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The Law of Contract

Introduction:

The law of contract may be conveniently discussed under two broad divisions: One dealing
with the general principles of contract and the other with the special classes of contracts. The
general law consisting of such topics as nature, formation, operation, interpretation and
dissolution of contract, mainly relying on English Common Law upon which the Contract Act
is based. And the rest, consisting of special contracts like agency, bailment etc. which are
governed by special rules not wholly covered by the general principle of the law of contract.

Nature of Contract :

It is quite difficult to define a very generalized concept like that of . It is perhaps

an oversimplification to say that contract is a , but looking at
some standard definitions, one might say that this is, in fact, a common theme.

To quote few noteworthy definitions-

recognized by the law. The factor which distinguishes contractual from other
legal obligations is that they are based on the agreement of the contracting
(Treitel)

which determines the circumstances in which a promise shall be legally

(Anson)

(Pollock)

gives a remedy or the performance of which the law in some way recognizes as
American Restatement (Second) of the Law of Contract, 1978]

2 (h)]. The defini

es intending to have a contract and secondly, the
agreement must be enforceable in law. When a person conveys to another his offer /
proposal and the other person assents thereto (accepts the offer) there is said to be an
agreement between them. But all agreements do not amount to a contract, unless the
parties have the intentions to create legal relationship between them at the time of
making the agreement. Such agreements (where no intention to create legal relationship
exists) are social engagements (i.e. simple agreement which can not be enforced in the
court of law).

Therefore, in our day-to-day life we go on making agreements between us and many of

them are simple agreements only and not contracts, simply because in such agreements
the parties had no intention at all to create a legal relationship in between them. Such
agreements (were there is no intention to create legal relationship) are not enforceable
against any of the parties in the agreement, since they are not contracts. Thus, one may say
that all contracts are agreements but all agreements are not contract.

Please note: A contract is an agreement which object is to create an obligation or obligations, but there
are other transactions which are based on agreements and which also create obligations but are not
called contracts, for example Marriage, Trust, Sale etc. The difference between such transactions and a
is (a) A contract is generally executory. It is a promise to do some thing, but marriage /
trust / sale and similar agreements are executed. They are complete in their operations as soon as
entered into. There is nothing more to be done by either party in furtherance of the agreement. (b) The
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contents of the contractual agreements are determined by the autonomous authorities of the party
concerned but in such agreements the contents of the obligations are determined by law, and the parties
have very little option in the matter. A husband, for example, has no more option to maintain his wife
then his option to maintain his children and he is not free to avoid such obligations. However, this is not
the case with a where obligations are created, modified or distinguished according to
the sweet will of the parties concerned.

Essentials of valid contract:

All contracts are agreement but all agreements are not contract. According to Section 10 of
Contract Act all agreements are contracts if they are made by the free consent of competent
parties for a lawful consideration, with lawful object and are not expressly declared to be void
by the Contract Act. In short an agreement in order to be a contract should fulfill the following
requirements:

(a) The agreement must be made by free consent.

(b) The parties to the agreement must be competent to contract.
(c) The agreement must be for a lawful consideration.
(d) The object of the agreement must be lawful.
(e) The agreement must not be expressly declared to be void by the Contract Act.

Please note: A contract may contain all the above elements; but still it may be void if it is against the
provision of any law or against public policy.

Rules regarding offer / proposal:

(a) A person is said to make an offer when he signifies to another his willingness to do or
to abstain from doing anything with a view to obtaining the assent of the person to whom it is
made. But a mere statement of intention is not an offer. Thus, A says to B in course of
conversation that he intends giving Tk. 1000 to anyone who marries his (i.e. A's) daughter
with his consent. B marries A's daughter with A's consent. Held that there is no contract
between A and B, because A's statement is not an offer.

(b) The proposal / offer must be made with the intention of creating legal relations,
otherwise there will be no agreement. If A invites his friend B to a party, which B accepts,
there is no agreement, in as much as here the parties do not obviously intend to create legal
relationship and this is why if B fails to join the party A has no legal remedy against B. Hence
social engagements are not contracts.

(c) Every offer / proposal must be communicated - either by wards or conduct. An offer
is not therefore open to a person who is ignorant of it; nor an ignorant compliance with the
terms of an offer means an acceptance of it. Thus, an offer of reward could not be claimed by a
person who was ignorant of it. However, the role that every offer must be communicated to
offeree does not mean that there cannot be a general offer. As a matter of fact, an offer may be
made to the public at large, but the offer can only be accepted by a definite person. Thus, an
offer of a reward for a lost ring though made to the public can only be accepted by the finder
of the ring. An offer of a reward for a particular information can be accepted by the first
informant.

(d) Every offer / proposal remains open for a reasonable period after which it lapses, i.e. it
loses its legal efficacy. What is a reasonable time is a question of fact and it varies with
different kinds of contract. An offer does not by itself create any legal right, it ripens into a
contract by acceptance. F offered by letter to buy B's horse for Tk.5000 adding "If I hear no
more from you, I shall consider the horse mine at Tk.5000". No answer was given by B. Here
there is no contract as the offer was not accepted by B. The offer of F lapses because of silence
on the part of B. Death or insanity of the offeror causes an offer to lapse provided the fact of
death or insanity comes to the knowledge of the acceptor before acceptance. Failure to accept
an offer, according to the manner prescribed, also causes an offer to lapse; if the offeree does
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not accept in the manner prescribed by the offeror, a duty is cast upon the offeror to inform
the offeree once again that his offer must be accepted in the manner prescribed. If he fails to
inform the offeree he is presumed to have accepted his acceptance.

(e) An offer must be revoked before acceptance and revocation must be brought to the
knowledge of the offeree before acceptance. An acceptance is not complete as against the
acceptor unless and until the letter of acceptance reaches the offeror, though it is complete, as
against the offeror as soon as it is put in course of transmission to the offeror so as to be out of
the power of the acceptor. Thus, A makes an offer to B on the 1st of January. The offer reaches
B on the 3rd January; on the 2nd January A sends a letter of revocation. On the 3rd January B
accepts the offer by posting a letter of acceptance. The contract is complete, as against A, as
soon as the letter is posted. It matters little that a letter of revocation is on the way but the
contract or rather the acceptance is not complete as against B unless and until the letter
reaches A. Hence after posting the letter of acceptance B can revoke the acceptance by a
telegram or by a letter provided it reaches the offeror earlier than the letter of acceptance. But
once the letter of acceptance reaches A, B cannot revoke the acceptance.

Rules regarding acceptance:

An offer must be accepted before there can be an agreement. An offer by itself creates no
obligation. An accepted offer is an agreement. An agreement may have one or more
obligations.

(a) Every offer must be accepted as it is. Acceptance of an offer with conditions and
reservations is no acceptance at all. Thus, an offer to sell a house for Tk. 20,000 is not accepted
when the offeree says that he is ready to buy it for Tk.15,000. It is only a counter offer.
Similarly, an offer once refused, it cannot be accepted, unless it is renewed.

