertisement

Facts: Company advertises software compatible with all systems, but it doesn't support Mac.

Legal Issue: Is it misrepresentation?

Legal Analysis:
Yes, if claim was made believing it true, but was incorrect. Buyer can rescind.

Case Law:
⚖
‍ Peek v. Gurney – Innocent false statements can still void contract.

Q38. Mental Incompetency During Consent

Facts: A mentally unstable person signs property transfer under advice of his brother.

Legal Issue: Is the consent free?

Legal Analysis:
No. Person of unsound mind cannot give free consent (Sec. 12).

Case Law:
‍⚖ Inder Singh v. Parmeshwardhari Singh – Consent by unsound person = voidable.

Q39. Threat of Filing False Case

Facts: B threatens to file a false theft case unless A signs a promissory note.

Legal Issue: Is it coercion?

Legal Analysis:
Yes. Threat of legal action with no basis is coercion under Section 15.

Case Law:
‍⚖ Chikham Ammiraju v. Chikham Seshamma

Q40. Induced Misbelief About Market Price

Facts: A convinces B the market rate of a product is much lower than actual, leading to a sale.

Legal Issue: Is it misrepresentation or buyer's negligence?

Legal Analysis:
If A intentionally misleads, it’s misrepresentation. But if B could’ve verified, courts may not
grant relief.

Case Law:
 ‍⚖ With v. O’Flanagan (1936) – Duty to update false impression before contract concludes.

Capacity to contract

PART A: Expanded Theoretical Questions and Detailed Legal Answers

Q1. Who is competent to contract under the Indian Contract Act, 1872?

Legal Provision:
Section 11 of the Indian Contract Act, 1872 states:

“Every person is competent to contract who is of the age of majority according to the law to
which he is subject, and who is of sound mind, and is not disqualified from contracting by any
law to which he is subject.”

Legal Requirements:

1. Age of Majority: 18 years (as per Indian Majority Act, 1875), or 21 if a guardian is
appointed.

2. Soundness of Mind: Must understand and form rational judgment about the
agreement.

3. No Disqualification by Law: Persons like convicts, alien enemies, or insolvents may be

barred.

Example:
Ravi, aged 25 and mentally sound, contracts to sell his house. This is a valid contract.

Case Law:
⚖
‍ Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC):
The Privy Council held that a minor is not competent to contract and any agreement with him is
absolutely void.

Q2. What is the effect of a contract entered into by a minor?

Legal Principle:
A contract by a minor is void ab initio, i.e., void from the beginning. It cannot be ratified even
after attaining majority.

Example:
A 17-year-old borrows 10,000 for business and later refuses to repay. The creditor cannot sue.

Case Law:
⚖
‍ Mohori Bibee v. Dharmodas Ghose – The minor executed a mortgage. Court held the
contract was void and unenforceable.

Legal Reasoning:
Since the minor lacks capacity, there is no valid "consent" under Section 13. Without valid
consent, no agreement can be a contract under Section 10.

Q3. Can a minor be a beneficiary or promisee in a contract?

Answer:
Yes. Though a minor cannot contract, nothing prevents a contract being made for the benefit
of a minor, which the minor can enforce.

Example:
If X contracts with Y to pay 50,000 to Y's minor son for educational expenses, the minor can
enforce this.

Case Law:
⚖
‍ Raghava Chariar v. Srinivasa (1916) 39 Mad 308 – A minor was held entitled to the
benefits conferred by a family arrangement.

Q4. Can a minor ratify a contract after attaining majority?

Legal Rule:
No. Ratification requires prior valid authority or contract. A void contract cannot be ratified (as
ratification relates back to original date).

Example:
Rohan, a minor, signs a loan agreement. On turning 18, he sends an email affirming it. Still, the
contract remains void.

Case Law:
 ⚖
‍ Indran Ramaswamy v. Anthappa AIR 1934 Mad 91 – Ratification of a void agreement is
ineffective.

Q5. What is the concept of ‘necessaries’ and liability of a minor for necessaries?

Statutory Reference:
Section 68, Indian Contract Act:
If a person incapable of contracting is supplied necessaries suited to his condition in life, the
supplier is entitled to reimbursement from the minor’s property (not personally).

Key Point:
Only reasonable necessaries (food, education, medicine) qualify.

Example:
Providing medicine to a minor suffering from a disease entitles the doctor to recover charges
from minor’s estate.

Case Law:
⚖
‍ Nash v. Inman (1908) 2 KB 1 – A tailor was denied payment for fancy coats as they were
not necessaries.

Q6. Can a minor act as an agent under Indian law?

Answer:
Yes. A minor can act as an agent under Section 184 of the Contract Act. However, he is not
personally liable to the principal or third parties.

Example:
Raju (minor) collects rent as an agent. His principal is liable for his acts, not Raju himself.

Legal Rationale:
Agency doesn’t require contractual capacity, only the ability to act.

Q7. Can a minor be admitted into a partnership firm?

Answer:
Yes. Under Section 30, Indian Partnership Act, 1932, a minor may be admitted to the benefits
of partnership, with consent of other partners. He:

 Shares profits
  Has access to accounts

 Is not personally liable

Example:
17-year-old is given a share in family business. He is not liable for firm's debts.

Case Law:
‍⚖ S.C. Cambatta & Co. v. S.C. Cambatta – Minor’s right to benefit upheld.

Q8. What is the legal meaning of "sound mind" for the purpose of contracting?

Statutory Provision:
Section 12 of the Indian Contract Act defines soundness of mind:

“A person is said to be of sound mind for the purpose of making a contract if, at the time of
making it, he is capable of understanding it and of forming a rational judgment as to its effect
upon his interests.”

Key Points:

 Soundness is time-specific — evaluated at the moment of the agreement.

 Sound mind excludes:

o Lunatics

o Idiots

o Persons in temporary unsoundness (e.g., during illness, intoxication)

Example:
If A, suffering from schizophrenia, enters into a contract during a lucid interval, it may be valid.

Case Law:
⚖
‍ Chacko v. Mahadevan AIR 2007 Ker 213 – Contract held valid as plaintiff was shown to be
of sound mind at the time of agreement.

Q9. Can a person of unsound mind ever enter into a valid contract?

