PakSearch.com - Pakistan's Best Business site with Annual Reports, Laws and Articles
Welcome to PakSearch.com Pakistan's Premier Business Information
Service


For business information, annual reports, laws, ordinances, regulations and articles.






Google
 
Web Paksearch.com

THE CONTRACT ACT
(ACT IX OF 1872)

[IMPORTANT: For facility of quick reference, Pakistani case-Law is digested at end of Indian Case-Law under each Section.]

Preamble: WHEREAS it is expedient to define and amend certain parts of the law relating to contracts; It is hereby enacted as follows:---

PRELIMINARY

1. Short title: This Act may be called the Contract Act, 1872.

Extent and Commencement: It extends to [the whole of Pakistan] and it shall come into force on the first day of September, 1872.

Enactments repealed: Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

COMMENTS

Law anterior to Contract Act, Introduction of English Law into India.--- The charters of the eighteenth century which established Courts of justice for the three presidency towns of Calcutta, Madras, and Bombay, introduced into their jurisdictions the English common and statute law in force at the time so far as it was applicable to Indian circumstances. It is, however, a matter of controversy jurisdictions the English common and statute law in force at the time so far as it was applicable to Indian circumstances. It is, however, a matter of controversy whether English law was introduced by the charter of 1726 (13 Geo. I.) so as to extend I o India the statutes passed up to that date only, or subsequently also by the charters of 1753 and 1774 so as to embrace statutes up to 1774.

Introduction of native Law of Contract into India.--- The indiscriminate application of English law to natives of India within the jurisdiction of the Supreme Court led to many inconveniences. To obviate this, the statute of 1781 (21 Geo. III. c. 70. s. 17) empowered the Court at Calcutta (being then the Supreme Court), and the statute of 1797 (37 Geo. III. c. 142, s. 13) empowered the Courts of Madras and Bombay (being then the Recorders' Courts), to determine all actions and suits against the inhabitants of the said towns, provided that their succession and inheritance to lands, rents, and goods, and all matters of contract and dealing between party and party, should be determined in the case of Muhammedans by the laws and usages of Muhammedans,. and in the case of Gentoos (Hindus) by the laws and usages of Gentoos, and where only one of the parties should be a Muhammedan or Gentoo by the laws and usages of the defendant. The effect of these statutes was to supersede English law so far as regards Hindus and Muhammedans in the case of contracts and other matters enumerated in the statutes, and to declare the right of Hindus and Muhammedans to their own laws and usages. The result was that in a suit on contract, for instance, between Hindus, the Hindu law of contract was applied, and the Muhammedan law in the case of a contract between Muhammedans, and this continued up to the enactment of the Indian Contract Act.

Native Law of Contracts as administered by High Courts.---- Turning to matters of contract, the Hindu law of contract was in fact applied by the High Courts in the exercise of their original jurisdiction to Hindus, and the Muhammedan law to Muhammendans, up to the passing of the Contract Act in 1872, although the Courts to which the statutes of 1781 and 1797 were applicable had been abolished. The preservation of this jurisdiction appears to be accounted for by the charters of the High Courts. Now, the law or equity applied by the Supreme Court being under the statute of 1781 the Hindu law of contract to Hindus, and the Muhammedan law of contract to Muhammedans, the provision in that statute for applying the native law of contract to natives became incorporated by implication in the charters of 1862 as well as 1865, and in this manner that provision came to have effect in the High Court. The Indian Legislature had, therefore, the power to alter by legislative enactment the provisions of cl. 19 of the charter, and this is done in the case of contracts by the Contract Act. The result is that notwithstanding the provisions of cl. 19 of the Charter of 1865, which directs the High Court to apply the same law or equity that would have been applied by the Supreme Court (i.e. to apply, inter alia, the native law of contract to natives), the High Court has now to administer the law as laid down in the Contract Act, whether the parties to the suit be Hindus, Muhammedans, or otherwise. In other words, the "law or equity" required to be administered by the High Court under cl. 19 of the amended Letters Patent is, in matters of contract, modified by the Contract Act and other enactments relating to particular contracts. Subject, however, to any law made by the Governor-General in Council, the High Courts are still bound, in the exercise of their ordinary original civil jurisdiction, to apply the native law of contract to natives as comprised in the expression "law or equity" in cl. 19.

Applicability of the Act.--- The second clause of s. 1 of the Act says in the most general terms that the Act is to extend to the whole of Pakistan. These words are large enough to include all Courts and persons of all denominations. The third clause of S. 1 provides that nothing contained in the Act shall affect the provisions of any statute not thereby expressly repealed. The schedule of the Act enumerates the enactments repealed by the Act, but this enumeration does not include the provision in the statutes of 1781 and 1797 directing Hindu law to be applied to Hindus and Muhammedan law to Muhammedans.

Scope of the Act.--- The Contract Act does not profess to be a complete code dealing with the law relating to contracts. As appears from the preamble, the Act purports to do no more than define and amend certain parts of that law. No doubt it treats of particular contracts in separate chapters, but there is nothing to show that the Legislature intended to deal exhaustively with any particular chapter or subdivision of the law relating of contracts.

In Ramdas v. Amerchand & Co. the point for decision was whether a railway receipt was an "instrument of title" within the meaning of s. 103 of this Act. It was contended that it was not, for the following reasons; First, that the Indian Contract Act was primarily a consolidating Act, and therefore ought, in default of a clear expression to the contrary, to be read as embodying the law as existing when it was passed. Secondly, that it was improbable that the Indian Legislature could have taken the lead in a legal reform for which England had to wait until the passing of the English Factors Act of 1877. In dealing with these arguments, the Privy Council said: "Their lordships cannot attach any weight to either consideration. The Contract Act recites the expediency of defining and amending certain parts of the law relating to contracts. It is therefore an amending as well as a consolidating Act, and beyond the reasonable interpretation of its provisions there is no means of determining whether any particular section is intended to consolidate or amend the previously existing law. Again their lordships do not see any improbability in the Indian Legislature having taken the lead in a legal reform. Such a reform may have been long recognized as desirable without an opportunity occurring for its embodiment in a legislative enactment, and it may well be that the opportunity occurred sooner in India than in this country, where the calls for legislative action are so much more numerous."

How far native Law of Contracts is still in force.---- As stated above, the Contract Act does not cover the whole field of contract law. In ,cases, therefore, not provided for by the Contract Act or other legislative enactments relating to particular contracts, it is incumbent upon the High Courts, in the exercise of their original jurisdiction, to apply the Hindu law of contract to Hindus and the Muhammedan law of contract to Muhammedans. As an instance of the above proposition may be mentioned the rule of the Hindu law of contract known as damdupat, according to which interest exceeding the amount of the principal cannot be recovered at any one time. There is, however, a difference of opinion as to whether the rule is abrogated by the Transfer of Property Act, 1882, as regards interest on mortgages governed by that Act.

Saving of usage or custom of trade, etc.--- The term "usage of trade" is to be understood as referring to a particular usage to be established by evidence, and perfectly distinct from that general custom of merchants which is part of the law of the realm and is to be collected from decisions, legal principles, and analogies, and, according to the opinion now received, can still be increased by proof of living general (not merely local) usage. Such a usage remains unaffected by the provisions of the Act, even though it may be inconsistent with those provisions. Both the reason of the thing and the grammatical construction of the section require that the words "not inconsistent with the provisions of this Act" should not be connected with the Clause "nor any usage or custom of trade," and apply only to the immediately preceding words "nor any incident of any contract," This view was taken by the Privy Council in Irrawaddy Flotilla Co. v. Bugwandas. The contrary seems to have been assumed by the Bombay and Calcutta High Courts in two earlier cases. Both these cases were considered by the Privy Council in the above case. In both these cases, again the opinion was expressed by the Bombay and Calcutta High Courts that the liability of a common carrier under the common law of England, which renders him liable for all loss or damage to goods except when caused by the act of God or the King's enemies, was a "usage of trade," the one Court holding that it was inconsistent, and the other that it was consistent, with the provisions of the Contract Act. In the Privy Council case cited above, their lordships were inclined to the opinion that the liability of a common carrier under the English common law as an insurer of goods was not a usage of trade, but an "incident" of the contract quite consistent with the provisions of the Act. Such an incident is not inconsistent with the provisions of ss. 151 and 152 of the Act, having regard to the words "in file absence of any special contract" occurring in S. 152.

Not inconsistent with the provisions of this Act.--- A stipulation in a contract of guarantee that the surety shall not have the benefit of s. 13 has been held to be inconsistent with the Act.