(b) Acceptance must be communicated. Mental assent is no acceptance. The acceptor

must do or say something to indicate his readiness to accept the offer. An offer is not
communicated unless it is brought to the knowledge of the offeree; but an acceptance is
sufficiently communicated, even though the offeror may be ignorant of the acceptance. Thus,
in contract by post, A makes an offer to B by a letter. The offer is communicated to B when he
gets the letter. If B wants to accept the offer he must not remain silent and he is expected to do
something to inform A of his acceptance of the offer. Thus if B posts the letter of acceptance it
is sufficient or if he sent a telegram or a messenger with the letter of acceptance it is also quite
sufficient. But it is not necessary that the offeror must actually know the acceptance of the
offer. Thus, in the above case if B merely posts the letter of acceptance, the acceptance is
sufficiently communicated to A though the letter may not reach A at all. (This has been settled
in the case of Household Fire Insurance Co. V. Grant). Here the letter of acceptance was lost in
the course of transmission to the offeror; but it was held by the highest Court of Appeal in
England that the acceptance had been sufficiently communicated and that there was a binding
contract.

(c) A conditional assent to an offer does not amount to acceptance. For example, where
the offeree accepts all the terms of the offeror "subject to the contract", the assent is conditional
and hence it does not amount to acceptance.

(d) In a tender for the purchase or sale of goods or the supply of services, the person
asking for tenders normally makes an invitation to treat. The offer comes from the person
making the tender; the other party can accept or reject the tender.

Please note: In Bangladesh a valid acceptance must fulfill two conditions: (1) The acceptance must be
absolute and unqualified. (2) The acceptance must be expressed in some usual and reasonable manner,
unless the proposal prescribes the manner in which it is to be accepted. Where the proposal prescribes
the manner of acceptance, and the acceptance is not made in such manner, the proposer may after the
communication of acceptance, insist that the proposal must be accepted in the prescribed manner; if he
fails to do so he accepts the acceptance. (Sec. 7 of Contract Act). Section 8 of Contract Act provides that
performance of the conditions of a proposal is an acceptance of the proposal. For instance, where a

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reward is declared for the recovery of a lost article, the offer of reward is accepted by the recovery of the
lost article, and the person who recovers can claim the reward.

Invitation to treat an offer:

An invitation to offer is a mere statement of the person's intention or declaration of his

willingness to enter into negotiations. It is an advertisement inviting others to make an offer.
It is not an offer, which is capable of being turned into an agreement by acceptance. Thus, a
catalogue of goods; quotation of the lowest price in answer to an inquiry; an advertisement for
tenders; or an advertisement of an auction are all invitation to offer. In such cases it is the
purchaser who makes the offer and it is the trader or auctioneer who accepts the offer or
rejects it.

Question of Free Consent/Vitiating elements of a Contract:

In many cases an apparent agreement may not in fact, be the real agreement between the
parties. Therefore, it is essential that every agreement must be a true expression of the
intention of the parties. An agreement does no reflect the real intention of the parties when it
is vitiated by mistake, misrepresentation, fraud, coercion and undue influence. To consider
the effect of each on contract it is to be noted that consent is said to be free when it is not
caused by coercion, undue influence, fraud, misrepresentation or mistake. (Sec. 14). If the
consent is given under the first four circumstances, then the contract is voidable at the option
of the party whose consent was so caused. (Secs. 19 and 19-A). If the consent is caused by
mistake of both the parties, then the agreement is void. (Sec.20).

(a) Coercion:

It is the committing or threatening to commit any acts forbidden by the Penal Code or the
unlawful detaining or threatening to detain any property to the prejudice of any person
whatsoever, with the intention of causing any person to enter into an agreement.

Also note, A threat to prosecute a man or to file a suit against him does not constitute
coercion because it is not forbidden by the Penal Code. Compulsion of law is not coercion,
under influence, fraud, misrepresentation or mistake [Andha Sugers Ltd. v. State of A. P. (1968)
AIR SC 599]. It is also not coercion to charge high prices or high interest rates because such
- Consent to an
agreement may be obtained by threatening to commit suicide e.g. by a fast to death. The
Madras High Court has held that this amounts to coercion. (Amiraju v. Seshamma (1917) AIR).
It was however, argued by Oldfield J, one of the judges of the Bench which decided this case,
that Section 15 must be constructed strictly and that an act which is not punishable under the
Penal Code ca
Code; only the attempt to commitsuicide is punishable. Therefore, suicide is not a crime and
the threat to commit suicide is not coercion.

(b) Undue Influence:

A contract is said to be induced by undue influence, where the relations subsisting between
the parties are such that one of the parties is in a position to dominate the will of the other and
uses that position to obtain an unfair advantage over the other. Thus, it is presumed that
persons holding real / apparent authority, such as moneylender, guardians and their wards,
teachers and the pupils. Persons in fiduciary relationship, such as husband and wife, guru and
his follower, legal advisers and their clients etc. and persons affected by mental incapacity,
such patients.

Please note: A pardanashin lady is one who observes complete seclusion. They are regarded by law as a
class of persons having imperfect knowledge of the world and specially exposed to undue influence.
Therefore, when a contract is made with a pardanashin woman, it is not enough that its terms have been
explained to her and she misunderstand them and their effect upon her interests.

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Also note, it has been held by judicial decisions that the existence of a power to dominate the
will of another cannot be presumed in the case of landlord and tenant, and creditor and
debtor. There is no presumption of undue influence between husband and wife (Mackenzie v.
Royal Bank of Canada) and in these cases the party alleging undue influence must prove that
undue influence existed. Lack of judgment, want of prudence, lack of knowledge of facts, or
absence of foresight are generally not, by themselves, sufficient reasons for setting aside a
contract. Undue influence cannot be presumed merely from the existence of any of the
aforesaid defects in a party. An allegation of undue influence may be rebutted if such facts
can be proved : the injured person had independent advice, all material facts were disclosed,
and the consideration as adequate. However, undue influence is suspected in cases where:
Inadequacy of consideration, Fiduciary relationship between the parties, Inequality between
the parties as regards age, intelligence, social status, etc., Absence of independent advisors for
the weaker party and Unconscionable bargains.

(c) Fraud:

raud is a false representation of fact, made with a knowledge of its falsehood or recklessly
without belief in its truth, with the intention that it would be acted upon by the other party
and actually inducing him to act upon it.

Does silence amounts to fraud? Mere silence as to facts likely to affect the willingness of a person
to enter into a contract is not fraud; but silence amounts to fraud in the following cases: (a)
when the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak or (b) when silence is in itself equivalent to speech. For
example: (a) A sells by auction to B, a horse which A knows to be unsound. A says nothing to
B about the horse's unsoundness. This is not fraud in A. (b) B says to A, "If you do not deny it,
I shall assume that the horse is sound. A says nothing. Here A's silence is equivalent to
speech.

Please Note: It is to be noted that mere commendatio

to fraud, unless a clear intention to deceive is proved.

A party who has been induced to enter into an agreement by fraud has the following
remedies open to him (Sec 19). He can avoid the performance of the contract. he can insist
that the contract shall be performed and that he shall be put in the position in which he
would have been if the representation made had been true. The party can also sue for
damages. Fraud is a civil wrong / tort, hence compensation is payable.

(d) Misrepresentation:

Misrepresentation arises when the representation made is inaccurate but the inaccuracy is not
due to any desire to defraud the other party. There is no intention to deceive.

Section 18 classifies cases of misrepresentation into three groups :

Unwarranted Assertion : The positive assertion, in a manner not warranted by the

information of the person making it, of that which is not true, though he believes it to

produces 12 K.G of rice pe

not have sufficient grounds for the belief. Later on it transpires that the land does not
produce 12 K.G. of rice. This is misrepresentation.
Breach of Duty an intent to deceive, gains an
advantage to the persons committing it, or anyone claiming under him, by
misleading another to his prejudice or to the prejudice of anyone claiming under
to disclose
certain facts and does not so and thereby misleads the other party.