Answer:
Yes. A person with unsoundness of mind (e.g., lunacy) can enter a valid contract during lucid
intervals when they temporarily regain understanding and judgment.
Example:
R, diagnosed with bipolar disorder, sells a car during a lucid phase. If he understood the nature
and implications, the sale is valid.

Burden of Proof:
On the party alleging unsoundness.

Case Law:
⚖
‍ Inder Singh v. Parmeshwardhari Singh AIR 1957 Pat 491 – Contract by lunatic upheld
where lucid interval was established.

Q10. What is the legal status of contracts by intoxicated persons?

Legal Position:
If a person is so intoxicated that:

 They cannot understand the terms, or

 Cannot form rational judgment,

then the contract is voidable at the option of that person.

Example:
S signs a property transfer document while heavily drunk and unaware of its nature. It is
voidable.

Case Law:
‍⚖ Bai Mani v. Jethabhai AIR 1976 Guj 23 – The court refused to uphold a contract signed by
a person under influence of alcohol who couldn’t comprehend its effect.

Q11. Can an alien enemy enter into a valid contract under Indian law?

Answer:
No. An alien enemy (i.e., a person whose country is at war with India) is disqualified under
public policy from entering into contracts with Indian citizens during hostilities.

Legal Reasoning:
Such contracts are either suspended or declared void, as they may prejudice national interest.

Q12. Can a foreign sovereign enter into contracts in India?

Answer:
Yes, but subject to doctrines of immunity and statutory limitations. They cannot be sued in
Indian courts without Central Government's sanction under Section 86 of CPC.

Example:
A contract by a foreign ambassador to rent a property in India may be valid but not enforceable
unless immunity is waived.

Q13. What is the effect of insolvency on capacity to contract?

Legal Rule:
An undischarged insolvent cannot enter into contracts that deal with their property, as it vests
with the Official Receiver.

However, they may enter into contracts for employment or service unless restricted.

Example:
An insolvent cannot sell his shop, but may be employed by a firm.

Q14. Are corporations competent to contract?

Answer:
Yes. A company is a juristic person and can contract within the scope of its Memorandum and
Articles of Association. Ultra vires acts are void.

Case Law:
⚖
‍ Ashbury Railway Carriage & Iron Co. v. Riche (1875) LR 7 HL 653 – Contracts beyond the
company's object clause were held void.

Example:
If a textile company enters a contract for building roads, it may be ultra vires and void.

Q15. Can a convict enter into a valid contract?

Answer:
A convict under sentence is temporarily disqualified from contracting while in prison, especially
for property-related matters. The disability ceases upon release or pardon.
Q16. Can a guardian enter into a contract on behalf of a minor?

Answer:
Yes, provided the contract is for the minor's benefit and the guardian has legal authority.
Courts scrutinize such contracts for fairness and benefit.

Case Law:
⚖
‍ Subramaniam v. Subba Rao AIR 1950 Mad 130 – Guardian’s contract upheld as it
benefited the minor.

Q17. Can a minor's misrepresentation of age result in liability?

Answer:
No personal liability, as the contract is void. However, courts may apply equitable doctrines to
restore property or prevent unjust enrichment.

Case Law:
⚖
‍ Leslie v. Sheill (1914) 3 KB 607 – Held that minor was not liable but could be compelled to
restore unjust gains.

Q18. Can a minor execute a power of attorney?

Answer:
No. A power of attorney is an authorization to contract, which requires contractual capacity.
Hence, a minor cannot validly execute it.

Q19. Can a physically disabled person (blind, deaf, mute) contract?

Answer:
Yes, provided they are of sound mind and understand the terms. Physical disability does not
affect capacity under Section 11.

Example:
A blind man signing with assistance or using braille documents is valid.

Q20. Who bears the burden of proof in establishing unsoundness of mind?

Answer:
The burden lies on the party alleging that the person was of unsound mind at the time of the
contract.

Case Law:
⚖
‍ S.K. Singh v. S.R. Jaiswal AIR 1963 All 336 – The party challenging the contract must
provide sufficient medical or factual evidence.

PART B: Case Study-Based Questions with Detailed Legal Answers

Q21. Case Study: Minor Signing Loan Agreement

Facts:
Arun, aged 17 years and 10 months, enters into a loan agreement with Mr. Bhaskar, borrowing
50,000 for a business venture. After turning 18, he refuses to repay the amount.

Legal Issue:
Is the contract enforceable against Arun?

Relevant Law:

 Section 11, Indian Contract Act – Minor not competent to contract

 Mohori Bibee v. Dharmodas Ghose (1903) – Contract with a minor is void ab initio

Application:
Arun was a minor at the time of contract, rendering the agreement void. Ratification after
majority is not legally valid.

Conclusion:
Mr. Bhaskar has no legal remedy; the contract is void and unenforceable.

Q22. Case Study: Minor Receiving Money for Necessaries

Facts:
Kiran, aged 16, receives 20,000 from Dr. Ahuja for urgent heart medication. He later refuses to
repay.

Legal Issue:
Is Dr. Ahuja entitled to reimbursement?

Relevant Law:

 Section 68, Indian Contract Act – Reimbursement for necessaries

  Nash v. Inman (1908) – Necessaries must be suited to the minor’s condition

Application:
Medical treatment for a life-threatening condition qualifies as a necessary.

Conclusion:
Dr. Ahuja can recover 20,000 from Kiran’s property (but not from him personally).

Q23. Case Study: Minor Misrepresenting Age

Facts:
Priya, 17, claims to be 19 and purchases a bike on EMI. Later, she refuses to pay the
installments.

Legal Issue:
Can the seller enforce the contract or recover the bike?

Relevant Law:

 Minor cannot be estopped from pleading minority

 Leslie v. Sheill (1914) – Minor cannot be personally liable for deceit

Application:
Although Priya misrepresented her age, the contract remains void.

Conclusion:
The seller cannot recover the money but can repossess the bike to prevent unjust enrichment.

Q24. Case Study: Lunatic Entering into Contract During Lucid Interval

Facts:
Mohan, occasionally suffering from bipolar disorder, sells his land during a stable mental phase.

Legal Issue:
Is the sale valid?