Evidence as to usage of trade.--- In this connection may be noted the provisions of s. 92 (5) of the Evidence Act, 1872, which enacts that, though a contract may be in writing, oral evidence may be adduced to prove any usage or custom by which incidents not expressly mentioned in the contract are usually annexed to contracts of that description, provided that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract. And further such incident should not be inconsistent with the general provisions of the Contract Act, having regard to the words "nor any incident of any contract not inconsistent with the provisions of this Act." This is a reproduction of the English law on the subject. As to the evidence necessary to prove a usage of trade, it is enough if it appears to be so well known and acquiesced in that it may be reasonably presumed to have been an ingredient imported by the parties into their contract. To prove such a usage, there needs not either the antiquity, the uniformity, or the notoriety of custom in its technical sense; the usage may still be in course of growth, and may require evidence for its support in each case.

Section referring to usage or custom of trade.--- S. 190 enacts that an agent cannot delegate his authority to another unless allowed by the "ordinary custom of trade." Similarly an agent is bound, in the absence of directions from the principal, to conduct business according to "the custom which prevails in doing business" of the same kind at the place where the agent conducts such business (s. 211). It may here be observed that the expression "usage or custom of trade" used in s. 1, as well as the sections referred to above, relates to a particular usage as distinguished from a general or universal usage. A general usage pervading all trades has no binding force, if it is inconsistent with the provisions of the Act. A general usage is equivalent to a general law, and no general law or usage in contravention of the general law laid down by the Contract act can be consistent with the validity of the Act itself.

Choice of law governing contract.--- It may be doubtful what law is to be applied to decide on the validity or the interpretation of a contract, or both, as where the contract is made in one jurisdiction and to be performed in another, or is sued on in a jurisdiction where it was not made or to be performed. The Act does not deal with questions of this kind.

Contract for carriage of goods--- Contract Act Applies. A contract for carriage of goods being only a contract is subject to the provisions of the Contract act except to the extent to which there may exist some special provision. In accordance with the Contract Act every contract is to be performed on the date which has been agreed to by the parties, and, in the absence of such a date, within a reasonable time.

Dispute in commercial matter--- Not resolveable by law or terms of contract--- Should be resolved by resort to reasonableness. Basically, reasonableness as determined by custom, common practice and current forms is the guiding principle in commercial matters for solving obscure questions and resolving those differences which cannot be satisfactorily solved and resolved with the help of the terms of Contract and relevant provisions of the law.

Change in value of foreign currency after date of breach to be disregarded. The nominalistic principle forms part of the legal system of all civilised countries. As a principle, nominalism applies to claims for unliquidated damages not less than two debts. Thus if damages are claimed for breach of a contract to deliver goods in a foreign country, they have to be assessed in the currency of that country and any change in the value of goods or in the exchange value of the currency after the date of the breach must be disregarded.

Damages---Actual damages not ascertainable--- Nominal damages may be awarded.

Existence of concluded contract---Test of. The question whether the parties had reached a concluded contract or not, is a question of fact to be deduced from the correspondence, and other documentary and oral evidence. The true test for deciding this question is to ascertain whether the parties were of one mind on all the material terms at the time it is said to have been finalised between them and whether they intended that the matter was closed and concluded between them.

Execution of--- Must be executed according to mandatory requirement of law or not at all. If the statutory requirement be that the contract should be executed in a particular manner and that requirement is also mandatory, there cannot be the slightest doubt that either the document should be executed in that manner or not all all.

Immovable property, contract relating to--- Time is not essence of contract--- Where the defendant is found to have committed breach of contract, it is not obligatory on the part of the plaintiff to prove his willingness to perform it up to the date of filing of the suit and that the plaintiff is absolved from showing that he was ready and willing to perform his part of the contract where the defendant has definitely repudiated the contract or has committed breach thereof.

Limitation for claim for costs of work done---Art. 56, Limitation Act applies.

Letter of intent---Ambiguous expression---Interpreted against person using it. Held: I have not come across the expression "Letter of Intent" even in the commercial dictionaries, nor was learned counsel able to assist us on the meaning of this expression, although it has been used by the appellant. As the expression "letter of intent" used by the appellant was ambiguous that ambiguity had to be construed against the appellant, because it had used the expression. Secondly, as the expression was ambiguous, the arbitrator was entitled to take into account the conduct of the parties for the purpose of construing this expression as well as the letter.

Rescission of contract---Only aggrieved party can make---Party guilty of breach of contract cannot rescind it.

The right of recission of the contract has been always held to vest in the aggrieved party and not in the party guilty of the breach.
Rescission of contract and competency to rescind--- Must be pleaded before civil Court only.

Sale of goods---Deviation from approximate contracted quantity should not be more than 5 %.----When word 'about' or 'thereabout' or 'approximate' is used in connection with quantity, the consensus of judicial opinion is that the deviation from the contracted quantity should not be more than three to five per cent.

Breach of contract---Which party is guilty of---Question of fact---No interference with concurrent finding of fact.

Consideration for contract of marriage---Lawful consideration---Enforceable---There is nothing wrong in giving one's sister in marriage in consideration for inter alia payment of a specified amount for the benefit of the divorce in case the wife is divorced. Such consideration or condition is neither unreasonable or against public, nor defeats the provision of any law.

Interpretation of---Plain meanings of words should be given effect to. It is the duty of the Courts to give effect to the meaning of a contract or an offer, however, far-fetched, provided the meaning is plain. If an offerer seeks to attach unsual conditions to his offer, he must do so in plain words and not by a side wind so to say.

Stipulation not expressly stated in contract---Cannot be held to be implied by Court. A stipulation not expressed in a written contract should not be implied merely because the Court thinks that it would be a reasonable thing to imply it. Such an implication can be made only if, on a consideration Of the terms of the contract in a reasonable and business like manner, the Court is satisfied that it should necessarily have been intended by the parties when the contract was made.

Term in contract---Deemed to be implied only when parties so intended---Court cannot introduce new terms as implied in contract.

Arbitration clause in contract---Contract cancelled---Arbitration clause may still be enforced.

Void and voidable clauses in contract not separable---Entire contract is not enforceable.

Application of law to contract---Terms of contract would determine. The application of a law in relation to a contract is ordinarily to be governed by the terms of the contract between the parties and the question whether one or the other law applies normally arises when the contract is silent.

Carrier exempted from liability in case of damage resulting from negligence---Contract ineffective---Liability may be enforced.

Contractor aware of schedule of rates in force---Cannot ask for higher rates after completion of work---concession given to contractor by Government---Not enforceable. The plaintiffs contractors were not only fully aware of the rates which existed on the date when they put in the tender but also submitted the tender fully accepting the rates as then existing. Any subsequent change in the schedule of rates would obviously be not applicable to the plaintiffs in respect of their contract. Any gratuitous concession in this respect by the Department concerned in favour of the contractors at any particular point of time after the work under the contract had already been executed, is not legally enforceable in a court of law, either by way of admission, estoppel or otherwise.

Proposal for sale made and accepted---Sale subject to consent by Central Board---Contract of sale not complete till consent given.

Sale of immovable property---Time is not of the essence of the contract. In contracts relating to immovable property, time is not of the essence of the contract.

Service contract entered into outside Pakistan---Pakistan Courts have no jurisdiction to enforce it.

Contract not performed within time by one party---Other party cannot unilaterally extend time---Remedy open to such party. The Court refused to accept the proposition that failure of the part of the appellant to make proper delivery gave a right to respondent to unilaterally extend the time within which the contract was to be performed. Such extension could only be made by mutual agreement and not by unilateral act of a party. The only course open to the aggrieved party if other party does not agree to extension of time is to claim damages.

Extension of time by one of several vendees---Binding on other vendees.

No period for performance of contract fixed---Contract must be performed within reasonable time. The agreement between the parties did not specify the date on or the period within which the contract was to be perfumed, it was required to be performed within a reasonable time. What is "reasonable" time must necessarily depend upon the facts and circumstances of each case, including in the case of a commercial contract for the sale of goods, the usage of the trade, the nature of goods, the place and mode of delivery and whether the goods are already available with the seller and in a deliverable stage or have to be manufactured or acquired by the seller or put in deliverable state.

No time fixed for performance of contract---One party may fix time by notice provided it is reasonable. In the case of mercantile and commercial contracts for sale of specific ready goods, where no time has been specifically fixed, it is permissible for one of the parties, by notice, to fix the time for the performance of the contract provided such time is reasonable.

Wagering contract---What is---Not enforceable. A wagering contract is one by which two persons mutually agree that on determination of a future uncertain event one shall win from the other and the other shall pay a sum of money, there being no other real consideration for the making of such contract. In cases of such contracts the intention of the parties is to be determined as a question of fact. It is to be seen whether actual delivery of the goods is contemplated or only the differences are required to be paid. All contracts by way of gaming or wagering are void and no action can be brought by the winner on a wager, either against the loser or the stakeholder to recover what is alleged to be won.