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Innocent Mistake : Causing, however innocently, a party to an agreement to make a

mistake as to the substance of the thing which is the subject of the agreement.

(d) Mistake:

A mistake may be one of fact or of law. When both the parties of an agreement are under a
mistake as to a matter of fact essential to the agreement or about a law not in force in
Bangladesh the consent is not free and the agreement is void. But if only one party is
labouring under a mistake, or if both parties are mistaken as to a law in force in Bangladesh
the contract is not void. (Secs. 20-22).

Question of contractual capacity/ Who are not competent to contract?

Under Section 11 of the Contact Act, 1872 there are two kinds of disqualification:
(a) Disqualification of infancy, and
(b) Disqualification by insanity.

1. Infancy:

Section 3, Majority Act, 1875, declares that every person shall be deemed to have attained his
majority when he shall have complete his age of eighteen years, and not before. In the case,
however, of a minor of whose person or property or both a guardian has been appointed by a
Court or of whose property the superintendent is assumed by a Court of Wards, before the
minor has attained the age of eighteen years, the Act provides that the age of majority shall be
deemed to have been attained on the minor completing his age of twenty-one years.

dable.
Section 10 of the Contract Act provides that every contract must be made by parties
competent to contract and Sec. 11 provides, among other things, that a person is competent to
contract when he has attained the age of majority. It follows, therefore, that a minor is not
competent to contract. This is further confirmed by Sec. 183 of the Contract Act, 1872 and Sec.
30 of the Partnership Act, 1932. But in English law a minor can make a contract for necessaries,
but this is not possible under the provisions of the Contract Act, 1872. However, Section 68 of
the Act provides: "If a person, incapable of entering into a contract, is supplied by another
person with necessaries suited to his condition in life, the person who has furnished such
supplies is entitled to be reimbursed from the property of such incapable person." It follows,
therefore, that a minor's contract is absolutely void in Bangladesh.

In a landmark case, a minor entered into a mortgage and the money was advanced to him by
the moneylender. It was held that the mortgage was void and the moneylender who had
advanced money to a minor on the security of the mortgage is not entitled to repayment of the
money under Sections 64 and 65 on a decree being made declaring the mortgage invalid
[Mohori Bibee v. Dhurnodas Ghose (1903) 30 Cal. 539 L.R. 30 I.A. 114].

Sale in favour of minors:

A duly executed transfer by way of sale in favour of a minor who has paid the consideration
money is not void, and it is enforceable by law.

Questions of supplying necessaries:

Section 68 Contract Act, 1872 provides for liability in respect of necessaries supplied to a
person incapable of entering into a contract. A minor is a person incapable of contracting
within the meaning of that section, therefore, if a minor is supplied necessaries by a person,
that person must be reimbursed from minor's property. For examples: (a) Costs incurred in
successfully defending a suit on behalf of a minor in which his property was in jeopardy are
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"necessaries". (b) Costs incurred in defending a minor in a prosecution. (c) A loan to a minor
to save his property from sale in execution of a decree. (d) Money advanced to a minor to
meet his marriage expenses.

2. Insanity:

A person is said to be a sound and for the purpose of making a contract if, at the time when he
makes it, he is capable of understanding it and of forming a rational judgment as to its effect
upon his interests. A person who is usually of unsound mind, but occasionally of sound mind,
may make a contract when he is of sound mind. A person who is usually of sound mind but
occasionally of unsound mind, may not make a contract when he is in unsound mind. For
example : (a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract
during those intervals. (b) A sane man is delirious from fever or who is so drunk that he
cannot understand the terms of a contract or form a rational judgment as to its effect on his
interests, cannot contract whilst such delirium or drunkenness lasts.

3. Other disqualification:

Certain persons are incapable of contacting owing to their political, professional or legal
status, e.g., aliens, foreign sovereigns, barristers in England cannot sue for fees for their
professional services. However, in Bangladesh, they can.

An alien means a citizen of a foreign state. Contracts with aliens are valid. An alien living in
Bangladesh is free to enter into contracts with citizens of Bangladesh. But the State may
impose restrictions and certain types of transactions with aliens may be prohibited. A
contract with an alien becomes unenforceable if war brakes out with the country of which the
alien concerned is a citizen. Foreign sovereigns or governments cannot be sued unless they
voluntarily submit to the jurisdictions of the local court. (Mighell v. Sultan of Johore). But,
foreign sovereigns / Governments can enter into contracts through agents residing in
Bangladesh and in such cases, the agent becomes personally responsible for the performance
of the contracts.

A member of the Royal College of Physicians cannot sue for their fees. But, they can sue and
be sued for all claims other than their professional fees. But, in Bangladesh these personal
disqualifications do not exist. It has been held in Nihal Chand V. Dilwar Khan that a barrister
can sue for his fees in India, A Barrister, before he can practice in Bangladesh, must be
enrolled himself as an Advocate in the Bangladesh Bar Council. An advocate can realize his
fees by a suit. (Gosta Behari Roy v. P. C. Gosh & Co.) Likewise, in Bangladesh there is no
restriction upon Doctors as regards suing for their fees.

Corporation being not natural persons, their contractual capacity is limited by their
Memorandum and Articles of Association as well as by the Companies Act, 1994.

Consideration:

Consideration is the price for which the promise of one party is purchased by the other: "A
valuable consideration in the sense of the law may consist either in some right, interest, profit
or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other" (Currie v. Misa). Thus, consideration is either some act,
forbearance or promise, done, suffered, or made by the promisee of the promise of the
promisor. But an act, forbearance or promise is not a consideration unless it satisfies the rules,
which are laid down to the validity of a consideration. These rules are:

(a) Consideration need not be adequate:

This means that it is not the business of the court to inquire whether the consideration in a
particular case is substantial, that is, whether the act or forbearance or promise of the
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promisee is proportionate in value to the promise of the promise of the promissor. It is

enough if this is a consideration, however minute, which is otherwise valid. Thus, if A
promises to pay Tk.100 to B for an old stamp which B gives to A, it will be no defense of A in
answer to B's claim that the stamp is in actual fact of a much smaller value.

(b) Consideration must be real and not sham:

This means that the consideration must be of real value and not one, which has only an
apparent value. Thus, if A promises to pay B TK. 1,00,000.00 in consideration of B's promise to
take him to the moon, the consideration is sham and not real, as B's promise is an
absurdity/silly.

(c) Consideration must not be illegal:

A consideration is said to be illegal when it is intended to defeat that provisions of any law or
is against the public policy. Thus, a promise by A to pay B TK. 10,000.00 in consideration of
B's promise to drop a prosecution for robbery instituted by him against A, is illegal as being
aimed at defeating the provisions of Law.

(d) Consideration must not be past:

Consideration may be executory or executed, but it must not be past. A consideration is said
to be executed when the promisee has already done or forborne something. Thus, A promises
to pay a sum of money to B if he paints a picture for A. B paints the picture. B's act is the
consideration for A's promise; since the act is done already it is said to be executed
consideration. A consideration is said to be executory when we have a promise for a promise.
Thus, A promises to pay a sum of money to B in consideration of B's promise to paint a
picture for A. B's promise is the consideration for A's promise, and since the promise has not
yet been performed it is executory. An executed consideration is a present consideration-
something is done or not done by the promisee on account of the promise, while where in an
executory consideration- already done something for another and then comes a promise from
the other, that promise is unsupported by any consideration and in this case we may say that
the consideration is past. Thus, A saves B's life. B promises to pay A TK. 1,00,0000.00 out of
gratitude. Here the consideration is past or strictly speaking, there is no consideration,
because A did not do anything or refrain from doing anything on account of B's promise.