Relevant Law:

 Section 12, Indian Contract Act – Sound mind during contract

 Inder Singh v. Parmeshwardhari Singh – Contract valid during lucid interval

Application:
Mohan was of sound mind at the time of contract.

Conclusion:
The contract is valid and enforceable.

Q25. Case Study: Intoxicated Person Signing a Contract

Facts:
Ramesh signs a property sale agreement at a party after heavy drinking. He later claims he was
too intoxicated to understand.

Legal Issue:
Is the contract voidable?

Relevant Law:

 Section 12 – Mental incapacity due to intoxication

 Bai Mani v. Jethabhai – Contract invalid if party was incapable of understanding terms

Application:
If proven, Ramesh’s contract is voidable at his option.

Conclusion:
Ramesh can legally avoid the contract if intoxication is established.

Q26. Case Study: Minor as a Beneficiary

Facts:
An insurance policy is taken in the name of a 12-year-old boy by his uncle, who pays all
premiums.

Legal Issue:
Can the minor claim the policy amount on maturity?

Relevant Law:

 Minor can be a beneficiary

 Raghava Chariar v. Srinivasa – Minor may accept benefit under a contract

Application:
The boy is entitled to the benefit as he is not a contracting party.
Conclusion:
Yes, the minor can claim the amount.

Q27. Case Study: Company Enters into Contract Beyond Its Objects

Facts:
ABC Ltd., a textile company, enters into a contract to supply cement. The contract is challenged.

Legal Issue:
Is the contract enforceable?

Relevant Law:

 Ultra vires doctrine

 Ashbury Railway Carriage v. Riche – Ultra vires acts are void

Application:
Since it falls outside the company’s object clause, the contract is void.

Conclusion:
The contract is not enforceable.

Q28. Case Study: Minor Appointed as Agent

Facts:
Sohan, aged 17, is appointed as a rent collection agent by a landlord.

Legal Issue:
Is the appointment valid?

Relevant Law:

 Section 184 – Agent need not be competent to contract

 Minor cannot be personally liable

Application:
Valid agency; landlord is bound by Sohan’s acts.

Conclusion:
Yes, the appointment is valid, but Sohan bears no personal liability.
Q29. Case Study: Minor Partner in a Firm

Facts:
Ravi, aged 16, is admitted to a family business as a partner sharing profits.

Legal Issue:
Is this arrangement valid?

Relevant Law:

 Section 30, Indian Partnership Act, 1932 – Minor may be admitted to benefits

 S.C. Cambatta & Co. v. S.C. Cambatta

Application:
He can share profits but has no personal liability for firm’s losses.

Conclusion:
Yes, valid to the extent of benefits only.

Q30. Case Study: Convict Attempting to Sell Property

Facts:
Ajay, serving a 7-year sentence, attempts to sell his land.

Legal Issue:
Is he competent to contract?

Legal Rule:
A convict loses capacity for certain contracts temporarily during incarceration.

Application:
Ajay’s right to dispose of property is suspended until release.

Conclusion:
The sale is invalid during the sentence period.

Q31. Case Study: Alien Enemy Enters into Lease Agreement

Facts:
A Pakistani national signs a lease with an Indian firm during war-like hostilities.

Legal Issue:
Is the lease enforceable?

Legal Rule:
Contracts with alien enemies are void during hostilities.

Conclusion:
The contract is invalid on public policy grounds.

Q32. Case Study: Minor Claims Property under Void Contract

Facts:
A minor contracts to buy a house, pays 10% advance, and later wants the property.

Legal Issue:
Can the minor enforce the agreement?

Application:
A contract entered by a minor is void. He cannot seek performance.

Conclusion:
No, the agreement is void and unenforceable.

Q33. Case Study: Minor's Estate Sued for Wedding Arrangements

Facts:
A wedding planner sues for unpaid bills of a minor’s lavish birthday party.

Legal Issue:
Are luxury services recoverable under Section 68?

Legal Rule:
Only "necessaries" suited to status can be recovered.

Conclusion:
Party arrangements are not necessaries. Claim fails.

Q34. Case Study: Unsound Mind Due to Epilepsy

Facts:
Jaya, who has epilepsy, signs a large financial guarantee contract.
Legal Issue:
Was she of sound mind?

Application:
If proven that she was incapable of understanding at the time, contract is voidable.

Conclusion:
Valid only if sound mind is established at the time.

Q35. Case Study: Minor Signing Power of Attorney

Facts:
Sita, aged 16, executes a power of attorney to sell her house.

Legal Issue:
Can she execute a valid PoA?

Answer:
No. Only competent persons can delegate authority. PoA is void.

Q36. Case Study: Person Disqualified by Law

Facts:
A bankrupt person enters into a hire-purchase contract.

Legal Issue:
Is it valid?

Answer:
No. Insolvent persons are disqualified from contracts dealing with their property.

Q37. Case Study: Minor’s Guardian Mortgages Property

Facts:
A minor’s guardian mortgages land to pay for medical treatment.

Legal Issue:
Is this enforceable?

Application:
If court-approved and for benefit, it’s valid.
Conclusion:
Yes, if proven beneficial and lawful.

Q38. Case Study: Contract by Deaf and Mute Person

Facts:
A deaf-mute person signs a rental agreement with assistance.

Legal Issue:
Is it valid?

Application:
Yes. No bar if of sound mind and understanding.

Q39. Case Study: Minor Becomes Partner Without Consent

Facts:
Without consent, R is listed as a minor partner in firm books.

Legal Issue:
Is the firm liable?

Answer:
Yes, firm may be liable if misrepresentation occurs.

Q40. Case Study: Minor Acquires Land by Gift

Facts:
K receives land by gift deed from his grandfather.

Legal Issue:
Can a minor own property?

Answer:
Yes. Minor can acquire, but cannot alienate without guardian or court approval.

Void agreements their implications

Q1. What is a Void Agreement under the Indian Contract Act, 1872?
Answer:

Definition:

According to Section 2(g) of the Indian Contract Act, 1872:

“An agreement not enforceable by law is said to be void.”

This means that even though the parties have come to an understanding or arrangement, if the
law does not recognize it as a valid contract, it will be termed as a void agreement. Such an
agreement creates no legal obligations and cannot be enforced in any court of law.

