FREE CONSENT

Consent forms a central part in Contract law. The law, by recognising the idea of contracts, is
giving two private individuals a freedom to make their own laws, be it law only governing their
own conduct. This is usually not considered to be the domain individuals, but rather the
sovereign. So, if such a right is given, there have to be certain requirements and rules governing
such transactions and relationships. Now, these rules can only be applied when both parties
agree to enter into such relationships. Both parties must be in unequivocal agreement to the
terms in order to make those terms binding. It is from here that the notion of free consent comes
in.

But for the consent of the parties, contracts would not have the legal sanctity they enjoy. The
entire idea of acceptance is about consent. Giving ‘assent’ is giving your consent to the terms
of the offer. So, the entire reason why a contract binds both parties is because they said ‘Yes’.

Section 13 – Consent defined – “Two or more persons are said to consent when they agree
upon the same thing in the same sense.” - Consensus ad idem

They have to agree to the same thing in the same sense, freely. So, the consent is said to be free
when it is not induced by
1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

These are the vitiating factors of a free consent. Even if agreement is on the same thing in the
same sense, consent is not free.
COERCION

Section 15 - Coercion” defined. — “Coercion is the committing, or threatening to commit, any

act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening
to detain, any property, to the prejudice of any person whatever, with the intention of causing
any person to enter into an agreement.”

Chikkam Amiraju v. Chikkam Sheshamma

A threatened to commit suicide and under that threat forced his son and wife to release a certain
property (son and wife ke naam pe thi zameen) in favour of his brother. The son and wife
claimed that the transaction entered into with the brother was not valid.

Question – is this coercion?

Court – Yes. Suicide is although not an offence but attempt to commit it is very much an
offence under the IPC. He is threatening to attempt it, so Section 15.

Ashley v. Reynolds

A took a loan from B. A gave a movable property as security. Now, A paid the money back,
but B refused to release the property until A gave more money over and above the loan amount.
He gave that extra amount, took his property back, and filed a suit for recovery of the extra
amount.

Court – if there is threat to detain a particular property, there is duress (English law mai duress
hota hai instead of Coercion, but duress is specific concept with regards to detaining of
property).

These two cases explain how we look at Section 15 of the ICA, which has two parts - acts
forbidden under IPC and acts of detaining property.
UNDUE INFLUENCE

Section 16. “Undue influence” defined. —

(1) A contract is said to be induced by “undue influence” where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will of the
other and uses that position to obtain an unfair advantage over the other.

This is a concept broader than coercion, as it covers those cases where there is no offence under
the IPC or no detaining of property. E.g., VM says if you don’t give 500 each for a scheme, I
will fuck your mid sems up. Here, VM, being the Professor, is in a position to dominate our
will, and he uses that position. Thus, there are two requirements for undue influence – dominant
position and use of that position.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of another—
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.

16 (1) is a general provision, but (2) is a specific provision (real and apparent authority,
fiduciary relationship, and mental capacity). So, if a case which does not fit into S. 16 (2), but
it does involve a person using his dominating position to gain undue advantage, it will still be
covered under part (1). The 3 conditions listed in 16 (2) is not an exhaustive list, but just a
statutory backing is provided to these situations where undue influence will automatically
apply.

Manu Singh v. Umadat Pandey

A was devotee of a guru. The guru told him that if you transfer all your assets which you own
in this life to me, it will secure you some benefit in the next life. A did the same in the form of
a gift. A then went to recover that.

Court – a relationship b/w a guru and a devotee is one where the guru can manipulate and
dominate the will of the devotee. The devotee vested trust and faith on the Guru on the spiritual
front. A can step back from the contract and recover whatever he gave to the guru.

Williams v. Bayley
A, a child, forged signatures of his father on a cheque. Then, he submitted that to the banker,
thereby creating a debt in favour of the father. The father requested the banker to cancel the
promissory notes as the debt was created on account of the mischief of the child. The banker
said I will cancel the promissory notes, but you have to issue a mortgage in my favour. If you
don’t give the mortgage, I will file a criminal case against your child. So, the father gave the
mortgage. Then father went to court saying that I never wanted to issue the mortgage, but I was
made to do it against my will on a threat.

Court – cancelled the mortgage deed, as banker dominated the will of the father and extracted
an unfair advantage. This case is outside the scope of 16 (2) but is still covered by 16 (1).

Also, this is not a case of malicious prosecution, as in that the person instituting the criminal
proceeding objectively knows that the other person is not wrong, but he still institutes that
action just to harass the other party.

Section 16 (2) (a) – Real or apparent authority, Fiduciary relationship

Real authority – VM vs. Bachche; in the societal matrix, the person should be placed in some
kind of authoritative position. E.g Boss and employee

Apparent authority – no real authority but is perceived by you as someone in authority. E.g.,
Partner at firm says to you, an Associate, that I will promote you if you gift me a certain thing.
Then you make the gift. This person has real authority over you. Now, if the same promise was
made by the Spouse of the partner, there is apparent authority. You know that if you don’t
respect the wishes of the spouse, it will affect your promotion. So, even the spouse is in a
position to dominate your will, although she has no real authority over you.

Fiduciary relationship – where parties vest utmost trust and confidence in each other (e.g.,
Manu Singh case). Parent and child. Doctor and patient. Lawyer and client. Teacher and
student. Trustee and beneficiary. The other person will never question the fiduciary’s
judgement and believe that it is in benefit of the person itself. Complete faith and confidence
is vested.

Moody v Cox

A asked his lawyer to purchase a property for him. Lawyer purchased it for A at a rate much
above the market price. A initially accepted the judgement of the lawyer, but afterwards got to
know that the property was over- valued due to some sort of collusion between the solicitor
and the seller. A wanted to vitiate the transaction.
Court – had it been a regular case of commerce, the parties would be free to measure their
benefits and purchase property at whatever price they want. But case which concern the
involvement of fiduciaries where the person vests trust and confidence in the fiduciary. Here,
the fiduciary must act for the best interest of the person, and therefore he would not be governed
by market principles. So, while there is no overt act by the solicitor to dominate the will of A,
because of the position that lawyer holds, A never questioned his judgement and got swayed
by the will of the solicitor. The solicitor dominated the will of A even without saying a single
word. A placed complete trust and faith in the solicitor.

Section 16 (2) (b)

The situation in which a person is forced to accept whatever terms are proposed.

Rani Annapoorni

E.g., a woman who had no sources of income (no money even to institute a suit of maintenance)
and was separated from her husband due to marriage BT, out of sheer desperation, went to a
moneylender who lent her money @ interest of 100%. She took the loan.

Court – woman was in extreme mental distress. She was struggling for the bare minimum, and
her sorry situation was used against her by the money lender. Although she is required to pay
the money (unlike in cases of minors and unsound mind, where the contract itself is void), the
court reduced the interest rate to @ 24 % (prevailing market interest rate). So, it’s not as if the
woman did not know the terms.

----

Mental distress is not about small things that worry you. Your mental capacity has to be
affected – either you are not able to understand the terms, or even if you understand them you
have to accept them due to your situations.

Illustration (d) – “A applies to a banker for a loan at a time when there is stringency in the
money market. The banker declines to make the loan except at an unusually high rate of
interest. A accepts the loan on these terms. This is a transaction in the ordinary course of
business, and the contract is not induced by undue influence.”

this is a purely commercial transaction, and there is an economic reason for charging the high
interest (there is less liquidity in the market, and therefore a higher interest rate has to be
charged based on fair market principles). But in the old woman case, the moneylender
purposely charged a higher rate solely with the intention of exploiting her will.

----
Raghunath Prasad Sahu v. Sarju Prasad Sahu

Rift b/w father and son w.r.t. to a certain immovable property, in which they both asserted a
right. While this was going on, the father instituted a criminal proceeding against the son on
certain grounds. As the son did not have enough funds to defend himself, he went to a
moneylender. Moneylender gave it @ 24%. Over time while the case went, the money went
into some lakhs (a lot). Son realised bhai ye karza toh nahi chuka paaenge lmao ded. So, he
instituted a suit against the moneylender, saying he was mentally distressed at the time as there
was a criminal case against me, and the moneylender charged unduly higher interest rate and
took advantage of me.

Court – son does not lack mental capacity, as facing a criminal prosecution does not fall in the
ambit of mental distress. The relationship b/w the son and the moneylender was purely
commercial, and no one is in a position to dominate to will of the other. So, there is no reason
to enter into undue influence at all, as the first requirement of the same is that a person has to
be in a position to dominate the will.

16 (2) concerns the person who is in a position to dominate, but part (b) is concerned with the
person whose will is being dominated. So, the question is whether it is a requirement for the
dominator to know of the mental incapacity of the other person. While 16 (2) (b) is silent in this
regard, if read holistically with part (1) of Section 16, it is presupposed that the dominator will
know of the position of the other person, varna how will gain an unfair advantage? (Uses that
position to gain an unfair advantage). Usko pata hai advantage unfair hai tabhi usne doosre ka
chutiya kata.

Section 16 (3)

“Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence
shall lie upon the person in a position to dominate the will of the other.”

Coming back to the example of charging 500 for VM’s scheme. After a year, when the course
ended, we sued VM. Who has to prove that there was a position of dominance and that that
position was abused? Us guys. As a general rule of evidence, the person alleging a particular
thing has to prove that. So, as per this general rule, the party who claims that their will was
unduly influenced has to prove it. But this is not the case, due to the effect of presumption.

A presumption – where in a certain situation, if something happens, it is presumed that someone

has done it. The one who has suffered does not have to prove it. The court will take the
allegation on face value, and the burden is on the other party to deny that allegation. So,
presumption essentially shifts the burden of proof. This is essence of Section 16 (3).

If a person is able to prove that the other party was in a position to dominate the will and is
able to show that the terms are highly unconscionable, the burden of proof shifts.

This related back to the concept of Inadequate consideration, and how the courts check the
inadequacy as a marker of lacking free consent. Rani Annapoorni is also a case of inadequate
consideration.

Md Taher v SK Allie

An illiterate lady owned large tracts of land. She transferred all of it in favour of her nephew
who was helping her manage the property. After that, the lady was left with the income of $30.
The court said that the transfer seems unconscionable on the face of it. Also, as the nephew
was helping her, he was in a position to influence the lady as she was old and illiterate. The
court held that the presumption in favour of UI arose, and the nephew had the burden of proof.

Subhash Chandra Das v Ganga Prasad Das

There was an old man who was taking care of his property efficiently. One of his properties
was gifted by him to one of his grandsons. The gift did not include the name of his sons. After
four years of gifting the property, he died. In four years of death, one of the sons went to the
court of the law, saying the grandson influenced the grandfather to gift that property.
The court said that presumption could not be raised simply because of the fiduciary
relationship. Since the old man was taking good care of his property, he knew what was
happening and could not be dominated by the grandson. Secondly, it is not unconscionable on
the face of it. There is nothing wrong with gifting.

ECONOMIC DURESS

It can happen that VM does not have real/apparent authority, or in a fiduciary relationship, but
he is in a position where he can inflict upon you serious economic harm. This is a form of
undue influence which is referred to as economic duress.

Universal Tankships Ltd. V. International Trade Workers Federation

Ship company A. One of their ships was anchored and was about to sail. The worker’s
federation decided that a certain amount should be paid to them by A, and if that is not paid,
they would not let that ship sail. On the scheduled date of sail, the workers refused to perform
the work required for the successful sailing of the ship. The problem was that A paid them the
money, as they could not afford to let the ship not sail. After the ship sailed, A asked for
recovery.

Question – should this particular agreement stand?

Court – A were a company, and when this arrangement was entered into, it was completely
dependent upon the workers. If the ship had not sailed, it would have caused major losses to A
and the workers knew this. The workers put undue pressure on A to secure the monetary
benefit, and therefore the transaction does not stand.
The idea of free consent does not relate to where the person does not understand that he is being
pressured. It relates to where a person very well understands the transaction, and knows that it
is in his detriment, but still has to conform to the transaction due to the circumstances (here,
undue pressure imposed by workers, resulting in the company not having any option). The
money has been taken by economic duress; therefore, contract is voidable.

In English law, ED is not considered as a part of Undue Influence. There, it is a kind of Duress,
which translates to Coercion in the Indian context. Because coercion has been defined
specifically with respect to the IPC, therefore including economic duress is not possible. But
such a classification has not been made under the English law.

INEQUALITY OF BARGAINING POWER

Lloyd’s Bank v. Bundy

A is a very old farmer. His son is doing a business for which he has taken a loan from a bank.
A mortgaged the only house that he had for the purposes of this loan. Kya kurbaani hai. Ab
iska beta chutiya, he wants to take more loan and increase the liability. The banker and the son
therefore approach A, ki bhai more loan hai toh the charge on your property will increase, so
just sign on this document (“Hey’ with the intention of chutiya kaatna buddhe ka). A was
looking for some advice from the banker, (as he had his account with the same bank, so this
expectation was valid). Banker said sab badhiya hai enjoy. But then, the business of the son
failed (yeah no shit), and the banker claimed the property. A went to court.

I was not aware and I did not understand the nature of the transaction when I entered into it. I
asked for advice from banker, and he said go ahead so I went. Now this case does not concern
UI specifically, but it is interesting to look at the way the court looked at

Primarily, there are certain circumstances in commercial law where there is an inequality of
bargaining power. If you look previous cases, this inequality can be largely categorised into 5
sub-heads –
o Duress over chattel (movable goods) [ Ashleigh v Reynolds]
 o Unconscionable transactions [Md Tahir v. SK Ali, Rani Annapoorni]
o Undue Influence [Moody v. Cox, Ummadat Panday etc.]
o Immense/Extreme pressure [William v. Bailey, Overseas tankships]
o Salvage agreement – agreements concerning maritime adventures, where one ship is in
a position to save a ship in need of rescue.

In those situations where there is such an inequality, and this is used by the person with the
better bargaining power, then that agreement is not legitimate in the eyes of the law. In this
case, the court said that the party here is an old man looking for an independent advice from
his banker, who would have normally told him what was in his best interest. Secondly, the old
man was vulnerable due to the love and affection he had for his sone and would have done
much to alleviate the situation. Thirdly, he did not anything about the banking world. Thus, the
court set aside the entire transaction.
FRAUD

Section 17 - “Fraud means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agent. with intent to deceive another party thereto
or his agent, or to induce him to enter into the contract—
a) The suggestion, as a fact, of that which is not true, by one who does not believe it to
be true;
b) The active concealment of a fact by one having knowledge or belief of the fact;
c) A promise made without any intention of performing it; (At time of creation of
contract not as time of performance – Important point)
d) Any other act fitted to deceive; (Residuary Clause to not limit the scope of Section
17 – obvious intention to deceive important here)
e) Any such act or omission as the law specially declares to be fraudulent” (Saving
Clause as it establishes that the ICA does not override other laws when it comes to
fraud. This last part therefore covers fraud in other areas of law e.g. insolvency or
TOPA)

Therefore, the ingredients of fraud are:

a) Fact represented to be true when there is knowledge that it is not true
b) Active concealment of facts (Passive is Not Fraud)
c) A promise made without any intention to perform it
d) Any act made to deceive

17(1): Assertion of facts without a belief in its truth

Fraud is proved when it is shown that a false representation has been made, —
a) Knowingly, or
b) Without belief in its truth, or
c) Recklessly careless whether it be true or false.

Derry v. Peek

In this case, a company's prospectus contained a representation that the company had been
authorised by a special Act of Parliament to run trams by steam or mechanical power. The
authority to use steam was, in fact, subject to the approval of the Board of Trade, but no mention
was made of this. The Board refused consent and consequently the company was wound up.
The plaintiff, having bought some shares, sued the directors for fraud. But they were held not
liable.

