Model Q. Ans For The Indian Contract Act 1872

Model Q & Ans.
for Judicial Service Main Exam

on
The Indian Contract Act, 1872
Q. 1
Distinguish an offer from an invitation to offer
referring case law.
Ans
S -2(a) of I.C. Act provides that When one person
signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a proposal.
e.g.: A bid at an auction sale is an offer or proposal.
S.K. Shukla
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S.S. Law Academy, Civil & judicial,

B-3/4, B-2, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09
A proposal, when accepted, becomes promise and that is

how a contract comes into formation. On the other hand, an
invitation to offer is different from making an offer.
In Grainger & Son Vs Gough 1896 Lord Herschell had
observed that the transmission of a price list does not amount
to an offer to supply unlimited quantity of the wine described in
the price list, rather pricelist is only an invitation to offer.
Thus a shopkeepers catalogue of price is not an offer. It is
only an invitation to offer to buy at the indicated prices.
Similarly in Pharmaceutical Society of Great Britain Vs.
Boots cash chemist Ltd 1952. Lord Goddart said It would
to wrong to say that the shopkeeper is making an offer to sell
every article in the shop to any person who might come in and
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that person can insist on buying an article by saying I accept

your offer.
e.g. In most bookshops customers are invited to go in and pick
up books, but there is no contract, until they proposes to buy and
same is accepted by shopkeeper. Here shopkeeper is not bound to
sell the book to him.
Thus the display of goods in a shop with price chits attached
to them is not an offer, even if there is a self service system
in the shop.
Similarly where a taxi driver, with his taxi on road, calling
the passengers, to sit in has taxi, actually makes an invitation. He
is not bound to allow every one, who comes to him, to sit in his
taxi, because his calling is not an offer, that can be accepted by
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any one, rather passengers are to make an offer to sit in his taxi
to go certain destination, subject to acceptance or refusal by the
taxi driver. Only on acceptance by taxi driver, the proposal of
passengers becomes contract.
Thus a menu card at a restaurant is also not an offer. It is
only an invitation to offer. In State of M.P. Vs Hakim Singh AIR
1973 MP 24 it was held that a bidder at auction sale only
makes an offer, which he can withdraw before its acceptance as
contemplated by the terms of the auction.
Similarly a notice calling for tenders is invitation to offer, the
reason being that by way of notice, a party furnishes some
information calling upon others to make offers.
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Q. 2
All illegal agreements are void, but all
agreements are not necessarily illegal. Explain.
void
Ans
As per S -2(h) An agreement enforceable by law is a
contract.
S -2(g) Says An agreement not enforceable by law is said to be
void.
An illegal agreement is an agreement, which is forbidden by
law. But a void agreement may not be forbidden by law.
e.g. (1) A promises to pay Rs. 1, 00,000 to B, if he kidnaps X. It
is an illegal contract. All agreements of such type are necessarily
void. No court can enforce them.
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(2) A makes promise to put life in dead body is void agreement,

but it is not illegal.
Similarly X promises to find out a treasure by magic, is a
void agreement, but not an illegal agreement.
In such a situation, courts would not enforce such an
agreement. In case of an illegal agreement and void agreement
main or primary agreement is unenforceable and as such if
something has been paid under such an agreement, same cannot
be recovered subject to certain exceptions.
So it is said that all illegal agreements are void, but all void
agreements are not necessarily illegal.
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Q. 3
Acceptance is to offer what a lighted match is to a
train of gun powder. It produces something which cannot
be recalled or undone. But the powder may have lain till it
has become damp the man who lain the train may remove
it before the match is applied.
Explain with illustration the principles sought to be
expressed in the above passage.
Ans
Effect of Acceptance
The statement in question is made by Sir William Anson in the

context of offer and acceptance. It deals with the binding effect of
acceptance. It says If once offer is accepted, it cannot be
revoked. Offer is just like a train carrying gun powder and
acceptance is just like a lighted match. As soon as lighted match
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is applied to train carrying gun powder, the train is destroyed.