Explanation:

A void agreement is a nullity in the eyes of law. It is as good as an agreement that never
existed. This arises when the agreement violates one or more essential elements of a valid
contract as per Section 10 of the Act.

The term "void ab initio" is often used to describe void agreements — meaning they are invalid
from the very beginning.

Examples:

1. Agreement to perform illegal activity: A agrees to pay B 50,000 to murder C. This

agreement is void since its object is unlawful.

2. Contract with a minor: A 16-year-old boy contracts to buy a car. Being a minor, the boy
lacks capacity. Thus, the agreement is void.

3. Agreement made without consideration (unless under exceptions in Section 25) is also
void.

Case Law:

1. Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC)

o Facts: A minor mortgaged property to a moneylender.

o Held: The contract was declared void ab initio as the minor was not competent
to contract under Section 11.

2. Gherulal Parakh v. Mahadeodas Maiya & Ors (1959 AIR 781)

 o Facts: A partnership for wagering transactions was formed.

o Held: Wagering agreements are void under Section 30. Though not criminal, they
are unenforceable.

Implications:

 Neither party can sue the other for performance.

 No damages or compensation can be claimed for breach.

 Any money paid under a void agreement is not recoverable unless under Section 65
(mistaken belief).

Conclusion:

Void agreements serve as a fundamental safeguard in contract law. By declaring certain

categories of agreements void, the Indian Contract Act ensures that contracts based on
illegality, lack of capacity, or immoral considerations do not receive legal validation,
preserving the integrity of contractual obligations.

✅ Q2. Distinguish between Void and Voidable Contracts under the Indian Contract Act, 1872.

Answer:

Understanding the difference between void and voidable contracts is fundamental in contract
law, as it determines whether and how an agreement may be enforced and what remedies are
available.

I. Definitions:

Void Agreement (Section 2(g))

“An agreement not enforceable by law is said to be void.”

A void agreement has no legal effect from the beginning. It is a nullity — no rights, no duties.

Voidable Contract (Section 2(i))

“An agreement which is enforceable by law at the option of one or more of the parties thereto,
but not at the option of the other or others, is a voidable contract.”

A voidable contract is initially valid and enforceable, but becomes void at the option of one
party due to flaws such as coercion, misrepresentation, fraud, or undue influence.

II. Key Differences:

Basis of
Void Agreement Voidable Contract
Difference

Definition Not enforceable by law Enforceable at the option of one party

Valid until avoided by the aggrieved

Legal Status Invalid from the beginning
party

Usually, no consent or unlawful Consent is not free (e.g., due to

Consent
object coercion)

Rights &
No legal rights or obligations One party can enforce, other is bound
Obligations

Aggrieved party may rescind or seek

Remedies No remedy available
damages

Agreement with minor or for illegal Contract under threat or

Example
purpose misrepresentation

III. Real-Life Examples & Case Laws:

A. Void Agreement Example:

Case: Mohori Bibee v. Dharmodas Ghose (1903)

 A minor executed a mortgage.

 Held: Contract is void ab initio.

 Legal Effect: No party can enforce the contract.

B. Voidable Contract Example:

Case: Chikkam Ammiraju v. Chikkam Seshamma (1917)

 A contract was executed under a threat of suicide.

 Held: Consent was not free → contract voidable at the option of the aggrieved party.

Section 19 of the Act allows the aggrieved party to either affirm or rescind such a contract.

IV. Legal Implications:

1. Void Agreement:

o Treated as if it never existed.

o Court does not recognize or enforce it.

2. Voidable Contract:

o Initially valid.

o If aggrieved party chooses to rescind, it becomes void.

o Till then, it is legally binding.

V. Additional Examples:

Void or
Situation Reason
Voidable?

Contract with a minor Void Incompetent party

Contract under coercion Voidable Consent not free

Agreement to smuggle gold Void Unlawful object

Agreement under fraudulent Consent obtained by

Voidable
identity fraud

VI. Conclusion:

Void and voidable contracts represent two distinct legal scenarios. While a void agreement is
never enforceable, a voidable contract offers a choice to the aggrieved party. Understanding
the distinction helps courts decide whether a party can demand performance, rescind the
contract, or claim compensation.

This distinction protects individuals from being bound by contracts made without genuine
consent or with unlawful objectives, thus balancing freedom of contract with public policy and
fairness.

✅ Q3. What are the essentials of a valid contract under the Indian Contract Act, 1872? How
does their absence make an agreement void?

Answer:

A contract is a legally enforceable agreement between two or more competent parties to

perform or not perform a specific act. Under the Indian Contract Act, 1872, the validity of a
contract depends upon the presence of certain essential elements. If any of these essentials
are missing, the contract may become void, voidable, or unenforceable.

I. Legal Basis:

As per Section 10 of the Indian Contract Act, 1872:

“All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.”

II. Essentials of a Valid Contract:

Let’s examine each essential in detail, with explanation and examples:

1. Offer and Acceptance (Consensus ad idem):

 There must be a lawful offer by one party and lawful acceptance by the other.

 The offer must be communicated and accepted unconditionally.

Example:
A offers to sell his bike for 40,000. B agrees. A contract is formed.

Absence Consequence:
If there's no clear acceptance, the agreement is void.
Case: Haridwar Singh v. Bagun Sumbrui (1973) – No concluded contract was found due to lack
of acceptance.

2. Intention to Create Legal Relationship:

 Parties must intend to enter into a legally binding contract.

 Social/domestic agreements usually lack such intention.

Example:
A promises B to take her to dinner. It’s not legally enforceable.

Absence Consequence:
If there’s no intention to be legally bound, it is void.

Case: Balfour v. Balfour (1919) – Agreement between husband and wife for maintenance was
held to be social, hence not enforceable.

3. Lawful Consideration (Section 2(d)):

 Consideration is what each party gives or promises in return.

 It must be real, legal, and not immoral.

Example:
A agrees to sell land to B for 5 lakh. Consideration exists.

Absence Consequence:
An agreement without consideration is void under Section 25, unless it fits within exceptions.

Case: Abdul Aziz v. Masum Ali (1914) – A promise to donate without consideration was held
void.

