THE INDIAN CONTRACT

ACT 1872

Vaibhav Kulkarni

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 Section 2 (h) defines a contract as “ an
agreement enforceable by law” thus to make
a contract there must be
1. An agreement

2. The agreement shall be enforceable by law.

3. All agreements are not enforceable by law

and therefore, all agreements are not contracts.

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Agreement
According to Section 2(e) an agreement is defined
as “ every promise and every set of promises
forming the consideration for each other”.
A promise is defined as an accepted proposal as
Section 2(b) says “ a proposal when accepted
becomes a promise “ Therefore it can be said that
an agreement is an accepted proposal.
In an agreement there is a promise from both the
sides. For example, A promises to deliver his
radio to B and in return B promises to pay a sum
of Rs. 500 to A. Is there an agreement?*

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An agreement is regarded as a contract when it
is enforceable by law.
In other words, an agreement that the law will
enforce is a contract.
The conditions of enforceability are stated in
Section 10. According to this section “ all
agreements are contracts if they are made by
the free consent of parties competent to
contract, for a lawful consideration and with
a lawful object, and are not hereby expressly
declared to be void.”
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Essentials of a valid contract
1. The agreement should be between two parties. An
agreement is the result of a proposal or offer by
one party followed by its acceptance by the other.
2. The agreement should be between the parties
who are competent to contract.
3. There should be a lawful consideration and
lawful object in respect of that agreement.
4. There should be free consent of the parties,
when they enter into the agreement.
5. The agreement must not be one, which has been
declared to be void.

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Proposal of offer

The term proposal has been defined in section

2(a) as follows:
 “ When one person signifies to another

his willingness to do or 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.”

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 The willingness to do or abstain from doing
something, i.e. the proposal or offer must be
made with a view to obtain the assent of the
other party thereto.
For example, A’s willingness to sell his radio
set to B for Rs. 500 if B accepts to
purchase the same, amounts to proposal by
A for the sale of the radio set. But if a
statement is made without any intention to
obtain the assent of the other party thereto
that cannot be termed as proposal.

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 Offer and invitation to treat distinguished
A proposal or an offer has to be
distinguished from an invitation
to treat. Sometimes a person
may not offer to sell his goods,
but may make some statements
or give some information with a
view to invite others to make
offers on that basis.
For example,
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a bookseller sends a catalogue of books indicating
prices of various books to many persons. This
catalogue is not an offer to sell those books at
prices indicated against those books. This is an
‘Invitation to treat.’ If any person is interested in
purchasing those books mentioned in the catalogue
he may make an offer. Similarly, inviting persons to
an auction where goods, which are to be auctioned,
are displayed is not an offer for the sale of goods.
The intending buyers, who make the bid make an
offer. Such an offer, when accepted, by the fall of
hammer or in some other customary way, will result
in a contract.

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Intention to create legal relationship
 In order that an offer, after acceptance, can
result in a valid contract it is necessary that the
offer should be made with an intention to create
legal relationship. Promise in the case of a
social engagements is generally without an
intention to create legal relationship, such an
agreement cannot be considered to be a
contract.
 Thus an agreement to go for a walk, to go to
movie, to play some game, or entertain another
person with a dinner, cannot be enforced in a
court of law. Sometimes the party may
expressly mention that it is not a formal or legal
agreement, whereas in some other cases such
an intention could be presumed from their
agreement. 10
In Rose and Frank Co. Vs. Crompton & Brothers
Ltd. the agreement between the parties provided ;
“ This arrangement is not entered into ………. as
a formal or legal jurisdiction in the Law Courts…….
that it (the agreement) will be carried through by
parties with mutual loyalty and friendly co-
operation.”
One of the parties made a breach of this agreement.
In an action by the other party to enforce the
agreement, it was held that since the agreement
had provided that it was not a formal or legal
agreement the same was not enforceable..