Privity of contract---Order placed by defendant in Pakistan to plaintiff (foreign company) for supply to defendant's foreign associate---Defendant's letter showing that defendant was not merely a post office or an indenting agent so as to escape personal liability---Held: there was privity of contract between plaintiff and defendant entailing liability to defendant for supply by plaintiff to defendant's foreign associate.

Question whether or not the' is of essence of a contract---Gives rise to a controversy of fact determinable from attendant circumstances of each case and on intention of parties gatherable from agreement itself and subsequent conduct of parties---Decree for specific performance can be refused even if time was not of the essence of contract but other reasons like plaintiffs delay in performance of contract justify such a refusal.

Plea that time was not of essence of contract for sale of immovable property---Cannot but lead to grave injustice in some cases---Such a plea should not be readily entertained or given effect to, especially in claims for discretionary relief like suit for specific performance of contract

Examination of goods---Goods contracted to be supplied after examination by one person---Supplied after examination by another---Seller guilty of breach of contract. Where there was a contract to the effect that goods would be supplied after examination by one person but were supplied by the seller after getting them examined by another person.

Held: The defendant was quite justified in law to stop the payment when he discovered the mistake that the inspection had not been done in accordance with the terms and conditions of the contract.

Carriage of goods by Sea---Shipper by negligence not unloading cargo at time of first call at port---Damages may be claimed by shipper---Calculation of damages. Where the carrier did not, because of negligence in loading of cargo, discharge it at K when he called at the port but subsequently transhipped the goods to K. The shipper thereupon claimed damages on the ground that due to late delivery he had to purchase the goods in the local market to supply to the Government under a contract previously entered into. Held: A carrier owes a duty to the shipper to show that skill which is normally expected of a person in that skilled profession. Where a carrier performs a loading in a manner which was bound to cause considerable delay in the discharge of the cargo of the shipper and which might necessitate the return of the ship to the port to which the shipper's cargo was destined or which might involve the carrying away of the shipper's goods to a destination far and distant, he cannot be said to have acted with the standard of care which is required of a carrier. In failing to perform his duty with the skill required of him the carrier must be held to have acted negligently. That being so, he cannot then fall back upon the exception clauses in extenuation of his action, which was necessitated due to the carrier's own negligence at an earlier stage. Therefore he is liable for damages. But as at the time when the contract was made the special circumstances that these imports were being made under a special licence for the supply .of bars to the Ministry of Defence within a certain time was not made known to the carrier. Therefore no claim for damages can be based on those special circumstances.

Currency in which obligation is to be discharged---To be determined from the date of contract. "It is as at the date of the contract that it must be decided what currency is meant by the contract as the currency or measure of value in which the contract obligation is to be discharged."

Contract with Government---Must be entered into proper form---Unenforceable if the officer executing is not authorised to do so. Where the requisitioning authority gave alternate accommodation to the person occupying the requisitioned premises and it was contended that there was a contract between K and the Government to provide him with that accommodation so that the Government could not ask him to vacate it.

Held: S. 176 of Government of India Act provides a particular methods by which a contract should be made with the Govt. In this case no formal document was executed. The plaintiff has merely relied on the assurance given by the Accommodation Authority. The Government, however, is not bound by the said assurance as it was not expressed to be made by the Governor. It is well settled that, when a statute provides a particular methods by which a contract should be made there must be compliance with the provisions of the statute.

Contract with Government----Not in the form prescribed by statute---Government not bound by contract. S. 175 (3) Government of India Act, 1935, Provides a particular method by which a contract should be made with the Government. In this case no formal document was executed. The plaintiff has merely relied on the assurance given by the Accommodation Authority. The Government, however, is not bound by the said assurance as it was not expressed to be made by the Governor. It is well settled that, when a statute provides a particular method by which a contract should be made, there must be compliance with the provisions of the Statute.

Contract with Central Government---Not expressed in G.G.'s name---Invalid. As the contract was not expressed in the name of the G.G. although Central Government was a party to it. It was contended in objection that there is no contract between the parties as contemplated by section 175 of the Government of India Act which requires that the contract should be expressed to be made by the Governor-General.

Held: The contract entered into by the Governor-General must ex-facie show that the provisions of section 115 of the Government of India Act had been complied with, that is, "the contract is expressed to be made by the Governor-General", in that "it is executed on behalf of the Governor-General" and that "it is executed by a person who is authorised or has been directed by the Governor-General to execute it." Therefore, the objection was upheld and the contract was declared invalid.

Oral contract---If written contract necessary for execution of---Question of construction. By the law of India an oral contract is valid and enforceable; but in such a case it is a question of construction whether the execution of the further written contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through.

Term---When should be deemed to be implied. The Court ought not to imply a term merely because it would be a reasonable term to include if the parties had thought about the matter, or because one party, if he had thought about the matter, would not have made the contract unless the term was included in it. It must be such a necessary term that both parties must have intended that it should be a term of tile contract, and have only not expressed it because its necessity was so obvious that it was taken for granted.

Term not expressed contract---When may be considered to be implied. A term may be implied in a contract to repair an intrinsic failure of expression. It is obvious that few contracts exhaustively deal with all possible future contingencies, and that, in a given case, certain important or even fundamental contingencies may have been overlooked which, if the parties had thought of them at the time of making the contract would have been certainly provided for.

Written contract---Construction of---Prior negotiations not to be considered. While construing a written contract, the Court will be erring in approaching the question of what formed !he subject matter of the negotiations which proceeded the written contract between the parties without first settling to what extent the contract was so ambiguous as to justify resort to evidence as to the negotiations.

Commercial contract---Terms in written party would prevail over slip attached. The written part of insurance policy covered hazardous goods but a slip attached to it did not cover those goods.

Held: It is settled principle in respect of commercial contracts and indents that the written part of it prevails against the printed part in case of any inconsistency. In the present case the written part of the contract which expressly allowed the keeping of hazardous goods in the godown must, therefore, be held to prevail against a warranty which is attached to every policy as a matter of course regardless of the terms of the contract.

Construction of contract should be strict and literal---Goods supplied according, to sample---Number given to goods not essence of contract. Where the contract between the parties was on the following terms.

"Name of the Article---Striped Japanese Printed Pyjama as per sample.

Quality---Japan Striped No. 2002."

It was contended that the plaintiffs had contracted to purchase cloth No. 2002.

Held: It is clear from a mere perusal of the contract that it was not essence of the contract that the cloth should bear No. 2002. It was enough if the cloth was according to the sample and was of the same quality as cloth No. 2002.

Held further: A contract in such cases must be strictly and literally construed and no deviation therefrom should be permitted.

Immovable property---Contract for sale of---Construction on of---Court warned against treating time as essence of contract. The tendency of the courts in cases of contracts relating to real property is to lean against a construction which would make time the essence of the contract unless it can be held to be the unmistakeable intention of the parties.

Frustruction of contract---How determined. The question whether frustration of contract occurs or not depends on the nature of the contract and on the events which have occurred. It therefore appears to us that in each case the question for consideration will be, "what was the common intention and a common purpose for entering into a contract and whether that purpose and intention has been frustrated by supervening circumstances" and it is not permissibe for a Court of law to imply a term which is not consistent with the express terms of the contract merely on the ground that parties being reasonable men must be deemed to have provided for a particular event.

Suit for breach of contract---Where may be filed. The suit on a breach of contract can be filed at any place where the contract should have been performed in whole or part, and even in so far as the price of the goods in the present case was payable at Karachi, the Karachi Courts would have jurisdiction to entertain the suit.

Contractors facing difficulties in performance of contract due to change of circumstances---Work started by contractor when Executive Engineer recommended 12 % rise in tender rates.---If Department bound by recommendation. The Contractor was unwilling to work at the tender rates. The X.E.N. recommended that the rates be raised by 12 %. On this assurance the contractor began the work. After a year of the recommendation the department informed the contractor that the recommendation had not been accepted.

Held: The contractor began the work at his own risk and in my opinion the conduct of the Department in rejecting his claim after the lapse of about one year is not such on which the rule of estoppel can be applied. This contention is without force and in my opinion the defendants are not estopped from challenging the claim of the plaintiff in this respect.

Earnest money---What is. Earnest money is part of the purchase price when the transaction goes forward. It is feited when the transaction fall through by reason of the fault or failure of the purchaser.

Refund of earnest money---Willingness of buyer to complete contract---Irrelevant. The question of readiness and willingness on the part of the buyer arises only in cases for the specific performance of the contract or for damages for breach thereof. It does not arise where the suit is only for the recovery of the earnest money. The question of the refund of the earnest money or forfeiture of the earnest money depends entirely on the question whether the purchaser or the seller was responsible for the breach of the Contract.

Death of partner---Continuation of partnership after death---How would be inferred. Held: That implied contract excluding dissolution by death of a partner may be inferred from the circumstances of the case.