Similarly as soon as offer is accepted, offer is destroyed, and
converted into an agreement, which cannot be revived, after once
burnt. But the person, who has lain over the train carrying
proposal in form of gun powder, can remove his train before
lighted match is applied. Similarly a person who has made a
proposal, can withdraw it any time before its acceptance, but not
afterwards, just like burnt train cannot be revived or removed.
The statement of Sir William Anson is relevant in the context
of section -5 of the ICA 1872. It reveals the character and effect of
proposal and acceptance.
S -5 says A proposal may be revoked at any time, before the
communication of its acceptance is complete as against the
proposer, but not afterwards.
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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 after
words.
S-7 says In order to convert a proposal into a promise, the
acceptance must be absolute and unqualified.
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Thus an offer before it is accepted unconditionally it can be

withdrawn, but when offer is once accepted unconditionally, it
cannot be withdrawn because upon its acceptance, it gets
converted into a contract and then remains no offer which can be
withdrawn.
In Florabel Skinner Vs Ramlila Mandal AIR 1980 the Full
Bench of P&H. High Court observed that under the law of
contract; an offer made by a party to another merely remains an
offer and can be withdrawn at any time before it is accepted by
the other party. But it is settled principle of law that once offer is
accepted, an agreement comes into being and the party making
offer cannot rescind from the offer and in spite of resiling from the
same, would remain bound by the contract.
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Thus
1872 and
context in
statement
Anson.
in light of provision and illustration made U/S -5 of ICA

observation of full bench of P&H. High Court in this
the aforesaid case, we come to conclusion that the
made in question is rightly observed by Sir William
Q. 4 Mention the circumstances in which a contract by a

minor is (i) void (ii) voidable or (iii) valid.
Ans
(i) Void: In terms of I.C. Act 1872 A void contract is
actually not a contract, because same is void from the very
beginning. Vide S -10 The parties to contract must be
competent to contract, while vide S -11 only those persons are
competent to contract, who are major under their own law, and of
sound mind and not disqualified by law to make contract. So
incapacity to contract saves the minor to bind him by the
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contract. However a minor can still derive benefit there under.

Where a minor has obtained any benefit, he cannot be directed to
refund the money. As it is laid down in Mohari Bibi Vs
Dharmdas Gosh (1903) 30 cal 539 A contract with a minor
is void-ab-initio. So no one can enforce contract against a minor,
even a minor cannot ratify contract entered into by him, while he
was a minor, on attaining the age of majority.
(ii)
Voidable: When a contract is enforceable by law at the option

of one party, but not at the option of the other, same is termed as
a voidable contract. Since contract with a minor is void ab initio,
same cannot be termed to be voidable.
(iii) Valid: Vide S -2(h) agreement enforceable by law is contract.

Contract with a minor being void ab initio, same is nullity in the
eye of law. However S -68 of the I.C. Act provides for the liability
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of a minor in respect of necessaries supplied to him. Such a

contract is actually a quasi-contract and valid in the eye of law.
e.g.: In case of money advanced to a minor to meet his
educational expenses or medical expenses, minor would be liable
to the creditor. However only property of the minor would be liable
and minor personally is not liable.
Q. 5
When the consideration or object of an agreement is
said to be lawful?
Ans
S -23 of the I.C. provides that the consideration or object
of an agreement is lawful unless:
(i)
It is forbidden by law or
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(ii)
is of such a nature, if permitted, it would defeat the provisions of

any law; or
(iii)
is fraudulent; or
(iv)
involves or implies injury to the person or property of another; or
(v)
The court regards it as immoral or opposed to public policy.

In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the
object or consideration is unlawful is void.
e.g.: (1) A, B and C enter into an agreement of 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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(2) A is to obtain for B an employment in the public service and B

promises to pay Rs. 1,00,000/- to A. The agreement is void, as the
consideration for it is unlawful.
In Oswal Agro Furane Ltd Vs Oswal Agro Furane
workers union, AIR 2005 SC 1555 the S.C held that A
contract which may otherwise be valid, however, must satisfy the
tests of public policy, not only in terms of the provisions of
sections 25-O and 25-N of Industrial Disputes Act, but also
in terms of section -23 of the Indian Contract Act.
In Jayamma Vs maria Bai AIR 2004 SC 3957 Apex Court
held that When an assignment or transfer is made in
contravention of statutory provisions, the consequence thereof
would be that the same is invalid and thus being opposed to
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public policy, the same shall attract the provisions of S-23 of the
I.C. Act.
Q. 6
A writes to B offering to sell him his house at a
certain price. B at the same time and date, writes a letter
offering to buy the same house at the same price. The two
letters cross each other. Is there a contract between A and
B.
Ans
S -2(a) of the I.C. Act 1872 says When one person
signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a proposal.
S -2(b) says When the person to whom the proposal is made,
signifies his assent there to, the proposal is said to be accepted.
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A proposal when accepted becomes a promise. So when a