4. Capacity of Parties (Section 11):

 Parties must be:

o Major (above 18 years),

o Of sound mind,
 o Not disqualified by law (e.g., alien enemies, convicts, insolvents).

Absence Consequence:
Contract with a minor or lunatic is void.

Case: Mohori Bibee v. Dharmodas Ghose (1903) – Contract with a minor was declared void ab
initio.

5. Free Consent (Sections 13-14):

 Consent must be free from:

o Coercion (Sec. 15)

o Undue Influence (Sec. 16)

o Fraud (Sec. 17)

o Misrepresentation (Sec. 18)

o Mistake (Sec. 20-22)

Absence Consequence:

 Consent not free → contract voidable at aggrieved party’s option.

 Mistake of fact (bilateral) → contract void.

Case:

 Chikkam Ammiraju v. Seshamma (1917) – Coercion made contract voidable.

 Raffles v. Wichelhaus (1864) – Mistake on identity of goods (Peerless ship) made the
contract void.

6. Lawful Object (Section 23):

 The object must not be:

o Forbidden by law,

o Fraudulent,

o Immoral or opposed to public policy.

Example:
A agrees to pay B 1 lakh to kill C – Void.

Case:
Gherulal Parakh v. Mahadeodas Maiya (1959) – Object being speculative (wagering) made it
void.

7. Agreement Not Declared Void by Law:

Certain agreements are declared void by the Act itself:

 Restraint of trade (Sec. 27),

 Restraint of marriage (Sec. 26),

 Restraint of legal proceedings (Sec. 28),

 Wagering agreements (Sec. 30),

 Uncertainty (Sec. 29),

 Impossibility (Sec. 56).

Example:
An agreement to restrict someone from marrying forever is void under Section 26.

III. Effect of Absence of Essentials:

Missing Element Resulting Legal Status

Offer/Acceptance No contract formed (Void)

Intention to
Void
contract

Void (unless exception under Sec

Consideration
25)

Capacity Void

Free consent Voidable or Void (if mistake)

Lawful object Void

Legal validity Void

IV. Conclusion:

Every valid contract must fulfill the conditions laid down in Section 10 and other relevant
provisions of the Indian Contract Act, 1872. The absence of even one essential element can
render an agreement void, meaning it will have no legal effect and will be treated as non-
existent in the eyes of law.

Understanding these essentials not only aids in drafting legally sound contracts but also in
identifying contracts that fail the test of enforceability.

✅ Q4. What are the various types of Void Agreements under the Indian Contract Act, 1872?
Explain with real-life examples and case laws.

Answer:

Under the Indian Contract Act, 1872, certain categories of agreements are expressly declared
void, even though they may satisfy some or most of the other conditions of a valid contract.
These agreements have no legal enforceability, and are considered non-existent in the eyes of
law.

Let us examine these categories in detail, supported by statutory references, judicial

interpretations, and practical examples.

I. Legal Foundation:

Section 2(g) – “An agreement not enforceable by law is void.”

Several specific provisions of the Act declare agreements void under Sections 11, 20, 23–30,
56, etc.

II. Categories of Void Agreements

1. Agreement by or with an incompetent party (Section 11)

Explanation:
Agreements with minors, lunatics, or persons disqualified by law are void.
Case:
Mohori Bibee v. Dharmodas Ghose (1903)

 A minor mortgaged property.

 Held: Contract was void ab initio as minor lacked capacity.

Example:
A 16-year-old signs a car lease — not enforceable.

2. Agreement with unlawful object or consideration (Section 23)

Explanation:
If the object or consideration is:

 Forbidden by law,

 Fraudulent,

 Immoral,

 Injurious to person/property,

 Opposed to public policy

…then the agreement is void.

Case:
Kedar Nath Motani v. Prahlad Rai (1960)

 Agreement to defeat creditors = void.

Example:
A agrees to pay B to smuggle gold → void.

3. Agreement without consideration (Section 25)

Explanation:
A contract without consideration is void, except:

 Out of love and affection (written and registered),

 Compensation for past voluntary act,

 Promise to pay time-barred debt.

Case:
Abdul Aziz v. Masum Ali (1914) – A promise to donate to a mosque without consideration was
unenforceable.

Example:
Oral promise to gift 50,000 — void.

4. Agreement in restraint of marriage (Section 26)

Explanation:
Every agreement restraining a person from marrying is void.

Case:
Lowe v. Peers (1768) – Promise not to marry anyone else was void.

Example:
A promises B 1 lakh if B never marries — void.

5. Agreement in restraint of trade (Section 27)

Explanation:
Agreements that prevent a person from engaging in a lawful trade or profession are void.

Exception: Reasonable restraints in sale of goodwill or employment contracts.

Case:
Niranjan Shankar Golikari v. Century Spg. & Mfg. Co. (1967)

 Negative covenant during employment held valid.

Example:
A contract saying B must never work in media — void.

6. Agreement in restraint of legal proceedings (Section 28)

Explanation:
Agreements that prevent legal recourse or limit time to sue are void.

Amendment Alert (2018): Clauses in bank contracts limiting jurisdiction are now partially
saved.
Example:
A contract that says “No party shall ever approach court” — void.

7. Agreements with uncertain terms (Section 29)

Explanation:
If terms of agreement are vague or ambiguous and cannot be made certain, it is void.

Case:
Scammell v. Ouston (1941) – Agreement on “usual hire purchase terms” was vague.

Example:
A agrees to supply “a reasonable quantity” of wheat — void due to uncertainty.

8. Wagering agreements (Section 30)

Explanation:
Wagers are agreements dependent on uncertain events, with no real interest in the outcome.

Case:
Gherulal Parakh v. Mahadeodas Maiya (1959) – Wagering agreements are void, not illegal
unless in Gujarat or Maharashtra.

Example:
A bets B 10,000 that India will win — void.

9. Agreements to do impossible acts (Section 56)

Explanation:
An agreement to do something that is impossible to perform is void.

Case:
Satyabrata Ghose v. Mugneeram Bangur (1954) – Doctrine of frustration applies where
performance becomes impossible.

Example:
A agrees to fly B to the moon — void due to impossibility.

