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Unique Aspects of Contract Law

A contract can be also known as an agreement when it becomes enforceable legally. This context has been honored in our Indian Legal System as a statute which was enforced on 1st September 1872 when India was ruled by the British Raj. The statute is termed The Indian Contract Act 1872. This has major divisions separating the topics to arrange the guidelines in an orderly manner.

These are presented in sections as such General Provisions have included sections 1 to 75, Sales of Goods are in 76 to 123, Indemnity and Guarantee are included in 124 to 147, 148 to 181 represents Bailment and Pledge, 182 to 238 consists the sections of Agency, and 238 to 266 includes Partnership. But in the year 1930, the portion of Sales of Goods was has been recognized as a separate Act, same was also done with the sections of partnership, which is determined as The Indian Partnership Act 1932 and the formers is considered as Indian Sales of Goods Act 1930.

Conventionally, contract and agreement seem to be synonymous but they do hold grounds for being divergent. With a reference from a well-known phrase "All contracts are agreements; all agreements are not contracts," it is understandable that agreement is a fundamental element of a contract. Agreements are formed when a proposal gets converted into a promise via acceptance and holds consideration.

When an agreement accommodates the criteria to be enforced legally; it becomes a contract. From a practical approach, only those agreements are enforceable which bears the essentials of a contract. The act comprises the definition of the legal terms under section 2 where clause 'e' and 'h' defines the terms agreement and contract.

The Contract Act was formed during the British rule, so the landmark cases are all of English origin. Balfour vs. Balfour is one of the recognized cases signifying an essential; 'intention to create a legal obligation.' In this regard, there lies a difference in Indian and English Law. Indian law, do not consider the intentions during the making of the contract, but English Law does.

The latter makes sure that both the parties have a common intention to enter a legal obligation during the formation of the contract. The parties of the case share a marital relationship. The plaintiff is the wife while the defendant is to be the husband. Here both of them went to England from Ceylon for a vacation. Over time, the wife gets sick and was advised to stay in England, and the husband returns to Ceylon due to work.

There a promise was made by the husband that he will pay a monthly allowance of thirty pounds to his wife. But after some time he discontinued to pay. Even both of them get separated, and arrangements were made between them. This case was dismissed by the court and the verdict was passed by Lord Atkin, stating that 'the parties never intended that they would have a legal intention, because agreements between husband and wife to provide capital are generally not contracts.'

Another element of the valid contract is certainty or in simpler words, proper knowledge regarding the terms and conditions of the contract to the parties. Here the case of Lalman Shukla vs. Gauri Datt can be referred. This case is between a servant and his mistress. Also, one important aspect to be considered that the servant needs to fulfill his duties and to follow the instructions. The plaintiff is the servant and the defendant is the mistress.

The nephew of the mistress escaped, to that she asked her servant to find him. As he went out, the mistress distributed pamphlets stating to reward to the one who could find her nephew. To this Lalmam Shukla fulfilled the given task and informs his mistress. All this time he was not aware of the offer. Later he files a suit claiming the reward. Here the judgment by Justice Banerjee was declared dismissing the suit.

It was stated that only those petitions can be enforceable by the court where there is a formation of a contract, where the parties have the proper knowledge and the process of offer and acceptance have taken place. This contradicts the suit filed by the plaintiff because before going for the search of the nephew he did not know about the offer; therefore he cannot accept the offer.

To all this, there seems that no contract was formed between the parties. Also contrary to the verdict, it is also true that if one performs all the terms and conditions of the offer, acceptance becomes implied; but in this case, specifically, this aspect cannot entertain as abiding the orders of the mistress fall under the duty of a servant, this clearly shows the fulfillment of duty by a servant.

From the previous element, it stated that mere performance of the task signifies acceptance, even if there were no communication between the two parties related to the offer. From the case of Carill vs. Carbolic Smokeball, the arguments by the defendant could be a strong influence on the role of acceptance during the formation of a contract. This case depicts various hidden instances that could seem to be vague.

The defendant gives an advertisement stating that, if anyone catches Influenza cold after using their product they will provide a hundred pound to the customer. Even to show sincerity they provide proof that they have deposited an amount of thousand pounds in Alliance Bank. Eventually, the plaintiff claims for the amount when he catches a cold after using the product according to the description.

During the trial, the defendant raises the defenses for which they need not pay the reward.

Firstly they said that their advertisement does not provide any time limit for the consumption of the product or to raise the claim on the grounds of specified consequences so accordingly, it stands to be vague.

Secondly, they stated that this suit lacks the intention for a legal obligation, and the motive behind the advertisement was to promote the product's existence so this ad is to be considered as a puffing advertisement.

Thirdly they claimed that there was no contract between the plaintiff and the defendant specifically this add was not for any particular individual, also the plaintiff provided no communication that he had accepted the offer. But the court was one step ahead to their defense and stated that this advertisement cannot be considered as vague because earlier they only stated that the reward will be provided only if one catches a cold after using the product according to the description.

So this implies the offer to be definite. Also, the court mentioned that they have deposited an amount of a thousand pounds, corresponding to the offer, which highlights the seriousness of the offer, therefore this cannot be termed as puffing add. And most importantly the act of the plaintiff signifies the performance of the condition which corresponds to sufficient acceptance without notifications. Through all this, the plaintiff got his reward.

