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THE
Contract Act
1st September 1872
[1st September 1872]

Q No.1- When the law of contract enacted?

Ans: It was enacted on 1st of September 1872.

Q No.2- What is a contract?

Ans: Every agreement and promise enforceable at law is a contract.

Q No.3- What is an agreement?

Ans: Every promise or set of promises forming consideration for each other is called agreement.

Q No.4- What is undue influence?

Ans: According to section 15 of the Contract Act undue influence means to influence that
prevents someone from exercising judgment concerning any transaction.

Effect of undue influence on contract:- According to section 19, when consent to an agreement is
caused by undue influence, the agreement is contracted void-able at the option of the party
whose consent was so caused.

The burden of proof:- Proof of undue influence shall be upon a person whose consent was
caused.

Void Contract:- A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable (Section 2-j of Contract Act).

Void-able Contract:- An agreement which is enforceable by law at the option of one party but not
at the option of other is a void-able contract (Section 2-i).

The burden of proof for void-able contract:- It lies on the party who claims that his consent was
caused by correction, undue influence, fraud or by misrepresentation.

Un-enforceable contract:- It is one where the contract is perfectly valid on its substance but which
can not be enforced because of certain technical defects “by want of stamp, by a bar of limitation
etc”.

Q No.5- What is a promise?

Ans: When the person to whom the proposal is made, signified, his assent thereto, the proposal is
said to accepted (Section 2-b).

A proposal, when accepted, is become a promise.

Promisor:- The person proposing is called promisor and the person accepting the promise is
called promisee.

Consideration:- The consideration is the price for which the promise of the other is brought and
the promise thus given for the value of enforceable.

Variable of the parties to a contract are called considerations.

Q No.6- What is consent?

Ans: Agreeing of two or more persons on the same thing and in the same sense.
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Kinds of consent:- 1. Implied, 2 Written/Expressed, 3. Intelligent consent.

Q No.7- What is coercion?

Ans: Section 15: Coercion is committing or threatening any act forbidden by PPC or the unlawful
detaining or threatening any person to enter into any agreement.

Q No.8- What is fraud?

Ans: Section 17 defines fraud as an act to following by person or his agent or his conveyance for a
contract:-
1. Untrue suggestion to a fact.
2. The active concealment of fact.
3. A promise without intending to perform.
4. Any other act filled to derive.
5. Or any act specially declared by any law.

Misrepresentation:- Section 18 defines as

1. The unwarranted positive assertion of information for which person making it knows to
be not true.
2. Any breach of duty without intention to _________ gains an advantage by a person
claiming under him, so doing to mislead another.
3. Causing innocently a party to an agreement to make a mistake to a substance or an
agreement.

Q No.9- State the exceptions to the rule that an agreement without consideration is void? The
exception that rule?
Ans:
1. Agreement made on natural love and affection 25(1).

Illustration No.1:- A for natural love and affection promise to give his son B Rs. 1000/=, A puts
his promise to B in writing and registers it. This is a contract without consideration.

Illustration No.2:- Agreement to compensate for past voluntarily service.

2. A promise to compensate wholly or in part:- a person who has already voluntarily done
something for the promisor is enforceable even there is no consideration.

3. Agreement to pay the time-barred debt.

An Agreement which is expressed in writing and signed by the person to charge with it, to pay
wholly or in part a debt barred by law of limitation is enforceable at law even if it is made
without consideration.

4. Contract of guaranty:- 25(4) of CA. In a contract of guaranty, there is no need of consideration

between the surety and the creditor and consideration received by the principal debtor is
sufficient for the surety.

5. Contract of agency:- 25(5):- A promises to sale B’s Car on his behalf. An agreement between A
& B is valid even without consideration.

6. Agreement to remit by promisee:- Where a promisee remits a part of debit and gives a
discharge for the whole debit on receiving the reduced amount there is no need for consideration.

7. An agreement under seal:- In English law contract under seal is enforceable without
consideration “A contract under seal means a contract which is in writing and which is signed,
sealed and delivered”
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Q No.10- What are the wagering contracts, differentiate between wagering and contingent
contract?
Ans: Section 30 defines as wager means abate something stated to be lost or won upon the result
of some future uncertain event.

Contingent contract: Section 31 defines a contract to do or not do something. If some event

collateral to such contract does not happen.