(e) Consideration must move from the promisee:

The consideration must move from the party entitled to sue on the contract. This means that
consideration ought to proceed from the party who is entitled to sue on the contract, for, the
rules is that "No stranger to the consideration can sue on the contact." Thus, if A promises to
pay B Tk.50 if C works for him in an election the promise is not enforceable and B cannot sue
on it for he has neither done nor forborne/ suffered anything/ made any promise in return
for A's promise.

Please note: Consideration in our country differs in two important respects from that of English Law -
(a) In Bangladesh consideration may be past, but in English law, a past consideration is not generally
recognized unless, of course, it comes under one or other of the three exceptions. (b) In our country
consideration may move from any other person besides the promisee; but in English Law, a
consideration is unreal when it moves from any person other than the promisee.

When a contact even without consideration is valid?

According to S. 25 of the Contract Act an agreement made without consideration is void

except in the following:

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(1) A gratuitous promise is binding if it be in writing and registered and if it be made on

account of natural love and affection between the parties standing in near relation to
each other.
(2) A gratuitous promise is also binding when it is a promise to compensate wholly or in
part, a person who has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do.
(3) A promise to pay a time-barred debt is enforceable provided the promise is in writing
and is signed by the promisor or his duly authorized agent.

Types of contract: in respect of validity and operation:

In respect of their validity and operation all contracts are divided in to four classes, they are (i)
Valid, (ii) Unenforceable, (iii) Void and (iv) Voidable.

(i) Valid Contract :

A contract is said to be valid when it creates in favour of one party a legal obligation binding
upon the other. A valid contract is enforceable at law, because it satisfies all the requirements
prescribed by law for the validity of a contract.

(ii) Unenforceable Contract:

A contract may be valid, but it may not, at the same time, be given even effect to in a court of
law. The statement is paradoxical, but it is nonetheless true. The contract is valid, because
judged by the canons of law, which are applied to test the validity of a contract, the contract is
flawless; but it cannot be enforced because of the difficulty created by the law of procedure.
Thus, A gives a loan of money to B. The contract of loan, let us assume, is valid in this case;
but if A does not sue on the contract within the period prescribed by law of limitation and
allows his claim to be barred by time, he cannot afterwards recover from B. He cannot
recover, not because the contract was invalid, but because the Statute of Limitation bars the
suit. Hence a valid contract may be unenforceable when it is barred by law.

(iii) Void Contract:

A void contract is one where there is no agreement in the strict sense of the term, or in the
contemplation of law, e.g., an agreement made under a mistake. The presence of mistake
shows that the parties did no really agree to the matter about which there seems to be an
apparent agreement. A payment made under a void contract can be recovered under certain
circumstances; but a payment made under an unenforceable contract cannot be recovered at
all. Thus, if a person by mistake pays a barred debt, he cannot recover the money. Again,
there is a difference between an illegal contract and a void contract. An illegal contract is one
whose object is declared by law. The distinction lies in the fact that an illegal contract is
prohibited by law whereas a void contract does not get the assistance of law. A further point
of distinction that a void contract does not affect the collateral transaction, but an illegal
contract does. Thus, if A promise to pay a sum of money on account of a wager to B, B cannot
enforce the promise for the simple reason that a wagering contract is void in law. But if X, an
agent of A, pays the money due on account of the wager under A,s instruction, he can recover
it from A; for though X paid the money towards the satisfaction of a void contract, yet as an
agent he is entitled to be reimbursed for anything done under the instruction of his principal.

(iv) Voidable Contract:

A voidable contract is a contract, which can be avoided or set aside at the option of one of the
parties to the contract. Thus, a contract vitiated by fraud or coercion is a voidable contract. A
void contract is a nullity from the very beginning; but a voidable contract is presumed to be
valid unless and until it is avoided. Thus, if A delivers goods to B under a mistaken belief that
B is C, and B sells these goods to D, a bona fide purchaser for value without notice. A can
recover the goods from D, because D purchased the goods from a man who had himself no
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title under a void contract (Cundy V. Lindsay). If, however, B obtains the goods from A by a
fraudulent misrepresentation and then sells them to D, a bona fide purchaser, before the
contract is avoided by A, A cannot recover the goods from D, because the contract between A
and B is a voidable contract, and a voidable contract is presumed to be valid before it is set
aside. Here D obtained goods from B when the latter had still title over the goods (Phillips V.
Broks).

Details of Enforceable, Void and Voidable Contracts in Tabular form:

Enforceable Not enforceable. Void agreement-s 2 (g) Enforceable by one party only.
Contract-S.2 Voidable contract-s 2 (i)
h
Requisites. Invalidating Causes. Voidable in Voidable
inception. subsequent
default.
(a) (I) Consideration or object unlawful s. 23 (a) Consent caused (a) Where offer of
Competent as being by fraud. Ss. 14, 17 performance is not
person Ss. - forbidden by law & 19 accepted-s. 38
11& 12. - defeating the provisions of any law
- fraudulent (b) Consent Caused (b) When one
- injurious to person or property of by coercion-Ss. 14, party prevents
another 15 & 19. performance of
- immoral or opposed to public policy reciprocal promise
(c) Consent caused S. 53.
(2) Without considerations. 25 by
(b) Free - unless by writing registered, between misrepresentation- (c) When a party
consent S. 14. near relations out of natural love and Ss. 14, fails to perform at
affection, or 16 & 19. the time fixed, if
- to compensate a person for something time is the essence
voluntarily done for the promisor or (d) Consent caused of the contract S.
which the promisor was bound to do, or by undue 55.
- in writing to pay a time-barred debt. influences-Ss. 14, 16
& 19-A.
(3) In restraint of the marriage of a person
not a minor S. 26.
(c)Lawful
consideration (4) In restraint of legal proceedings S. 28
- (saving references to arbitration)
Ss. 2 (d) & 23.
(5) By way of wager S. 29.
(d) Not
declared to (6) By way of wager S 29.
be void-
Ss. 25-30. (7) Of uncertain meaning S. 30.

(8) To do an act which is impossible of

becomes impossible Ss. 35, 36 & 56.

(9) Mistake of both parties as to essential

matter of fact S. 20.

(10) Mistake of both parties as to foreign

law S. 21.

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Contracts required to be made in writing:

The following contracts must be made in writing:

1. An agreement may be made without consideration if it is expressed in writing and

registered and is made on account of natural love and affection between parties standing in a
near relation to each other [Sec. 25 (1)]

2. If an agreement is to pay a debt of which the creditor might have enforced payment but for
the law for the limitation of suits, it must be made in writing and should be singed by the
person to be charged with [Sec. 25 (3)]

3. The Memorandum of Association and the Articles of Association of a Company

incorporated under the Companies Act, 1994, must be made in writing [See Companies Act.
1994].