10. Agreements that are expressly declared void by the Act or Courts
Examples:

 Agreements involving fraud,

 Contracts made under mutual mistake of fact (Section 20),

 Contracts with alien enemies.

III. Summary Table

Sectio
Type of Void Agreement Key Example
n

With a minor/incompetent
Sec. 11 Minor signing a lease
party

Unlawful object or
Sec. 23 Smuggling agreement
consideration

Without consideration Sec. 25 Promise to donate money orally

Restraint of marriage Sec. 26 Promise not to marry anyone

Restraint of trade Sec. 27 Ban on future employment

Restraint of legal proceedings Sec. 28 No-suit clauses

Agreement to supply “some

Uncertain agreements Sec. 29
goods”

Wagering agreements Sec. 30 Cricket match betting

Impossible agreements Sec. 56 Fly to the moon

IV. Implications of Void Agreements:

 No enforceability: Parties can’t sue for enforcement or breach.

 No restitution, unless covered by Section 65 (mistake).

 No damages recoverable.

 No estoppel, even if performance was partly made.

V. Conclusion:

The Indian Contract Act has deliberately excluded certain categories of agreements from legal
recognition to uphold public policy, morality, fairness, and the rule of law. Understanding these
void agreements is crucial to drafting enforceable contracts and preventing legal disputes.

✅ Q5. Explain Section 23 of the Indian Contract Act, 1872. How does an unlawful object or
consideration render an agreement void?

Answer:

Section 23 of the Indian Contract Act, 1872 is a cornerstone provision that invalidates
agreements made for unlawful objects or considerations, thus protecting public morality, law,
and order.

I. Text of Section 23:

“The consideration or object of an agreement is lawful, unless—

(1) it is forbidden by law;
(2) is of such a nature that, if permitted, it would defeat the provisions of any law;
(3) is fraudulent;
(4) involves or implies injury to the person or property of another;
(5) the court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful, and
such an agreement is void.”

II. Meaning of "Object" and "Consideration":

 Consideration = "Something in return" (quid pro quo) for a promise.

 Object = Purpose or design for which the agreement is made.

Both must be lawful. If either is unlawful, the agreement is void.

III. When Object or Consideration Becomes Unlawful:

Let’s examine each clause with real-life examples and landmark case law.

1. Forbidden by Law

Explanation:
If the law expressly prohibits a certain act, an agreement to perform it is void.

Case: Srinivas Ram Kumar v. Mahabir Prasad (1951)

 Sale of goods without a required license → forbidden by law → void agreement.

Example:
A contracts with B to sell narcotics — violates NDPS Act → void.

2. Defeats the Provisions of Law

Explanation:
Even if not directly forbidden, if the object circumvents or frustrates law, the agreement is void.

Case: Rattan Lal v. Vardesh Chander (1976)

 Agreement to undervalue property to evade stamp duty → void.

Example:
A agrees to pay B under-the-table to avoid tax → void.

3. Fraudulent Object

Explanation:
An agreement meant to deceive a third party is void.

Case: Ram Sarup v. Bansi Mandar (1915)

 Agreement to show a sham marriage to claim inheritance — void due to fraudulent

object.

Example:
A agrees to create false documents to help B get a loan → void.

4. Injury to Person or Property

Explanation:
If an agreement’s object is to harm someone, it’s void.

Example:
A hires B to burn C's house → agreement is criminal → void.

Case: K.M. Kamath v. K.R. Baliga & Co. (1958)

 Injurious acts through contract violate Section 23.

5. Immoral or Against Public Policy

Explanation:
Courts may strike down contracts that are immoral (e.g., prostitution) or that harm the public
good.

Case:

 Pearce v. Brooks (1866) – Hiring carriage to prostitute held void.

 Gherulal Parakh v. Mahadeodas Maiya (1959) – Wagering not against public policy but
still void.

Example:
A leases flat to B for running a brothel → void.

IV. Combined Example:

If A agrees to pay B 1 lakh to obtain a fake passport, both the object (illegal activity) and the
consideration (bribe) are unlawful → void ab initio under Section 23.

V. Burden of Proof:

 Burden lies on the party alleging that the agreement is void under Section 23.

 If the illegality is proven, courts refuse to assist either party ("ex turpi causa non oritur
actio").

VI. Judicial Summary:

Clause of Sec 23 Key Ruling or Principle

Forbidden by law Srinivas Ram Kumar v. Mahabir Prasad

Defeats provision of any

Rattan Lal v. Vardesh Chander
law

Fraudulent object Ram Sarup v. Bansi Mandar

Injury to person/property K.M. Kamath v. K.R. Baliga

Pearce v. Brooks, Gherulal Parakh v.

Immoral/public policy
Mahadeodas

VII. Effects of Unlawful Object/Consideration:

 Agreement becomes void ab initio.

 No legal remedy – parties cannot sue for breach.

 No restitution under Section 65 (as object is illegal).

 Contract cannot be ratified.

VIII. Conclusion:

Section 23 ensures that only contracts aligned with legal, moral, and public norms are
enforceable. Any agreement tainted by unlawful purpose or consideration is automatically
declared void, thus safeguarding public interest and the integrity of law.

✅ Q6. Explain the Doctrine of Public Policy. How does it relate to void agreements under
Section 23 of the Indian Contract Act, 1872?

Answer:

The Doctrine of Public Policy is a fundamental principle of contract law that prevents the
enforcement of agreements that are harmful to the public interest, even if they are not
specifically prohibited by statute. It is embedded in Section 23 of the Indian Contract Act, 1872,
and forms a ground for declaring agreements void when their object or consideration is
contrary to public policy.
I. Legal Basis:

Section 23, Indian Contract Act:

“The consideration or object of an agreement is unlawful when... the Court regards it as

immoral or opposed to public policy.”

Thus, if a contract is against public policy, it is void ab initio and unenforceable in a court of
law.

II. What is Public Policy?

The term “public policy” refers to the principles and standards regarded by the legislature or
courts as being of fundamental concern to the state and the whole of society.

Justice Burrough in Richardson v. Mellish (1824) called it:

“A very unruly horse, and once you get astride it, you never know where it will carry you.”

Despite its vague and flexible nature, courts apply it cautiously to protect the moral and social
fabric of the society.