They were not guilty of fraud as they honestly believed that once the Parliament had authorised
the use of steam, the consent of the Board was practically concluded. It follows, therefore, that
the person making a false representation is not guilty of fraud if he honestly believes in its truth.
It has to be seen whether there existed an intention to deceive or not. (In this case there was no
intention to deceive).

17(2): Active Concealment

“Active Concealment” is something different from mere “passive concealment”. Passive

concealment means mere silence as to material facts.

Mithoo Lal Nayak v. Life Insurance Corporation of India

Man took a life insurance from LIC but did not inform them of the ailments he was suffering
from and lied to them during the investigation they do before giving one life insurance. He
died, and LIC was asked to pay which they refuted as they alleged the contract based on fraud.

The court held that the policy-holder was guilty of fraudulent suppression of material facts
relating to his health and the Company was entitled to recede from the contract as there was an
Active Concealment of Facts.

17(3): Contract made with no intention to perform it

To tie-up a person to a promise with no intention of performing from one's side and with the
intention of only preventing the other from dealing with others, is an example of a promise
made without the intention of performing it. E.g purchase of good without any intention of
paying the price.

Delhi Development Authority v. Skipper Construction Company

A builder entered into a large number of bookings, nearly three times the available units of
accommodation and collected money. This was held by the Supreme Court to be fraud because
he should have known that he would not be able to perform the contract with all of them. The
Court allowed reimbursement of the advanced amount paid to the builder by various people
who had made bookings.

He was also held liable to pay interest, even though there was no provision to for interest on
the deposit money. The Court said that there was fraud causing inducement for booking by the
purchasers: such fraud creates liability even outside the agreement.

Explanation – “Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself,
equivalent to speech.”
There is a distinction between passive concealment and active concealment. Take the case of
Mithoolal Nayak. Here, you are taking active steps to conceal what is otherwise the truth.

Let’s say you go to Mama’s and ask if the milk is fresh, and Mama just replies by saying “Fruity
is also very good”. Here, Mama did not take any active steps. He has kept silent, and thus it is
a passive concealment. Now, in an alternate situation, if Mama puts a sticker on the bottle to
hide the expiry date, it’s an active concealment. So, the distinction lies in the nature of the
actions – if they are calculated and directed towards concealing something, then it is active
concealment. There have to be positive steps to prevent information from reaching the other
party.

So, mere silence as to the material facts is not fraud. The other party has to the onus to be duly
diligent.

Due diligence – finding the facts by yourself (accounts, reports, bank statements etc.). In cases
of fraud, due diligence is done when there is no duty to speak. You come to me wanting to buy
shares of my firm. Now, I won’t tell everything and anything about my firm, as if I do, no one
will buy my shares. Therefore, you do due diligence and ascertain for yourself. E.g A candidate,
who had full knowledge ki iske paas attendance nahi hai does not mention this in the
examination form and sits and writes the exam. This is not fraud – concealment of material fact
– as it is the duty of the University to scrutinise the forms.

But when is silence fraud? (The principles below are applicable to misrepresentation as well,
except the deceptive part, because misrepresentation does not have malafide intent)

When silence is deceptive, as silence amounts to speech - Now going to Mama example. In the
milk example, if you directly ask Mama “If you do not say anything, I will assume that the
bottle is fresh and take it”. So here silence is equivalent to speech.

Now, cases where there is a duty to speak (all cases up until now are not covered by this part
of the explanation) – fiduciary. When there is trust and confidence in a relationship, there is a
duty to speak. Relations of utmost good faith (Contracts Uberima Fides) –

o Insurance contracts – because such a contract depends on the disclosures made by the
assured. It’s an example of how one party is without any means of discovering the truth
and has to depend on the good sense of the other party.
o Prospectus of a company - because the intending purchasers do not have the means
to verify information.

Last, change in circumstances (a duty to speak which is besides uberima fides, applies in case
of misrepresentation as well) - Sometimes a representation is true when made, but it may on
account of a change of circumstances becomes false when it is actually acted upon by the other
party. In such circumstances, it is the duty of the person who made the representation to
communicate the change of circumstances. E.g. An allottee of shares can avoid the allotment
of the shares because changes in directorate took place before the allotment.

With v O’Flanagan

A doctor represented to the other person that his practice was worth 2000 pounds. Afterwards,
however, when the other person bought the doctor’s practice, the value had decreased
substantially as the doctor had fallen ill and wasn’t able to perform as well any more. However,
the other party wasn’t informed of the change in circumstances.
The court held that it was the duty of the doctor to inform the other party of the change in
circumstances.
Misrepresentation

Section 18 - Misrepresentation” means and includes—

(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or anyone claiming under him; by misleading another to his
prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the
substance of the thing which is the subject of the agreement.

Unwarranted Statements – 18 (1)

Oceanic Steam Navigation Co v. Soonderdas Dharmasey

X chartered a ship from Y, who stated that the ship was certainly not more than 2800 ton. Y
had never actually seen the ship – the ship had never been to Bombay where Y lived. She turned
out to be more than 3000 tons. Y allowed to repudiate contract as it was entered into on the
basis of tonnage.

In this case, if the information is from a trustworthy source, then the decision would have been
different. Here, Y misrepresented based on hearsay.

Where a representation acquires the status of being a term of the contract, and it turns out to be
untrue, the aggrieved party can avoid the contract and sue for damages.

E.g. 1 – rep becoming term – A land was purchased solely for building a duplex. The seller
said that no BT in doing this. But a permission to build it was refused unless a sewage costing
some $3000 was provided. Though the misrepresentation was innocent, the buyer was allowed
to avoid the contract.

E.g. 2 – rep not becoming term

Chaun Bee Realty v Teo Chee Yeow

An advertisement was made about a property - property is of certain dimensions, is very

beautiful and has a reflective swimming pool. But in reality, poora property was an ugly bitch.
X visited the property and then agreed to purchase it. After agreement of sale finished X said I
do not want to go ahead as the ad said it had a beautiful and reflective pool but the pool here
was not that.
Court said that he had inspected the property and since he still ahead with the transaction means
that that (the swimming pool) was not a big deal. X was not allowed to rescind the option to
purchase, because the statement in the advertisement had not become as an implied term of
the option to buy, and X has seen the property.

Breach of duty – 18 (2)

Any breach of duty which brings an advantage to the person committing it by misleading the
other to his prejudice is a misrepresentation.

While there is no intention to deceive, the circumstances are such that the party who derives a
benefit from the agreement is equally answerable, as if he actually had an intention to deceive.
For e.g., X did not have time to read what was written in a deed. He signed it as he was given
the impression by Y that it contained nothing but formal matters already settled between them.
The deed however contained a property in favour of Y. X was allowed to set aside the deed.

Doctor-patient relationship is fiduciary. So, there is a duty. In both cases below, the outcome
is different solely because of a difference in the type of representation made, and the reason of
the court in awarding damages.

Thake v Maurice

X was undergoing vasectomy and was not warned by Z (surgeon) that there was a slight risk
of his wife (Y) becoming pregnant. Z was held responsible to X and Y for the pains of
unwanted pregnancy. Court said X and Y were entitled to damages for pain, suffering and
distress since the personal distress and pain of birth was a separate head of claim. There is no
reason why damages cannot be recovered from the pains of normal pregnancy.

Eyre v. Measday

X (female) was undergoing vasectomy. The doctor told that her surgery would be irreversible
but did not inform her that there would be a small risk of failure and pregnancy. She got
pregnant and sued the doctor for breach. The doctor had merely said that the process of
vasectomy was irreversible, and not that the outcomes were 100%. irreversible. The court did
not believe that the doctor meant that the expected result would actually be achieved.

Here, no damages were requested for pain and suffering due to a pregnancy, but for the breach
of a contract. Toh basically, contract law mai remedy nahi hai (Eyer’s case), but dramein karke
randi-rona karna hai toh karlo (Thake’s case).
Inducing mistake about subject matter – 18(3)

The subject matter of every agreement is supposed by the parties to posses certain value or
quality.

Ferrand v. Lazzarous

X had an agency of selling second hand cars. He pasted a sticker near the odometer saying the
reading of odometer is incorrect. Y looked at the sticker and afterwards purchased it. He
realized that the difference was bohot zyada and wanted to repudiate contract. X knew itna
zyada difference tha, but did not disclose it.

Court - a reasonable person would not think that the odometer will be so grossly incorrect that
it is not even close to actual distance. The sticker induced a mistake in the mind of Y as to the
substance of the agreement. The court said that although in the ordinary way dealers were under
no positive duty to disclose the defects and disadvantages of their goods, they were required to
volunteer the truth.

[ See, if you are confused ki how is this not covered under silence amounting to fraud, then
first;y, ye fiduciary nahi hai, secondly there is no silence amounting to speech, and third, no
change in circumstance. Also, if you are confused as to why X was entitled to tell Y about the
defect, its because of the sticker. Understand this way – 1st scenario – Y comes to X and just
buys the car without saying anything. Now, even if there is a defect, X was not obligated to
reveal it. 2nd scenario – Y comes to X and asks, after checking the price, ki koi defect toh nahi
hai. Now X has a duty to speak, and silence is fraud. 3rd scenario is present case, where X has
represented that there is a defect, and that the reading is wrong. But the reading is so grossly
wrong that it attacks the subject matter of the agreement.]

Suppression of material or vital fact – either 18 (2) or 18 (3)

R v. Kylsant

The prospectus of a company stated that the company had regularly paid dividends which
created the impression that the company was making profits. The truth was that the company
had been running into losses for years, and the dividends could were being paid through past
profits accumulated during war. The suppression of this fact was held as to be
misrepresentation.
Expression of opinion

A mere expression of opinion cannot be regarded as a misrepresentation of facts even if the

opinion turns out to be wrong. But in some cases statement of opinion may amount to
misrepresentation, as the opinion might be classified as a fact.

In cases where parties equally know about the facts and circumstances, it is expression of
opinion. But if that is not the case, then an opinion from the one who understands the situation
better can include a material fact, because such a person is essentially saying that he knows
facts which justifies his opinion.

Bisset v. Wilkinson

X sold land to Y. X was aware that Y needed the land for sheep farming and therefore expressed
the opinion that the land had a carrying capacity of 2000 sheep. The land turned out to be
unsuitable for sheep farming and Y refused to pay the price.

The court asked Y to pay the price. Here both parties were aware that X had no knowledge
about sheep farming in that particular piece of land. Y was not justified in regarding whatever
was said by X as a material fact.

Representation of state of mind

Edgington v. Fitzmaurice

The prospectus of company X misstated the purpose for which money being borrowed was
going to be used. Directors stated that the representation in the prospectus was connected to
their state of mind as to how the money was going to be used, and they could change their mind
at any stage. Therefore it was not a misrepresentation of a fact.

Court - Representation of state of mind is representation of fact

FRAUD V. MISREPRESENTATION

Similarities

• render contract voidable

• involve false representation
• necessary that consent has to be induced by either (fraud or misrep) [see Section 19
explanation]
• Where there is means of discovering the truth by ordinary diligence, silence does not
amount to either fraud or misrep [see Section 19 exception]

Differences

• Fraud is intentional
• Fraud can also lead to an action in tort for damages. Misrepresentation is not a tort, but
there is remedy under Section 75 (which is also there for fraud nonetheless)
• A person committing misrepresentation can go with the defence that he had the “means
of discovering the truth with ordinary diligence”. But with the exception of fraud by
silence, person committing fraud cannot say that the other person has such means, or
that he was too easily deceived.

Law around fraud and misrepresentation should be studied together, as the distinguishing factor
is only the deceptive intent. But what is common is that a party is given a wrong set of facts.

Mere silence neither amounts to fraud, nor misrepresentation, unless there is a duty to speak.

Exceptions to the explanations in Section 17 apply to Section 18 as well – With v O’Flanigan

Remedies

Now, what is the effect of these 4 vitiating factors – what is the legal recourse if these things
have happened? A party, faced with fraud etc., would like to either step back from the
transaction or be restored to his position before the contract was formed.

The transaction is voidable at the option of the party whose consent has been taken by way of
fraud, coercion, misrepresentation, or undue influence. So, this person is granted a recission
from the contract (he recedes from it). He is allowed to go back to the position he was in before
the contract was created. – Section 19 (Fraud, Misrepresentation and Coercion) and Section
19 (a) (Undue influence)

Section 19. Voidability of agreements without free consent.—When consent to an agreement

is caused by coercion, 1*** fraud or misrepresentation, the agreement is a contract voidable at
the option of the party whose consent was so caused.

A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks
fit, insist that the contract shall be performed, and that he shall be put in the position in which
he would have been if the representations made had been true.

Exception.—If such consent was caused by misrepresentation or by silence, fraudulent within

the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent
was so caused had the means of discovering the truth with ordinary diligence.

Explanation.—A fraud or misrepresentation which did not cause the consent to a contract of
the party on whom such fraud was practised, or to whom such misrepresentation was made,
does not render a contract voidable.

Section 19A. Power to set aside contract induced by undue influence.—When consent to an
agreement is caused by undue influence, the agreement is a contract voidable at the option of
the party whose consent was so caused.

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid
it has received any benefit thereunder, upon such terms and conditions as to the Court may
seem just.

Moreover, in cases of fraud and misrepresentation, there is another remedy (see second para of
section 19). The defrauded or misrepresented party can ask for undoing the effect of the fraud.
Here, the contract will continue, but the defrauding party must restore the previous position of
the party.
E.g. You are a moneylender giving me 3 lakhs, and you want a security worth 5 lakh rupees.
Here, I give you a property worth only 3 lakhs. Now here, the moneylender has been defrauded,
yes, but say the moneylender in this case argues that “It’s fine, I will go ahead with this security
amount, as I have no problems with this fraud. But I want the remaining security amount (2
lakh additional security)”. So here, the moneylender is not receding from the agreement, but
asking for something else/more (an additional thing). But this concept is not restitution.

Note that restitution is not under Section 19, but under Section 64 of the Act. The essence of
Section 64 is restitution, a remedy in equity. The idea is that both parties have to give back
whatever they take. This implies that party seeking rescission must be in a position must be in
a position to restore the benefits he has obtained under the contract.

Section 64. Consequences of rescission of voidable contract. —"When a person at

whose option a contract is voidable rescinds it, the other party thereto need not perform
any promise therein contained in which he is promisor. The party rescinding avoidable
contract shall, if he have received any benefit thereunder from another party to such
contract, restore such benefit, so far as may be, to the person from whom it was
received.”

*Note the relationship between 19 (a) and 64.

What is the meaning of this term “recission’? Recission as a remedy although used under the
contract act, is recognised under the Specific Relief Act.

Section 27 of Specific Relief Act – “When rescission may be adjudged or refused. —

(1) Any person interested in a contract may sue to have it rescinded, and such rescission
may be adjudged by the court in any of the following cases, namely: —
(a) where the contract is voidable or terminable by the plaintiff.”

When we are talking about voidable arrangements, the party will ask for two remedies
(voidable is not remedy bhai, voidable leads us to remedy) –

• Recission
• Restitution

(First, we will recede from the contract, then we will go for restitution).

Also, this is different from a breach of contract. Damages will not be granted in this case. If
you do want damages, go to tort law (fraud and misrepresentation). But if you do prove fraud
in tort, then you cannot rescind the contract, as the fraud has already been done good. You can’t
take both remedies. So, if you have taken damages as a remedy, you cannot recede.