4. Any contract made by a company must be in writing [Companies Act. 1994].

5. A sale, a mortgage, a lease, and a gift of the immoveable property must be made in writing
[Sec. 54, 59 & 123 of Transfer of Property Act, 1882]

6. A trust must be created in writing [Sec. 6 Trust Act,1877]

7. An agreement in the form of an acknowledgement to save the law of limitation is required

to be made in writing [Sec 19 Limitation Act, 1908]

8. An agreement to refer a dispute to Arbitration must be made in writing [Sec. 2 Arbitration

Act. 2001]

Nature of Quasi-Contract:

Contractual obligations are generally voluntarily created; but there are some obligations
which are not contractual, but which are treated as such by law, that is to say, there is no
contract in fact, but there is one in the contemplation of law. Such contracts are called quasi-
contracts. Thus, if A pays a sum of money to B believing him to be his creditor, when as a
matter of fact he was not, he is bound to return the money to A on the assumption that the
above sum was given to him by way of loan. (Refer to Section 68-72 of Contract Act, 1872)

A quasi-contract is thus not a contract in fact, but it is so in the contemplation of law. Thus,
where money is paid under a mistake of fact, the person who has received the money is under
obligation to return the money. The principle of quasi-contract is based on unjust benefit of
unjust enrichment. A person who has received benefit from another person, must pay for it.
Otherwise, it would be unjust for him to retain such benefit. Law does not support unjust
benefit or unjust enrichment at the cost of another person. In modern times the theory of
'implied contract' as the basis of a quasi-contract has been discarded. Lord Atkin, Lords
Denning and also Anson does not support the implied theory; the modern theory is based on
the doctrine of unjust enrichment and is the basis of the quasi-contract which could enable the
courts to promote the growth of quasi-contract.

Chapter V of the Contract Act, 1872 consisting of Section 68-72 talk of quasi-contractual
obligations/relations and the liability to pay by the defendant under these sections arises out
of either from (a) An implied contract or (b) Doctrine of unjust enrichment. However, we have
already seen that the modern trend is to prefer the doctrine of unjust enrichment.

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(1) If a person incapable of entering into a contract, anyone whom he is legally bound to
support, is supplied another person with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed from the property of such
incapable person (Sec. 68).

Thus, when A supplies B, a lunatic, with necessaries suitable to his condition in life. A is

B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed

y.

(2) A person, who is interested in the payment of money pays it, is entitled to be
reimbursed by the other. Thus, if a tenant, in order to protect his interest, pays off the
Government revenue of his landlord, he can recover the same from the landlord (Sec.69).

B holds land on a temporary lease granted by A, lessess of Govt. of Bangladesh, the zemindar.
The revenue payable by A to the Government being in arrear, his land is advertised for sale
by the Government. Under the revenue law, the consequence of such sale will be the

lease, B pays to the Government the sum due from A. A is bound to make good to B the
amount so paid. It is to be noted, the person making the payment must have his own interest
in making the payment, and the payment must be for protection of the interest.

(3) Where a person lawfully does anything for another person, or delivers anything to
him not intending to do so gratuitously, and such other person enjoys the benefit thereof, the
latter is bound to make compensation to the former in respect of, or to restore, the thing so
done or delivered compensation to the former in respect of, or to restore, the thing so done or
delivered.

(4) A person, who finds goods belonging to another and takes them into his custody, is
subject to the same responsibility by a bailee (Sec. 71).

(5) A person, to whom money has been paid or anything delivered by mistake or under
coercion, must repay or return it (Sec

property from fire. A is not entitled to compensation from B, if the circumstances show that
he intended to act gratuitously.

Thus, it would seem that whoever finds and restores lost property, apart from any question
of a reward having been offered, is entitled to compensation for his trouble if he did not
intend to act gratuitously. Such person must show, (a) the thing must be lawfully done. (b) it
must be done by a person not intending to act gratuitously, and (c) the other person must
enjoyed benefit thereof. Where a person managed the estate of his wife and his sisters-in-law
and was under the impression that he would receive remuneration for his services, he was
entitled to claim peasonable payment [Palanivelu v. Neelavathi (1937) 39 Bom. L.R 720].

Thus, when A and B jointly owe TK. 1000 to C. A alone pays the amount to C, and B, not
knowing this fact, pays TK. 1000 over again to C. C is bound to repay the amount to B. Again,
when A Railway Company refuses to deliver up certain goods to the consignee, except upon
the payment of an illegal charge for carriage. The consignee pays the sum charged in order to
obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.
Also note, Where a person who is charged with a non-compoundable offence is induced to
pay money to the complainant to stifle the prosecution, he may recover the money so paid;
[Muthuveerappa v. Ramaswammi, (1917) 40 Mad. 285], but, not if no pressure or compulsion
was exercised upon the accused. [Amjadennessa Bibi v. Rahim Buksh, (1915) 42 Cal. 286].

Agreement Expressly Declared Void under the Law:

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In order to make a valid contract, an agreement must not be one of those that are expressly
declared by law to be void. The agreements that are expressly declared void are:

(1) Agreements in restraint of marriage:

Every agreement in restraint of the marriage of any person, other than a minor, is void
because they are injurious to the moral welfare of the people. (Sec. 26)

(2) Agreements in restraint of trade:

An agreement, the object of which is to deprive a person of his right to exercise a lawful
profession, occupation, trade or business of any kind, is to that extent void. (Sec. 27) However
under English Law if a restraint is reasonable it is valid; but the law in Bangladesh does not
recognize any restrain of trade except as mentioned under the provisions of Sec. 27 (Contract
Act, 1872), Sec. 11(2), 36(2), 54 and 53(3) of the Partnership Act, 1932.

Please note: Agreements merely restraining freedom of action in the exercise of a business are not void,
e.g., a stipulation in an agreement whereby one party agrees that he would not sell to others for a certain
period any goods of the same description as he was selling to the other party is not in restraint of trade.
Similarly an agreement, which limits competition to keep up price is not void. Again an agreement of
service by which an employee binds himself, during the term of his agreement, not to compete with his
employer directly or indirectly is not in restraint of trade.

(3)Agreements in restraint of legal proceedings:

Every agreement, by which any party thereto is restrained absolutely from enforcing his
rights under or in respect of any contract, which limits the time within which he may thus
enforce his rights is void to that extent (Sec. 28). However, there are to exceptions (a) this
section shall not render illegal any contract whereby the parties agree that if any dispute
arises between them in respect of any subject, it shall be referred to arbitration and (b) this
section does not render illegal any contract in writing by which two or more persons agree to
refer to arbitration any question between them which has already arisen or does not affect any
provision of any law in force.

(4) Agreements involving uncertainty:

Agreements, the meaning of which is not certain, or capable of being made certain, are void
(Sec. 29).

(5) Agreements to do impossible acts:

An agreement to do an act, which is impossible in itself from its very inception, is void. So,
also a contract to do an act which, after the contract is made, becomes impossible (by
destruction of the subject-mater or by an act of God), or by reason of some event which the
promisor could not prevent, unlawful becomes void when the act becomes impossible or
unlawful (Sec. 56).

(6) Agreements in Writing or Registered:

It is essential for the validity of a contract that it must be in writing, attested by witness and
registered, if so required by any other law in force in Bangladesh. Thus, under the provisions
of Transfer of Properties Act, 1882 contract of sale, mortgage, lease or gift of immovable
properties are required to be in writing and registered under the law of the land otherwise
the same will be void.