Agreement to purchase---Price unpaid by vendor---If vendor entitled to pay interest on unpaid money. Held: If the plaintiff succeeds in his claim that the contract should be specifically performed not only as to the shares but also as to the fruit they have borne while the price remained unpaid, he cannot claim a fair measure of the profit earned or the expense saved by reason of the price being unpaid without denying the vendors a correlative equity and ignoring the quality and character of the relief which he has sought.

Clause excepting from of limiting liability---How should be contracted---Such limiting or excepting should be express. In a case from Lower Canada, the Privy Council held; that if the contracting party wanted to limit his liability in respect of negligence, he must do so in clear terms in the absence of which the clause is construed as relating to a liability not based on negligence.

The duty of a Court in approaching the consideration of such clauses may be summarised as follows :---

(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereinafter called the "Proferns") from the consequence of the negligence of his own servant, effect must be given to that provision.

(2) If there is no express reference to negligence. The Court must consider whether the words used are wide enough, in their ordinary meaning to cover negligence on the part of the servants of the proferns. If a doubt arises on this point, it must be resolved against the proferns in accordance with Article 1019 of the Civil Code of Lower Canda: "In cases of doubt the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation."

(3) If the words used are wide enough for the above phrase the Court must then consider Whether "the head of damage may be based on some ground other than that of negligence." The "other ground" must not be so fanciful or remote that the proferns cannot be supposed to have desired protection against it; but subject to this qualification which is no doubt to be implied from Lord Green's words, the existence of a possible head of damage other than of negligence is fatal to the proferns even if the words used are prima facie wide enough to cover negligence on the part of his servants.

Doctrine of mutuality---Not to be extended beyond the provisions of Contract Act. The doctrine of mutuality cannot be extended outside the provisions of the Contract Act or other relevant enactment.

Restriction sale of car---Covenant that if the car was sold before 2 years of the purchase the seller would pay pound 1000 to the dealer as compensation---Penalty---Not recoverable. Where the buyer of a Chevrolet moter car covenanted with the dealer that he will not during the space of two years after the delivery of the vehicle to him transfer the same by sale, mortgage, etc. to third persons, in case of breach of which covenant, he was to pay to the dealer "as and by way of liquidated damages and not as a penalty" the sum of pound 1,000.

Held: That the amount stipulated was a penalty and was not recoverable.

Agency of oil company---No clause in contract about notice before termination---If agency can be terminated without notice. The plaintiff was provisionally appointed a dealer of an oil company, but his appointment was abruptly cancelled without any notice to him, and the petrol pump was not given to him on the appointed days.

Held: It could not have been in the contemplation of the defendant either that the parties were free to abruptly terminate the agreement without any notice and that, on the other hand, both of them must have, on account of the very nature of the business regarding which they were contracting, contemplated that the agreement between them could be terminated only after a fair and reasonable notice.

Mutual obligation in contract---Contract is considered performed only when respective obligations have been fulfilled. A contract which places mutual obligations on the contracting parties cannot be treated as wholly executed until the respective obligations have been discharged. Thus, in a contract for the supply of goods the contractor has to make the supplies and the other contracting party has to make payments for the said supplies and until the payments have been made the contract is not at an end and the liability arising under the said contract is still subsisting. If the contract has been wholly performed, that is to say, the supplies made and payments received, then there is nothing outstanding and no question of any liability occurring thereunder arise.

Executory contract---When can be resiled from---Position of parties discussed. If the contract is not yet performed or is merely an executory contract, then one of the parties may resile from his agreement subsequently, and may, in such circumstances, recover money paid in consideration thereof upon the repudiation of the contract as upon a failure of consideration. But if the illegal purpose or any material part of it has been performed, then the money paid cannot be recovered, for the parties in such cases must be held to be equally at fault, and the rule is that in cases where the parties are in 'part delicto' to position of the defendant is always better.

Benefit of contract passing to more than one person after the contract---Contract not split up---Default in payment to one party is considered default as to the agreement as a whole. The plaintiff agreed to let his land to one party and promised that she would not eject him if he continued to deliver the agreed quantity of grain. The plaintiff sold a part of the !and to another person. Thereupon the defendant made default in payment.

Held: If the benefit and burden of a contract should by transfer or by operation of law pass to more than one person, the contract is not split up and such persons do not become independents promisees. They together constitute a party to the contract and a default in respect of any of them is a default in relation to the agreement.

Therefore the default amounted to a breach of the agreement.

Stipulation binding each party---Reasonable diligence should be used for the performance of it. Where the purchaser's contract to purchase was subject to his obtaining import licence, and on his not obtaining it he was used for damages.

Held: A stipulation binding each party to use reasonable diligence to obtain the licence requisite for the fulfillment of his part of the bargain should be implied. But the true construction of the expression "Subject to seller's export licence and to buyer's import licence" raised considerable controversy for the appellant it has said that the words "Subject to" meant "The above obligations are subject to", so that, until the necessary licence had been obtained the sale stipulations of the contract remained inoperative. For the respondent, on the other hand it was contended that the whole contract came into force immediately. The effect of the licence clause being to make it subject to defeasance if, despite all due diligence, either seller or buyer was unable to get the appropriate licence.

The first question to be determined, and on the facts of this case it is the crucial question, is the same, namely, did the appellant use reasonable diligence to obtain an import licence? If he did, the action must fall (whether it be regarded as based on a breach of the implied term or of an operative contract of sale) for it is clear that he never got a licence. If he did not, he is liable in damages unless excused by certain special defences not yet mentioned as, for example, that the contract was a c.i.f. contract and respondent did not tender the requisite documents.

Breach of contract---Date of performance is the date of breach of contract. Ordinarily. in a contract for sale of goods the date of the breach of the contract is the date when the contract ought to have been fulfilled but was not and not the date of the refusal of the liability or repudiation of the contract.

Breach of contract---Goods to be supplied in November in bages to be supplied by the buyer---Bags supplied on November 30th---Breach on the part of purchaser. The respondent had to supply the bags ill which the appellant was to supply corn. He supplied the bags on 30th Nov. The corn was not delivered in November. Therefore the respondent brought a suit for breach of contract.

Held: It is manifestly clear that the respondent did not supply the gunny bags for the contract within a reasonable time in order to enable the appellant to fulfill their part of the contract to supply the goods within the month of November, 1951.

Time for performance extended by consent of parties---Contract not performed in extended time---When was breach of contract committed. The time for the performance of contract was extended by consent of parties, but the contract was not performed on the appointed day. The question was on which day did the breach of contract occur.

Held: It was open to the plaintiffs-appellants to extend time for delivery and if the defendants accepted the extension and were willing to perform the contract, breach will take place either on the failure of the defendants to perform the contract within the extended time or on their refusal at any earlier time.

Time essence of the contract---If party not following time schedule can be required to give further time to the other party. Where time was held to be the essence of the contract but vendee contended that the vendor should be ordered to give further time to it for performing its part of the contract.

Held: To require of the vendor that he should allow reasonable time beyond the fixed period to enable the purchaser to do what he was required to do by the terms of the contract, would amount to making a new contract for the parties, the time was extended.

Commercial contract---Terms in accordance with usage of trade may be implied. In a commercial contract a term may be implied in accordance with the usage of the trade or business to which the contract pertains.

Sale of immovable property---Time not essence of contract---When should the contract be performed. In contracts relating to immovable property, equity presumes that time is not of the essence of the contract unless expressly made so.

Where one of the clauses of the agreement ran as follows:

"If on the other hand, on account of any fault or default on the part of the lessee, the lease shall not be completed and registered on the day and at the place aforesaid, this agreement shall stand cancelled and the lessee should be liable to consequential damages."

Held: The agreement show that a certain time is mentioned therein for the performance of the contract but it is not expressly stated therein that time is to be deemed to be of the essence of the contract.

The language used in the agreements is not such from which it can be construed that time was regarded as of the essence of the contract, specially when there is nothing in the conduct of the parties previous to the contract which could show that the parties had no other intention.

If this view of the mailer the position was that the parties have the right to have the general contracts performed within a reasonable time and, if there was unnecessary delay by any party the other party could give him notice fixing a reasonable time after the expiration of which he would treat the contract as at an end.

Sale of immovable property---Contract stipulating date for performance and also right to cancel in case of non-performance---Time essence of contract. The. mere fixation of a period of the contract, even when coupled with a power to treat the contract as cancelled, in the event of default in performance of the contract within the stipulated time, is not sufficient to make the time fixed the essence of the contract. It seems that something more is necessary to have this effect and where the determination of this question depends only on the language of the conduct. It must be such as would unmistakably exclude the notion that the time limit was merely of secondary importance.