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In the case of Meritt Vs. Meritt, (1970) the
husband and wife were the joint owners of a
building which was subject to a mortgage to a
building society. The husband left the
matrimonial home to live with another
woman. At that time, at the insistence of the
wife, the husband signed a note saying that
the wife will pay all outstanding amounts in
respect of the house and in return “I will
agree to transfer the property into your
sole ownership”. It was held that in this
case it was clear that the parties intended to
create legal relationship and, therefore, the
husband was bound by the contract
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Communication of offer

An offer when accepted results in a

contract. An offer can be accepted only
after the same has come to the knowledge
of the offeree. It means that the offer has to
be communicated to the offeree in order that
the offeree can accept it. According to
section 4,
“ the communication of a proposal is
complete when it comes to the knowledge
of the person to whom it is made.”

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If an offer has not yet been communicated, even if somebody
acts according to the terms of the offer, he cannot be deemed to
be the acceptor of the offer. Acting in ignorance of an offer does
not amount to the acceptance of the same. This point may be
explained by referring to the case of Lalman Shukla Vs. Gauri
Dutt. (1913)
In this case the defendant’s nephew absconded from home. The
plaintiff, who was defendant’s servant, was sent to search the
missing boy. After the plaintiff had left in search of the boy, the
defendant issued handbills announcing a reward of Rs. 501 /- to
anyone who might find the boy. The plaintiff who was ignorant of
this reward, was successful in searching the boy. When he
came to know of the reward, which had been announced in his
absence, he brought an action against the defendant to claim
this reward. It was held that since the plaintiff was ignorant of
the offer of reward, his act of bringing the lost boy did not amount
to the acceptance of the offer, and therefore, he was not entitled
to claim the reward.

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If the plaintiff has the knowledge of the offer,
his acting in accordance with the terms
thereof amounts to the acceptance of the
same. In such a case it is immaterial that at the
time of accepting the offer the acceptor does not
intend to claim the reward mentioned in the offer.

In Williams Vs. Carwardine (1833) the plaintiff

who knew that the reward had been announced
to be given to anyone who gave information
leading to the conviction of an assailant for
murder, gave the necessary information. While
giving the information the plaintiff mentioned
that she had given the information ‘to ease
her conscience’. At that time she did not
intend to claim the reward. It was held that since
the offer had been accepted with its knowledge,
there was a valid contract and, therefore, she
was entitled to claim the reward. 15
Cross Offers
When the offers made by two persons to each
other containing similar terms of bargain cross
each other in post they are known as cross
offers. For example, on 1st January A offers to
sell his radio set to B for Rs. 500/- through a
letter sent by post. On the same date B also
writes to A making an offer to purchase A’s
radio set for Rs. 500 /- When A or B send
their letters they do not know about the offer
which is being made by the other side. In these
cross offers, even though both the parties intend
the same bargain, there arises no contract. A
contract could arise only if either A or B , after
having the knowledge of the offer, had
accepted the same.
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Specific and General Offers
When the offer is made to a specific or an ascertained
person it is known as a specific offer, but when the
same is not made to any particular person but to the
public at large it is known as general offer. For
instance, an offer to give reward to anybody who finds
a lost dog is a general offer This general agreement
will be deemed to be accepted by anyone who
actually finds the lost dog. The person, who accepts
this offer, generally by performing the condition of the
proposal, can bind the person making the offer.
According to Section 8, “Performance of the conditions
of a proposal ….. is an acceptance of the proposal.”
Thus although a general offer is made to the public at
large, the contract is concluded only with that person
who acts upon the terms of the offer.

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The case of Carlil Vs. Carbonic Smoke Ball Co. ( 1893) is
an illustration of a contract arising out of a general offer. The facts
of the case are : The defendants advertised their product
“Carbonic Smoke Ball”, a preventive remedy against influenza.
In the advertisement they offered to pay a sum of 100 pounds
as reward to any one who contracted influenza, colds or any
disease caused by taking cold, after having used the Smoke Ball
three times a day for two weeks, in accordance with the
printed directions. They also announced that a sum of 1000
pounds had been deposited with the Alliance Bank to show
sincerity in the matter. The plaintiff ( Mrs. Carlil ) relying on the
advertisement purchased a Smoke Ball from a chemist, used the
same in accordance with the directions of the defendants, but still
caught influenza. She sued the defendants to claim the reward of
100 pounds advertised by them. It was held that this being a
general offer addressed to all the world had ripened into a contract
with the plaintiff by her act of performance of the required
conditions and thus accepting the offer. She was therefore,
entitled to claim the reward.