proposal is made, the other to whom it is made has to signify his
assent thereto.
In this case, A is alleged to have offered to sell his house to
B. The offer has been made by writing a letter. At the same time
and on the same day, B is alleged to have made an offer to A, by
writing him a letter, to buy the very house offered by A in his
letter. But both the letters cross each other. Both these letters are
letters of offer addressed by one to the other written without
knowing about the letter of the other. Neither A nor B wrote his
letter signifying his assent to the letter of offer.
Under I.C. Act offer becomes promise only when it is
accepted. In the given circumstances, only when B accepts the
offer conveyed to him by A in his letter, it would become promise.
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Similarly only when A accepts the offer conveyed to him by

B in his letter, it would become promise. Here none of letters is by
way of an acceptance of the offer made by the other. So this is a
case of cross offers with no acceptance. Consequently this is not a
case of contract between A and B.
Q. 7
Explain the doctrine of frustration or impossibility
with illustrations.
Ans
Doctrine of Frustration
Each party to a valid contract is legally bound to perform their

respective part of the agreement. At times, after the contract is
formed, performance of part of agreement by one or the other
party becomes impossible for one reason or the other. Sometimes,
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after the contract is arrived at, the contract, itself becomes

unlawful.
e.g.: After formation of the contract for import of goods, import
of goods is forbidden by the government or the goods get
perished or the property in question is destroyed, in such an
eventuality, it would have a case of subsequent impossibility or
frustration.
It is significant to note that an agreement arrived at
between the parties to do an act which is impossible in itself is
void.
For example Where A agrees with B to join two straight lines,
the agreement is void.
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Section 56 of the I.C. Act 1872, deals with the doctrine of

frustration
It says
(1)
An agreement to do an act impossible in itself is void.
(2)
A contract to do an act, which, after the contact is made, becomes

impossible or by reason of some event, which the promisor could
not prevent, becomes void, when the act becomes impossible or
unlawful.
e.g.: (1) A contracts with B to put life in a dead body is void
contract, because it is an agreement to do an act impossible in
itself.
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(2) A and B contract to marry each other. Before the time fixed for
the marriage, A goes mad, the contract becomes void, due to
subsequent impossibility of the performance of contract.
Doctrine of frustration or subsequent impossibility generally
occurs in the following circumstances.
(1)
Destruction of the subject matter of contract
(2)
Change of circumstances
(3)
Non-happening of an event contemplated by the parties.
(4)
Intervention or restriction by the government
(5)
Declaration of war.
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However, it is noteworthy that frustration should not be self

created or self induced.
S -65 of the I.C. Act provides as to the rights of the parties,
when an agreement is discovered to be void or when a contract
becomes void. It says that when an agreement is discovered to
be void or when a contract becomes void, any person who has
received any advantage under such an agreement or contract ,is
bound to restore it or to make compensation for it, to the person
from whom he received it.
e.g.: (1) A pays B, Rs. 1,00,000/- in consideration of Bs promise
to marry C, As daughter. C is dead at the time of promise. The
agreement is void, but B must repay A the Rs. 1,00,000/-.
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(2) A contracts to sing for B at a concert for Rs. 10,000/-, which

are paid in advance. A is too ill to sing. A is not bound to make
compensation to B for the loss of the profits which B would have
made, if a had been able to sing, but A must refund to B the Rs.
10,000/- paid in advance.
Q. 8
Whether the remedies available U/S -73 & 74 for the
breach of contract also contemplate a void agreement.
Ans
Remedies available U/Ss 73 & 74 of the I.C. Act 1872,
contemplate only a valid and binding agreement between the
parties and not a void agreement. If the forfeiture clause is
contained in an agreement which is void, it cannot be enforced, as
the agreement itself is void U/S -20 of the contract Act. It is well
settled that a void agreement cannot split up. None of the parties
to the agreement can be permitted to seek enforcement of a part
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only of the contract through a Court of law. If the agreement is

void, all its terms are void, except in certain known exceptions.
These exceptions may be like a case where the clause is treated
to constitute separate and independent agreement, servable from
the main agreement. In such a situation such a clause of
agreement can be enforced separately and independently.
S -73 of the Act, deals with one of the remedies available for
the breach of contract. It is provided that where a party sustain a
loss on account of breach of contract, he is entitled to receive,
from the party, who has broken the contract, compensation for
such loss or damages
S -74 of the Act comes into application, where the parties to
the agreement stipulate either a particular amount which is to be
paid in case of breach or an amount may be mentioned to be paid
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by way of penalty. In such a situation, the party complaing of the