Dissolution of Contracts:
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A contract may be dissolved in one or other of the following ways: (1) by agreement, (2) by
performance, (3) by frustration, (4) by breach, and (5) by operation of law.

The different methods by which obligation under a contract may be discharged.

1. By agreement:

Since a contract is created by means of an agreement it may also be discharged by another

agreement between the same parties nullifying the previous. An agreement discharging the
previous contract may take one or other of the following forms:

(a) Release or waiver: is the surrender of a contractual right. Thus, A gives a loan of
money to B. A has, of course, the right to recover the money from B; but by an
agreement he may give up the right. This giving up of a right is called release or
waiver. An agreement of release, if gratuitous, must be made under seal. To this rule,
however, there is an exception. The holder of a bill of exchange or promissory note
may waive his rights without consideration, either by writing or surrender of the bill
or the note, as the case may be.

(b) Accord and Satisfaction: If a person, instead of giving a release out and out to
his debtor for nothing, accepts something for giving up his right, it is a case of accord
and satisfaction. Thus, when a claim for damages for the breach of a contract is settled
by payment of a sum of money, the transaction is one of accord and satisfaction. The
essence of accord and satisfaction is that by mutual consent one party gives
something different from that which he has bound to give and the other party accepts
it in satisfaction of his claim. Thus, A builds a house for B in consideration of B's
promise to pay Tk.5,000 to A. After the construction of the house B offers a plot of
land to A instead of Tk.5,000. If A accepts B's offer in lieu of Tk.5,000, it is the case of
dissolution of contract by accord and satisfaction. Sec. 63 of the Contract Act provides
inter alia that every promisee may accept instead of the promise made to him any
satisfaction which he thinks fit.

(c) Recession : When each party to a contract surrenders his contractual rights and
releases the other party from his corresponding contractual obligations. Thus, A
promises to deliver a horse in consideration of B's promise to pay Tk.50. This contract
can be rescinded by an agreement in which A waives his right to Tk.50 and B the
delivery of the horse. Sec. 62 of the Contract Act, provides that if the parties to a
contract agree to substitute a new contract for it, or to rescind or alter it, the original
contract need not be performed. suppose that A owes B Tk. 10,000, and that A enters
into an arrangement with B, and gives B a mortgage of his (A's) estate for Tk.5,000 in
place of the unsecured debt of Tk.10,000. This is a new contract and extinguishes the
old one.

2. By Performance:

Performance is the most natural mode of extinction of an obligation. When the parties to a
contract have performed their shares of the promises, the contract is at an end. The
performance must be made in the manner prescribed by the contract having regard to the
place and time of performance.

Besides performance, a contract may also be discharged by a valid tender. Tender is not
performance, but an offer of performance. Now, a tender may be an offer to deliver goods, or
to pay a sum of money. A contract to deliver goods is completely discharged by tendering the
goods for acceptance according to the contract. If the goods are refused, they need not be
offered again, and the seller is discharged. He can bring an action for non-acceptance, or
defend an action for non-delivery. But where a sum of money is due, tender by the debtor, if

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refused, does not operate as a discharge. The debtor must remain ready and willing to pay,
and, if sued, must pay the money to the Court, and plead the tender which is then a good
defence. But it should be remembered that the interest on the loan ceases to run from the date
of valid tender. A tender, in order to be valid, must be of the whole amount, the creditor is not
bound to accept part-payment of the debt. Effect of refusal to accept offer of performance is
dealt with in Sec. 38 of the Contract Act.

3. By Frustration:

A contract may also be dissolved by frustration. By frustration we mean the impossibility in

the fulfillment of the purpose of the parties in entering into a contract. Every contract is made
with a purpose. This purpose may be baffled in several ways. When a party is so baffled in the
fulfillment of the purpose of the contract, he may say that since he cannot achieve the object
for which he made the contract, he is no longer interested in its performance.

In early English law when a person promises to do a thing, he must do it, or pay damages for
its non-performance. His promise is absolute and not dependent on the fulfillment of the
purpose for which he made the promise (Paradine V. Jane). But this uncompromising attitude
of early common law has been given up in favour of a more rational view of the matter and a
very large number of exceptions are:

(a) A contract is discharged if a specific thing which is essential to the performance of the
contract is destroyed. In Taylor V. Caldwell the defendants being the owners of a music
hall agreed to lend the use of the hall to the plaintiffs for the purpose of giving concert
therein. Before the time came for the delivery of the hall, it was destroyed by fire, so
that the concert had to be abandoned after the plaintiffs had incurred considerable
expenditure for its preparation. The plaintiffs sued the defendants for damages for
breach of the contract. If was held that the defendants were not liable.

(b) A contract of personal service is discharged if the performance of the contract is

rendered impossible on account of death or incapacitating illness of one of the parties
to the contract. In Robinson V. Davidson the plaintiff made a contract with the
defendant that at a concert to be given by the plaintiff on a specified day, the
defendant's wife would play the piano. On that day the lady was unable through
illness to attend the concert. It was held that her failure to do so gave no cause of
action to the plaintiff.

(c) A contract is discharged when the fulfillment of the purpose of the contract becomes
impossible. In Krell V. Henry the defendant agreed to hire the plaintiff's flat for June
26th and 27th, on which days it was assumed that the coronation procession of King
Edward VII would take place and would pass by the flat. The contract contained no
express reference to the procession or to any other purpose for which the flat was
taken. The purpose of the contract was known to both the parties. The procession was
postponed and the defendant did not occupy the flat of the plaintiff. The plaintiff
sued for rent. It was held that the contract was to be read subject to the implied
condition that the procession would take place on the appointed days and that this
implication could be inferred from the circumstances of the case known to both the
parties, although there was no basis for it in the terms of the written contract.

(d) A contract is discharged if, on account of supervening circumstances over which the
parties had no control, its performance becomes impossible within the time or in the
manner contemplated by the parties. In Metropolitan Water Board V. Dick, Kerr & Co., a
contract to construct a reservoir for the Metropolitan Board was dissolved by the act
of the Ministry of Munitions in ordering the contractor to discontinue and suspend
the erection of the work under the authority conferred on that Ministry during the
war with Germany.

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(e) A contract is discharged when its performance becomes impossible on account of a

change in the existing law - Persons generally contract on the basis of the law existing
at the time of the contract. If this law is subsequently changed, they are not expected
to face the consequence of the violation of the law by performing the contract. In Baily
V. De Crespingy, A gave a long lease of land to B covenanting as lessor that neither he
nor his assigns would erect on the adjacent land which he retained, any but
ornamental buildings. A railway company under parliamentary powers took the
adjacent land and built a railway station thereon. It was held that the lessor was
discharged from his covenant.

Please note: Under Section 56 of the Contract Act, 1872 it has been provided inter alia that a contract to
do an act which after the contract is made, becomes impossible, or, by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. This
provision of Section 56 is known as the Doctrine of Frustration. The Doctrine of Frustration cannot avail
a defendant, when the non-performance of a contract is attributable to his own default. The essential
idea upon which the Doctrine of Frustration is based is that of impossibility of performance of the
contract; in fact, impossibility and frustration are often used as interchangeable expressions.

Rights and liabilities of the parties to a frustrated contract:

If, under the terms of a contract, any money has been paid by one party to the other, it cannot
be recovered on the ground that the contract is discharged for impossibility. Thus, A hired a
room to see the coronation procession and under the terms of the contract a sum of money
was to be paid before the day fixed for the procession. A paid a portion of the money before
the day fixed for the procession. The procession was abandoned. It was held that A was
bound to pay the balance. Neither party can recover any compensation or remuneration for
acts of part-performance which have been done by him under the contract during the period
of its subsistence, for which payment was not already due at the date of the determination
(Chancellor V. Webster).