Different Between wagering and contingent contract

Wagering contract is absolutely void. A contingent contract is absolutely valid

In this, parties are not interested in the In a contingent contract, the parties have a real
occurrence of the event except for winning or interest in the occurrence or non-occurrence of
losing the back amount. an event.

Wagering contract/agreement is an agreement In a contingent contract, this is not necessary

by mutual promise each of them conditional on that there should be a mutual promise in the
happening or non-happening of an unknown ___ of every contingent contract.
event.

Q No.11- the general rule is that all the wagering agreement are absolutely void, exceptions to
this rule?
Ans: 1. Horse Race, 2. Crossword competition.

Q No.12- Who are the persons by whom a contract may or must be performed? Can a contract be
performed by a person other than a party to it?
Ans: Section 40 says:
1. Promisor himself:- In case of a contract involving the exercising the personal skills the
promisor must himself perform the contract.
2. Promisor or his agent:- A promises B to sale sugar. A must perform this promise himself
or he should ask his agent to perform the contract.
3. A legal representative of promisor:- Section 37 defines, promisors binds the legal
representative of the promisor in case of death of such promisor, before performance
unless a contrary intention appears from the contract.
4. Third-person or third party:- According to Section 4, when a person accepts performance
of the promisee from a third person or party, he can not afterwards enforce it again to the
promisor.

Q No.13- Define Novation?

Ans: Wherewith the consent of the parties to a contract, a new contract is substituted for the old
one, this is called a novation of a contract.

Kinds of Novation:-
1. A Novation involving a change of parties.
2. A Novation involving substituting of a new contract in place of the old contract.

Q No.14- What is meant by breach of contract and what are the different remedies available to an
aggrieved party as a result of a breach of contract?
Ans: Section 73. Parties to a contract are expected to perform their respective promises,
sometimes one of the parties breaches the contract by refusing to perform the promise, this is
known as breach of contract.

Remedies for breach of contract:-

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1. The recession of the contract:- If one party has broken his contract, the other party may
refuse further performance and may successfully define a suit for non-performance. He is
faced with all his obligations under the contract.
2. Suit for damages:- When a contract is breached the injured party can claim the damages.

a) Meaning of damages:- Damages mean compensation in terms of money for the loss
suffered by the injured party.

b) The object of damages:- The object is to put the injured party into the position, in which
he would have been had there been performance and not breach.

c) Kinds of damages:-
1. Ordinary damages:- Ordinary damages are general damages calculated in such a
way as to compensate for the loss suffered by the aggrieved or injured party. In
Ordinary damages, remote and indirect consequences are not regarded.

2. Special damages:- Those damages which result in the breach under special or
peculiar circumstances.

Illustration: A is the owner of the mill and he delivers the machine to a common carrier to be
carried for repair to another town. It is also in the knowledge of the carrier that for want of the
machine to mill was stopped and he promises to carry that machine for immediate dispatch. If
the carrier facts to return the machine in time he will be liable for profit that would have occurred
to the Mill owner.

3. Exemplary Damages:- These damages are awarded by way of punishment only two cases:

1. In breach of promise to marry:- The number of damages will be determined by the extent of
injury to the lady’s feeling. The amount may be quite heavy.

2. Wrongful dishonour of cheque by a Banker:- In above care, a drawer of the cheque may be
awarded heavy damages against the Banker _______ upon the loss of credit and reputation of
drawer on account of dishonour the cheque.

3. Nominal Damages:- These damages are consist of a sum of money which is very small in
quantity. Where the Court, found that the party has not actually suffered many damages or when
the Court believes that breach ______________ petty, the Court allows petty, the Court allows
petty sum as damages.

4. Suit upon Quantum Merit:- The above phrase means “As much as earned”. A person can
under certain circumstances claim payment for work done or goods supplied where a contract
has terminated by breach of contract or has become void for some reason. The injured party is
entitled to claim reasonable compensation what he has done under contract.

4. Suit for specific performance:- In certain cases by breach of contract, the damages are
inadequate. The Court may in such cases direct the party to perform the contract.

5. Injunction:- An injunction is an order of the Court restraining a person from doing some act. It
will be granted to enforce a negative stipulation in a contract where damages would not be an
adequate remedy.

6. Restitution of Benefit:- When a person, at whose option the contract is void-able, ________ such
contract, he must restore to the other party any benefit which may have received, for example,
when a contract for the sale of a house is voided on the ground of undue influence any money
received on account of the piece must be refunded.