Held further: The tendency of the Courts in cases of such contract relating to real property is to lean against a construction which would make time of the essence of the contract unless it can be held to be the unmistakable intention of the parties.

Contract on C.I.F. basis---Obligations of seller---Effect of delivery of documents to buyer stated. In C.I.F. contract it is well established rule that the obligation of the seller is only first to make out an invoice of the goods sold; secondly, to ship at the port of shipment goods of the description contained in the contract, thirdly to procure a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract; fourthly, to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer; and fifthly, with all reasonable despatch to send forward and tender to the buyer these shipping deocuments, namely, the invoice, bill of lading anti policy of assurance. The law is that the delivery of these documents to. the buyer is symbolical of delivery of the goods purchased, placing the same at the buyer's risk and entitling the seller to payment at their price.

Contract on C.I.F. basis---Goods lost on way---Seller is not responsible for loss. Under a C.I.F. Contract, the sellers in law had discharged their responsibility by endorsing the documents of title to the goods, namely, the invoice, the bill of lading and the insurance policy in favour of the buyer. If the goods had not been received at destination or had been lost on the way or were transhipped by the shipping company on the way no responsibility for that could be fixed on the seller firm.

Contract on C.I.F. basis---Documents delivered to buyer---Buyer cannot allege non-shipment of goods---Proof of non-shipment must be positive. The endorsees of the bill of lading were estopped in law to challenge the statement in it that the goods had been shipped. At any rate if they wanted to challenge this fact it was necessary and incumbent upon them to disprove it by reliable evidence. Since in the present case no such evidence was led by the endorsee-buyer it was not possible to hold that the goods were not shipped.

Sale of goods---Suit for damages and refund of deposit by purchaser---If purchaser must allege and prove that he was prepared to perform his part of the contract. Held: In a suit for damage for breach of contract for sale of goods or for the refund of the amount paid as deposit to the seller by the purchaser, it was not necessary for him to allege and prove that he was ready and willing to perform his part of the contract unless the defendant expressly pleads and puts him to such proof.

Sale of goods---Goods not delivered---Damages for breach of contract---How computed. Where the goods contracted to be sold to the plaintiff were not delivered to him and he claimed damages.

Held: The plaintiff was entitled to purchase the goods from the market at the market price and recover the loss from the defendants,

Even if they had not made any purchases they would be entitled to the difference between the market price and the price agreed upon between the parties. In ease of a breach of contract by the seller the purchaser is entitled to make purchases in the market and to recover the difference from the seller. But he is not bound to do so and is entitled to the profit which he would have earned by sale of the goods in the market if the goods had been delivered to him.

Extra work beyond the scope of building contract---Employer should pay for, even when he has not given written order for it. The general rule is that where a written order is a condition precedent, if an architect to the knowledge of the employer gives an order for work which the contractor considers to be no part of the contract and refused to execute it without a written order but the architect or the employer requested him to carry it out, it becomes a question of fact whether the. work was within the contract and if it is found to be an extra work the employer would not be permitted to set upto the plea of absence of written orders as it would plainly be fraud on the builder.

Building contract---Circumstances changing through fault of one party---The other party must get proper compensation. Due to change of circumstances the contractor had to incur extra expenses for the execution of the contract. The XEN recommended that the rates should be raised by 12 % to meet the exigency but the department rejected the recommendation. In the meantime the contractor had executed the contract.

Held: It appears to me that Courts of law ought to find out whether or not on the terms of the contract the parties have entered into the contract on the footing that if a particular thing and state of things does not continue the contract will be treated as frustrated. I agree that this implied term is not to be spelled in those cases where unexpected turn of event had made it more onerous than had been contemplated but it will certainly apply to those cases where the conditions of contract have so changed due to the fault of the other party that the very basis on which it was entered into had disappeared. If the Court comes to such a conclusion it must hold that it was an implied term of the contract that the defaulting party would compensate the sufferer. This is what is known in law as the Doctrine of Frustration on account of changed circumstances and the injured party is entitled to a fair compensation or quantum merit.

Unlawful consideration for divorce---Divorce effective---Husband accepting such consideration cannot take advantage of his own wrong. Where part of the consideration for divorce was withdrawal of a suit against the wife under S. 380, 317 PPC which amounted to stiffling prosecution and the husband brought a suit for restitution of conjugal rights on the ground that the agreement to divorce was based on unlawful consideration and was therefore illegal.

Held: When the parties to a contract are themselves in pari delicto neither of them is entitled to ask any relief from a Court of law. The Court will not come to the aid of either party to retrieve his position. The appeal was dismissed.

Bill of ladings---Clause in Bill of ladings about delivery of goods to shippers or their assigns---Goods delivered in contravention of the clause---Liability. Where the clause in the Bill of lading was "unto order or his or their assigns" but the goods were delivered without the bill of lading being produced.

Held: the goods were to be delivered to the order of the shippers, if they had not assigned the bill of lading, or to their assigns, if they had. The shipping company did not deliver the goods to any such person. They are therefore liable for breach of contract unless there is some term in the bill of lading protecting them. And they delivered the goods, without productions of the bill of lading, to a person who was not entitled to receive them. They are therefore liable in conversion unless likewise so protected.

Voidable contract---Party exercising option can do so only once---Option exercised in affirmance.--The contract is a full-fledged contract. A voidable contract is one which is enforceable at the option of one party to the contract, but the party can exercise this option only once. If it elects to affirm the contract, it becomes enforceable henceforth at the option of both the parties. The true conception of a voidable contract is that it remains in abeyance till the party that has the option exercises it. It then becomes, if the party approves, a full-fledged contract.

2. Interpretation clause. In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context :---

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

(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promises;

(c) The person making the proposal is called the "promisor," and the person accepting the proposal is called the "promisee".

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise:

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

(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises:

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but put at the option of the other or others, is a workable contract

(j) A contract which ceases to be enforceable by law becomes Void when it ceases to be enforceable.

Summary of the Section.---This section is understood to be the work of Sir James Stephen. There is nothing like it in the original draft prepared by the Indian Law Commissioners at home, which only laid down in general terms that "a contract is an agreement between parties whereby a party engages to do a thing or engages not to do a thing". As the section stands, its position and, form are open to the remark that it professes to be an interpretation clause, but really declares a considerable part of the substantive law. Moreover, the propositions it lays down are by no means confined to principles of universal jurisprudence, but embody several conceptions which are peculiar to the Common Law, or of peculiar importance in it. We learn from cls. (a), (b), (c) (e), and (f) that an agreement is a promise or a set of reciprocal promises ; that a promise is formed by the acceptance of a proposal; and that there must be a promiser who makes the proposal and a promisee who accepts it. In the case of reciprocal promises each party is a promisor as to the promise he makes and a promises as to that which he receives; he is both proposer and acceptor, proposing to become liable and accepting the other's liability. The mutual proposals of the two parties become promises by mutal acceptance; whatever may have happened before the promises are exchanged is merely preliminary negotiation, and does not enter into the legal analysis of the transaction.

Proposal and Promise.--- The word "proposal" is synonymous in English use with "offer". But the language of these definitions appears to confine "proposal" to an offer to be bound by a promise. Thus a man who offers to sell and deliver, then and there, existing portable goods in his immediate control, such as a book or a jewel, does not offer a promise but an act, and if the other party takes the goods on the spot and becomes liable to pay for them, he (the buyer) is the only promisor. In such a case the seller would seem not to make a proposal within the terms of the Contract Act. But in England no one would hesitate to say that he offers (or proposes, though this word is less usual) to sell his goods. A quotation of prices is not an offer, but an invitation for offer; the same is true of many common forms of advertisement. A statement of the lowest price at which a landowner is prepared to sell has been held by the Privy Council not to be an offer. A term in a partition deed that any of the parties wishing to sell his share will sell to the others at the market value is not an offer but an undertaking to make an offer.

The Act does not say, but it seems to imply, that every promise is an accepted proposal. In the Common Law this is not so, for a binding promise may be made by deed, that is, by writing under seal without any communication between the parties at all. This is because the deed, as an ancient formal method of proof, was conclusive against its maker.

Promise and Consideration.--- Again, the technical use of the word "promise" in the Act is far narrower than the popular use. Express words of promise may be and often are in law no more than a proposal. In common life many promises are made, and regarded as morally binding between one person and another, without any "view to obtaining the assent of that other" to the contents of the promise. In common speech no one thinks of acceptance by the promisee as being an essential condition which must be satisfied before a declaration of intention amounts to a promise. These elements are embodied in the definition of consideration by cl. (d) of this section. This clause is especially open to the remark that what purports to be interpretation of terms is really substantive enactment. Only in s. 25, however, with partial anticipations in ss. 10, 23, and 24 does it appear for what purpose the notion and definition of consideration have been introduced.