III. Common Heads of Public Policy (Recognized by Indian Courts):

1. Agreements to commit a crime

2. Agreements interfering with the administration of justice

3. Agreements restraining parental duties

4. Agreements restraining personal liberty

5. Agreements restraining trade

6. Marriage brokerage contracts

7. Agreements in restraint of marriage

8. Agreements tending to create corruption or undue influence

9. Agreements promoting sexual immorality

IV. Case Laws on Public Policy

1. Pearce v. Brooks (1866)

 A prostitute hired a carriage to attract clients; the owner knew the purpose.

 Held: Agreement was immoral and opposed to public policy → void.

2. Gherulal Parakh v. Mahadeodas Maiya (1959)

 The Supreme Court of India held: wagering agreements are void but not necessarily
against public policy.

3. Ouseph Poulo v. Catholic Union Bank Ltd. (1965)

 A loan was taken to bribe government officials.

 Held: Void, as bribery is opposed to public policy.

4. N. C. Dhoundial v. Union of India (2004)

 Court observed that what constitutes public policy must evolve with time.

V. Indian Examples of Void Contracts under Public Policy

Resul
Agreement Type Example
t

A promises B not to marry in return for

Restraint of marriage Void
5,00,000

Marriage brokerage Paying agent to arrange daughter’s marriage Void

Political bribery Promise to pay money if elected Void

Custody of children A gives away custody to avoid responsibility Void

Collusive maintenance of false Funding a lawsuit for profit-sharing Void

litigation

VI. Relationship with Section 23

Section 23 explicitly recognizes public policy as a ground for holding a contract void.

It states: “The consideration or object of an agreement is unlawful when the court regards it as
opposed to public policy.”

Therefore:

 Any agreement that undermines social, legal, or moral standards is considered void.

 Courts will refuse enforcement even if parties consented willingly.

VII. Effects of Agreement Opposed to Public Policy

1. Void ab initio – has no legal existence.

2. Unenforceable – courts will not aid either party.

3. No restitution – even if performance has begun.

4. Cannot be ratified – as illegality taints the contract permanently.

5. No estoppel – a party cannot claim relief based on illegal contract.

VIII. Criticism and Evolution

 Criticism: The doctrine is vague and allows judges to insert personal views.

 Support: It helps the courts preserve justice and public morality.

 Courts apply it sparingly, and only when there's clear harm to society.

IX. Conclusion:

The Doctrine of Public Policy is an evolving and protective tool in contract law. Though its
boundaries are not rigid, courts use it judiciously to prevent contracts that are socially or
morally reprehensible. Under Section 23 of the Indian Contract Act, it stands as a pillar to
uphold legality, morality, and public welfare.
 ✅ Q7. Explain the difference between Illegal and Void Agreements under the Indian
Contract Act, 1872. Illustrate with examples and legal consequences.

Answer:

Understanding the distinction between Illegal and Void agreements is fundamental in Indian
Contract Law. Although both types of agreements are unenforceable, their legal nature,
consequences, and remedies differ significantly.

I. Definition:

Aspect Void Agreement Illegal Agreement

An agreement not enforceable by law; An agreement expressly prohibited by

Meaning
treated as null from the beginning. law; unlawful and criminal in nature.

Void but not necessarily illegal or Both void and illegal; involves breach of
Legal Status
criminal. law or crime.

Reference in Section 2(g) of Indian Contract Act, Section 23 and various penal/statutory
Law 1872 provisions.

II. Key Differences

Parameter Void Agreement Illegal Agreement

Nature of Contract involving an act forbidden by

Invalid contract without legal effect
Contract law

Agreement with minor (Mohori Contract to smuggle drugs or commit

Example
Bibee case) crime

Not enforceable and also punishable

Enforceability Not enforceable; court won’t help
by law

No penalty; contract treated as non- Penalty, fines, or imprisonment

Consequences
existent possible

Effect on Parties Neither party can sue for breach Parties may face criminal prosecution
 May be allowed under Section 65 in
Restitution Restitution generally denied
some cases

Refuses to enforce; may award Strikes down agreement; may report

Court’s Role
restitution to authorities

III. Detailed Explanation with Examples and Cases

1. Void Agreement

 Definition: An agreement that lacks one or more essential elements of a valid contract
or has a defect that makes it unenforceable.

 Example 1: Agreement with a minor — Mohori Bibee v. Dharmodas Ghose (1903).

 Example 2: Agreement in restraint of trade — Niranjan Shankar Golikari v. Century Spg.

& Mfg. Co. (1967).

 Effect: The contract is considered as not existing, parties cannot sue for enforcement or
damages but may recover benefits unjustly conferred under Section 65 of the Contract
Act.

2. Illegal Agreement

 Definition: Agreements that involve criminal acts or acts prohibited by statute.

 Example 1: Agreement to commit murder or smuggle goods.

 Example 2: Agreement to bribe a public official.

 Case: Karnataka Ex-MLA’s Case (1999) – Bribery agreement void and punishable.

 Effect: The contract is void and illegal, parties may face prosecution; courts refuse to
grant any relief or restitution.

IV. Legal Consequences of Each

Consequence Void Agreement Illegal Agreement

Suit for enforcement Not maintainable Not maintainable

Suit for damages Generally not allowed Not allowed

Restitution or Allowed under Section 65 if

Not allowed
recovery applicable

Criminal liability No Yes

Contract null and parties may be

Effect on parties Contract treated as null
punished

Strong disapproval, may report

Court's attitude Neutral, declines enforcement
offense

V. Summary Table

Feature Void Agreement Illegal Agreement

Forbidden by law and

Definition Not enforceable
criminal

Example Contract with minor Contract to smuggle drugs

Legal No criminal
Penal consequences possible
Consequences penalties

May grant
Court’s Relief No relief; parties penalized
restitution

Enforcement No No

VI. Illustrative Case Studies

Case Study 1: Mohori Bibee v. Dharmodas Ghose (1903)

 Minor mortgaged property — contract void, no enforcement.

Case Study 2: Gherulal Parakh v. Mahadeodas Maiya (1959)

 Wagering contract — void but not illegal, no criminal penalties.

Case Study 3: State of Maharashtra v. Mayer Hans George (1965)

 Agreement for smuggling foreign currency — illegal and punishable.