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Revocation Of Offer
It is only after the acceptance of an offer that there arises a
contract and then both the parties becomes bound by their
respective promises. Before the offer has been accepted it can
be revoked. After the offer has been accepted it ripens into a
contract and then it cannot be revoked. According to Section 5 :
“ A proposal may be revoked at any time before the
communication of its acceptance is complete as against the
proposer, but not afterwards.”
In case of sale by auction the bids made at the auction are
offers, and the highest offer may be accepted by the auctioneer.
In such a case the sale is complete when the auctioneer
announces its completion by the fall of the hammer or in any
other customary manner ; and , until such announcement is
made, any bidder may retract his bid.

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 Submission of a tender to supply or purchase goods at a
stated price is making an offer. Person submitting the
tender may withdraw his tender before the same has
been approved
 The respondents advertised for receiving tenders for
sale of Tendu Patta (leaves). The petitioner submitted
his tender. Before the date of the opening of the tenders
the petitioner made an application withdrawing his tender
and also requesting that his tender be not opened. One
of the conditions in the tender notice was that a tenderer
may withdraw his tender before the tender are open
provided that there should be at least one other valid
tender when the tenders are opened. Petitioner’s tender
was the only tender submitted. In spite of his request to
withdraw the tender the Government accepted his
tender. Since the petitioner did not execute the
purchaser’s agreement , Tendu leaves were sold to
somebody else at a lower rate, and then an action was
brought against the petitioner to claim compensation for
the loss suffered by the Government. 20
 The contention of the petitioner was that since he had
withdrawn his tender before the same had been opened
and accepted, there was no offer in existence which
could be accepted. The respondents, however,
contended that the offer could not be withdrawn in
accordance with the tender notice and, therefore, the
petitioner’s offer was still alive and had ripened into
contract by acceptance.
 It was held that in spite of the clause in the tender notice
against the withdrawal of the offer, the petitioner had a
right to withdraw his offer before the same was
accepted. In this case there was no offer which could be
accepted, there had arisen no contract between the
petitioner and the respondents and, as such, the
respondents had no right to claim any compensation.

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Revocation in contracts by post
We have already seen earlier that as
per Section 5, a proposal may be
revoked at any time before the
communication of its acceptance is
complete as against the proposer, but
not afterwards. In contracts by post it
has to be seen, as to what time the
communication of acceptance is
complete against the offeror, because
no revocation is possible after such
communication has been completed.

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When is the communication of acceptance
complete against the offeror (proposer) ?
 According to section 4 : “The communication of an
acceptance is complete as against the proposer, when it
is put in the course of transmission to him, so as to be
out of the power of the acceptor.”
 For instance in response to my offer sent by post to you,
you post the letter of acceptance to me. As soon you
have posted the letter my power to revoke comes to an
end. This may be made further clear by referring to the
following illustration ;
 A proposes, by a letter sent by post, to sell his house to
B . B accepts the proposal by a letter sent by post. A
may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not
afterwards.

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Revocation how made?
Section 6, mentions the various modes of revocation, which are
as under :
A proposal is revoked –
(1) by the communication of notice of revocation by the proposer to
the other party ;
(2) by the lapse of time prescribed in such proposal for its
acceptance or, if no time is so prescribed, by the lapse of a
reasonable time, without communication of the acceptance :
(3) by the failure of the acceptor to fulfil a condition precedent to
acceptance :
(4) by the death or insanity of the proposer, if the fact of his death or
insanity comes to the knowledge of the acceptor before
acceptance:

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3. By the failure to fulfil a condition precedent

When the offer is subject to some condition precedent, such a

condition has got to be fulfilled before the acceptance is made. If
there is failure of the acceptor to fulfil a condition precedent to
acceptance, the offer stands revoked. For example, if the offer
requires the deposit of some earnest money, or the execution of
some document etc. these conditions must be fulfilled. Failure to
fulfil these conditions may make an offer to lapse.