breach is entitled, whether or not actual damage or loss is proved
to have been caused, to receive from the party, who has
committed the breach of contract, compensation not exceeding
the amount mentioned in the agreement or the penalty stipulated
therein. However this provision of law also contemplates a valid
and binding agreement between the parties.
Q. 9
What is the law relating to restitution in case of a
void agreement?
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Ans
S -65 of the I.C. Act deals with an obligation of
person, who has received advantage under void
agreement or contract that becomes void.
It says that when an agreement is discovered to be void or when a
contract becomes void, any person who has received any
advantage under such agreement or contract is bound to restore
it, or to make compensation for it, to the person from whom he
received it.
S -65 is based on equitable doctrine. It may often be that the
parties may realize, after having entered into the agreement or
after having signed the contract, that one of the matters which
was essential to the agreement, was not understood by them in
the same sense and that both of them were at the time of
entering into the agreement or executing the document. Such
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realization would have the effect of invalidating the agreement

U/S -20 of the Act. On such realization it can be legitimately said
that the agreement was discovered to be void. Comprehend a
situation in which the parties were suffering from a mistake of fact
from the very beginning, but had not realized, at the time of
entering into the agreement or signing of the document, that they
were suffering from any such mistake and therefore had acted
bona-fide on such agreement. The agreement in such a case
would be void from its inception, though discovered to be so at a
much later stage.
So the provision of S -65 i.e. for restitution would come into
application in case of an agreement which is void ab initio, but the
parties had not realized that it was void.
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Q. 10A stranger to contract cannot sue on it. Explain this

statement in context of Doctrine of privity of contract.
Discuss this doctrine of British Law in context of India with
its exceptions.
Ans
Doctrine of privity of contract
The doctrine of privity of contract had its genesis in English

common law, because first time it was adopted by the Court of
kings Bench in Dutton Vs Poole 1677. In this case A person had
a daughter to marry and in order to provide her a marriage
portion, he intended to sell a tree, which was possessed by him at
that time. His son the defendant promised that if the father
would forebear to sell at his request, he would pay to her sister
1,000/- pond. The father accordingly forbore, but defendant did
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not pay 1000 pond to her sister. So the sister and her husband
sued him for the promised amount.
It is here clear that the defendant gave his promise to his
father and it was the father alone, who by not selling the tree, in
contract, had furnished the consideration for the promise of
defendant.
The plaintiff was neither privity to contract nor interested in
the consideration. But it is equally clear that the whole object of
the agreement was to provide a portion to the plaintiff. It would
have been highly inequitable to allow the son to keep the tree and
amount both, and deprive his sister of her portion. Accordingly he
was held liable to pay 1000 pond to his sister, as promised by him.
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But after about 200 years this principle was rejected by Lord
Whiteman in Tweddle Vs Atkinson 1861. He held that the
doctrine of privity of contract is well settled principle of English
common Law, so third person cannot sue on a contract made by
the contracting parties, even for his benefit.
Once again this principle laid down by Lord Whitman was
affirmed by Lord Haldane in Dunlop Vs Selfridge case in 1915
and he held that only a person, who is party to contract alone
can sue upon it.
This doctrine is even today in practice in England with some
exceptions.
Applicability of the Doctrine in India: In India consideration
may proceed from a stranger to the contract i.e. third party, but
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only a party to contract is legally entitled to bring an action for

enforcement of contract in Court.
In Jamma Das Vs Ram Autar 1911, it was held that the
purchasers contract to pay off a mortgage debt could not be
enforced by the mortgage, who was not a party to the contract.
The Supreme Court has endorsed this principle of privity of
contract in a number of cases; particular reference may be made
to (1) M.C. Chako Vs The State of Trakancore AIR, 1970 and (2)
Khusha bhai patel Vs Mohd. Hussain AIR, 1981.
Exception to the doctrine: some main exceptions to the
doctrine of privity of contract are:
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(1)
Where a trust is created in favour of the stranger, as held in

Canady Vs Canady 1880.
(2)
Where provision is made in the marriage settlement as held in

Khwaja Mohd. Khan Vs Hussain; Begum 1910.
(3)
Where provision is made in a partition or family arrangement for

maintenance or marriage of a female member or minor as held in
Dhankaur Vs Sarla Devi 1914.
(4)
Where a charge is created in favour of a stranger as held in Abdul