BUT, if you have receded, and then you suffer losses due to your act of stepping back, then
you have Section 75 of the Act. This would apply in cases where you are stepping back, taking
back what I given to you, but have still lost something. These losses must prevail even after
rescission or restitution.

Section 75. Party rightfully rescinding contract, entitled to compensation.— “A person who
rightfully rescinds a contract is entitled to compensation for any damage which he has
sustained through the non-fulfilment of the contract.”

The important thing is to understand the domain of these transactions – where is 19 applicable,
where 64 applicable, where is 75 applicable with 64 and where does 27 come in in all this?

Also, Section 31 of the Specific Relief Act – “When cancellation may be ordered.—(1) Any
person against whom a written instrument is void or voidable, and who has reasonable
apprehension that such instrument, if left outstanding may cause him serious injury, may sue
to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and
order it to be delivered up and cancelled.”

This will apply when the contract still exits after everything is done and dusted (restation,
Section 75 etc.), where you must cancel the instrument because now there is no use of the
contract.

So finally, 19, 19 (a), 64, 27, 75, and 31.

WHERE RESCISSION NOT ALLOWED

1. Affirmation - In certain cases, it might happen that in rescission of contracts, a party in

discovering the vitiating factor affirms it. If a party affirms that his consent was not
free, he cannot rescind.

Long v Lloyd

A person sold a lorry to B, and it was represented that the lorry was fit. B realised that there
were defects after testing it and went to A saying take it back. A said don’t give it back, take it
for repair and we both will bear 50% of the repair costs. But after this, the lorry got completely
destroyed. B went to A again.

Court said that B had affirmed the fraud, and the rescission will not apply in this case.
 2. Rescission not allowed due to lapse of time - After discovery of fraud, say if you desire
to recede after an unreasonable amount of time, even then rescission would go for a
toss.

3. Where a third party bonafide interferes– I defraud you and take a good from you. The
contract is voidable. And before you realise the fraud, I transfer the property to X. Here,
you cannot rescind from the agreement. The transaction b/w me and you was valid (it
was voidable at your option), which means that the title was also valid, which implies
that the title can be transferred to X.

[But this logic would not apply in cases of Mistake, as there, the transaction is void ab initio.
In Hardman v Booth, the court justified that it was a mistake because the parties never mutually
agreed to the same thing/ to a common set a of affairs.]

Therefore, if you want to recede from a contract, should communicate it to the other person
prior to the sale of the property to a third party, or should do enough to bring it to the notice of
the other party. The reason is that a third party, acting in good faith, as acquired rights in the
subject-matter of the contract.

The catch is that the third party has to be bonafide innocent. If the third party knew about the
fraud, then you can rescind.

MODE OF RESCISSION

Give notice to the other party if you want to rescind. This is covered under Section 66. If other
party

Car and Universal Finance Company v Cladwell

A car company sold a car to a person against a cheque. Afterwards, the cheque bounced. The
car company thus wanted to tell the person that they would rescind the contract because of this.
The company could not trace the person. Thus, they alerted the police and the automobile
association to trace the person. In the meanwhile, the purchaser sold the car to a third person,
who presumably was a bona fide man.

The court said that the party could not contact the initial purchase. The company did enough to
bring to the notice of the other party that they want to rescind the contract. This was sufficient
rescission. After all this, if the car was still sold, this agreement is not valid.
MISTAKE

Mistake operates in two ways –

• It may defeat the consent that parties are supposed to have given. These cases, such as
Raffles v. Wichelhaus, fall under Section 13, which is basically consensus as idem.
• It may mislead the parties as to the purpose which they contemplated. Here Section 20
applies.

Section 20. Agreement void where both parties are under mistake as to matter of fact.—Where both
the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the
agreement is void.

Now what are these facts which are essential to an agreement?

• Identity of parties
• Identity and nature of the subject matter of the contract
• Nature and content of the promise itself

MISTAKE OF IDENTITY

Hardman v. Booth

X, intending to deal with Thomas Gandell & Sons, went to their office and took an order from
Y (Edward), who represented himself to be a partner in the firm Thomas Gandell and Sons. Y
told X that the goods should be sent in the name of Edward Gandell & Sons. Y received the
goods, carried them away and sold them to Z, a bona fide buyer. X sued Z to recover the goods.

Court – Agreement void. Y was not partner of firm. Both parties did not agree to the same thing
in the same sense, so there is no contract at all. X intended to deal with Gandell and Sons while
interacting with Y. X was allowed to recover the goods. As there was no legally enforceable
contract (contract void), the possessory title never passed from the X to Edward. As such, it
could not then pass from Edward to Z.

**All cases of assumption of false identity are cases of unilateral mistake nevertheless regarded
as void. This is because the rogue party is aware of the mistake of the other. However, where
one is unaware of the mistaken belief of the other, the agreement would be enforced. In such a
case, the court applies the objective test of reasonable man, rather than looking at the intention
of the parties.
Boulton v Jones

X took over the business of one Brocklehurst (B). Y used to deal with B. He did not know of
the change in ownership and sent B an order for goods. Order was received by X, who sent the
goods. Y got to know of the change only when he received an invoice, and by that time had
already consumed the goods. Y complained that B owed him some money, and therefor he had
intended to contract with him. He thus refused to pay the price of the goods to X. X sued Y.

Court- Y not liable. Plea of mistake of identity will be entertained only when the identity is of
material importance. Here, the existence of a debt made the identity of the party of vital
importance. Y intended to contract with B and not X, and therefore agreement void on account
of mistake.

Cundy v Lindsay

A owned a company which manufactured handkerchiefs. Another company in the name of

Blenkeron in London. An imposter took a place on hire on the same street as Blankeron and
wrote a letter to A saying that “I want you to deliver so and so quantity at so and so price”. The
imposter wrote the letter on the letterhead of Blancorn. A thought it was Blankeron and sold
the quantity. After they gave the goods, the imposter absconded and never paid up. He sold the
hankeys later to an innocent person, who did not know of imposter’s malice.

Company – agreement is induced by mistake of identity, and due to this the third party has no
title over the goods. Goods have to be returned to A.

Two rules –
When a person takes a name of another established person, without being physically present in
front of the other party, makes the other party believe that he is someone else (through letters
etc.), there is a mistake of identity.

Where the parties are standing in front of each other (contract made in physical presence), there
is a presumption that the identity of the imposter is that of the person himself, and the contract
is made with that imposter. (In these cases, it is fraud)

Philips v Brook

There was a jeweller (A). B entered A’s shop and liked certain rings and asked A for the price.
A quoted a certain price, to which B said yes. B took out a cheque, signed that price and gave
it to A. B said “You see who I am, I am George Bollo. Since I am in a hurry, I will go now.
But I will come back later and purchase more jewellery.” B sold it to a third-party innocent
buyer and eloped. The cheque bounced.
This is not a mistake of identity, as B was standing right in front of the person. Thus, it is
fraud, and the third party is not required to return the jewellery back, despite the fact that that
the jeweller has never paid for it.

Ingram v. Little

3 sisters were willing to sell off second hand cars, and they advertised this sale. An imposter A
saw this ad and approached these women and intended to buy them. He was given a price to
which he agreed to, he pulled out a cheque, but the ladies refused. A said bhai check kyun nahi
loge, I am very interested in buying. I am a Hutchinson, a well-established businessman who
stays in the area. The sister checked a directory, which confirmed the status of A. Based on
these representations, the car was sold in return of the cheque. Before the cheque bounced, the
car was sold to a third-party innocent buyer. A absconded. Question again was whether it was
mistake or fraud.

The court for the first time analysed the presumption which Cundy had created (about physical
presence). The court distinguished between identity and attributes. The general presumption is
that the identity is that of the person standing. But where the parties completely relied on the
name and stature of the person, the name (which otherwise is an attribute) can be considered
as an identity of the person. IN this case, the ladies made a lot of effort showing that the name
of the person mattered a lot. His name is same as that of his identity, and not attribute. Identity
is also who the person claims himself to be, not just the name he claims to have. Thus, this is
a case of mistake, and further, the third-party innocent buyer has to return the car as neither
him nor A had a good title over the car.

Lewis v. Averay

A had a showroom of cars. B, an imposter, approached him and asked to purchase a car. He
took an assistant on a test drive. After he was satisfied, he pulled out a cheque, signed it and
gave the cheque. A said I won’t take cheques… if you want to give cheque tell me who you
are. B said I am Richard Green, a theatre director something. He also showed an identity card.
B sold the car to an innocent person. Question again same.

Denning – this entire façade of what is the identity and what is the attribute is completely
useless. The distinction b/w identity and attribute is not a valid one – a distinction without a
consequence. These are unnecessary legal constructs to decide who gets the title of the goods.
The only difference b/w Phillips and Ingram is this artificial distinction (arising from the fact
that one of the sisters ran to directory and shit), leading to different outcomes.

This case should be decided based on the position of the parties.

When the car was transferred by way of cheque, A assumed the risk – the cheque may encash
or not. Whereas, the position of the third party buyer is not of any risk. In this whole transaction,
the position of taking risk was with the showroom owner, it is a case of fraud. So, while the
consequence is same, the reasoning is different. The reasoning is based on who deserves the
benefit, which is further dependant on who takes the risk.

Cundy v Lindsay is the genesis of the distinction b/w identity and attributes. It created this
distinction to explain fraud. Lewis v Averay is the conclusion that this distinction is without
consequence.

(sabke facts same hai, outcome alag hai)

Shogun Finance v Hudson

A, an imposter, forged a driving license of a man named Patel and reached a car showroom. “I
want to purchase the car on a hire-purchase basis” – instalments. (till instalments are done, you
are hiror, after that u=you are owner). Owner said we don’t do hire-purchase, but we can
connect you to a finance company. The Shogun Fin drafted the hire-purchase agreement, signed
with Patel. This man A took the car, sold it to third party, and absconded. Car showroom filed
a case for recovery of the car. Is it mistake or fraud?

The court went into some different technicalities – the case is not the same as the earlier 3
cases, as earlier there were oral agreements. Here, there is proper written agreement in which
the name Durlab Patel figures. Since the name is mentioned in a written document, no oral
evidence can be taken against it.

This case says Cundy is correct, but it talks about those situations where agreements are not
written and drafted. So, Cundy cannot be squarely applied to the present case, as there is rule
of evidence (no oral evidence against the written document). It is a case of mistake, and the
third-party buyer must give it back. The court also said that if it was not a written contract, we
would have decided it on the basis of the presumption in Cundy v. Lindsay.

The dissenting judges said Cundy ki MKC, ye distinction chutiya hai, aur said Lewis follow
karo. Chaahe banda letter likhra hai, video call pe hai, hugg raha hia, chod raha hai, if he
misrepresents his name, that is a fraud. What is presence mai rehna hai shit.

Throughout all this, one thing is certain – if a person represents a name whose person does not
exist (its not a real person), it is not a mistake, but a fraud, because for whom are you mistaking
the person with. In all cases, Richard, George, Blankeron etc. all these people were real.
King Norton Metal Comp. v. Edridge

Wallis assumed the name of Halleman company and contracted with another person. The
question was whether fraud or mistake?

This is a case of fraud without any confusion, as Halleman company was not a real company.

Where the identity of the person is extremely important, it is a case of mistake – say for e.g. in
a case, a person had made wrongful remarks and got into a fight with the theatre people.
Therefore, he was banned from watching the first show of every theatre. He sent his friend to
get him ticket. The friend got the ticket. When this person went, he was topped. He argued that
I have ticket fuck off. The court said that the ticket would have never been sold if it were known
that you were the one who had come to the counter and bought it. So here, there is a case of
mistake.

MISTAKE OF SUBJECT MATTER

1. Mistake as to the existence of subject matter

Gustavus Courturier v. Robert Hastie

A and B enter into a contract for selling certain goods, which were on voyage. The parties were
unaware that the ship carrying the goods was stuck at sea, and due to the perishable nature of
the goods, the captain sold off the goods at an intermediate port. The contract was entered into
after the goods were already sold. The court said that there is no contract (as there is mistake),
as both parties believed that the subject matter existed.

If the goods cease to exist before the contract is entered into, it is mistake.
If the goods cease to exist after the contract is entered into, then depending on the
circumstances, it may be a breach or frustration.

2. Mistake as to the rights of parties in relation to the subject matter

Cooper v. Phibbs

A nephew (A) and uncle (B). B was owner of fishery business. He, through his daughter,
entered into arrangement of transferring that business by way of letting it to A. A was tenant
of the fishery business. Then, there was dispute. Later, it was realised that the whole contract
was based on a mistake - the nephew was actually the owner in this arrangement, as the property
of the fishery had devolved in such a fashion sue to succession. But the contract believed the
daughter and Uncle to be the owner. Thus, the contract is void ab initio as the parties were
mistaken as to their rights and titles in the agreement. Both parties believed the nephew is the
tenant.

3. Mistake due to different subject matters

Raffles v. Wichlehaus

A entered into an agreement with B for sale of a certain quantity of Surat cotton. A said the
cotton will be delivered by way of a ship name Peerless. But there were two ships names
Peerless which sailed from the Bombay port. The seller had the October ship in mind, and
Buyer had the one sailing in December in mind. Who breached the contract? No one, as the
contract was under a mistake of subject matter – both parties has different subject matters in
mind. The agreement was declared void ab initio.

4. Mistake as to the substance/quality of the subject matter

Sheikh Bros v. Ochner

A owned a forest in Kenya. Forest was full of Sisal trees, the extract of which is collected from
its leaves and used for various productive purposes. A gave the forest on lease to B, to fell the
trees, process the leaves, and hand over the extract worth 50 tonnes in weight to A for a
particular cost. In the middle of his task, B realised that the leaf potential is not so much so as
to give the decided amount. Towards the end, he did not deliver that. A called breach.

Court – parties were mistaken on a very important and fundamental aspect of the contract – the
extract producing function of the leaf. They believed that the leaves were potent enough. Thus,
there is a mistake as to the substance of the subject matter, and the agreement is void ab initio.

But (and this is where it gets technical) substance must be distinguished from quality.
Substance is those attributes of the subject matter which are relevant and important for the
parties, so that their intentions can be executed, at the time of entering into the contract. If
quality of the SM informs the intention of the parties in a contract, it is a mistake as to the
substance (as was in the case of Sheikh Bros). But, as in the below mentioned case, it is not
always that quality and substance fall under the same head.
Smith v. Hughes

A owned a horse, and reached out to B, a seller of cereals. A asked if B had old oats that he
could feed to the horse. B did not say anything about the age of the oats and told him that this
is oats that I have and showed A a sample. A looked at it and ordered for more of the same.
Oats were delivered, and A realised that the oats were not that old so as to make it a good diet
for his horse. A filed a case for mistake, as he was mistaken as to the desired quality of the
oats.

Court – parties are mistaken as to the quality of the oats, but quality is separate from substance
in this case. The substance of the agreement was that the bulk of the oats to be delivered must
be the same as that of the sample shown to A. The quality is not an important consideration in
this case, and it is not part of the substance of the SM. A had seen the oats with his eyes, and
merely wanted more of the same. If what was delivered to him was different from what he saw
in the shop, then it is a different case, but that did not happen.

Bell v. Lever Bros

A, an English Company, has its subsidiary B in Africa. Mr Bell was the MD of B for a particular
period of time. In that time, B merged with another company C. As it merged, it was required
that Mr Bell’s services were no longer needed. Mr Bell agreed on a consideration of some
money. Both signed an agreement in the form an instrument of recission (premature
termination). After wards it was realised that Mr Bell indulged in many corrupt practices as
MD. C claimed that they were mistaken as to the quality of the services that Mr Bell had offered
to the company.