Please note: In Bangladesh on the point the law different. Section 65 of the Contract Act provides that
when an agreement is discovered to be void, or when a contract becomes void, any person who had
received any advantage under such agreement or contract is bound to restore it, or make compensation
for it to the person from whom he received it. If this section is read along with section 56 it follows that
when a contract becomes void on account of subsequent impossibility of performance any payment
made under such a contract can be recovered. Thus, A contract to sing for B at a concert for Tk.1,000
which is paid in advance. A is too ill to sing. He is not bound to pay compensation to B for the loss of the
profits which B would have made if A had been able to sing, but must refund to B Tk.1,000 paid in
advance.

4. By Breach:

When a contract is broken by one party, the other party can bring a suit for damages. This
remedy is available in every case of breach of contract. But there are some cases when a
breach of contract gives the other party not merely a right to sue for damages, but also a right
to avoid the contract. These two remedies are not alternative but cumulative. Thus, when A
makes a contract with B and afterwards breaks the contract, B is thereby released not merely
from the performance of his share of the obligation, but can also bring a suit for damages.
However, it must not be supposed that every breach of contract releases the other party from
the performance of his obligation. He gets such option only in few cases (a) An actual or
present breach, or (b) a constructive or anticipatory breach.

Please note: Section 54 of the Contract Act provides that when a contract consists of reciprocal promises
such that one of them cannot be performed, or that its performance cannot be claimed till the other has
been performed, and the promisor of the promise last mentioned fails to perform it, such promisor
cannot claim the performance of the reciprocal promise, and must make compensation to the other party
to the contract for any loss which such other party to the contract may sustain by the non-performance of
the contract. Thus, A promises to B to sell him 100 bales of cotton to be delivered next day and B
promises to pay for them within a month. A does not deliver according to his promise. B's promise to
pay need not be performed and A must make compensation.

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What is Reciprocal promise: Promises which form the consideration or part of the
consideration for each other are called reciprocal promises, e.g. A promises to build a house
for B and B promises to pay a sum of money to A. Here A's promise is a consideration for B's
promise and vice versa. Such promises are called reciprocal promises.

5. By operation of law:

Discharge of contract by operation of law may occur in any one f the following ways: (a) by
merger, (b) by insolvency and (c) by alteration of a written document.

(a) Merger: Merger means the sinking or drowning of a less estate in a greater, by reason
that they both coincide and meet in one and the same person. Thus, if a party makes
an oral contract and afterwards makes the identical contract under writing the oral
contract is merged or lost in the formal / written contract.

(b) Insolvency: When an insolvent person obtains an order of discharge from a Court of
competent jurisdiction, he is released from all debts payable under the Bankruptcy.

(c) Alteration of written document: When a written contract is altered by way of addition
or erasure in a material part, it is dissolved. It is to be remembered that such alteration
must be effected without the consent of the other party, otherwise it will be a new
contact. The effect of alteration of a contract is dealt with in Sec. 62 of the Contract Act,
1872 which says inter alia that if the parties to a contract agree to alter a contract, the
original contract need not be performed.

Remedies for breach of contract :

A breach (of a Contract) may be Anticipatory or Present:

Anticipatory Breach: An anticipatory breach occurs when, prior to the promised date of
performance, the promisor signifies his intention not to fulfil the contract and that he will no
longer be bound by it. On anticipatory breach by a party, the other party is excused from
performance or further performance upon the contract. Besides, he becomes entitled to sue
the defaulting party immediately, or after the time the act was to be done, has expired.
If the aggrieved party opts to wait till the time agreed for performance and leaves the contract
alive, it shall have following consequences:

(1) The party repudiating the contract may change his mind and
perform the time comes in such his case his promise the promisee
when will be bound to accept the same.
(2) If meantime the contract is alive, some event happens which
discharge the contract otherwise than by impossibility, the contract
will be discharged by repudiation, e.g. by subsequent impossibility
and not by breach. The promisisee shall not be entitled to sue the
other party for breach of contract.
(3) If the promisor fails to perform by the time agreed for performance
and the repudiation is accepted (on a later date), the damages for
breach shall be assessed at the time when the promisor repudiated
the contract.

Present Breach: When a promisor signifies his refusal or disability to perform a contract, at
the time agreed for its performance, the breach is said to be present.

Remedies for breach:

When a contract is broken the party who suffers on account of it has one or other of the
following remedies: (1) Damage (2) Specific performance (3) Injunction (4) Cancellation of the
instrument and (5) Rectification of the instrument.
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(1) Damage :

It is the universal remedy for the breach of a contract. It can be claimed in every case.
Damages may be nominal or substantial. A nominal damage is generally granted by way of
vindication of a right. Thus, A makes a contract with B. The contract is afterwards broken by
A, but B suffers no damage on account of the breach, still he is entitled to some damage,
however trifling, it may be by way of vindication of his right.

Substantial damage, on the other hand, is measured by the loss actually suffered by the party.
Such loss must naturally arise in the usual course of things from such breach, or which the
parties knew, when they made the contract, to be likely to result from the breach of it. It
follows, therefore, that a party is not liable for loss which is too remote, i.e., which is not the
natural and probable consequence of the breach of the contract. Thus, A contracts to sell and
deliver 50 maunds of saltpetre to B at a certain price to be paid on delivery. A breaks his
promise. B is entitled to receive from A by way of damage, the sum, if any, by which the
contract price for which B might have obtained 50 maunds of saltpetre of like quality at the
time when saltpetre ought to have been delivered. X delivers to Y, a common carrier, a
d for
want of the machine. Y unreasonably delays the delivery of the machine and X, in
consequence, loses a profitable contract with the Government. X is entitled to recover from Y,
by way of compensation the average amount of profit which would have been made by the
working of the mill during the time that delivery of it was delayed, but not the loss sustained
through the loss of the Government contract, because it is too remote.

When a party has done some work under a contract and the contract is brought to an end by
repudiation of the other, the party who has performed the work may sue either for damages
for breach of the contract or for quantum meruit, i.e., for the value of so much as he has
already done. Thus, A places an order with B for the supply of 100 chairs to be delivered by
installments. B delivers 20 chairs when A informs him that he will require no more. In this

sue A for the breach of the contract or for the value of 20 chairs already supplied. It is to be
seen that a claim for quantum meruit is not based on the original contract, because the original
contract is at an end by the repudiation. It is a new implied contract arising from the offer and
acceptance of the service.

(2) Specific Performance:

When damage is not an adequate remedy the Court may by its discretion grant the specific
performance of the contract, i.e., compel a party to do what he promised to do. But unlike
damage, specific performance cannot be claimed as a matter or right. However, unless and
until the contrary is proved, the Court shall presume that the breach of a contract to transfer
immovable property cannot be adequately relieved by compensation in money, and that the
breach of a contract to transfer movable property can be thus relieved. (Sec. 12 Specific Relief
Act, 1877).

In the following cases the Court may, at its discretion, enforce a contract specifically -

(a) When the act agreed to be done is in the performance, wholly or partly, of
trust. Thus, If a holds certain stock of goods in trust for B and wrongfully
disposes of the stock of goods then the law creates an obligation on A to
restore the same quantity of stock of goods to B. Otherwise, B may enforce
specific performance of this obligation.