Gafar Vs Mohd. Salim.
(5)
Where there is a direct agreement to pay to the defendant, who

constitute himself as the agent of the third party as held in
Venkta Reddy Naidu Vs Narsimha Rao 1935.
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It is clear from the above matters that so far as the

exceptions to the rule are concerned, they are similar both under
Indian and English Law.
Q. 11Explain the terms Bailment, Bailor and Bailee with
Illustrations. What are essentials of Bailment.
Ans
Bailment, Bailor & Bailee
S -148 of I.C. Act defines the term Bailment, Bailor and

Bailee as follows:
A bailment is the delivery of goods by one person to
another for some purpose, upon a contract that they shall when
the purpose is accomplished, be returned or otherwise disposed of
according to direction of person delivering them.
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The person delivering the goods is called Bailor. The

person to whom they are delivered is called the bailee.
Explanation
If a person is already in possession of the goods of other,
contracts to hold them as a bailee, he thereby becomes the bailee
and the owner becomes the bailor of such goods, although they
may not have been delivered by way of bailment.
Case Law
(1)
As per A T. Trust Ltd. Vs Trippunthure Devasworm 1954

Bailment is a technical term of the common law. Though
etymologically it might mean any kind of handing over, it involves
change of possession. One has custody without possession, like a
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servant or guest using his hosts goods, is not a bailee. On the

whole a bailment might be described as a delivery on condition to
which the law usually attaches an obligation to re-deliver goods or
otherwise deal with them as directed, when the condition is
satisfied.
(2)
In UOI Vs S.N. Traders AIR 1992 Karnataka H.C. held U/S -73
of the Railways Act, the responsibility of railway administration as
a carrier and also as a bailee commences from the moment the
goods are entrusted to the railway administration for transit to
carried by railway and continue until the goods are unloaded at
the destination point.
(3)
In Kavita Trehan Vs Balsara Hygiene Products Ltd. AIR,

1992 Delhi H.C. held In all cases of bailment the bailee is
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bound to take as much care of the goods bailed to him as a man

of ordinary prudence would under similar circumstances.
This observation of Delhi H.C is based on S -151 of I.C. Act
1872, which deals with care to be taken by bailee.
Essential Elements of Bailment
According to S -148 of I.C. Act 1872, there are three essential
elements of a valid bailment:
(1)
Delivery of goods by the bailer.
(2)
Delivery of possession upon a contract and
(3)
Bailee bound to return goods or to disposes of goods according to

directions of bailor.
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(1)
Delivery of goods: To constitute bailment, there must be a

delivery of goods from one person to another for some specific
purpose.
As per S -149 The delivery to the bailee may be made by
doing anything, which has effect of putting the goods in the
possession of intended bailee or of any person authorized to hold
them on his behalf.
(2)
Contract: There can be no bailment without contract. Hence

for bailment, the essentials of contract U/S -10 are to be satisfied.
In Ram Gulam Vs State of U.P. Allahabad H.C held that
obligation of bailee can arise only out of a contract of bailment
and not otherwise.
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(3)
Return or Disposal of Goods: In Bailment the goods are

delivered for specific purpose. VIZ safe custody, repair, carriage
etc. After the purpose is accomplished, the goods may be returned
to the bailer in the same or altered condition or may be disposed
of as directed by the bailer.
Q. 12Ans
What are the ways of discharge of a contract?

A contract may be discharged in any of the following ways:
(1)
Performance of contract.
(2)
Impossibility of performance
(3)
By agreement
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(4)
By breach and
(5)
By operation of law.
(1)
Performance of contract: Each party to a contract is bound

to perform his part of obligation. After the parties have made due
performance of contract, their liability under the contract comes
to an end. In such a case contract is said to be discharged by
performance.
(2)
Impossibility of performance: According to Anson Most

legal systems make provision for the discharge of contract, where
subsequent to its formation a change of circumstances renders
the contract legally or physically impossible of performance.
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In English law, such a situation is provided by the doctrine of

frustration and in India it is covered by S -56 of I.C. Act 1872. In
Satyabrata Ghosh Vs Mugneeram AIR, 1954 the S.C
observed when change in circumstances makes the
performance of contract impossible the parties are absolved from
the further performance of it, as they did not promise to perform
an impossibility.
(3)
Discharge of contract by agreement: According to S -62 of