Corresponding to the context of acceptance there lies another element that is consent. Specifically, consent is defined under section 13 of the Act. It signifies the purpose of authorization or permission. When consent is provided free from the parties that count as a valid element essential for the formation of a contract. But in this regard, there are various grounds where consent can be obtained by illegal means. Section 15 to 19A defines all these aspects.

These include the grounds of fraud, undue influence, coercion, and misrepresentation. All these are legally chargeable and punishable under IPC. From a practical aspect, it can be considered that these grounds provide an escape to choose a way which may not be legal, and as if one holds enough pieces of evidence one could succeed. But again law also consists of other provisions maybe not from this act but from others that could prevent the fraud from happening. It is said that mistakes can be pardoned, but upon this, there are various grounds where the mistake is investigated and inquired so one cannot take these aspects lightly.

Two cases are considered to signify the importance of the capacity of the contract. Section 11 of the Contract Act represents this element. It states that the age of majority is an essential element for the parties to the contract to be competent, also the person should not be unsound mind and not disqualified from contracting any law to which he is a subject.

The case of Morhiribibi vs Dharmodas Ghosh holds the facts relating to this aspect. The parties of the case are Brahmodatt, a money lender, Kedarnath, his agent, Dharmodas Ghosh a minor, the mother of the minor, wife of Brahmodatt, Morhiribibi. Dharmodas Ghosh being a minor, mortgages land to Brahmodatt for an amount of Rs. 20,000 and with a rate of interest of 12% per year. The payment of the first installment is also been paid by Kedarnath to Dharmodas Ghosh.

After this, the mother of the minor gets the knowledge of this mortgage and she sends a letter to Kedarnath asking to cancel the contract as Dharmodas is not competent as he is a minor. To this Brahmodatt demands the payment which Kedarnath had paid on his behalf as the first installment. The lower court has passed that judgment where it stated that as this is not a valid contract so the defendant need not pay back any money.

Later the same petition was filed to Supreme Court by Morhibibi. There they relied on sections 64 and 65 of the Contract Act which says in case any contract becomes void or voidable the benefits received by the concerned parties need to be restored. But Supreme Court rejected the contention and stated that the basis of sections 64 and 65 is a valid contract as Dharmodas was a minor so, there was no valid contract, so no benefits can be restored.

Then Section 41 of the Specific Relief Act was brought into action which stated that in case if a contract gets dissolves this section gives discretion to the court to ask the concerned party who has received the benefits, to compensate the other party. But this was also rejected by the court stating that at the time of the mortgage, Brahmadatt was aware of the minority of Dharmodas, still, he entered the contract, this signifies the negligence towards following the guidelines before any formation of the contract. So here the plaintiff is not eligible to receive any compensation.

Another case corresponding to the capacity aspect is Khangul vs Lakha Singh. Here the facts state that a minor comes in contract with another party and purposely hides his age and sells a plot of land where he receives the money and did not give the land to the other party, and states that as he is a minor so he need not act according to the contract.

To this, the court takes a different approach where they did not follow the previous judgment as their motive is not to favor the fraud even it is done by the minor and cannot allow him to enjoy the benefits. So the minor was asked, to compensate the party to whom he has done the fraud. In this instance, there was a loophole whose advantage was taken by the minor, but since our judiciary has the right to give judgments according to the circumstances so here the justice carried with equity.

It also happens like this there may be a contract between two parties but the benefits are directed to some other party who may not be the party to the concerned contract. So here a question arises that whether the third party holds any right to claim for the benefits in case one may be deprived of the same. Corresponding to a similar situation Chinnaya V. Rammaya is a landmark case. Here in total, there are three parties but the contract included only two of them.

The whole act happened between mother, daughter, and sister of the mother. The mother had land from which she allotted a portion of it to her sister. Then after she gifted the whole land to her daughter, and made a contract that after receiving the gift she will provide an annuity to the sister of her mother. To this, she accepted the offer. Later on, she refused to provide the annuity to the sister, here the sister filed a petition claiming annuity as per the terms of the contract.

Here the defense states that she has received the plot as a gift from her mother and to which her aunt is someone outsider to the contract so she is not eligible to claim. The verdict of the court was passed that includes when the daughter has accepted the contract she had agreed to all the terms and conditions which included the context of providing annuity to her aunt.

Now when she refuses to pay it holds to be not abiding by the terms of the contract were receiving the gift and providing the annuity are the simultaneous part of the same contract to which the other party present has the right to question. As the sister of the landowner is not a party to the contract but still she is a beneficiary so there she deserves to receive the annuity.

So these were the essentials of a valid contract, but apart from this it there are many other that holds importance, and one should not be negligent towards them. It may happen due to fewer considerations of the other elements, the contract may lose validity and can be declared as a void which may result in losses. Every aspect of any statutes should be taken seriously in case of any legal works, this increases the efficiency of the document and the purpose of the work and also make the work effective and can be accomplished speedily.

References:
  • Balfour vs. Balfour 1991 2KB 571
  • Lalman Shukla vs. Gauri Datt, 1913,40 ALJ 489
  • Carill vs. Carbolic Smokeball, [1892] EWCA Civ 1, [1893] 1 QB 256 (CA)
  • Morhiribibi vs Dharmodas Ghosh (1903) ILR 30 Cal 539 (PC)
  • Khangul vs Lakha Singh AIR 1928 Lah 609
  • Chinnaya V. Rammaya ILR (1876-82) 4 Mad 137

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