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4. By the death or insanity of the offeror

An offer is revoked by the death or insanity of

the proposer, if the fact of death or insanity
comes to the knowledge of the acceptor before
acceptance. In India the death or insanity of the
offeror does not automoffer stands revoked if the
fact of death or insanity comes to the knowledge
of the acceptor before acceptance automatically
make the offer to lapse. The. It means that if
the fact of death or insanity has not come to the
knowledge of the offeree while he accepts the
offer, it is valid acceptance giving rise to a
contractual obligation.
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Standing, Open or continuing offer
 An offer which is allowed to remain open for
acceptance over a period of time is known as a
standing, open or a continuing offer. For
example, an offer to, in accordance with the
order to supply 1,000 bags of wheat from 1st
January to 31st December which may be placed
from time to time to time, is a standing offer. As
and when the orders are placed that amounts to
acceptance of the offer to that extent
 Tender for supply of goods is a kind of standing
offer. An advertisement inviting tenders is merely
invitation for quotations. When the tender is
approved it becomes a standing offer.

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In Bengal Coal Co. Vs. Homie Wadia & Co., the
defendants (Bengal Coal Co.) agreed to supply coal to
the plaintiff up to a certain quantity at an agreed price for
a period of 12 months, as may be required by the
plaintiffs from time to time. The plaintiffs placed orders
for the supply of coal and the same were complied with.
Before the expiry of 12 months, the defendants
withdrew their offer to supply further coal, and refused to
comply with the orders to supply further coal, and
refused to comply with the orders placed thereafter.
They were sued for breach of contract. There was
simply a continuing offer to supply coal. They were
bound to supply coal only as regards orders which had
already been placed, but were free to revoke their offer
for supply of coal thereafter.

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ACCEPTANCE
 A proposal when accepted, results in an
agreement. It is only after the acceptance of the
proposal that a contract between the two parties can
arise.
 According to Section 2 (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 promise “
 The person making the proposal does not become
bound thereby until acceptance. As soon as his
proposal is accepted that is known as promise
whereby both the parties become bound.

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Effect of Acceptance
A contract is created only after an offer is
accepted. Before the acceptance is made
neither party is bound thereby. At that stage the
offeror is free to revoke or withdraw his offer,
and the offeree is free not to accept the offer or
reject the same. After the offer has been
accepted it becomes a promise which, if other
conditions of a valid contract is satisfied, binds
both the parties to the promise. After
acceptance each party becomes legally bound
by the promise made by him through the
medium of offer or acceptance of it.

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Essentials of a valid acceptance

In order that acceptance of an offer can result in a

contract the acceptance must satisfy the following
requirements.
1. Acceptance should be communicated by the offeree
to the offeror.
2. Acceptance must be made in the prescribed
manner, and if no manner is prescribed, in some
usual and reasonable manner.
3. Acceptance should be absolute and unqualified.
4. Acceptance should be made while the offer is still
subsisting.

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1. Acceptance should be communicated

We have seen above that when the person to whom the proposal
is made signifies his assent thereto, the proposal is said to be
accepted. It means that the offeree must signify his assent, or
communicate the acceptance.

When the parties are face to face, communication could be oral.

When they are at a distant place communication could be made
by post, by telegram, by a message on phone, through a
messenger, or in any other reasonable manner. Sometimes the
conduct of a person might indicate his assent. For example,
when a passenger boards a bus and travels thereby, he
impliedly assents to pay the necessary fare.

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Communication must be made by the offeree or
his authorised agent
In order that the acceptance can be treated as valid it is necessary
that the same must be communicated to the offeror either by the
offeree, or by some duly authorised person on his behalf. If the
communication is made by an unauthorised person it does not result
in a contract. In Powell Vs. Lee, (1908) Powell was one of the
candidates for the post of head master of a school. The Board of
managers passed a resolution selecting him for the post. No
communication about this decision was made to Powell by the
Board. one of the members of the Board who had not been
authorised to communicate this decision, acting in his individual
capacity, informed Powell about his selection for the post.
Subsequently, the Board of managers met again and decided to
cancel the appointment of Powell and appoint another candidate,
Parker, in Powell’s place. Powell sued Lee, the chairman of the
Board of managers for the breach of contract. It was held that since
the resolution passed by the Board was not communicated to
Powell by the Board, or any authorised person on its behalf, it could
not give rise to a contract. Powell’s action therefore failed.