Court – agreement is valid, Bell is not obligated to return. The substance is that a term of certain
years was promised, and it was not granted. In return for dispensing with you early, I will give
you money. The quality of the services was only an ancillary aspect to the discussion.

Great Peace Shipping v. Tsavliris Salvage

A ship (A) was stuck in the sea and had suffered damage. It required that a salvage ship comes
and vacates this ship. An agreement was entered for sending the salvage ship, and it was
believed at the time that B was 30 miles away from A. Afterwards, it was realised that B was
400 miles away from A. Therefore, A entered into a contract with other, closer, ship. B claimed
for the consideration in the contract. The important fact here was that A was not so damaged
that it was in immediate need of salvage. B, even though 400 miles away, could have reached
on time and salvaged. Thus, the court said that the contract cannot be declared to be void just
because the parties were mistaken as to a mere ancillary fact (quality).
 5. Mistake as to the rights and obligations of parties in the principal agreement

Magee v. Penine Insurance

A, a lady, purchased a car for her son (18 years old). Son had a driving license. The dealer,
while applying for insurance, applied for it in the name of A. He mentioned that the applicant
has a driving license. But A, unlike her son, did not have a driving license. The car then met
with an accident, and an accident claim was raised against the insurance company. The
company decided that we will give you 200 Pounds. After this agreement was reached, the
company realised that A does not have a driving license, and that the insurance was granted
against her name. The insurance company therefore backed off, as they argued that this
agreement (200 Pounds) is void as it was based on a mistake that the initial insurance filed by
the dealer is a valid one (which it is not). Therefore, here, both parties are mistaken as to the
very existence of the agreement which formed the backbone of the negotiation in question.

Court – the agreement is a void ab initio, and company is not liable to pay any sum to A.

Kalyanpur Lime Works v State of Bihar

A acquired a lease from the State to a hill in Bihar to do limestone quarrying. One of the terms
was that the company is not entitled to grant a sub-license/ sub-let the hill. Sadly, (matlab unke
liye sad bruh), the company went into liquidation, and a liquidator (B) thought that the lease
should assigned to someone else to ensure the company stays afloat. State got to know, there
forfeited the lease against A and grants the lease to someone else (new lessee). A (old lessee)
went to court against the forfeiture and reassignment of lease.
Privy Council – as per the Contract, State does not have the right to forfeit and reassign the
lease. This forfeiture is wrong, the lease was assigned back to A.

After the lease expired, the new lessee (Kalyanpur Lime Work) asked the State to give the lease
to them now, as they has sort of acquired it before, and they waited for so long. The State said
that we granted you the lease based on a mistake of fact as to our rights in the agreement (we
thought we could re assign the lease).

Now Kalyanpur went to court saying lease nahi diya mujhe aw.

Court – the State was indeed mistaken in the previous case, as rightly held by the Privy Council.
But here, there is no mistake as far the rights of State are concerned, as they can grant the lease
to anyone they want after it has expired with respect to the previous lessee.
MISTAKE AS TO THE NATURE OF PROMISE

It may happen that parties that entering into contract, and they have different views of that
agreement in mind. It becomes very difficult for such an agreement to be enforced.

Nature of promise – where one party induces the mistake in the mind of the other person by
way of a fraudulent misrepresentation.

If there is a fraud as to content, it is fraud. But if the contents have been moulded in a way so
as to change the character of the agreement, it will be mistake. There is no consensus ad idem,
and thus comes under mistake.

E.g. A approached B (illiterate and old), asking him to sign a document which he told B was
the lease deed of his property. In reality, it was a gift deed in favour of A. After B signed, and
A executed it, B realised he committed a blunder. He went to the court saying he wanted his
property back. The question here is – fraud or mistake?

Court– prima facie fraud (deceptive conduct by A). But there needs to be distinction between
fraud as to the contents of the documents, and fraud as to the character of the document. If the
fraud is with the character of the document, you cannot for a moment recognise such documents
as legal – the fraud is of such a grave nature. In the previous cases we have discussed, mistake
was induced w.r.t. a material aspect of the contract, not about the fundamental nature of the
contract. When the fraudulent misrepresentation is with the character of the document, the law
mandates that the agreement must be void ab initio.

Dilemma – can this logic be extended to the cases of mistake of identity? Can we say that the
identities of the parties are of such a fundamental nature so as to be made part of the
fundamental ‘character’ of the contract?

NON EST FACTUM

Not my agreement (in the present case, B was not signing on what he thought he was signing
on). The principle is for those who cannot read the agreement (illiteracy, impairment, age) [not
for those who are careless in reading the agreement].
 Foster v. Mackinnon

A, in his regular business, signed performance guarantees1 for other people. B

approached him and asked him to sign on the back of the paper, not showing him the
front side of the paper. On asking what’s in the front side, he said aree chhod na bhai
tera toh roz ka hai karde plz daddy this is just a regular guarantee. It turned out (surprise
surprise) that B made A sign a bill of exchange, having the effect of A incurring a
personal liability. A said bhai I thought I was signing a guaranteed agreement where
my liability was secondary, only chipping in when the first person fails. I did not agree
to this.

Court – B induced a grave fraud and mistake in the mind of A. It is a void ab initio
agreement. A did not have the opportunity to peruse the agreement, not that he did not
want to. This is not a case of A being careless.

You can only claim non est factum if the mistake is to the nature and character of the
promise.

Gailee v Lee

A, a 78-year-old woman, owned property. Because she loved her nephew B, A told him
that I will transfer the property so that you can do well in your business. B bought Mr
Lee with him, and presented a document to A saying that it was document of transfer
to B. But this transfer was in favour of Mr Lee. Mr Lee in turn mortgaged the property
to a creditor as against a loan. The creditor took the property in good faith and gave a
loan. But then Mr Lee failed to give back the loaned amount, and the creditor knocked
on the door of A.

A said that I could not read the document as I am old, and my spectacles were broken
at the time they showed me the document, and I did not know my property was
transferred to Lee. She pleaded non est factum. The court agreed. You can be mistaken
as to whether the property was transferred to B or Lee or jo bhi. But the court also said
that you cannot say that you were mistaken as to the nature of the promise, as you knew
that the property will be used to raise money for business purposes (this was an
established fact – A knew that the property was to be used for business purposes). The
reason why you entered into the agreement was because you wanted your nephew to
benefit.

The title of the creditor cannot be countered, as Mr Lee was (as it was a fraud) was the
owner of the property and he legitimately mortgaged it in favour of the creditor.

1
Suppose you take a loan from a bank. Bank says bring another person who will pay if you fail to pay the loan
back. So, this third person performs the function of guaranteeing the creditor.
 Cases where non est factum would not apply.

1. If you are not prudent and don’t read

2. If you cannot do so, if the non-reading has not led to the violation of the contract in
the way in which you thought it would

WHEN CONTRACT FAILS TO EXPRESS THE INTENTION OF THE PARTIES

(Case below are not dealt under Section 22 and 23 of the ICA, but rather Section 26 of the
Specific Relief Act)

Sometimes it may happen that parties had agreed to a certain thing, but when they wrote that
particular agreement, what was written did not convey the intentions. Here, there is not mistake
in the mind, only a drafting mistake. What do we do here? We read the document as if it was
not mis drafted.

Section 26. When instrument may be rectified. —

(1) When, through fraud or a mutual mistake of the parties, a contract or other
instrument in writing [not being the articles of association of a company to
which the Companies Act, 1956 (1 of 1956) applies] does not express their
real intention, then—
(a) either party or his representative in interest may institute a suit to
have the instrument rectified; or
(b) the plaintiff may, in any suit in which any right arising under the
instrument is in issue, claim in his pleading that the instrument be
rectified; or
(c) a defendant in any such suit as is referred to in clause (b), may, in
addition to any other defence open to him, ask for rectification of the
instrument.

Hartog v. Collins & Shiells

There was an agreement for sale of Argentinian rabbit skin. All the conversations that these
parties had was w.r.t. price per pound. But when they drafted, price per pound was written as
price per piece. The buyer here was at an advantageous side, and seller ka katt gaya cuz price
per piece was actually much higher. Buyer, in his optimism, said ab toh yahi chalega haha.
Court – all conversation, negotiations and letters are in price per pound. There is a mere drafting
error. Agreement should be read as if it was mentioned ‘price per pound’. This is how the true
intention of the parties was executed.

New India Rubber Company v. Oriental Fire and Accidental Insurance

A (company) had taken an insurance policy was riots fires etc., which expired. In the terms of
renewal, A wrote a letter to the Insurance company (B) saying that we only want the insurance
for fire (not for riots and etc.) and not for others. But B issued a renewal on their set template,
including riots and other things. Later, a riot actually happened in the area. A wanted to take
advantage of the wrongful drafting. B said bhai letter dekho apna.

Court – insurance claim was not granted rectified the insurance policy for the benefit of the
insurance company.

Where is it that the law of mistake does not operate? Limiting factors of mistake

• Where a mistake unilateral (Section 22). Mistake is only operable where it is bilateral.
E.g. A said I want to charter a steamer for 10th August, and the company allowed this.
A had in his mind that 10th August is the 15th day after the completion of Hajj yatra.
Then, he to the company that bhai yaar I was mistaken, so I cannot perform the terms
of this agreement. Court said that this is one parties mistake, there is nothing wrong in
this arrangement.

• Mistake of law (Section 21)

• Where the mistake is w.r.t. to a attribute of the subject matter which is not substantial
to the agreement (discussed before)

Agreements based on mistake are void ab initio. Anyone taking a title on account of mistake is
not bona fide, where in case of fraud, this title is bona fide
 VOID AGREEMENTS

UNLAWFUL AGREEMENTS

Section 23 - What considerations and objects are lawful, and what not.—

The consideration or object of an agreement is lawful, unless—

it is forbidden by law; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or is
fraudulent ; or
involves or implies, injury to the person or property of another; or
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. Every
agreement of which the object or consideration is unlawful is void.

Object is where the parties want to reach/what they want to accomplish with the agreement. It
might happen that object and consideration may be same, but the fact of them coinciding does
not make them similar.

Example of VM, a well-reputed cotton seller, and us with cotton – consideration is also getting
cotton, and object is also getting cotton. But take loan agreements for example. Object and
consideration are different – for what purpose the loan was taken, and the fact that the loan was
taken respectively.

FORBIDDEN BY LAW

In a case, there was liquor license given to a person. He was not allowed to further sub-let this
liquor license or enter into a partnership agreement as per the Excise Act. He nonetheless did
so. He was reprimanded. It is an Act for the public interest.

Object of the statute, and object of agreement is important. If the intention behind a law is to
forbid an act in public interest, then agreement to do said act is void. But if the intention is
merely to regulate an act by prescribing certain terms, a contract to do the act without fulfilling
these terms would be void.

In a case, X acquired a lease of certain tolls. Law – lease cannot be sub-letted to another person
without the Collector’s consent. X sub-letted the toll to Y without permission. Is this sub-lease
void? No. Object of statute not to disallow such transactions. The Tolls Act was passed for the
benefit of revenue, and not public morals. Therefore, X and Y ka contract valid. The transaction
may be void as against the Collector though.

DEFEAT THE PURPOSE OF ANY LAW

Where object or consideration of agreement is not directly forbidden by law, but would defeat
the provisions of law if permitted.

In a case, a person had taken some loan against agricultural land. Under a statute, the loan was
waived. The farmer intended to sell off the land, and in selling, the debt was set off against the
price.

The court said that the contract was defeating the provision of the statute. The law said that the
loan was waived off, but as per the agreement, the loan was a consideration. Thus, the
consideration has the effect of defeating the provision of the law and hence the agreement was
void.

But innocent violation of law is fine, and agreement will be enforced.

In a case, there was a pilot. The owner of the aircraft asked him to take the plane out of Nigerian
territory, making him believe that there was a threat to life in Nigeria. So he flew the plane out
of Nigeria and landed it at Ivory Coast. When the authorities at IC found out that the flight left
without authorisation from Nigerian authorities, they made him fly back. The pilot asked for
the fee on the way back.

The court said that when a person commits a crime, he cannot reap the fruits of that crime. But
in this case, there existed a situation of necessity because he thought there was a threat to life.
Therefore, though he committed an offence in not taking permission of Nigerian authorities,
he is entitled to the fees because he innocently violated the law.

FRAUDULENT OR DECEPTIVE EFFECT - Bid rigging

IMMORAL

If object/consideration immoral, then void. Subject to the court/judge, and their standards of
morality. But some things are always immoral (jaise ye notes without permission share
karna…ma chod doonga)

Gerulal Parakh v Mahadeodas Maiya – girls ko dance karne do please

OPPOSED TO PUBLIC POLICY

Contracts which are opposed to public policy void. Courts will not enforce in public interest.

Several heads (only below-metioned head has case example) – trading with enemy, trafficking
in public offices, interference with administration of justice, marriage brokerage contracts,
unconscionable dealings.

Unconscionable dealing – Where the parties are not on equal footing and there is gap in
bargaining power.

Central Inland Water Transport Corp v Brojonath Ganguly

A Govt Corp imposed a term on an employee, that he can be removed just by three months’
notice or pay in lieu of notice without any ground. This is exploitation and that is opposed to
PP.

SECTION 24 - If in an agreement, a part of the consideration or object is void, the agreement

will be void. If the legal and illegal parts are not separable, the entire agreement will be void.
Otherwise only that part will be void.

X had a license for trading ganja and opium. Opium license said no partnership. He brought in
a contract for partnership for ganja and opium. Assets of the opium and ganja are the same.
Partner wanted the firm to be liquidated. But we cannot enforce intention w.r.t ganja as we will
also end up doing it for opium. S partnership w.r.t only ganja cannot be enforced as it cannot
be severed from opium. Therefore, whole contract void.
AGREEMENT IN RESTRAINT OF TRADE

Section 27. Agreement in restraint of trade, void.—Every agreement by which any one is
restrained from exercising a lawful profession, trade or business of any kind, is to that extent
void.

Void? Not illegal, but merely not enforceable by law. Now remember contract is an agreement
enforceable by law. And agreement enforceable by law? This is talked about in Section 10
(requirements of a valid agreement). So how is Section 10 connected to Section 27? Phrase
“Expressly declared to be void by law” in Section 10. So the ICA has certain provisions, like
27, which directly say ki contract void hai, and this is supported by Section 10.

Firstly, what is this restraint of trade? You are restricting the freedom to enter into any trade or
business – I will not do X, and X should be regarding profession, trade, or business. And then
the law says we will not enforce this. So finally, why does the law say this? When, say, the
agreement was voluntary, on free consent, having legal objects and considerations etc, why
does the law butt in? Every individual has an interest in him exercising his labour and skill.
And this is not only me who has an interest, (as then I can say na ki chalo mereko nahi hai
interest ma chudao) but society has interest in each individual’s skills. E.g. IPL contract.
Imagine IPL contracts aisa hota ki 15 crore milenge but you have to sit at home… will society
agree? Will the individual, say Virat Kohli, agree?

Relevant area of law as it is involved in employment disputes, business disputes etc. and there
are many cases in practice.

Madhub Chander v. Raj Kumar

Two rival shopkeepers in a locality in Kolkata. X told Y to close the shop in a locality, and he
would pay him some amount for this. The shop was closed but the money didn’t go to Y. Y
argued that the agreement was not void because it was not an absolute restraint. Restraint was
partial and he was only stopped from carrying business in that locality. So, it’s not an agreement
in restraint of trade and I am entitled to money.