Q No.15- Define Contract of Indemnity?

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Ans: Section 124, A contract by which one party promise to save the other from loss caused to
him by the conduct of the promisor himself or by the conduct of any other person is called the
contract of indemnity. (Indemnifier parties and indemnified/indemnity holder).

Rights of indemnity holder, when said:-

1. Right to claim damages.
2. Right to recover all costs (as to suit)
3. Right to recover all sums.

Kinds: Implied and expressed.

Q No.16- Define the contract of guaranty?

Ans: A contract to perform the promise or discharge the liability of the third person in case of his
default.

The person giving guaranty is called the surety, on whose behalf the guaranty is given is called
principal debtor and the person to whom a guaranty is given is called a creditor.

For a contract of guaranty and suretyship, there must be a tri-party agreement between the
creditor, principal debtor and surety. In the case of a contract of indemnity, indemnity doesn't
need to act at the request of the debtor, whereas in guaranty and surety, surety or guaranter must
give the guaranty at the request of debtor.

2. In case of a contract of indemnity, it is the direct engagement between two parties thereto,
whereas in guaranty there are three parties, the creditor, debtor and the surety who undertakes at
the request of a debtor to answer the default or miscarriage.

Several combats:- There is only one contract in a contract of indemnity between indemnifier and
indemnity holder.

While the contract of guarantee there are three contracts, one between principal debtor and
creditors, second between creditor and surety third between creditor and P.D.

Liability:- In a contract of indemnity, the liability of the indemnifier is primary and independent,
while in the contract of guarantee the liability of the surety is not primary but secondary.

Existence of contractual liability:- In a contract indemnity of the liability of indemnifier arises

only in the happening of a contingency, while in the contract of guarantee there is an existing
debt or duty, the profit manes of which is guaranteed by the surety.

Q No.17- How surety can be discharged from his liability in contract of guarantee?
Ans:
1. Revocation Section 130, A continuing guarantee may at any time be revoked by the surety as to
future transaction by notice to the creditor.
2. By the death of surety, S. 131.
3. by variance in the contract, S. 132.
4. Release or discharge of the principal debtor, S. 134.
5. Arrangement without surety’s consent. When a creditor compound or gives time to or agrees
not to sue the principal debtor, the surety is discharged.
6. Creditor act’s or omission, S. 139.
7. Loss of security, S. 141. Where there is more than one surety in a contract guarantee, every
surety is liable to avail the concession at the contract to which any surety has availed in any case.
S. 141.

Q No.18- What is the contract of bailment? When and how can it be revoked?
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Ans: A bailment is a delivery of goods by one person to another for some purpose upon a
contract that they shall when the purpose is accomplished be returned or otherwise as per the
direction of the bailer.

Parties: Bailer and Bailee.

Essentials:
1. Delivery of possession.
2. Delivery should be upon a contract.
3. Delivery must be upon a specific purpose.
4. No change of ownership.
5. Return of goods.

Termination/Revocation of bailment:-
1. Expiry of time, in the contract of bailment, is for specified of time.
2. The accomplishment of purpose.
3. Un-authorized use.
4. On Death.
5. Termination of the bailer.
6. Destruction of the subject matter.

Kinds of Bailment:-
1. Deposit:- A simple type of bailment for the keeping of goods Eg. The safe vault in Bank.
2. Commodatum:- When the goods are lent to friends gratis to be used by him.
3. Hire:- When the goods are delivered to be the bailee for bier.
4. Pawn:- When the goods are delivered to another by way of security for money barred.
5. Non-Gratuitous bailment:- When the goods are delivered to be carries or something to be done
about these for the reward to be payable to the bailment.
6. Gratuitous bailment:- When the goods are delivered to be carried or something is done without
receiving.

Duties and rights of bailer:-

1. Duties to disclose faults.
2. Duty to repay the necessary expenses.
3. To repay extra-ordinary expenses.
4. To compensate bailee for defective title.
5. To indemnity bailee.
6. To take goods back.

Duties of bailee

1. To take reasonable care.

2. Not to make an un-authorized case.
3. To return goods.
4. to return increase.

Rights of bailee

1. Right to claim damages.

2. To recover expenses.
3. Right to deliver goods.
4. To compensation.
5. Right to sue.
6. Right to the Loire.

Q No.___ What is a contract of the pledge? Section 172.

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Ans: The bailment of goods as a security for payment of debt or performance of a promise is
called pledge.