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When is communication of acceptance
complete ?
 As soon as the communication of acceptance
is complete that results in a contract whereby
both the parties become bound. In case the
parties to the contract are present at the
same place, one making the offer and the
other communicating the acceptance, both
parties become bound immediately. The
problem arises when the parties are at a
distant place and the contract is concluded
through post

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Acceptance by post

Illustration
B accepts A’s proposal by a letter
sent by post. The communication of
the acceptance is complete, --
As against A , when the letter is
posted ;
As against B, when the letter is
received by A.

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Communication of acceptance to a wrong person
It has already been seen that the offeror becomes bound as soon as the
letter of acceptance is posted to him. If the letter of acceptance is posted
at the wrong address or to a wrong person, that will not bind the offeror.

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In this connection reference may be made to the decision of
the court in the case of Karan Singh Vs. The Collector,
Chhatarpur to explain the point. In that case in an auction of
the quarry lease the petitioner’s bid of Rs. 1,800 was the
highest bid. In accordance with the auction conditions the
petitioner deposited the security deposit and earnest money of
Rs. 540. The bid was not accepted at the auction. The bid
was subsequently accepted by the collector, but instead of
sending the communication of acceptance to the petitioner the
same was wrongly sent to somebody else. The officer
concerned realised the mistake after the expiry of the period of
lease. Then a demand notice was sent to the petitioner asking
him to pay the lease money. The petitioner, on the other hand,
demanded the refund of the security deposit of Rs. 540.
It was held that the petitioner’s bid, which was an offer,
although accepted on file, did not result in a contract as no
intimation was sent to the petitioner which was received by
him. The demand notice for recovering the lease money was
quashed and the respondents were directed to refund the
security deposit. 37
Acceptor Bound when his letter
reaches the offeror
It has been noted above that though the
offeror becomes bound when the letter of
acceptance is posted to him, the acceptor
himself does not become bound thereby.
Acceptor becomes bound by his acceptance
when his letter of acceptance comes to the
knowledge of the offeror.

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Acceptance by Telephone or Telex
 In Bhagwandas Vs. Girdhari Lal & Co. (1966)
the Supreme Court has held that in case of
telephonic conversation the position is the same
as in the case where the parties are in the
presence of each other, and the rule of contract
through post does not apply to such contracts.
In case of acceptance sent by post the contract
is concluded when the letter of acceptance is
posted, whereas in the case of acceptance by
phone, the contract is deemed to be complete
when the offeror hears the acceptance at his
end rather than when the acceptor speaks the
words of acceptance.

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Communication of acceptance not needed in
acceptance by conduct
 It has been noted above that as a general rule no
contract can arise unless and until the acceptance
has been communicated to the offeror. In
exceptional cases the terms of the offer may be
such which waive the necessity of communication of
acceptance, or a certain kind of conduct on the part
of the offeree may be treated sufficient to create a
contract. If that is so, the contract could be created
even without communication of acceptance.
According to Section 8, “Performance of the
conditions of the proposal……………. Is an
acceptance of the proposal.” ( case of Mrs. Carlil
Vs. Carbonic Smoke Ball Co.)

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2. Acceptance should be in the prescribed manner

 If the proposal prescribes any manner of acceptance, the

acceptance must be made in that manner. When the manner of
acceptance has not been prescribed, it must be made in some
usual and reasonable manner.
 Acceptance by post, telegram, telephone or through personal
messenger may be considered to be a usual manner of
acceptance. If no manner of acceptance is prescribed,
acceptance in some usual and reasonable manner will suffice.
If, however, the proposal prescribes any particular manner of
acceptance, the acceptance must be made in that manner. If the
proposal prescribes a manner in which it is to be accepted, and
the acceptance is not made in such manner, then, according to
Section 7 (2), of the Indian Contract Act, “the proposer may,
within a reasonable time after acceptance is communicated to
him, insist that his proposal shall be accepted in prescribed
manner, and not otherwise ; but if he fails to do so, he accepts
the acceptance.”