The court said that the agreement was void as it is restraint of trade. S 28 uses the word
‘absolutely’. S 27 does not have this word. Hence the judge said that the intention of S. 27 was
clearly absolute as well as partial restraint of trade.
EXCEPTIONS

In English law, there is the concept of reasonableness – restriction can be imposed on trade if
it is reasonable. This is best explained by Nordenflet’s case. So, they see it through the angle
of reasonableness of the restriction.

Now we have created 2 forms of exceptions, which are similar to the English position, but its
slightly different.

1. Statutory

SALE OF GOODWILL

Exception 1.—Saving of agreement not to carry on business of which good-will is sold.—One

who sells the good-will of a business may agree with the buyer to refrain from carrying on a
similar business, within specified local limits, so long as the buyer, or any person deriving title
to the good-will from him, carries on a like business therein, provided that such limits appear
to the Court reasonable, regard being had to the nature of the business.

Here also, as pointed out earlier, there is the concept of reasonableness. Suppose there is Paradise
Biryani. It is operating at the regional level. Inhone bech diya business and aapne khareed liya. Ab
socho they started the same business again. They can do that – agreement in restraint of trade void. But
if they had sold the business as well as the goodwill of the business, then they cannot start the same
business. Law says that restrictions have to be reasonable – e.g. you can’t ask Paradise to not restart
operations in China…they don’t have goodwill there this the restriction is unreasonable.

What is goodwill? Simple – probability that the old customer will resort to the old place. But often
goodwill is the most essential thing because of which a business is running. It is the advantage that a
firm receives due to its reputation and connection.

Why is goodwill important here? Chalo Paradise ka valuation hua 700 crore. Now say they have charged
you 1200 crore and said isme mai band kar doonga. What is this extra 500? This is the goodwill.
Goodwill is therefore a saleable and marketable commodity. Ab aap goodwill bech sakte ho, and that
is in the interest of everyone. Paradise ko paise mil gaye goodwill ke, tumko unka business mil gaya
and the others are incentivised to create a goodwill which is actually worth something. Thus there is a
public purpose behind the protection of this goodwill.

All the interests (of parties and the public) here have to be legitimate, and the restriction has to be
reasonable. These are the two conditions that have to satisfied – legitimate interest and reasonable
restriction.
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd

Nordenfelt was selling off the goodwill of his company to X’s company. The agreement said
he could (1) not pursue the same business anywhere in the world for 25 years, and (2) not get
into any other business which X might carry, and that was competitive with X.

The court said that the first clause was reasonable and valid. As Nordenfelt’s business had
global clientele, global restriction reasonable – necessary to protect Y’s interest. However, the
second clause was unreasonable. Legitimate interest and goodwill was only in one business – guns
and ammo. Tum unko thodi bologe ‘ab aap kuch bhi nahi kar sakte’. You are basically avoiding
competition, and that amounts to restraint of trade.

Thus, the first clause fell under the exception, but the second clause could not.

Vancouver Malt and Sake Brewing Co. Vancouver Breweries

Company X had license to produce wines, beers and sake, but it only produced sake (another form of
liquor). Its only customer was the Govt. X entered into agreement with Y, selling goodwill and business
of manufacturing wine and beer, but not the right to produce sake.

Court - Agreement void. X only has sake ka business. It had no goodwill in wine and beer. Nothing has
been sold. What has happened? X has agreed to not carry on a particular branch of business (wines and
beers) for a certain period in return for a sum of money from Y. bas.

2. Judicially Created

A. TRADE COMBINATIONS – Traders in the same line of business can bring organisation
into their production. Business regulation is fine, restriction is bad. Regulation furthers
business interests, and leads to healthy competition. You have to see competition which
is ruinous in nature, because that would make business difficult to survive. The purpose
of competition is to make things better, and if the situation is that this fundamental
assumption does not apply, then fuck that. Therefore, restraint cannot be disguised as
regulation.

e.g. There were four cotton mills which got into an agreement to each other to contribute
capital, etc. A minimum price was also fixed, and profts were to be distributed equally.
The court said that this was about regulating trade and not restraint.

Kores Manufacturing Co. Ltd. v Kolok Manufacturing Co. Ltd.

Companies were involved in similar business, and there were trade secrets involved. The nature
of employment was such that employees were capable of knowing those trade secrets. The
companies got into an agreement with each other to the effect that any person who was
employed in either of the two companies for any period of time cannot be employed by the
other company for five years.

Court - agreement did not make any distinction between classes of employees- skilled or
unskilled, a person who has been employed for years/or for a day. The court said that the
agreement was less about regulation of trade and more about restraining employment of the
people.

B. SOLUS OR EXCLUSIVE AGREEMENTS – Where a producer/manufacture markets his goods

through a sole agent, who agrees not to deal with others. This is not per se void. As long
as the negative stipulation is nothing but an ordinary incident or ancillary to the positive
covenant, it will fall outside the scope of Section 27.

Coca Cola v. Gujrat Bottling Company

Agreement where Coca Cola grants franchise to GBC to manufacture, bottle and sell beverages
of Coca Cola. Negative stipulation restrained GBC to do all of this for other companies during
the subsistence of the agreement.

Court – negative stipulation actually promotes trade in such cases (of Coca Cola here). People
like Coke would be encouraged to do business as they would be assured of a certain market for
their products. Moreover, operation of the stipulation was confined to subsistence of the
agreement and not after the termination.

*There has to absorption of all resources. If not, then the supplier must be allowed to sell the
surplus to others. If there is sterilization of resources, void. Even if its absorbing all, you have
to see the reasonableness of the restriction especially in terms of time period.

Esso Petroleum v. Harper

There were 2 garages which had an exclusive dealing agreement with Esso Petroleum. EP said
that all supplies of lubricants, etc., would come from EP, and the garages would operate based
on EP’s co-operation plan. Agreement with one was for 4.5 years and with other was for 21
years. The second garage (21) was also mortgaged to Esso against a loan which repayable in
instalments lasting 21 years and not earlier.

The court said that the agreement with Harper’s Garage was not valid as it was an unreasonable
amount of time.
Where contract is reasonable at the start, but change in circumstance makes it unreasonable.

Shell UK Ltd. V. Lostock

Lostock tied to Shell for a certain reasonable period. There was sharp rise in petrol prices,
decreasing its demand and therefore affecting the business of garages. Other garages cut prices
so that sales don’t suffer. But Shell ke dimaag mai laddu phoota. It adopted compensation plan
for all its pumps, including Lostock. Tu high price pe hi bechna, I will compensate later. But
this plan did not really apply to Lostock, as their sales had not decreased to the extent that it
was brought within the ambit of the compensation plan. Lostock got into an agreement with
another petrol company.

The court said that the agreement between Shell and Lostock, while initially reasonable,
became unreasonable, because other petrol companies did not suffer losses in the way that
Lostock is suffering. Shell neither allowed Lostock to cut down on losses, nor did it offer
compensation. Due to its peculiar situation, it was stuck in the middle. Thus, Lostock was
allowed to go to other petroleum companies. The agreement was held to be valid.

C. EMPLOYMENT AGREEMENTS

Restrictions operate in two ways – during the subsistence of the agreement or after the
termination.

1. During employment

If the restriction is during, then it is reasonable (employer is entitled to your 100% labour, as
he has paid for it – a legitimate interest).

[Here, the problem arises when a person leaves for a certain period, and comes back later. Say
5 saal takk kaam karna tha, and he left for 2 years after working for 1 year, and comes later.
This is not per se invalid] – this is irrelevant, nothing to support or elaborate this in Avtar Singh.

Niranjan Shankar Golikari v. Sanctuary Spinning and Manufacturing – X hired by a

technical company. He was given training also to operate a particular technology. His
agreement was of 5 years. Now there is another company, and this guy joins the rival company.
Is X injuncted from working with the rival company? If you allow injunction, what will X do?
His daily needs and necessities? But X has violated the employment contract. So, during the
subsistence of the agreement, it cannot be terminated. In this case, injunction was granted. But
granting of injunction has been subjective.

Paramount Coaching v. Ranjan Prakash - person was hired to teach for a duration in the
coaching, and this was for 3 years. You cannot work for another coaching institute, and you
cannot give private tuitions as well. One day, coaching sees in the FB post of individual that
he has left Paramount and joined another coaching Para-chut. Ab dekho kitni BT di hai iss
aadmi ne – itne bachhe aae padhne, aur ye saala saanp nikla. Defence of teacher was that
Section 27 daddy save me. SO is this in restraint of trade?

Court – restrictions during the subsistence of the employment period do not amount to
restrictions in restraint of trade.

One more question is whether to grant injunction or not – court will consider many policy
factors as well. In this case, it granted injunction. This person cannot work for the rival
coaching.

But then another question – the person will be left jobless? Because the rule (important) is that
if this person is left jobless, then no injunction (this is one consideration).

Court – he can give private coachings. Agreement only restricted him from teaching children
from other coachings and not to go another coaching. While the agreement also said that pvt.
coaching not allowed, but the essence is that the individual is not allowed to carry on a different
business (be it his own, or someone else’s). Toh court found a situation where he is not exactly
violating the terms of the agreement, but he is also not working with anyone else.

**Also, in under no circumstances would the court ask an individual to go back to his original
place of employment, as that is an impingement on individual liberty.

2. After termination of employment

About after, is there a legitimate interest in protecting that extra year for which the employee
cannot work for a rival company? Any restriction after the duration of the contract has ended
is invalid. You are, here, trying to avoid competition, and that is no legitimate interest.

But, there is one ground on which restriction after termination could be justified – if it is
necessary for the protection of the goodwill of the employer. – Superintendence Co of India
v. Krishan Murgai

Note that employee has to cease to be employee due to natural termination, or if he himself left
early. This wont apply if he is fired early.

But what about trade secrets? – Coca-Cola ka formula? See information such as these are the
property of the employer. But the reality is that this is protected by many people. And nobody
can divulge this information. So just because there is a trade secret, you cannot restrict
employees from carrying out business. Shah Jahan nahi banna hai. SO the principle of no
restriction after termination holds. But employer is still entitled to reasonable protection of his
secret. So if an employee, in a subsequent business, uses the secrets of his previous employer,
then that’s not allowed. But he can forssure carry out same or similar business.

AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS

Part (a) – “ by which any party thereto is restricted absolutely from enforcing his rights under
or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which
limits the time within which he may thus enforce his rights; or”

Meaning of the word ‘absolutely’

Meaning of the phrase “which limits the time within which he may thus enforce”.

Exceptions (Arbitration clause) – when parties introduce an Arbitration clause, it has the effect
of restricting the jurisdiction of regular civil courts. In such a case, it not possible for the courts
to entertain a matter while an Arbitration clause exists. Thus, Arbitration is treated as an
exception (Exception 1) to sort out the dilemma created by this rule.

Ganesh Nayak – March 1997

The insurance policy said, “any claim emanating from this policy will be entertained only if it
is brought to Arbitration within 12 months from the date on which the claim has arisen”. Now
this period of 12 months is less than what is afforded in the Limitation Act. In the case, the
claim was presented by the insuree after the 12-month period.
Question – is this particular claim genuine? Is this clause barred under Section 28 ? (Limits the
time waala)

Court – there is a distinction. Usually, the limit is with respect to taking legal course, and the
rights to do so are separate. Over here, the parties have agreed that the right itself ceases to
exist after the 12-month period, which is a different ball game. Hence, the claim of the
insurance company is correct, as the insuree’s right ceases to exist after the 12-month period.

Understand like this – You are a lessee on my land (12-month lease) and are required to
effectuate repairs on the land before the 12 months expire. In case you don’t, I will evict you
with a 3-month notice. If I do not evict you in these 3 months, my right to evict you ceases.
Here, we are not saying that we cannot go the court after 3 months and exercise my right. What
is being said is that after these 3 months, you don’t have a right itself. The Section reads “limits
the time within which he may this enforce his rights”.
The case would be different if the lease agreement said that I cannot go the court and enforce
my right of evicting you – this would be covered under the Limitation Act. (The right exists,
but the time in which I can exercise my right is limited).

But then, this is an artificial distinction, as this distinction can be used to surpass the intention
and provision of the Limitation Act. The ICA was amended, overturing Ganesh Nayak’s
distinction, and Section 28 (b) was added. Thus, 28 (a) and (b) are catering to different things.
28 (a) – enforcing of subsisting rights, and 28 (b) is extinguishing of these rights.

“(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from
any liability, under or in respect of any contract on the expiry of a specified period so as to
restrict any party from enforcing his rights,”

WAGERING AGREEMENTS

Section 30 Agreements by way of wager, void. —Agreements by way of wager are

void and no suit shall be brought for recovering anything alleged to be won on any
wager, or entrusted to any person to abide by the result of any game or other uncertain
event on which any wager is made.
Wager - As a promise to give money or money's worth upon the determination or ascertainment
· It is an uncertain event, and neither party to have control over the event
· Mutual chances of gain or loss
o In a case the organisers of a wrestling tournament mandated that the
participating wrestlers pay Rs. 500 as security in case they choose not to turn
up. A case was filed and the question before the court was that whether this
stipulation was a wager. The court held that it is not a wagering agreement as
there is nothing for the wrestler to lose.

· No other interest in the event other than the money

Is a Lottery a Wagering Agreement?
Yes, a lottery is a wagering agreement as there is no control over the event. The quirk is that,
wagering agreements are void but not illegal. Thus, in case there exists a wagering agreement,
then enforcing it through a court will not be possible. However, entering it would still be
allowed and thus payment of the prize depends upon the people paying the prize. (Application
of Skill means not a wager)
Is an Insurance Agreement a Wagering Agreement?
No, an insurance agreement is not a wagering agreement even though there exists the question
of chance and an event which is out of control of both parties as there exists a real substantive
interest apart from the pay-out.
Is a Horse Racing a Wagering Agreement?
It is important in the case of a wagering agreement that it does not involve any skill. It is a
matter of luck or chance. W.r.t horse racing, the courts have accepted that horse racing is not a
mere game of chance but involves skill because the individuals betting have done research on
the horses and used their intellect before betting.
RK Sir believes that the problem with accepting that horse races require skill opens up a rabbit
hole wherein, the same logic can be applied to other sports such as cricket. Then one can say
that even if it is not a wagering agreement, the government can still prohibit it due to other
reasons such as prevention of match fixing. Cricket involves external factors such as mafias
and syndicates and thus the government may choose to regulate betting on it.
This finding about horse races has been incorporated into the Indian Contract Act in the form
of an exception.
Exception in favour of certain prizes for horse-racing. —This section shall not be deemed to
render unlawful a subscription or contribution, or agreement to subscribe or contribute, made
or entered into for or toward any plate, prize or sum of money, of the value or amount of five
hundred rupees or upwards, to be awarded to the winner or winners of any horse-race.
Speculative Transactions
Sometimes parties enter into an agreement, say A and B for a good the price of which is Rs.
100 per kg and the quantity to be supplied by A to B is 5 quintals. Sometimes parties may say
that at a later date depending on the price of the good at a later date, one can pay the other the
difference of the price. This counts as a wagering agreement as no actual activity is going on
between the parties.