Definition of Consideration.---The terms of the Indian definition must now be examined. They do not appear to follow those of any authoritative English exposition; they expand, with only verbal difference, those of one of the explanations in the Commissioner's original draft. Whether it was so intended by the framers or not, some of the terms are capable, in their literal meaning, of restoring a doctrine which was long ago finally disallowed in England, and, moreover, they have been held to have that effect. We take the material phrases in order.

"At the desire of the Promisor."---The act constituting the consideration must have been at the desire or request of the promisor, as when a person contracts a marriage in consideration of a promise of a settlement. As act done at the desire of a third party is not a consideration. Thus a promise by the defendants to pay to the plaintiff a commission on articles sold through their agency in a market constructed by the plaintiff, not at the desire of the defendants, but of the Collector of the place, is void under S. 25, being without consideration. Nor can it be supported under el. 2 of that section, which enacts that an agreement without consideration is void, unless it is a promise to compensate a person who has already voluntarily done something for the promisor. The expression "voluntarily" appears to be used in contradiction to the words "at the desire of the promisor". In this case, even if the market were not established by the plaintiff at the desire of the defendants, the agreement would be binding, provided it was done by the plaintiff voluntarily for the defendants. The Court, however, found that the market was not constructed by the plaintiff for the defendants so as to bring the case within the provisions of S. 25, cl. 2.

"Or any other person".--- In modern English law it is well settled that consideration must move from the promisee. Under the Act, however, consideration may proceed from the promisee or any other person. The result, according to the decisions now to be cited, is to restore the doctrine of some earlier English decisions which are no longer of authority in England.

Past consideration.----In the same clause the words "has done or abstained from doing" call for special attention. They declare the law to be that an act done by A. at B.'s request, without any contemporaneous promise from B., may be a consideration for a subsequent promise from B. to A. Now, the general principle of the common law is that in the formation of a contract the consideration is given and accepted in exchange for the promise. Hence the acceptance of the consideration and the giving of the promise must be simultaneous, and, in order to have the effect of binding the party making it, a request must be the offer of a promise in return for some consideration, which offer will become a promise (if not meanwhile revoked) if and when the consideration is furnished as requested. Thus the consideration must always be present at. the time of making the promise, and there is no such thing as a past consideration. If a service is rendered without any immediate promise or understanding that it is to be recompensed, it is a merely gratuitous act having no legal effect except such transfer of property of the like as may be contained in the act itself. If there be such a promise, express by words or tacit by understanding, to be inferred from the circumstances, there is at once an agreement, in which, if the recompense be not specified, the promise is to give such reward as may be found reasonable. A subsequent promise specifying the reward will not make an obligation where there was none before, but will show what the parties thought reasonable, and there is generally no reason why the parties' own estimate, in a matter which concerns only themselves, should not be accepted. Such a promise "may be treated either as an admission which evidences, or as a positive bargain which fixes, the amount of that reasonable remuneration on the faith of which the service was originally rendered". In many common circumstances the fact of service being rendered on request is ample evidence of an understanding that it was to be paid for according to the usual course.

The use of the perfect tense in the clause now under consideration embodies in the law of India the exception to the general rule which is supposed to have been made by the seventeenth-century case of Lampleigh v. Brathwait (A.D. 1615). There it was allowed that in general a service rendered without any agreement for reward at the time will not support a subsequent promise of reward---"a mere voluntary courtesy will not have a consideration to uphold an assumption"---but it was said that if the service was "moved by a suit or request" of the promisor, the promise "couples itself with the suit before," or, as we should now say, is held to relate back to the original request, and accordingly is deemed to be made on good consideration.

Courts have here followed, as they were bound to do, the terms of the Act. In Sindha v. Abraham, the plaintiff rendered services to the defendant at his desire expressed during his minority, and continued those services at the same request after his majority. The question arose whether such services constituted a good consideration for a subsequent express promise by the defendant to pay an annuity to the plaintiff. The agreement was one to compensate for past services, and it wag held that it could be enforced, as the services formed a good consideration within the meaning of this section. The Court was of opinion that the services were intended to be recompensed, though the nature and the extent of the proposed recompense were not fixed until the agreement sued upon was executed by the defendant. If so, there was a contract for reasonable recompense when the services were rendered, and the decision might have been put on that ground alone. It was chiefly rested, however, on the ground that, under the words of the present sub-section, services already rendered at the desire of the promisor and such services to be rendered stood upon the same footing. It would seem that, under the Act, the decision must have been the same on this ground even if the services were rendered at the time gratuitously, though at the desire of the defendant. It was also said that if the services had been rendered without the desire of the defendant the case would be within S. 25 of the Act (see below). As to the conditions of suing in respect of services rendered by the plaintiff voluntarily without any request from the defendant, see S. 25 of the Act. It must be noted here that neither that section nor the clause now before us will enable a person who has purported to bind himself, when not competent to contract (S. 11), to repayment of a loan, to bind himself to it by a new promise when he is competent.

"Or does or abstains from doing": Forbearance as Consideration.--- The essence of consideration is that the promisee takes on himself some kind of burden, or "detriment," as the English authorities call it. Where the consideration is a present performance and not a promise (the only case now before us; promise as a consideration will be dealt with under the following words of this sub-section), the detriment may consist either in actually parting with something of value, or in undertaking a legal responsibility, or in foregoing the exercise of a legal right. It is not common experience that the exercise of one's legal rights is always profitable; nevertheless that which the law deems worthy of its protection must be presumed to be of some value. Thus the performance which constitutes a consideration may be negative as well as positive, provided that the promisee's abstinence from exercising a right was undertaken at the request of the promisor. There need not be a total abandonment of the right, or an undertaking to suspend it for a definite time. Such an undertaking, if it exists, is of course not a performance, but a promise, and then the contract is formed by mutual or reciprocal promises.

Where it was agreed at the time of partition that a particular co-sharer should realise arrears of rent due before partition, and distribute the amounts to the other co-sharers in proportion, and the particular co-sharer failed to realise the amounts, it was held that the other co-sharers could claim their share of the rent from him as there was consideration for the agreement.

There is an element of fiction in some of the cases on forbearance. The consideration in such cases may be executed or executory. If the debtor promises to pay or to give security, and the creditor promises to forbear, there is a bilateral contract and the consideration is executory. If there is a request for forbearance, coupled with a promise to pay or give security, and followed by forbearance, there is a unilateral contract and the consideration is executed. In the cases, however, there is often neither an express request for forbearance nor an express promise to forbear, and if there is to be consideration one or other must be implied.

The difficulty of implying a promise to forbear is that such an implication is often at variance with the facts, and the element of fiction is therefore more apparent.

Compromise.--- The most usual and important kind of forbearance occurring in practice is that which is exercised or undertaken by way of compromise of a doubtful claim. It is a question of some importance within what limits the abandonment or compromise of a disputed claim is a good consideration. But this seems to belong not to the definition of Consideration, but to the substantive law declared in S. 25 of the Act. We shall therefore deal with it under that section.

Apparent forbearance when really an act.--- Actual performance is sometimes apparently passive. A trader exposes his goods for sale, the price being marked or otherwise well known. A customer comes in, takes the object he wants, and gives his name to the trader. The case is common enough. Here a captiously literal person might say that the consideration on the trader's part is forbearing to interfere with the customer's action. But what we do say, both in law and in common sense, is that the seller, by authorising the buyer to take the goods within his reach, in fact sells and delivers them by the buyer's own hand, and the act, though mechanically the buyer's, is in substance the seller's. This remark is needed only when the sale is on credit. If ready money is expected and given, there is no promise at all in the transaction, and therefore no contract; see the commentary on the next following words.

"Or promises to do or to abstain from doing something": Mutual Promises:--- These words, supplemented by sub-ss, (e) and (f), convey in a somewhat indirect and inconspicuous manner the extremely important proposition that a contract may be formed by the exchange of mutual promises, each promise being the consideration for the other. In this case neither promise is of any value by itself, but each of them derives its value from the exchange which makes them both binding. This effect of mutual promises is not a logical deduction from the general notion of consideration, but a positive institution of law required by the convenience of business in civilised life. In many archaic systems of law there is no obligation to perform a promise until there has been performance or at least some act done towards performance on the other side. The widespread custom of giving something by way of earnest "to bind the bargain" is a relic of this view.

A consideration which consists in performance (or so far as it consists in performance) is said to be executed. If and so far as it consists in promise, it is said to be executory. Some writers, especially in America, speak of a contract in which the consideration on one side is executed as unilateral, and of a contract in which it is executory on both sides as bilateral. This terminology is concise and convenient. It is obvious that the consideration cannot be wholly executed on both sides. For where performances, and performances only, are exchanged, of which a sale of goods over the counter for ready money is a familiar example, nothing remains to be done by either party, and there is no promise at all and nothing for the law to enforce.