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 3. Acceptance should be absolute and
unqualified:
It lapses by rejection or counter-offer
 Another essential of valid acceptance, which can
convert a proposal into a contract, is that the
acceptance must be absolute and unqualified.
Conditional or qualified acceptance is no
acceptance which could result in a contract. By such
an acceptance the offer is deemed to be rejected.
By such an acceptance the offer is deemed to be
rejected. The effect of such a counter-offer in the
eyes of law is to destroy the original offer. And an
offer once refused is dead and cannot be accepted
unless renewed.

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4. Acceptance should be made while
the offer is still subsisting
We have seen earlier that the offeror is free to
withdraw the offer, or the offer is revoked under
various circumstances mentioned in section 6. After
the offer has been withdrawn or has lapsed there is
nothing which can be accepted. It is, therefore,
necessary that the acceptance should be made
while the offer is still alive and subsisting.
Acceptance after the lapse of the offer cannot give
rise to a contract. Similarly, the offer is deemed to
have ended by rejection of the original offer or a
counter offer.

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 Who are competent to contract.—
Every person is competent to
contract who is of the age of
majority according to the law to
which he is subject,and who is of
sound mind and is not disqualified
from contracting by any law to
which he is subject.

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 12. What is a sound mind for the
purposes of contracting.—A person is
said to be of sound mind 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.

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 (a) A patient in a lunatic asylum, who
is, at intervals, of sound mind, may
contract during those intervals.
 (b) A sane man, who 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

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 15. ‘Coercion’ defined.—‘Coercion’ is the
committing, or threatening to commit, any act
forbidden by the Indian Penal Code (45 of
1860) or the unlawful detaining, or
threatening to detain, any property, to the
prejudice of any person whatever, with the
intention of causing any person to enter into
an agreement.

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

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

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

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 (a) A having advanced money to his son,
B, during his minority, upon B’s coming of
age obtains, by misuse of parental
influence, a bond from B for a greater
amount than the sum due in respect of the
advance. A employs undue influence
 (b) A, a man enfeebled by disease or age,
is induced, by B’s influence over him as
his medical attendant, to agree to pay B
an unreasonable sum for his professional
services, B employes undue influence

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 17. ‘Fraud’ defined.—‘Fraud’ means and
includes any of the following acts committed by
a party to a contract, or with his connivance, or
by his agent1, with intent to deceive another
party thereto or his agent, or to induce him to
enter into the contract:—
 (1) the suggestion, as a fact, of that which is not
true, by one who does not believe it to be true;
 (2) the active concealment of a fact by one
having knowledge or belief of the fact
 (3) a promise made without any intention of
performing it;
 (4) any other act fitted to deceive
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 (2) the active concealment of a fact by one
having knowledge or belief of the fact
 (3) a promise made without any intention
of performing it;
 (4) any other act fitted to deceive

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 (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 is A’s daughter and has just come of
age. Here the relation between the parties
would make it A’s duty to tell B if the horse is
unsound.
 (c) 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.
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 (d) A and B, being traders, enter upon a
contract. A has private information of a
change in prices which would affect B’s
willingness to proceed with the contract. A is
not bound to inform B.

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

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 20. Agreement void where both parties are
under mistake as to matter of fact.—Where
both the parties to an agreement are under a
mistake as to a matter of fact essential to the
agreement the agreement is void.
Explanation.—An erroneous opinion as to the
value of the thing which forms the subject-
matter of the agreement, is not to be deemed
a mistake as to a matter of fact.

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 (a) A agrees to sell to B a specific cargo of
goods supposed to be on its way from
England to Bombay. It turns out that, before
the day of the bargain the ship conveying the
cargo had been cast away and the goods
lost. Neither party was aware of these facts.
The agreement is void.

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 (b) A agrees to buy from B a certain horse. It
turns out that the horse was dead at the time
of the bargain, though neither party was
aware of the fact. The agreement is void.
 (c) A, being entitled to an estate for the life of
B, agrees to sell it to C, B was dead at the
time of agreement, but both parties were
ignorant of the fact. The agreement is void.