(b) Where there exists no standard for ascertaining the actual damage caused by
the non-performance of the act agreed to be done. A agrees to sell two rare
China vases to B, B may compel A to perform the contract specifically,

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because there is no standard for ascertaining the actual damage which would
be caused by the non-performance of the promise.

(c) When the act agreed to be done is such that pecuniary compensation for its
non-performance would not afford adequate relief, e.g., contract to sell a
piece of land.

(d) When it is probable that pecuniary compensation cannot be got for the non-
performance of the act agreed to be done. Thus if A transfers without
endorsement, but for valuable consideration, a promisory note to B. A
becomes insolvent, and C is appointed his assignee. B may compel C to

pecuniary compensation for not endorsing the note would be fruitless. (Sec.
12 Cl. a, b, c & d of the Specific Relief Act, 1877).

But the following contracts cannot be specifically enforced :

(a) A contract for the non-performance of which compensation in money is an

adequate relief.
(b) A contract which runs into such minute or numerous details, or which is so
dependent on the personal qualification, or volition of the parties that the
Court cannot enforce specific performance of its material terms.
(c) A contract which is uncertain.
(d) A contract which is revocable.
(e) a contract made by trustees either in excess of their powers or in breach of
their trust
(f) a contract made by or on behalf of a corporation or public company created
for special purposes, or by the promoters of such company, which is in excess of its
powers (Sec. 21 of Specific Relief Act, 1877)
(g) A contract the performance of which involves continuous duty extending
over a longer period than three years from its date.
(h) A contract of which a material part of the subject has ceased to exist.

Please Note: The jurisdiction to decree specific performance is discretionary, and the court is not bound
to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but
sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.

The following are cases in which the court may properly exercise a discretion not to decree
specific performance:

(1) Where the circumstances under which the contract is made are such as to
give the plaintiff an unfair advantage over the defendant, though there may

(2) Where the performance of the contract would involve some hardship on the
defendant which he did not foresee, whereas its non-performance would
involve no such hardship on the plaintiff. (Sec. 22 Cl. 1 & 2 of the Specific
Relief Act, 1877)

The following is a case in which the court may properly exercise discretion to decree specific
performance:

(1) Where the plaintiff has done substantial acts or suffered losses in consequence of a
contract capable of specific performance. (Sec. 22 Cl. 3 of the Specific Relief Act,
1877).The court has discretion to refuse specific performance even though it might be
a lawful claim. But the discretion of the court is not arbitrary but sound and
reasonably, guided by judicial principles capable of correction by a Court of appeal (7
DLR 642). The Courts have exercised a very wide discretion to refuse specific
performance and to emphasize a well-established principle that a Court of equity is a
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forum of conscience and that it would refuse to lend its helping hand in regard to
matters where the court will feel that it will be unconscionable to do so having regard
to the interest of the public. As to what would constitute unconscionable transaction
will, of necessity, depend upon the facts and circumstances of each cases and no
specific form can be enunciated which will be of universal application. It follows that
an agreement which inflicts more injury upon the defendant than confers benefit on
the plaintiff should not be enforced. Thus, the court cannot specifically enforce a
negative covenant providing not merely that a person should not serve in a rival firm
or a rival company but also providing that he should not serve anyone else during
that period in any part of Bangladesh. To specifically enforce such a negative
covenant would amount to specifically enforcing the positive covenant also, because
the person cannot serve any other firm in any part of Bangladesh. It is open to the
employer to employ any other person to perform the same job. It may be that he may
have to pay higher salary to such a person. If that is so, it can be compensated by
damages. It is, therefore, clear that the issue of an injunction in such a case would be
to decree specific performance of a negative covenant and to give the employer-
plaintiff an unfair advantage over the employee-defendant and would involve some
hardship on the defendant, whereas the non-performance would not involve such
hardship on the plaintiff (AIR 1964 Gujerat 215).

specific performance is not confined to them. In special cases when there are some good and
reasonable grounds for not exercising this discretion in favour of the plaintiff, the court will
not hesitate to exercise that discretion against the plaintiff (AIR 1960 Patna 235).

In short, the grant of specific performance of contract is absolutely within the discretion of the
court and no rigid rule can be laid down when and where this discretion can be exercised by
the Court. It will depend on the circumstances of each case but the discretion must be judicial
one (12 DLR 554 DB).

(3) Injunction :

Injunction like specific performance is also a discretionary remedy of the Court. An

injunction may be temporary or perpetual. It is generally granted to prevent the breach of an
obligation arising out of a contract. Where a contract comprises an affirmative agreement, to
do a certain act coupled with a negative agreement, express or implied, not do a certain act,

certain period to sign nowhere else. Afterwards she made a contract with Z to sing at his
theatre and refused to perform her contract with B. The singer cannot be compelled to sing at
Lumley V. Wagner). Again, A
contracts to sell to B the good-will of a busine
shop and solicits his old customers to deal with him. This is contrary to his implied contract,
and B may obtain an injunction to restrain A from soliciting the customers, and from doing
any act whereby their good-will may be withdrawn from B. (See Sec. 57, Specific relief Act,
1877).

A negative covenant, referred to in S. 57, need not be express; it may be implied from the
tenor of the agreement. But it must be a covenant by which a party to the agreement
undertakes either expressly or by necessary implication not to act in a particular manner.
Whether an agreement is affirmative or negative is a matter of substance and not of mere
form, and the negative stipulation, whether it is express or implied, must be distinct, and it
should be sever able from the positive stipulations. It must be remembered that an
affirmative agreement does not by itself imply a negative agreement not to do something
inconsistent therewith. There must be something in the agreement, apart form the affirmative
agreement which shows that the promisor has expressly or by necessary implication agreed
not to do a thing such as the sale of the property to any person other than the purchaser. An
agreement to sell or allot the properties to the plaintiff does not imply an agreement that the
properties will not be sold to other persons.

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Where the Government has granted a contract to an electric Company to supply electricity at
a particular place, the grant cannot be construed as a negative contract by Government not to
take up supply themselves so as to enable the Company to get perpetual injunction
restraining the Government from starting work of supplying electricity.

(4) Rescission of the Instrument:

Any person interested in a contract in writing may sue to have it rescinded and such
rescission may be adjudged by the Court in any of the following cases : (a) where the
contract is violable or terminable by the plaintiff (b) where the contract is unlawful for causes
not apparent on its face and the defendant is more to blame than the plaintiff (c) where a
decree for specific performance of a contract of sale or of a contract to take lease has been
made and the purchaser or lessee makes default in payment of the purchase-money or other
sums which the court has ordered him to pay (Secs.27 and 28, Specific Relief Act, 1877).

(5) Rectification of the Instrument :

When through fraud or mutual mistake of the parties a contract or other instrument in
writing does not truly express their intention, either party or his representative in interest
may institute a suit to have the instrument rectified; and the fraud or mistake is clearly
proved and the real intention of the parties ascertained, the Court may, at its discretion,
rectify the instrument so as to express that intention, so far as this can be done without
prejudice to rights acquired by third persons in good faith and for value [Sec. 26(2),Specific
Relief Act, 1877].

A contract in writing may first be rectified, and then if the party claiming rectification has so
prayed may be specifically enforced [Sec.26(3), Specific Relief Act, 1877].

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