The proposal to give a promise for a promise is accepted by giving the promise asked for, and thereupon, if there be no special ground of invalidity, the two parties are both bound, each being both promisor and promisee. It does not seem necessary or useful or indeed true to say that the promise of the party who accepts has ever been a proposal, though the language of sub-s. (b) does not seem to recognise the existence of promises which have not passed through that stage. Still it is true that, but for the counter promise or "reciprocal promise" as the Act has it, neither party’s "signification of willingness" could become a promise within the definition of the Act; and in this sense we may say, if we please, that the acceptance of an offered promise, by giving the reciprocal undertaking asked for, has itself the nature of a proposal, though it becomes a promise in the act of utterance, and there is no moment at which it exists merely as a proposal. But it does not appear that anything of practical importance can turn on this.

Promises of forbearance.--- An actual forbearance to exercise a right may be a good executed consideration, provided it be at the promisor's request. So a promise of forbearance may be a good executory consideration. The validity of such considerations, as distinct from their formal definition, will be spoken of, as above mentioned, under S. 25.

"Such act or abstinence or promise is called a consideration for the promise":---Further requirements.--. It will be observed that, according to the terms of the definition, it is only required that something, no matter what, should have been done, forborne, or promised at the request of the promisor. We shall find, however, that in some cases expressly provided for by the Act, and in others apparently not so provided for, but well known in the Common Law, and still recognized in Indian practice, the legal effect of consideration in making promises binding is withheld from acts, forbearances, and promises which arc within the terms of the definition. English lawyers are accustomed to say, in some at least of such cases, that there is no consideration. This way of speaking would seem to be excluded by the Act. One would expect the Act to say somewhere that, in order to have legal effect, a consideration must not only be something which the promisor asked for and got, but must be "good" or "valuable"; that is to say, something which not only the parties regard, but the law can regard, as having some value. This is a fundamental rule in the Common Law.

Sub-ss. (e) to (.j) :---Agreement and Contract.---- The group of sub-ss. (e) to (j) may be considered together. But sub-s. (e) an agreement is either a promise or a group of promises and, therefore, it would seem that an executed consideration is not reckoned as part of the agreement This is not according to the current use of language, which treats an agreement as an act of both parties, whether a legal obligation is incurred by one or both of them. A unilateral contract is not the less a transaction between two parties to which both must contribute something. It would not be difficult, however, to find arguments for the language of the Act if .required. Sub-s. (f) agrees with common usage, except that the adjective "mutual" is more common in English books.

The distinction between "agreement" and "contract" made by sub-s. (h) is apparently original ; it is convenient, and has been adopted by some English writers. It should be strictly observed in India, though lapses such as "void contract" sometimes occur. The conditions required for an agreement being enforceable by law are contained in Chap. II of the Act, ss. 10 sqq., below, where it will also be seen that the absence of any such condition makes an agreement void, and certain defects will make a contract voidable. The duties of parties to a contract are set forth in Chap. IV of the Act. The manner in which contracts are, if necessary, enforced belongs to civil procedure.

Proposal---Acceptance---Unconditional appropriation of first premium---Not tantamount to implied acceptance of insurance proposal.

S. 2 Qanun-e-Shahadat Order (X of 1984), Art. 118---Breach of agreement---Proof---Suit for recovery of contract amount---Where defendant failed to prove that any breach of agreement was committed by plaintiff justifying stoppage of payment to him, while admitting liability to pay claimed amount, plaintiff held, was entitled to decree of his suit.

Agreement to sell---Effect of---Held: Agreement to sell per se not to create title in property---Held further: Such agreement only creating right to obtain another document, no registration of it to be required even though it contains acknowledgment of receipt of earnest money or part payment of price.

Interpretation of documents---Arbitration agreement---Contract---Arbitration agreement essentially a contract. and to be governed by same rules in matter of interpretation as apply to construction of contract---Contract to be construed in harmoneous manner and each part to be construed in harmony with other parts so that a rational meaning be given to all parts of contract.

Constitution of Pakistan, 1973, Art. 199---Allotment of plots in housing project---Terms and conditions set forth in a document signed by parties---Document containing terms and conditions whether a "contract"---Constitutional jurisdiction of High Court whether exercisable for breach of terms of contract---Document offering plots for construction of houses containing therein memorandum of acceptance, setting forth terms and conditions for allotment of plots---Such a document, held, would have all the characteristics and necessary ingredient of a contract between parties---Allotment order relating to plots was nothing but a contract which came into being as a result of offer by Government to sell and acceptance by allottees---Where scheme for allotment of plots had not been framed or issued in pursuance to any statute or statutory Rules, same could not be enforced as statutory rules or instruments in constitutional jurisdiction of High Court---Rights and obligations arising from and connected with contract between parties could not be enforced in constitutional jurisdiction as remedy therefor was in a civil Court under ordinary law---Term "aggrieved person" would have no relevancy in the context of a case where breach of contract was to be adjudicated---Petition being devoid of merit was dismissed in circumstances.

Power to increase rates unilaterally given by contract---Such increase cannot be challenged as improper.

Void and voidable---Meaning---Distinction stated. There is a clear distinction between things "void" and "voidable" though the two terms arc not infrequently used without special regard for the difference or distinction particularly where such distinction is of no consequence or where the attention of the Court is not particularly directed to this distinction. The expression "void" in the strict or accurate sense means "absolutely null" that is to say incapable of ratification or confirmation and of no effect whatever. The word "voidable" on the other hand is something which could be avoided or confirmed and which is not absolutely void. In other words what is voidable has some force or effect, but which may be set aside or annulled for some error or inherent vice of defect. "Thus that which is voidable operates to accomplish the thing sought to be accomplished until the fatal vice in the transaction has been judicially ascertained and declared." A common place instance of a void act or transaction in the sense of an absolute nullity is an agreement by a person under a legal disability, e.g. a minor or a person of unsound mind. Such act is void ab initio and is incapable of ratification or confirmation. Law forbids the enforcement of such a transaction even if the minor were to ratify it after attaining majority. This is clearly distinguishable from a case in which a thing or an act is "relatively void" which the law condemns as wrong to the individual concerned who can avoid it by appropriate proceedings. A common-place instance of such transaction is that which is brought about by undue influence, fraud, etc. which remains of full effect unless avoided by appropriate proceedings.

Insurance contract---Proposal not accepted formally and no first premium receipt issued---Insurance contract does not come into effect.

Contract void under S. 2 (g)---Party may claim compensation under S. 65. In the event of the contracts being found to be unenforceable or, in other words being 'void' within the meaning of section 2 (g) of the Contract Act, the plaintiff could claim compensation in terms of section 65 of
the Contract Act.

Promise---When enforceable---Person resigning in response to general offer by employer to give financial benefits to persons voluntarily resigning---Resignation not accepted---No breach of contract. It is only a promise supported by a consideration which becomes a contract under our laws. Where file plaintiff employee had submitted his resignation in response to an alleged scheme introduced by the employer containing substantial financial benefits for persons resigning voluntarily. The employer, however, did not accept the resignation of the plaintiff. It was contended on behalf of the plaintiff that file alleged scheme being an offer, as soon as the resignation of the plaintiff in response thereto was received by the employer it created a legal contract binding upon the employer. Held; In submitting his letter of resignation the plaintiff did not act to his detriment, and this letter cannot be treated as consideration on his part so as to bind the employer.

Agreement to sell---No interest created in immovable property. An agreement to sell does not create any right, title or interest in immovable property.

Agreement to make gift of house to bride by father of bridegroom on her contracting marriage with his son---Marriage contracted---Bride may enforce contract. Such agreements are frequently made in Muslim families in this part of the country between the parents and guardians of the parties to the marriage and it would occasion serious injustice if a person in the position of the plaintiff is not allowed to take advantage of the provisions of such an agreement on the ground of her not being a party to it.

Agreement discovered to be void---Effect. The term "agreement" has not been used as being synonymous with the term 'contract' in this section. An agreement, which by its very nature was void from its inception, would still attract the consequences which this section provides if after the agreement is made it is discovered to be void.

Consideration---Meaning of---Deposit of money for safe custody not an act without consideration. In the eye of law, consideration would mean and include some right," interest, profit or benefit accruing to one party and some forbearance, by the other. Thus where a person deposited money with another for safe custody till such time that he buys, a rickshaw. Held: In the eye of law forbearance on the one side and acceptance of responsibility on the other, is sufficient consideration to constitute Contract.

Grant of scholarship to student by University---Not a contract.
Scholarship was granted to a student by the University but it was withdrawn later on because another student was found to have stood first in the examination as a result of scrutiny of results and re-marking of papers. It was contended that the scholarship, was a contract and the University could not withdraw the offer.

Held: This is not a contract.