Collateral Agreements
Even though wager agreement is void, its not illegal. Thus, transactions collateral to the main
agreement are enforceable.
Gherulal Parekh v. Mahadeodas
Gherulal Parakh (appellant) and Mahadeodas Maiya (Respondent) were managers of their
respective family and they entered into partnership agreement to hold on a wagering contract
with two companies based in Harpur namely Messrs. It was in the contract and was also agreed
by the partners that they would share all the profits and losses equally. Mahadeodas Maiya
entered into 32 contracts with Mulchand and 49 contracts with Baldeosahav and after sometime
they all suffered huge losses. Due to loss suffered the respondent was liable to pay to Harpur
merchants all the amount that was due to them. The appellant refused to pay the amount that
was due to them as a partner. The respondent, with his sons, filed a suit in the court of the
subordinate judge, Darjeeling, for the recovery of the amount due by the appellant. The
respondent filed an appeal to the Supreme Court of India after that.
The court held that the partnership agreement between the partners entering into wagering
transactions is not void but is enforceable and valid as according to Section 23 of Indian
Contract Act, 1872. These types of contracts are neither forbidden by law nor immoral. The
court held that for a partnership to enter into wagering transactions is not illegal under Section
23 of the Act and therefore a partner who has paid the losses on wagering transactions may
recover proportionate indemnity from his co-partners. Therefore, the transactions collateral to
the main transaction are enforceable. For example, in another case, the plaintiff who lent the
money to the defendant to enable him to pay off a gambling debt was given a decree to recover
the same from the defendant.
The case also laid down that the public policy heads were set in stone and cannot be expanded.
Sections 25 to 30 minus 29 are void for public policy reasons. Section 29 is void for legal
concerns as the court cannot enforce something it cannot understand.

**Read from page 337 to 343 in Avtar Singh after you done till here, and before you move on
to Discharge.
 DISCHARGE OF CONTRACT

Till Section 30 done? The part on creation of contracts is over. Now, the part on discharging
obligations is left. (Go to first part – introduction part).

Creation – Section 10 (Creation is basically the offshoots of Section 10)

• (Free consent – Section 13 – 22)
• Competent to contract (Section 11 and 12)
• Lawful Object (Section 23 and 24)
• Lawful Consideration (Section 2d, 23, 24, and 25)
• Agreements declared to be void – (Section 23-30)

All of this you have done till now.

Discharge – how to discharge a contract.

• Perform the contract (Section 31 – 54, 57 – 61, and 67)
• Operation of law/ Doctrine of frustration (Section 56)
• Mutual consent (Section 62 and 63)
• Breach/ Remedies
o Damages (73 – 75)
o Specific performance (Section 9-25 of Specific Relief Act)

PERFORMANCE OF CONTRACT

CONTINGENT CONTRACTS – SECTION 31 TO 36

– if a certain future event happens/ does not happen, I shall do this or that.
e.g., car insurance (you can raise a claim for insurance of your car in case of an accident. The
performance will kick in only if a future uncertain event happens, of which parties do not know
of. We are moulding the performance of the contract in light of a future uncertain event. “to do
or not to so something” in Section 31 – this hints at the domain of performance

*Life insurance contracts are not contingent contracts, as death is not a future uncertain event.
But term insurances (involving dying before a certain period of time).

Read Section 35 and see the term ‘become void’. The term has a different meaning in the
domain of performance. It does not mean void ab initio, neither does it mean voidable. It means
that the contract (not agreement) simply cannot be enforced in a court of law due to something
which has happened after due creation of contract in line with Section 10. So, void here does
not mean void ab initio – the contract has been rightly created. Void ab initio means
unenforceable from the very inception. Here, the contract may become void afterwards as a
certain contingency has not happened, or whatever. This is why there is a huge leap from
Section 30 and 31. Also, voidable in this context would mean that the court reserves the right
to make this agreement void at the instance of the parties.

But, under Section 36, the agreement is created void.

PARTIES’ DUTY TO PERFORM – SECTION 37

OFFER OF PERFORMANCE – SECTION 38
EFFECT OF REFUSAL OF PARTY TO PERFORM – SECTION 39
BY WHOM TO BE PERFORMED – SECTION 40 – 41
PERFORMANCE OF JOINT PROMISES – SECTION 42 – 45
TIME AND PLACE OF PERFORMANCE – SECTION 46 – 50
PERFORMANCE OF RECIPROCAL PROMISES – SECTION 51 – 54

TIME FOR PERFORMANCE – SECTION 55

If contract specifies time, then usually it is expected that the parties will perform their
obligations at said time. But if one doesn’t what is the effect on the contract? See Section 55.

Section 55. Effect of failure to perform at fixed time, in contract in which time is essential.—When a
party to a contract promises to do a certain thing at or before a specified time, or certain things at or
before specified times, and fails to do any such thing at or before the specified time, the contract, or so
much of it as has not been performed, becomes voidable at the option of the promisee, if the intention
of the parties was that time should be of the essence of the contract.

Effect of such failure when time is not essential.—If it was not the intention of the parties that time
should be of the essence of the contract, the contract does not become voidable by the failure to do such
thing at or before the specified time; but the promisee is entitled to compensation from the promisor for
any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract
voidable on account of the promisor‟s failure to perform his promise at the time agreed, the promisee
accepts performance of such promise at any time other than that agreed, the promisee cannot claim
compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless,
at the time of such acceptance, he gives notice to the promisor of his intention to do so.2
When is Time of Essence?

• Where parties have expressly agreed to treat it as essence

• Where delay operates as injury
• Where the nature and necessity of the contract require it to be so construed

Budhra Chand v. Betts

X wanted Y’s elephant for idc what fuck that. Contract said that elephant had to be delivered
on 1st October, 1910. Y sought extension of time till 6th, but finally delivered it on 11th. X
refused to take elephant and sued for damages for breach.

Court – X can recover, breach as time was of the essence. Y obtained extension of time; if time
was not of the essence of the contract, he need not have asked for an extension.

In commercial transactions, time is usually of the essence.

Mahabir Prasad Rungta v. Durga Dutta

X owned a coal mine. He engaged Y to transport the coal from his mine to the railway station.
Duty of X was to provide for petrol, ensure the roads connecting mine and railway station is
proper, pay transporter money on 10th day of every month. X did not pay him on time several
times, did not pay for petrol or take care of road. Y stepped back from transaction saying time
was of essence.

Court - that time was of essence in this case as it is a commercial transaction. These dates,
including the time of payment, were considered to be crucial for performance. Y has right to
rescind.

China Cotton Exporters v Beharilal Ramcharan Cotton Mills

Case of shipment of goods. Shipment time here was October/November 1950, and it was added
– ‘Contract is subject to import license and therefore shipment date not guaranteed’.

Court – shipment date is of essence. The only effect of such a proviso was that shipment was
not guaranteed to the extent obtaining import license might cause delay. Warna above-
mentioned date is guaranteed.

In contracts for sale of land/immovable property, usually time is not of the essence. But this
not the case for renewal of lease.
Caltex India v Bhagwan Devi Marodia

Lessee of a petrol pump had to apply for the renewal of the lease within a time fixed by the
contract. He was late by 10 days. Landlord refused to renew. Court said time of essence gm.

Also, voh immovable property waala rule doesn’t apply in a lot of cases, toh thoda dekh ke
intention substance blah blah.
FRUSTRATION

Section 56. Agreement to do impossible act.—An agreement to do an act impossible in itself is

void.

Contract to do an act afterwards becoming impossible or unlawful.—A contract to do an act

which, after the contract is made, becomes impossible, or, by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.1

Compensation for loss through non-performance of act known to be impossible or unlawful.—

Where one person has promised to do something which he knew, or, with reasonable diligence, might
have known, and which the promisee did not know, to be impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such promisee sustains through the non-
performance of the promise.

First para – initial impossibility…simple

Second para – subsequent impossibility… performance of contract possible when it was made,
but becomes impossible due to some event.

This is difference from mistake, as there the contract is void at the outset (in creation phase).
But here, there are some subsequent events which make the contract void.

Taylor v. Coldwell

Contract to let certain musicians use a music hall for concert. But before the first day of concert,
hall gets destroyed due to a fire on no fault of either party. Musician sued hall owner for losses.
Court - Performance of contract made physically impossible due to disappearance of subject
matter. Contract was not absolute and was based on the continued existence of the hall. It is
void because the court cannot enforce the contract as its practically impossible.

This principle is not just confined to physical impossibilities, but to a situation where the object
the parties had in mind has failed to materialise.

Krell v. Henry

X hired flat from Y for the days on which the coronation of the King was to take place. The
procession was to pass from the same street, and X wanted to see a royal cock. X paid part of
rent. But show cancelled because King fell ill. Y refused to pay the advanced amount back.

Court – real object of the contract, recognised for both parties, was to have a view of the
procession. Therefore, this event was the main thing. The object of the contract was frustrated
by non-happening of coronation. Contract becomes void.
Thus, doctrine of frustration will come into play in two situations –
• Physical impossibility
• Failure of object

Commercial Hardship – this itself cannot be equated to impossibility. Circumstances have to

be such that they upset the whole purpose of the contract.

Sachindra Nath Basu v Gopal Chandra Ghose (see below somewhere)

Tsakiarglou v. Noblee Thorl GMBH (see below somewhere)

Harnandrai Fulchand v Pragdas

X told Y dhoti de. Y said okay. These dhotis were to be manufactured by Z mills, and Y said I
will deliver the dhotis as and when I receive them from the mills. Due to Z fucking up, Y could
not deliver required amount of dhotis to X. X called breach, but Y pleaded frustration.

Court – ‘as and when’ does not make the delivery by the mills a condition precedent. That
would be the case in ‘as if and when. As and when only signifies the time. What lies in the
heart of the contract is sale and purchase of dhoti. Irrespective of mill, similar quality dhoti can
be bought by seller from somewhere else. Intention of parties is still in place. So, no frustration,
but breach.

In another case, purchase of tapestries by X from Y to sell in Australia. But Australian Govt.
said we do not want an import of said tapestries. So, Y said I won’t sell this shit to you. X
called breach. Y frustration.
Heart of contract is sale and purchase of tapestries. Where to sell is a commercial consideration.
Australia might get you higher profits, but that doesn’t matter. Same rule, but this case has
Govt. involvement which might confuse.

SPECIFIC GROUNDS FOR FRUSTRATION

Frustration is broad, but these have been repeatedly recognised as grounds for frustration.

1. DESTRUCTION OF SUBJECT-MATTER

Taylor v Coldwell
 2. CHANGE OF CIRCUMSTANCES

If there is entirely unanticipated change of circumstances, we have to see if this change of

circumstances has affected the performance of the contract to such an extent as to make it
virtually impossible, or even extremely difficult/hazardous. If that’s the case, the courts will
not enforce the contract (assuming both parties).

Pameshwari Das Mehra v. Ram Chand Om Prakash

Agreement for sale-purchase of goods on certain date, with arbitration clause whose seat shall
be in Karachi. Seller sent goods to buyer which was inferior, less in quantity and late. Buyer
wanted to arbitrate. But then Partition (1947) b/w India & Pak. Both parties were Hindu and
staying in India and cannot go to Karachi. Party claims arbitration agreement is frustrated.

Held: heart of the contract is arbitration and seat is not so important as to vitiate intention. So
they can arbitrate in some other place. Change of circumstance did not have material effect on
contract.

3. NON-OCCURRENCE OF CONTEMPLATED EVENT

Krell v. Henry

Happening of the event must be the foundation of the contract

Herne Bay Steamboat v. Hutton

Royal Naval Review was supposed to be held. X chartered steamboat to get paying passengers
on board for viewing the Review, and for a cruise around the Royal fleet. But Review cancelled.
X.

Contract here was not frustrated. Since people take streamer on hire all the time to take people
on the Thames river. Primary purpose was to take people on river which can still be done
without the Review. Its just that with the naval review it could be done with greater comfort.

In Krell those houses were not meant to stay in – they were not hotels per se. In this case, the
purpose of this contract was not to see the naval review, but to go on a boat right, the attraction
of which was the Review. You can still make a profit by organising boat ride on Thames.
Impossible in the realm of frustration means that what lies at the heart of the contract cannot in
any manner be done. The key word here is heart of the contract – can the contract be performed
without this particular aspect of it.

For example, taking a ship for hire. If the river dries up or if the ship becomes faulty, then kya
kar sakte hai.

Sachindra Nath Basu v Gopal Chandra Ghose - A person took a hotel premises for hire.
Because army troops are stationed in the area, he thought he would be able to make ore profit
as these army people are rich. So, he agreed to pay for a higher rent. But as soon as he entered
into business, the army troops receded. So, he contended that the contract is frustrated, as I had
agreed based on the fact that the army troops were there. But the courts said that this is merely
a commercial concern, not a legal one. The essence of the contract was you entering into an
agreement for hire of a premises. You paid higher rent because of an expectation of profit -
Whether or not that hire is profitable is not of any consequence to the court.

Say a contract was entered into for only one purpose. E.g. You hire a very ultimate telescope,
as Pluto (a faraway celestial body), as per certain calculations, is only visible through that. But
it turns out that these calculations were wrong, and you cannot see Pluto as its apparently farther
away. In this case, the contract is vitiated as the only purpose for which the telescope was hired
was to see a faraway celestial body (Pluto). Here, nothing else is of interest to you – there is no
profitability or commercial aspect. The only purpose was to see Pluto.

Thus, sometimes the purpose of the contract might be the heart of the contract, sometimes it
might not be. In the hotel case, the party thought that the purpose (army se paisa) was. It has to
be dependant on the intention of the parties while entering into the agreement, and not what
thw parties believe to be the purpose of the contract.

4. DEATH OR INCAPACITY OF A PARTY

If a party during the pendency of a contract dies or becomes incapable of performing the
contract, the contract becomes frustrated. However, the contract should be such which is not
capable by someone else, but only that one party. It must be based on the personal skills and
qualification of that party. The key identifying factor is whether the contract was entered into
based on the personal skills and qualifications of the party.

Robinson v. Davidson

Theatre, and woman – a good pianist. A, theatre owner, asked woman to play piano in a
particular concert. But on that day, woman fell ill, making her incapable to perform the terms
of the contract. The entire show was publicised, and people has purchased tickets based on the
reputation of the women. In this situation, the contract was frustrated. The purpose was not to
play piano, but that the woman herself comes and play the piano.

As for the people who bought the tickets, they can ask for refund of the tickets, not for damages.
(why?)

The contract is such that it can only be performed by that particular person.

5. GOVERNMENT OR LEGISLATIVE INTERVENTION

Govt. passes a legislation/ order which interferes with the performance of the contract. Even in
this case, it has to hit at the heart of the contract.

Satyabrata Ghose v. Mugneeram Bangar (1954)

There was a contract to construct a locality for stay, on a barren land. That place today is Salt
Lake City. The land was given to A to develop that. As per that agreement, before construction,
he had to put drains and sewers. While he was doing that, WW2 broke out in 1938, and army
troops were commissioned on that land and all other things had to stop. Thus A could not do
anything. After WW2 stopped in 1945, he was asked to start developing that patch of land
again. He said mkc tumhaari rates toh 1938 ke thee, ab itna time hogaya WW2 hogaya gand
marao. I’m not doing it now fu.

Court – asked on question; was time of essence in this particular transaction. Did the parties
decide on strict timelines, an outer limit? There was no sign of any time limit being imposed
on any party. The work had to be done based on the rates mentioned in the contract. Despite
15+ years passing since the land was granted, and the decision, the court still ordered
performance. If the contract is not performed, its breach and not frustration. It can be said that
this is a narrowly construed understanding of frustration and impossibility. But it is justified as
in frustration, the breaching party gets everything. If the construction is like Hutton’s case, then
breaching parties sue karte rahenge. The tussle is there between the promise to perform a thing,
and events.

This case shows that the nature or degree of the extremities does not matter. What matters is
that the heart of the contract is affected due to these severe circumstances.