VII. Practical Implications

 Businesses must avoid contracts with illegal or void elements to prevent disputes and
penalties.

 Parties should verify the legality of the contract’s object and parties’ capacity.

 Courts act as guardians of legality and morality in contracts.

VIII. Conclusion

Void agreements and illegal agreements both lack enforceability, but illegal agreements carry
additional penal consequences and involve conduct expressly prohibited by law. The Indian
Contract Act, 1872, through its various provisions, clearly demarcates these concepts to ensure
fairness, legality, and protection of public interest.

Case Study 1

Question:
A agrees to sell his ancestral land to B. After the agreement is signed, it is discovered that A was
a minor at the time of contract formation. B sues A for specific performance. Discuss the
validity of the contract and whether B can enforce the agreement.

Answer:

 Issue: Whether the contract between A (a minor) and B is valid and enforceable.

 Relevant Law:

o Section 11 of the Indian Contract Act, 1872: A minor (below 18 years) is not
competent to contract.
 o Section 2(h) defines a contract as an agreement enforceable by law. If a party is
incompetent, agreement is void.

 Application:
Since A was a minor at the time of contracting, he lacked legal capacity. Thus, the
contract is void ab initio — it has no legal effect from the outset.
B cannot sue A for specific performance because there is no valid contract. The contract
is void, not merely voidable.

 Supporting Case:
Mohori Bibee v. Dharmodas Ghose (1903) — The Privy Council held that agreements
entered into by minors are void and cannot be enforced.

 Conclusion:
B’s suit for specific performance will fail. The contract is void due to A’s minority, and B
has no legal remedy for enforcement.

Case Study 2

Question:
C contracts with D to bribe a government official to expedite a license approval. D fails to pay
the bribe. Can C sue D for breach of contract?

Answer:

 Issue: Whether C can enforce an agreement for an illegal object—bribery.

 Relevant Law:

o Section 23 of Indian Contract Act, 1872: Agreements with unlawful consideration

or object are void.

o Bribery is an illegal act prohibited by statutes such as the Prevention of

Corruption Act, 1988.

 Application:
The object of the contract (payment of bribe) is illegal and against public policy.
Therefore, the contract is void ab initio. No court will enforce such an agreement or
provide remedy for breach.

 Supporting Case:
 Ouseph Poulo v. Catholic Union Bank Ltd. (1965) — The Supreme Court declared
agreements to pay bribes as void and unenforceable.

 Conclusion:
C cannot sue D for the unpaid bribe. The contract is illegal and void; courts will not assist
in enforcing such contracts.

Case Study 3

Question:
E agrees with F to pay 2,00,000 if F refrains from marrying anyone for the next 5 years. Later, F
marries. Can E sue F for breach of contract?

Answer:

 Issue: Whether a contract restraining marriage is valid and enforceable.

 Relevant Law:

o Section 26 of the Indian Contract Act, 1872: Agreement in restraint of marriage

(except for a minor) is void.

o Such agreements are considered against public policy.

 Application:
The contract restraining F’s marriage is void as it violates public policy.
Hence, E cannot sue F for breach because there is no valid contract.

 Supporting Case:
Delforce v. Bignell — Agreements restraining marriage are void as against public policy.

 Conclusion:
E’s suit for breach will fail. The agreement is void, and courts will not enforce such
contracts.

Case Study 4

Question:
G enters into a contract with H for the sale of goods. Unknown to G, H was already declared
insolvent and is under insolvency proceedings. Is the contract valid?
Answer:

 Issue: Validity of contract when one party is insolvent.

 Relevant Law:

o Insolvency and Bankruptcy Code (IBC), 2016 and related provisions.

o Contract Act does not specifically void contracts by insolvents but insolvency can
affect enforceability.

 Application:
Insolvency does not automatically render a contract void. However, the right to enforce
the contract may be affected by the insolvency laws.
The insolvency estate typically handles contractual claims, and courts may stay
enforcement during proceedings.

 Supporting Case:
Official Receiver v. Turner — Insolvency affects ability to enforce but does not make
contracts void.

 Conclusion:
Contract between G and H is valid, but enforcement rights are subject to insolvency
laws.

Case Study 5

Question:
J agrees with K that K will maintain J’s sick mother in exchange for payment. Later, J asks K to
stop the maintenance. K sues for breach. Is this contract valid? Can K claim payment?

Answer:

 Issue: Whether a contract for maintenance of a person is valid and enforceable.

 Relevant Law:

o Section 25 of the Indian Contract Act, 1872: Agreement in restraint of legal

proceedings is void.

o No law prohibits contracts for maintenance.

 Application:
 This contract is valid with lawful consideration and object.
K is entitled to maintain J’s mother and claim payment as agreed.
If J withdraws without cause, K can sue for breach and recover damages or agreed
remuneration.

 Supporting Case:
Chandrakant Motilal v. Shantaben R. — Maintenance agreements are valid if not
immoral or illegal.

 Conclusion:
K can enforce the contract and claim payment for the maintenance provided.
Unit 3:Performance of Contract, Breach of Contract, and Its Remedies

Performance of Contract: Meaning and importance, Who must perform the contract?, Types of
performance: Actual performance and attempted performance (tender), Rules regarding time,
place, and manner of performance, Discharge of contract: Methods (by performance,
agreement, impossibility, operation of law), Breach of Contract: Meaning and types: Actual
breach and anticipatory breach, Consequences of breach, Remedies for Breach of Contract:
Damages (compensatory, nominal, liquidated, and unliquidated damages), Specific
performance, Injunction (temporary and permanent), Rescission of contract
Unit 4:Sale of Goods Act, 1930 & E-commerce Transactions

Introduction to the Sale of Goods Act, 1930, Meaning of Sale and Agreement to Sell, Sale vs.
Hire Purchase Agreement, Conditions and Warranties, Transfer of ownership in goods, IT laws
applicable to online sales and E-commerce transactions
Unit 5:Rights, Duties, and Legal Aspects of Contracts & Sales

Rights of an unpaid seller, Breach of contract and legal remedies, Performance of contracts and
consequences of non-performance, Consumer protection in the sale of goods, Recent case laws
and contemporary legal aspects