Firstly, a contract is an agreement which can be enforced by law, and if the University decided not to give any scholarship, how it can be forced to give it? The argument that a gift in contemplation becomes a contract when it goes beyond the stage of contemplation, for that is what it comes to, is too unreal to be entertained.

Secondly, the University decides to award scholarship before the actual examination, and the offer that is made after the examination has reference only to the previous decision, when it was not known, who would stand first in the examination.

Sporting offer---Not a proposal. As sporting offer made casually and not genuinely by a plaintiff in the course of his cross-examination, in reply to a question put by the counse1 of the opposite party, primarily intended to discharge the burden of proof placed upon him under an issue, cannot be interpreted by any stretch of imagination or language as a "Proposal" within the meaning of section 2 (a) of the Contract Act.

Suit or basis of compromise---Compromise must be based on some consideration passing from the party. Where a party to a compromise brought a suit on the basis of the compromise by which he had settled matters pretaining to his claim in the property of a deceased person.

The compromise was rejected by the judges on the ground that the agreement was without consideration.

Held: The question to be determined is whether any consideration moved from the respondent to support the agreement. This depends upon whether the respondent had a bona fide claim to the property which was the subject of the agreement of compromise.

Executed and executory contracts---Difference between. An executed consideration consists of an act which forms the consideration---No contract is formed unless and until the act is performed e.g. the payment for a railway ticket, but the act is stipulated for exhausts the consideration" so that any subsequent promise, without further consideration, is merely a nadum pactum---In an executed consideration the liability is outstanding on one side only, it is a present as opposed to a future consideration.

In an executory consideration the liability is outstanding on both sides. It is in fact a promise; one promise is brought by the other---The contract is concluded as soon as the promises are exchanged. In merchantile contracts this is by far the most common variety. In other words, a contract becomes binding on the exchange of valid promises, one being the consideration for the other.

It is clear, therefore, that there is nothing to prevent one of the parties from carrying out this promise at once, i.e., performing his part of the contract, whereas the other party who provides the consideration for the act of or detriment to the first may not carry out his part of the bargain simultaneously with the first party.

Mutuality in contract---Absence of---Contract voidable. The clause in contract was, "in the event of dispute of any nature arising in respect of the said goods or the execution of this contract you are always to have the option of cancelling the contract or referring the matter to the Arbitration of one or two merchants and I/we agree and bind myself/ourselves to accept the decision of the Arbitration/Arbitrators as final anti should the Arbitrators not agree they are to appoint an Umpire whose decision shall be final and binding upon the parties, the party at fault to pay the fee or fees."

Held: That as the clause gives right to cancel or to refer to arbitration to one party only the agreement was voidable within the meaning of section 2 (1) of the Contract Act and therefore, cannot be enforced.

Trust Act (11 of 1882), S. 94---Civil Procedure Code (V of 1908), S. 115---Contract in form of compromise in favour of stranger---Enforcibility---Compromise arrived at between parties to contract that respondent, a party to contract, shall be bound to sell land in question to petitioner, a stranger to contract---Respondent, held, to trustee qua petitioner and petitioner can file suit against respondent to enforce his right of purchasing land on payment of stipulated sum of money in compromise deed---Finding of Courts below that plaint of petitioner disclosed no cause of action, held further, without jurisdiction and illegal and set aside and case remanded to trial Court for decision of suit on merits.

Civil Procedure Code (V of 1908), S. 96---Contract---Collection of octroi (weighment fee) through auction---A valid contract in matter was to come into existence between parties on acceptance of auction---Although auction notice specified that highest bidder had to execute an agreement yet conduct of parties showing that action on contract had started, highest bidder allowed to collect octroi and acceptance, in writing, was only a formality---A valid contract of auction, held, had come into existence between parties in circumstances.

Contract---Quantum of damages---Proof---Evidence produced by plaintiff to prove quantum of damages neither convincing nor of a reliable nature---Opinion of witnesses on which damages allowed by Court only a bare opinion and not based on any solid ground or fact---Plaintiff had not actually invested any money in performance of his part of contract, his duty under contract was to collect octroi for which he was not required to make any investment---Question that if he had invested money he would have earned a profit, held, hypothetical and meaningless.

Specific Relief Act (I of 1877), S. 12---Civil Procedure Code (V of 1908), S. 115---Agreement of sale---Specific performance---Mere inadequacy of consideration, held, no ground for refusing specific performance of contract in respect of immovable properties unless inadequacy was shown to be such which would shock conscience of Court while decreeing suit for specific performance or there were fraud or misrepresentation on part of plaintiff which induced defendant to enter into a contract for sale or there were certain circumstances under which plaintiff took improper advantage of his position or difficulties of defendant making him victim of his imposition.

Civil Procedure Code (V of 1908), S. 9---Agreement to sell---Document produced by plaintiff only a sort of receipt acknowledging a sum as earnest money and not showing essential terms of sale consideration, time for completion of sale, payment of balance of sale consideration or anything about delivery of possession of property---Serious doubts existing between parties about sale consideration---Burden of proving sale consideration not discharged by plaintiff who failed to examine witnesses before whom he paid earnest money---Held, since document relied by plaintiff was not mentioning most important term of sale namely sale consideration it could not be said that parties were ad interim or of one mind as to essential term of sale.

Fraud---Ab initio valid contract---Subsequent event of adding letter 's' in contract, held, would not turn same to be void or voidable, even if it was assumed that letter 's' was added---Such contract, nevertheless, would remain enforceable in terms of its original condition.

Qanun-e-Shahadat Order (X of 1984), Art. 118---Breach of agreement---Proof---suit for recovery of contract amount---Where defendant failed to prove that any breach of agreement was committed by plaintiff justifying stoppage of payment to him, while admitting liability to pay claimed amount, plaintiff, held, was entitled to decree of his suit.

Agreement, constitution of---Requirements---To constitute an agreement, it was held necessary that there should be an unconditional offer and same was accepted by competent person/authority giving rise to accrual of right to parties to such agreement---Where a tenderer made an offer to purchase Certain property and attached conditions thereto, an agreement could not come into effect unless conditions were also accepted by Authority issuing tenders---Offer of tenderer having not been accepted by Authority, no right had accrued to such tenderer on basis of his conditional offer.

Agreement--Liability under---Agreement for securing cash credit facility and Memorandum of deposit of title deeds signed by predecessor, held, would bind his successors on equitable mortgage of property---Transfer of Property Act (IV of 1882), S. 58.

Agreement between debtor and strangers about transfer of business---Effect---Such transfer of business subsequent to borrowing of money by debtor, held, would not bind creditor as to terms of such agreement-Strangers, however, could contest suit on behalf of debtor.

Contract---Cancellation of---Political Agent competent to cancel contract at any time without assigning any reason on issuing 15 days prior notice---Contract in case, however, cancelled without giving such notice---Held: Action though improper and wrong, Political Agent not to be said to have acted without jurisdiction, illegally and with mala fide intention.

Terms of contract between vendor and vendee specifying action to be taken in case of a breach of terms of contract---Vendor taking action in accordance with terms of contract and taking other coercive measures for recovery of contractual amount as well as damages and fine---Amount due from vendees to extent of balance of purchase money, damage and fine, held could not be recovered because of action having already been taken by vendor in terms of contract.

Constitution of Pakistan, (1973), Art. 199---Allotment of plots in housing project---Terms and conditions set forth in a document signed by parties---Document containing terms and conditions whether a "contract"---Constitutional jurisdiction of High Court whether exercisable for breach of terms of contract---Document offering plots for construction of houses containing therein memorandum of acceptance, setting forth terms and conditions for allotment of plots-Such a document, held, would have all the characteristics and necessary ingredients of a contract between parties---Allotment order relating to plots was nothing but a contract which came into being as a result of offer by Government to sell and acceptance by allottees---Where scheme for allotment of plots had not been framed or issued in pursuance to any statute or statutory Rules, same could not be enforced as statutory rules or instruments in constitutional jurisdiction of High Court---Rights and obligations arising from and connected with contract between parties could not be enforced in constitutional jurisdiction as remedy therefore was in a civil Court under ordinary law---Term "aggrieved person" would have no relevancy in the context of a case where breach of contract was to be adjudicated---Petition being devoid of merit was dismissed in circumstances.

Agreement, constitution of---Requirement---To constitute an agreement, it was held necessary that there should be an unconditional offer and same was accepted by competent person/authority giving rise to accrual of rights to parties to such agreement---Where a tenderer made an offer to purchase certain property and attached conditions thereto, an agreement could not come into effect unless conditions were also accepted by Authority issuing tenders---Offer of tenderer having not been accepted by Authority, no right had accrued to such tenderer on basis of his conditional offer.

Google
 
Web Paksearch.com




Home | About Us | Contact | Information Resources