Suppose an agreement says that a water tank was to be constructed within an upper limit of 6
months, and army troops are commissioned again. Here the decision would be different, as
time is at the essence. (Metropolitan Waterboard v. Dick Kerr & Co)

Naihati Jute mills v. Khyaliram

 6. INTERVENTION OF WAR

War directly interferes, unlike SPG where the army commissioned due to an administrative
order was the event in question.

Tsakiarglou v. Noblee Thorl GMBH

Agreement was sale of Sudanese groundnut, to be transported to Hamburg from Sudan. Ship
was to sale from Suez Canal. War like situation was there (Suez Wars). Suez Canal got blocked
because of the war. Seller said frustration. Buyer groundnit waterways se dena haina, toh poora
Africa cross karke aajao. The distance can be mulitiplied by 10 times.

Court – despite the war, it is not frustration as the sea is a reasonable way of passage. While
the cost would have been much higher, it would have still been performed.

Tnentsche Overseas v. Uganda Sugar factory

Similar to Phoolchand case. Agreement for delivery of steel rails, to be used in the sugar
factory. As they entered into agreement, subject matter of the contract was Krupps steel rails.
WW2 came. Seller could not procure Krupps as it was German company, as it was England’s
enemy.

Court – when you are saying Krupps, its referring to a certain quality and value associated to
that particular steel rail. It was very much possible for seller to find a viable substitute. Krupps
is mere description of the steel rails. Contract is not frustrated as the parties are required to
perform.

Dekho aisa har baar nahi hoga. Samay aisa tha, or vichaar aise the. General idea is not that A
bolo, par B bhi chalega. Court here said that yes Krupps was imposible, but heart of the contract
was not Krupps but what Krupps offers you. So first ascertain what has been desired, then if
that is impossble see if there as other alterntives.

Because plea of frustration is so narrowly construed by the courts, contract drafters include a
force majeure clause in a contract – this is not connected to frustration. FM is not related to
Section 56 but related to 32 (contingent contract). While FM might have the effect of
discharging the parties, it stems from 32.

So existence of FM makes it not about frustration or operation of law (court would have to see
the possibilities of performance, and other things). But now its very simple - contingent
contract – event hua toh badhiya khatam nahi hua toh gm. FM are used to mitigate the rigour
with which the court administer the doctrine of frustration.
RIGHT OF PARTIES IN FRUSTRATION

Section 65 – when a contract becomes void or discovered to be void

64 and 65 incorporate the remedy of restitution – benefits are restored, and parties are placed
in a position in which they were before the contract was entered into.

**This is the remedy for mistake as well (discovered to be void).

But discovered to be void in frustration cases? Where at the time of making a contract, you
think its fine, but later you realise that despite due diligence on your part you could not
understand the position of law on that aspect. This is not due to ignorance of the law, but only
because parties realised later.

Even if the agreement is discovered to be void, restitution under Section 65 is subject to the
limitations imposed by minority. (toh minority waale concept ko isse connect karo, cuz I have
a feeling aaega)

Jagdish Prasad Pannalal v. Produce Exchange Corporation (becomes void)

Agreement for sale and purchase of maze. In beginning of December, ceiling price of maze
was 73/ton. Contract created. Afterwards, in middle of December, notification saying ceiling
price revised to 48/ton. This notification applies to all transactions happening in the next year
from January. In this case, the contract was performed on 3rd January. 73/ton was the price.
The buyer then got to know ki bhai price toh kam hua hai maine itna mehenga kyun khareeda.
Buyer sued for recovery of the balance amount under Section 65.

In case where a contract becomes void you are entitled to restitution of only that benefit which
you have conferred on the other party while the contract was subsisting and valid. Any benefit
exchanged between the parties after the contract has become void cannot be restored.

So, contract became void on 1st of January as the notification was applicable from then. Thus,
court did not allow restitution in this case.

Discovered to be void – agreement is already void, but this fact gets discovered later on. But if
the thing discovered is something unlawful, then pari delicto.

Pari delicto – 65 is not applicable because Section 2 (H), 10 and 23.

Exceptions to this principle

1st - Section 27 (B) – where contract is apparent on its face – pari delcitio, but if its not then 27
(B)
ASSIGNMENT OF RIGHTS AND OBLIGATIONS IN A CONTRACT

I owe you 50 rupees, and you in turn owe C 50 rupees as well. You tell me, to bhai direct C ko
dede, and I’ll discharge your debt. I basically assigned my liability to another person.

Promisor – person who is performing.

Promisee – to whom it is to be performed.

But assignment is an agreement between a promisor and a promisee, and the promisor
outsources his performance through a third party. Assignment of obligations arising from
another contract is a contract in itself, and it has to fulfil the requirements of Section 10.

So, what can you assign? – Promisor can assign the performance of contract to a third party if
the intention was not that the promisor will perform that contract himself or herself.

The rights and obligations that I get from the contract are also assignable to a third party.

What cannot you assign? Obligation of being sued for breach cannot be assigned by promisor.
Promisee cannot sue third party, the responsibility here is on the promisor itself. Contractual
obligations can be assigned but existing legal obligations cannot be assigned. Moreover, there
is privity.

Kemp v. Baerselman

Baker B, and supplier of eggs E. B and E agreed to purchase aggs for an entire year. Imp part
– eggs were to be taken on credit – B would pay later on. In the middle, B, who was a sole
proprietor, converted his business into a company. His personal liability became company’s
liability. So the liability was assigned to the company as well. E said I agreed with you., and I
believe in your creditworthiness, not the company’s (which E thought could bcome insolvent).
E believed in the personal capacity of B, and therefore wanted to step back.

Court said Yes E can step back, as agreement was based on the personal identity of the party.
Personal identity does not always mean that I have to perform some specific skill. It can also
mean that the other party trusted you, and some personal skill of yours or commercial aspect
related to your skill.
DISCHARGE BY MUTUAL CONSENT

There are 4 modes of discharge by mutual consent. Discharge us when parties are liberated
from their obligations under the contract. Now, as parties, you have created a contract – a result
of you own will. So, you as parties can do whatever the fuck you want with the contract – you
can change the terms, do away with the performance, replace it with a new one etc. Contract is
not a sui generis instrument – it stands in its form only as long as our will stands. Thus, if
parties can create a contract, they can enter into an agreement to change/do away the contract.

Section 62 – Effect of novation, rescission and alteration of contract

Novation – substituting the old agreement with a new agreement. Novation can be small. E.g.
contract to extend loan @ 7% annum. VM comes after a year and says he will decrease the
interest rate to 6.5 %, and I say badhiya. What we have done is just change one figure in the
contract, but the effect is that the entire contract is substituted (since in a contract of loan,
interest is the most important thing – it is most material to such a contract). So novation is
basically substituting a new contract for an older arrangement. Here, the contract was
substituting by changing one figure in the contract.

Novation can happen by substituting a party for another party. E.g. liability in a loan agreement
is transferred from A to B after A and B enter into a separate agreement. VM has a loan he has
to pay

In novation, there is a subsequent agreement you entering into, and you are released from the
obligations of the previous contract. Here, the new contract has to fulfil the requirements under
Section 10, and has to have a valid consideration.

Material Alteration – changing certain terms so that the contract has a different effect, but there
is no change in the intention of the parties. E.g. VM 100 Bales cotton. Then I come and say to
VM, bhai baaki sab same, bas 200 Bales deliver karde and I will pay more as per the increase.
So here, we have altered on of the material term of the contract, but have not changed it such
that there is a new contract. The underlying intention in this contract is the same. In the interest
waala example, interest is something which is so central that is forms the material intention of
the contract.

Alteration is changing a material term of the contract without affecting the intention of the
parties. Whereas, novation is where you change terms so as to make the old contract completely
loses its identity. Therefore, it is the impact of the change which decides whether it is novation
or alteration.
Recission – stepping back, abrogating the contract, disowning the obligation arising out of the
contract; parties deciding ma ki chut is contract ki.

Remission – reducing the performance; either wholly or partly, without any consideration on
the reducing parties behalf. Take the example of Julia Beers. In England, such a reduction of
obligations without consideration is not allowed, but in India it is. Here, you can reduce the
obligations of the promisor in performing his promise.

Section 62 uses the term ;parties to a contract’, but 63 uses the term ‘promisee’. Therefore,
under 62, the new contract under novation can only happen when there is a consideration, as
both parties have to agree. But under 63, there can be unilateral communication without
consideration, by the promise who is otherwise entitled to take a higher advantage (accepting
80 Bales instead of 100 as the other party cannot give 100).

Therefore, remission can be unilateral, but those thing under 62 cannot. Here you consider the
position of the other party, and say “bhai jaisa hai karde”. There has to be no detriment to the
other party.

Remission, despite being unilateral, is still a discharge by mutual consent as the other party
still has to agree to the unilateral communication.

Charles Rickard v. Oppenheim

Agreement to purchase a Rolls Royce car, a custom-made car. B, owner, said we have built the
car, and I have given it to C so that he can customise it. C was also to deliver it, and discharge
the rest of the obligations. C could not deliver the car to A. A said aur time lele, C ne le liya
par phir kuchh ni kiya. A finally gave 4 weeks to C, after which he would not be willing to
purchase the car. C delivers it in 2 months. A said time was of the essence in the contract, and
you delivered late. Other side argued that you cannot harp on the strict terms on the contract,
as A kept giving extentions, time cannot be the essence anymore.

It would have been a remission through promissory Estopel, but for the notice the man sent.

Accord and Satisfaction – say there is a breach; the person who has suffered from the breach,
rather than filing the suit, offers certain terms to the breaching party and says isko perform
karde sab maaf. One party has a consideration (not being held liable for breach, reduced terms
whatever), but the other doesn’t (merely not being irritated by the legal system is not
consideration).
Novation happens before the breach, and A&S happens after.

E.g. Manohar Koyal’s case

Loan tha 1170 ka, and debtor breached. The, debtor and creditor entered into a subsequent
agreement where C said abhi 400 dede, and pay 700 at a later point, and I will take in fulfilment
of the entire debt of 1170. Now the creditor filed a case against D on the original bond of 1170,
saying that while we had novated the contract, we are going back.

Court – this is not novation, but accordance and satisfaction (which is basically, novation after
breach).

DISCHARGE BY BREACH

Discharge by performance is the way things should be (ideal way)

Discharge by operation of law is due to certain unforeseen situations (parties cannot do

anything about such supervening circumstances)

Discharge by mutual shit is due to the will and situation of the parties

Breach – I will not perform, I don’t want to perform. Mai toh rebel karega. So other party is
also not obligated to perform. But such a discharge goes against the ethos behind the idea of a
contract. Aren’t parties supposed to fulfil the terms of the contract? Thus, such a form of
discharge – breach – is accompanies by a cost – Damages. AB bas breach and damages discuss
karenge.

Breach comes from the idea of a duty – what you breach is a duty, and what gets breached is a
right. Common law understanding of breach is with reference to a duty – obligation to perform
by the promisor. A particular party renounces its obligation to perform, or renders itself
incapable of performing.

If I am incapable of performing the contract for reasons attributable to only myself – breach

If due to some supervening circumstances, I cannot perform – frustration

Idea of breach fascinating – in torts, there is no breach as long you do something at the moment
to disturb the civil peace – hitting a pedestrian by your scooter. Breach is there only in the
present. But in contracts, there is a negotiating table where terms can be exchanged, it is not
essential that I have to perform the terms now, and I can inform the other party of my intentions.
So here there are two concepts – present breach and anticipatory breach.
ANTICIPATORY BREACH

In anticipatory breach, you tell the other party in advance that you cannot perform the terms of
the contract. E.g. VM has to deliver goods on 14th Feb but on 10th he realised fuck up cant do
it my workers are lover boys valentinve some shit

What do you in such cases though? Do you wait till the date of actual performance so that the
breach concretises, or do you call the breach out prematurely and hold the other party liable?

Hachster v De La Tour

Tour guide, A, communicated by tourist B. B said I want to travel Europe, and you will be my
courier (mazdoor) and tour guide. Before the date of arrival, B said ma ki chut teri nahi aana
mujhe. A filed suit – you are in breach and I want damages for the losses. B said I just told him
of a possibility that I won’t come – kya pata mera mannbehel jaata and I would actually come?
The breach has not concretised as the date of performance has not yet come.

Court – if a party, in anticipation of non-performance, communicates this to the other party,

the other party can either accept the repudiation, or wait till the actual date of performance and
keep the contract alive till then. Forcing the party who is receiving the letter of repudiation to
wait till the date of performance means that he has to be [repaired with all the resources till the
date, even though tour guide knew that A won’t be coming. Also, do you expect A to sit idle
till time B might be coming? What about his business? B is anyway not paying no. Therefore,
the suffering party can ask for damages the moment it is addressed with a letter of repudiation.

Also, with respect to the computing of damages, it depends on when the suffering party
concretises the breach

Avery v. Bowler

Shipowner (A) was to reach a port, load cargo for a charge from B. A said mai port pe aagaya
kaha hai B bhai. B said I am not ready to load the cargo, and I won’t be able to perform. Tum
chale jao. A like nahi jaoonga ily, and I will wait till the date of performance. But during this
period, a war broke out in the region due to which the performance anyway became impossible.
A left and filed for breach. War is just excuse, and B was anyway in no position to perform his
terms.

Court – party chose to keep the contract alive – therefore it was very much capable of being
performed – frustrating event happened and contract got discharged there and then due to war
– and since the contract was already discharged before the date of performance, it cannot said
to be breached.

Fercometal v. Mediterranean Shipping Co

Again shipowner same shit loading shit. Loader said I can’t load – letter of repudiation.
Shipowner said I will wait. Now what happened was on the date of performance, loading party
was ready with the cargo on the port, but the shipowner was not there.

Shipowner was held in breach as he kept the contract alive (accepting an anticipatory breach).

[Repudiation must be made like acceptance is made – external overt manifestation of intent.]

Options that addressee of letter repudiation has in anticipatory breach - if a party before date
of performance bring it to the notice of the other party ki date of performance mai I won’t be
able to form. Here, there is no point in holding the addressee of the repudiation letter to the
contract. This guy should be free to accept the consequences of his breach – despite knowing
he won’t be able to perform the contract, how can you expect this guy to be ready to perform
at any time? Iska koi fayada nahi. Addressee does not have to accept the discharge. In such a
situation, he can keep the contract alive which may get discharged later through various
avenues (mutual consent frustration).

First choice – terminating contract then and there - De La Tour. Here dmaages will be assessed
as on the date of repudiation.

Second choice – keeping contract alive – damages assessed on the date of breach. There is a
risk in waiting for long here.

Now, sometimes it might happen that a perty while performing contrct, performs it with such
irregiularity, the irregularity hits at the heaet of the contract. While the party might say ki haan
bhai mai ready hoon tu aa toh, the way they perform the contract is fucked. Now when will
such an irregular performance constitute a breach.

Maple Flock v. Universal Furniture

Agreement for delivery of a certain quantity of flock. F was to be delivered in instalments. X

and Y decided that F would be of a certain quality standard. Sab theek chal ra, but the 16th
instalement which was delivered was such that it was slightly below the quality of standard.
Purchaser (x) said its breach as there is a standard, and I want to step back from the contract.

Was the irregularity that potent so as to vitiate the intention of the parties and hit the heart of
the contract.
Court – any and every irregularity will not vitiate the entire contract. If an irregularity is to
culminate into a breach, it has to hit at the heart of the contract and has to defeat the intention
behind the contract completely.
Two tests to check when irregularity hits heart of contract – both tests have to be read together.
1. We should see the ratio which the breach/irregularity holds w.r.t. to the larger performance
of the contract, qualitatively. Qualitatively means by how much degree was the
performance inferior. Were the goods completely fucked? Or was it chumma fucked? Not
quantity only; ki bhai 40 instalments the 4 tatti nikle.
2. What is the possibility of repetition of such an irregularity.