Parties to a contract of the pledge:- 1. Pawner and 2. Pawnee

Essential of a contract of the pledge:-
1. Movable property, 2. In persuasive of contract, 3. Delivery of possession, not ownership, 4.
Limited interest.

Right and duties of Pawne:-

1. Right to the redemption of goods, S. 176.
2. Right to remedy, S. 177.
3. Right to claim damages.
4. Right to claim increase.
5. Preservation and maintenance.

Duties of Pawner:-
1. To compensate the pawner.
2. To complete obligation.

Rights and duties of Pawnee:-

1. Right to retain.
2. Right to retain goods as collateral security.
3. Right to receive extraordinary expenses.
4. Right to sale the pledge of the goods.
5. To retain other debits.
6. To recover balance.

Duties of Pawnee:-
1. Take reasonable care of goods.
2. Un-Authorized use.
3. Not to mix goods pledge with others.
4. Not to act inconsistently with conditions.
5. Returns the goods when dues are discharged or stipulated time.

Q No.___ Can a valid pledge be made by a person other than the owner?
Ans: Yes, Ordinarily the pledge is made by the real owner a person who owns goods of the
others can not make a valid pledge, but there is an exception to the rule:
1. By mercantile agent, S. 178.

2. By a person in possession under voidable contract.

3. By a person having limited interest, S. 179.

4. Buyers in possession before the sale.

Q No.___ What are the duties and rights of a finder of goods?

Ans: A person how finds goods belonging to another and taken them into his custody is subject
to some responsibility as bailee, Section 71.
Duties:-
1. Finder of the real owner.
2. To take reasonable care.
3. Not to use the goods.
4. Not to miss the goods.
5. Return that goods found.
Rights of the finder:-
1. To retain until he receives compensation and expenses etc.
2. To sue for a reward.
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3. To sue against the third person who deprives him of possession.

4. Right of sale, S. 1689.

Q No.___ Define and explain the agent and principle (S. 182)?
Ans:
Principal:- Principal is a person who is agreed to be represented by the agent. Any person who is
of the age of majority according to subjected law, of sound mind, may become principal.

Agent:- Agent is a person implied to do any act for another or to represent another in dealings
with the third person is called an agent.

An Agreement can neither sue nor be sued personally in respect of a contract made by him for his
principal.

Q No.___ What is agency?

Ans: Relation in which one person acts for or represents another by letter’s authority.

Essentials of agency:
1. Competency to contract.
2. Agreement.
3. Consideration not necessary, S. 185.
4. Intention.

Creation of Agency:-
1. By direct appointment.
2. by implication.

Revocation of Agency:-
1. Mutual Agreement.
2. Revocation by the principal.
3. Revocation by agent (Renunciation by an agent to the principal)
4. Completion of Burness.
5. Principal or agents dealing.
6. Principal or agent comes an unsound mind.
7. Insolvency of Principal.
8. On the expiry of time.
9. Winding up of Company.
10. Destruction of the subject matter.

Rights and duties of agent and principal:-

Principal Rights:-
1. Right to repudiate transaction, S. 215.
2. Right to benefit.

Principal Duties:-
1. Duty to indemnify.
2. Duty to indemnify for acts done in good faith.
3. Duty to compensate for the agent for injury.

Agent Rights:-
1. Right to retain.
2. Right to receive the commission.
3. Right to a lien.
4. Right to be indemnified against consequences act done in good faith.
5. Right of compensation for injury.
6. Right of stoppage of goods in transit.
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Agents Duties:-
1. Duty to follow the direction of custom.
2. Duty to conduct business with reasonable care.
3. Duty to render an account.
4. Duty to communicate with the principal.
5. Duty not to deal on his record.
6. Duty not to make any secrete profit.
7. Duty to pay all sums.
8. Duty not to delegate authority.
9. Duty on termination of agency contained in S. 209.

Sub-Agent (S. 191):- A Sub-Agent is a person employed by and acting under the control of the
original agent in the business of the agency.

Co-Agent:- Where an authority is expressly given on several people with no stipulation is called
co-agent.

Q No.___ Differentiate between void and illegal contract?

Ans: All illegal contracts are void but all void contracts are not necessarily illegal.
Eg.
A Void agreement is devoid of legal effect when it is proved to be so, but an illegal contract is so
ab-initio.

A wagering contract is indeed void but not illegal.