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 The consideration or object of an agreement
is lawful, unless—" it is forbidden by law; 14 or
is of such a nature that, if permitted, it would
defeat the provisions of any law; or is
fraudulent; or is fraudulent; or" involves or
implies, injury to the person or property of
another; or" the Court regards it as immoral,
or opposed to public policy.

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 (a) A agrees to sell his house to B for 10,000
rupees. Here, B’s promise to pay the sum of
10,000 rupees is the consideration for A’s
promise to sell the house and A’s promise to
sell the house is the consideration for B’s
promise to pay the 10,000 rupees. These are
lawful considerations.
 (b) A promises to pay B 1,000 rupees at the
end of six months, if C, who owes that sum to
B, fails to pay it. B promises to grant time to
C accordingly. Here, the promise of each
party is the consideration for the promise of
the other party, and they are lawful
considerations. 62
 (c) A promises, for a certain sum paid to him
by B, to make good to B the value of his ship
if it is wrecked on a certain voyage. Here, A’s
promise is the consideration for B’s payment,
and B’s payment is the consideration for A’s
promise, and these are lawful considerations.
 (d) A promises to maintain B’s child, and B
promises to pay A 1,000 rupees yearly for the
purpose. Here, the promise of each party is
the consideration for the promise of the other
party. They are lawful considerations. 63
 "(d) A promises to maintain B’s child, and B
promises to pay A 1,000 rupees yearly for the
purpose. Here, the promise of each party is
the consideration for the promise of the other
party. They are lawful considerations."
 (e) A, B and C enter into an agreement for
the division among them of gains acquired or
to be acquired, by them by fraud. The
agreement is void, as its object is unlawful.

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 (f) A promises to obtain for B an employment
in the public service and B promises to pay
1,000 rupees to A. The agreement is void, as
the consideration for it is unlawful.
 (h) A promises B to drop a prosecution which
he has instituted against B for robbery, and B
promises to restore the value of the things
taken. The agreement is void, as its object is
unlawful.
 (k) A agrees to let her daughter to hire to B
for concubinage. The agreement is void,
because it is immoral, though the letting may
not be punishable under the Indian Penal
Code (45 of 1860). 65
 (a) A promises, for no consideration, to give
to B Rs. 1,000. This is a void agreement.
 (b) A, for natural love and affection, promises
to give his son, B, Rs. 1,000. A puts his
promise to B into writing and registers it. This
is a contract.
 (c) A finds B’s purse and gives it to him. B
promises to give A Rs. 50. This is a contract
 (f) A agrees to sell a horse worth Rs. 1,000
for Rs. 10. A’s consent to the agreement was
freely given. The agreement is a contract
notwithstanding the inadequacy of the
consideration. 66
 26. Agreement in restraint of marriage, void.
—Every agreement in restraint of the
marriage of any person, other than a minor, is
void.
 27. Agreement in restraint of trade, void.—
Every agreement by which any one is
restrained from exercising a lawful
profession, trade or business of any kind, is
to that extent void.

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 Exception 1.—Saving of agreement not to
carry on business of which goodwill is sold.—
One who sells the goodwill of a business may
agree with the buyer to refrain from carrying
on a similar business, within specified local
limits, so long as the buyer, or any person
deriving title to the goodwill from him, carries
on a like business therein, provided that such
limits appear to the Court reasonable, regard
being had to the nature of the business.
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 29. Agreements void for uncertainty.—
Agreements, the meaning of which is not
certain, or capable of being made certain, are
void.
 (a) A agrees to sell B “a hundred tons of oil”.
There is nothing whatever to show what kind
of oil was intended. The agreement is void for
uncertainty.
 (f) A agrees to sell to B “my white horse for
rupees five hundred or rupees one
thousand”. There is nothing to show which of
the two prices was to be given. The
agreement is void.
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 Agreements by way of wager, void.—
Agreements by way of wager are void; and
no suit shall be brought for recovering
anything alleged to be won on any wager, or
entrusted to any person to abide the result of
any game or other uncertain event on which
any wager is made.
 Exception in favour of certain prizes for
horse-racing

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