It’s possible that you cannot use these tests in a situation. These two tests are just ways of
ascertaining how much the heart of the contract is affected. But if application of these becomes
acontextual, then go back to the basics and check whether the irregularity has defeated the heart
of the contract. That is the primary thing.

Section 52, 53, and 54 – reciprocal promises. This principle emanates from here. Ki if you
don’t perform your part properly, I also won’t.

In a goods contract, one term was that “a reasonable notice will be given to the seller for loading
the cargo on the ship, and in this notice whatever date is mentioned sellers have to ready on
that date”. Sellers were not ready with the cargo on that particular date. Is this irregularity of
date leading to breach?

Court – in long term sale of goods contract – ship hai loding hai lamba safar hai one-piece
dhoondhna hai- time is of the essence. So violating the time requirement will certainly classify
as an irregularity grave enough to attack the heart of the contract.

Indian law on anticipatory breach

Section 39 - Effect of refusal of party to perform promise wholly.—When a party to a contract

has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee
may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its
continuance.

This is anticipatory breach in Indian law.

Where are the options now? Option 1 – may put an end.

Use of term acquiescence means that if you say nothing to the communication by the other
party (where he says that I can’t perform), that means you choose to keep the contract alive
and are basically exercising the second option. E.g. He gives you a letter repudiation, and you
say nothing about it. This would classify as ‘conduct’ in acquiescence.
But if you want to put the contract to an end, you have to do it by an external manifestation
(letter, oral sex, filing a suit, any act which shows that you positively want to put an end to the
contract).

One problem with the Section. – uses the term ‘entirety’. Does it mean that, in the Indian
context, the party has to be disabled to perform the contract in its entirety? What if there is a
partial irregularity which will hit the root of the contract (which we just discussed na kaise 16
mai se 1 instalments nahi diya toh)?

But entirety has to be viewed keeping in mind the whole section. Even a partial breach can
affect the root of the contract.

Jaggilal Case

Agreement to deliver 2 kind of fibres – ek tha naam tha Bablu aur ek tha Taplu. They were to
be delivered in 3 instalments – April, May and June. Seller did this – April and May instalment
of Bablu done and April instillment of Taplu. After doing this, he told buyer ab tu direct mill
se jaake baaki lele I can’t give you the rest. Buyer could not go to the mill. He said this
irregularity on your part of not delivering 2 instalment of Tablu and 1 of Bablu is breach.
Idea of contract was not only w.r.t. the sale and purchase of fibre. It was also w.r.t to that there
was a seller from whom you require a certain thing at a certain cost. But this seller directed
buyer to other places. So, while there is a partial breach, the act would constitute breach. Wahi
heart waala bakchodi likhde.

Intention in entirety has to be vitiated – that is the actual meaning of the word entirety. Section
does not say ‘perfromance in entirety’, it says ‘promise in entirety’.

Anticipatory breach done

PRESENT/ ACTUAL BREACH

Breach has happened on the date of performance (present) – remedy of either Specific
performance of contract or damages.
We have already discussed what constitutes a breach.
DAMAGES

Next idea – although breach is form of discharge, it is a unilateral form of discharge. Therefore,
this comes with a cost – damages. Whatever harm the other party has suffered due to such a
unilateral discharge, that harm should be compensated.

Damages are compensatory and not penal in nature. They are only meant to monetarily
compensate the aggrieved w.r.t. to its losses. It’s not a penalty, even though breach is a bad
girl. Damages are meant to bridge the gap. In fact, this is the idea behind any remedy.

When a contract is created by way of fraud – what is the remedy? Rescission and restitution.
Same of coercion, misrep, fraud, minority. When we restitute and we recede, what are we
doing? We are placing the parties in a position so that the effect is that the contract was never
created. It’s to negate the harm. The wrong is in the creation of the contract, so you tackle the
creation and make it so that the contract was never created. This is the principle behind the
remedy of restitution.

In breach, the wrong is in the performance. So, what will you do? Place the parties in a position
so that the effect is that contract was never performed. This is principle behind the remedy of
damages.

VM, for the 69th time, - “The purpose of damages is to place the aggrieved party in that position
(as far as money can do it) in which it would have been if the contract would have been duly
performed.” This principle is called the Robinson v. Herman principle.

Damages in contract law is a remedy only for breach. If it’s a wrong of creation, remedy is
rescission, restitution, and cancellation (subject to limitations of minority, pari delicto etc.)

Robinson v Herman

A leased his property to B. A said 20 saal ke liye le le at a rent of 110 Pounds. B had made a
good bargain as rent was comparatively lesser. A said, at the time of giving lease, I have no
interest in this property as this is a trust and I am merely a beneficiary. Title to transfer lies
with the trustees. Contract is essentially breached, as the lease cannot be performed. B
approached the Court for damages. A said B suffered no loss excpet the cost of documenting
the lease - 20 pounds. B said no there is loss. Since I struck a good bargain, I am entitled to the
difference between the normal amount of rent (more than 110) and the price I have bargained
for. Therefore, B said his loss is this difference which would be borne by him everh year for
the next 20 years.

Court - applying the above principle, if the contract was, say, performed, B would have to pay
documentation charges regardless, but the argument of B stands.
One would say, why is this case not ot fraud. A said he was owner, but later that turned out not
to be the case. But B did not go for this. As if he would have gone here, then the remedy he
would have gotton was restitution. He would have only received the documentation charhes
back.

In a situation where a person makes a fraudulent representation, but is still able to perform his
end of the contract despite his fraud, the remedy lies only through fraud - restitution.

But here, party made a fraudulent representation but he himself could not perform his part of
agreement. Here, the person has a choice to choose between restitution or damages.

What is meant by damages are not penal? Why would the court not grant damaged above what
is required to restore original positions?

Golden Strait Corp v. Nippon Yusen Kubishika (Golden Victory Case)

There was charter party (ship given on hire) to B the charter. A was the owner of the ship. The
charter party agreement was for 7 years. B in the 3rd of the charter party repudiated the
agreement. A accepted breach, and filed a suit for Breach against B to recover losses. But while
the matter was in Arbitration, the matter of payment of losses of the remaining 4 years came
up and this was about to be decided by the court. But now, the Gulf War broke out. There was
a clause in the Agreement which said that if the Gulf war broke out, then the agreement would
automatically end. The war broke out 15 months after repudiation by the parties.

Now the question is kitna damages dena. - should the date be on the date if breach, or on the
date of the decision of the Court.

Court - primary principal in granting damages is to compensate the aggrieved party. Party
should not get more than what he would have gotten if the contract would have been duly
performed. In this case, assuming the contract has been duly performed, it would have ended
anyway in 15months due to war. Thus, damages would be not for 48 months, but 15. Giving
anything more would be penalising the charters.

See dissenting opinion.

A had taken lease of property for business. Agreement said lease is for 6 months. A is allowed
to install fixtures on the land required for business. But after the ending of lease, he cannot take
the fixtures back with him. B, 10 weeks prior to the date of termination, repudiated the lease
and evicted A. Now A went to Municipal authorities and asked them to allow him to continue
his business from his home garage. So her took this permission, and functioned from the
garage. Later, B filed against him for the rent which he not paid while he was occupying his
property. A on the other hand filed a case against B.

Court – cannot give A damages as he is in already in a better position due to how things worked
out. We cannot ask him to change his current position, and if we also give him damages now
for the 10 weeks waala thing, then he will be in an even better position.

If there is a possibility for granting the party more than the loss which it has suffered, the court
will not do that.

Limitations on Robinson v Herman Principle

• Remoteness
• Directness
• Mitigation

Remoteness and Directness - Damages will only be granted for those consequences of the
breach which are not too remote and directly related to the incident of the breach. What is
meaning of remoteness and directness?

REMOTENESS

Hadley v. Baxendale

A was named Hadley and he had a wheat flour mill. He used a certain machine in that mill.
One of the parts of the machine got damaged. A contacted the maker of the machine. B said
mujhe bhejo damaged part, I will renew it and send back A went to courier company and said
deliver kardo B ko on so and so time. Company C delayed the delivery of the crankshaft to B,
which meant theek hoke late aaya A ke paas, as a result of which the mill stayed idle for 5 extra
days. A filed a case against C for damages for these 5 days.

Court – losses are there yes due to breach by C. But all the losses which emanate from the
breach of contract cannot be granted. In cases of a breach of contract, damages will only be
granted for the losses emanating from those consequences of the breach which happened in the
usual course of things after the breach, or for those consequences of which the breaching party
had a special knowledge of. Therefore, the Court gave two tests –
(i) Test of imputed knowledge – only those losses which occur from the usual course
of things. Usual course of things is that a reasonable person, in the shows of the
party, would contemplate as a natural consequence of the breach in usual course of
things.
 (ii) Test of special knowledge – certain consequences of breach can be such that the
parties could have imagined normally. If there was special knowledge, then losses
will be granted under this head.

A was in a peculiar situation here. He had in his mill just one machine, and the only crankshaft
attached to this machine got broken. But that does not mean that a reasonable person would
assume such a precarious position for a mill owner. Therefore, its unreasonable to think that a
one would contemplate that a whole mill would cease to operate solely due to defect in one
part of one machine. So, first test is unsatisfied. Moreover, here, the courier must have had to
have special knowledge of A’s situation – which it did not. Toh dono test tatti, A would not
receive damages from C.

Madras Railway Co v. Govinda Rau

A was tailor. There was a festival. A parcelled a cloth and a suing machine by way of railways
to the place where the festival was happening. His intention was to sue the clothes at the fair
and sell the clothes. He also reached the place and booked an acco. But the railway delayed the
courier, and samaan reached only after the festival ended. A filed a case against company, and
asked for damages under 3 heads –
• Loss for travelling to that particular place.
• Accommodation charges in that
• Loss of profit suffered.

Court again said for these damages to be granted, the railways are expected to have a special
knowledge of A’s intention w.r.t. the contents of the courier. So, no damages.

Simpsons v. London Railway Co

There was huge cattle fair in Newcastle. A consigned a stock of cattle from his place to
Newcastle. He asked the company to deliver the cattle on the day of the fair. But the railway
company delayed it. By the time he reached cattle thi hi nahi. Should the railways give damages
to A for the loss of profit he suffered due to breach caused by delay? Yes. Cattle fair well
known, usually people don’t transport cattle like this, and it was reasonable here to assume
things here.

DIRECTNESS – no such set of tests as in the remoteness. Directeness means directness, should
not be an intervening cause.

Quinn v. Burch Bros.

A was a mason – plastering whitewashing. He used a ladder often. His ladder got damaged. He
gave to B for repair within a certain time. B did not repair and deliver in time. A used an
unsuited equipment to stand on and do his work due to unavailability of the ladder. He fell and
injured himself. He sued B for the recovery of the costs he had incurred due to his injury.

Court – looking at the chain of causation – breach -> man used unsuited equipment, which was
his own act -> suffered injury. The breach is not directly connected to the injury, as the
intervening cause of person fucking up on his own accord. Refused to granted damages. What
is a direct consequence and what is not can be understood by way of common sense. So, the
only test which the court gave was – chain of causation, and common sense.

MITIGATION

If a party has breached a contract, and if the other party had at the time of breach an
opportunity to reduce the losses that it has suffered due to breach, then it is the duty of the
aggrieved party to exercise this possibility of reduction, provided this possibility is a
reasonable one.

E.g. VM cotton bale 100/bale gave it me. I am intending to sell this cotton for 140/ bale VM
did not deliver cotton to me as promised. Assume that VM knew that I am purchasing
cotton for resale. Say on the date of breach it was possible for me to procure the cotton
from the market at a rate of 120/bale. I could have procured cotton from market and resold
it thereof. Here, the loss would have been 20/Bale if I would have done this. Since I did
not, I am claiming losses worth 40/bale. Now, court will ask a question – was it possible
for you to reduce/mitigate the loss? Yes. Thus, court will only grant you 20/Bale.

British Westinghouse Electric & Manufacturing Co v. Underground Electric Railway Co. of

London

Company A made electricity by using turbines. Turbines got purana kharaab thoda type, so
they gave it to B for repair. But B did not repair them quite well, due to which turbines
which were delivered were of no use to A and were useless. A was forced to purchase new
turbines from the market to continue the business. A did not pay B the money for repair. B
filed a case against A for recovery of fees for repair. A said I will pay money, but I want
damages from B for not repairing and delivering correctly.

Question – although party is duty bound to mitigate, but If mitigation has already happened
automatically, then what is going to happen? A particular fact in this case was that the new
turbines were of such high efficiency – something which neither party knew – that the
mitigated most of the loss which had occurred due to B.

Court will never impose a burden on the aggrieved party to explore a possibility of
unreasonable mitigation. But if an extraordinary thing has happened, and it has mitigated
the losses automatically, the court will then consider only the mitigated losses.
Compensation, remoteness, directness, and mitigation in one case –

Murlidhar Chiranjilal v. HarishChandra Dwarkadas

There was an agreement was sale of goods. A, in Kanpur, will receive the goods from B and
load the goods in the train from Kanpur to Calcutta and will take the consignment receipt
from the railway. The goods would be sent Kolkata and will be sold by way of a railway
receipt.2 But B failed to supply the goods at Kanpur.

Question before the Court – quantum of damages. Goods were sold by way of railway receipt.
Idea was the goods would be sold to someone else further, as that is how the railway receipt
works. So there exists special knowledge that the goods are to be sold further. Now after
the breach, what is he next logical step? Procuring the goods from market price. So,
measure of damages would be difference between market and contract price. But which
market is the question – Calcutta or Kanpur. Is A entitled to profits he would have received
from resale of goods in Calcutta?

Court - The goods were deliverable at Kanpur, and the only loss which would be said to have
arisen naturally in the usual course of things would be the loss that A would have incurred
by reselling the goods in Kanpur. This is in accordance with the principle of mitigation.
Another peculiar circumstance was that the contract price and the market price in Kanpur
were the same, so the court granted aise hi kuchh thoda sa paisa but yeah.

See in this case, all the principles will apply (remoteness, mitigation so and so). SO see how
these apply.

Section 73 which reaffirms most of the principles -

Section 73. Compensation for loss or damage caused by breach of contract.—When a contract has been
broken, the party who suffers by such breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual
course of things from such breach, or which the parties knew, when they made the contract, to be likely
to result from the breach of it.

2
Railway receipt – pehle trade happened through waterways only when baaki sab was not there. Cargo is on
ship, and ships take time. Now you want to have an option of dealing with the cargo while it is on sea. So, these
people would have a slip. Now either you could address this slip to self or endorse it to someone else. This
consignment slip is known as the bill of lading. Through this, there was possible a constant transfer of goods.
Slip transfer karte rahoge waise waise property ka ownership change hota rehta. But as new transportations
came up, this idea of Bill of lading got extended to railways, and the idea of Railway receipt came up.
Explanation - Such compensation is not to be given for any remote and indirect loss or damage sustained
by reason of the breach.

Hedley v Bexandale and remoteness, directness and mitigation sab covered.

Badi Badi baatein – contract act only recognises one cause of action – damages. So what about
other remedies?

• You can’t approach the court with fraud, coercion, UI, frustration etc. These are
defences. If you want to approach the courts with this, the remedy lies in the Specific
Relief Act (Rescission, Cancellation etc.). But practically both these statutes work
together. Ghoom phir ke it comes back to who wants the remedy. Who wants to take it
up as cause of action.