I.C. Act:
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.
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Thus within the meaning of S -62 if parties substitute a new

contract for the old, or revoke it or alter it the original contract is
discharged.
Example
A owes money to B under the contract. It is agreed between A, B
and C that B shall thenceforth accept C as his debtor, instead of A.
The old debt of A to B is at end and a new debt from C to B has
been contracted.
(4)
Discharge of contract by breach: Anson Says: If one of

the parties to a contract breaks an obligation, which the contract
imposes, a new obligation will in every case raise a right of action
conferred upon the party injured by the breach. Besides this there
are circumstances in which the breach not only gives rise to cause
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of action, but will also discharge the injured party from such
performance, as may still be due from him.
Breach of contract may be of two type
(i)
Anticipatory breach of contract.
(ii)
Breach of contract during performance of contract.
(5)
Discharge of contracts by operation of law: The instances

of the discharge of contract by operation of law are following:
(i) Merger (ii) Discharge by judgment (iii) Alternation or
cancellation of a written instrument (iv) Bankruptcy
If in place of lower security, a higher security is accepted,
the lower security will be deemed to be merged in the higher
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security and party concerned shall be discharged from its

obligation in respect of lower security.
A contract may also be discharged by the judgment of a
court of competent and appropriate jurisdiction in favour of the
plaintiff.
If a party to contract makes alterlation or cancellation of a
written instrument of contract, the other party is discharged from
its obligations under the contract.
When a person is adjudged a bankrupt by the court, he is
thereby discharged from his debts and other obligations. Thus
bankruptcy may also operate to discharge the obligations of a
party to a contract.
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Q. 13-
Decide whether following are offer:
(i)
Catalogue and display of Goods.
(ii)
Announcement to hold Auction
(iii) Free distribution of Articles.

(iv) Tender
Ans
(i) Catalogues and display of Goods
This topic is related to offer and invitation to offer.

In Grainger & Son Vs Gough, 1896 Lord Herschell had
deserved that The transmission of a price list does not amount
to an offer to supply unlimited quantity of the wine described in
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the price list. Thus in the light of above observation A

shopkeepers catalogue of prices is not an offer. It is only an
invitation to offer to buy at the indicated prices.
Similarly in Pharmaceutical Society of Great Britain
Vs Boots Cash Chemist Ltd, 1952 Lord Goddart said It would
be wrong to say that the shopkeeper is making an offer to sell
every article in the shop to any person who might come in and
that person can insist on buying any article by saying I
accept your offer.
e.g.: In most bookshops customers are invited to go in and
pickup books, but there is no contract. until they proposes to buy
and same is accepted by shopkeeper. Here shopkeeper is not
bound to sell the book to him.
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Thus the display of goods in a shop with price chits attached

to them is not an offer even if there is a self service system in
the shop.
(ii) Announcement to hold auction
An auctioneers announcement that specified goods will be sold
by auction on a certain day is not an offer to hold auction and he
will not be liable to persons travelling up to place, if he changes
his mind and does not hold auction
In Union of India Vs Gangadharan Mohan Das 1997 it
has been held that for cancellation of auction after due
consideration, no bidder can claim anything under the doctrine of
legitimate expectation. Even when an auction is held the bid is not
an acceptance so as to entitle, the highest bidder to get the
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goods. The highest bid is nothing more than an offer to buy and it
requires to be accepted by the auctioneer.
In Spencer Vs Hording Court held It does not matter for
this purpose that the auction was held by the Government. Even a
Government auction may be cancelled before any bid is finally
accepted.
(iii) Free Distribution of Articles
Where in pursuance of a scheme adopted by ESSO, the petrol
station proprietors announced that they would give World cup
Coins one to every buyer of four gallons of petrol, it was held that
the distribution of the coins was not a contract of sale so as to
attract the provisions of Purchase Tax Act, but only a gift.
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The above observation was made by the court in ESSO

petroleum Co Ltd. Vs Commissioner of Customs & Excise.
Thus we can say that the free distribution of articles is not a
contract, under contract law. So an action cannot be brought for
breach of offer.
(iv) Tender
Tender is not an offer rather an invitation to offer. After its
acceptance, it sometimes becomes what is known as a standing
offer or continuing offer. A contract takes place only after the
order is placed.
In Bengal Co. Ltd Vs Home Wadia & Co Defendant
entered into an agreement to supply a kind of coal from time to
time required by the plaintiff for a period of twelve months. The
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plaintiff, in pursuance of the said agreement, placed certain

orders and the defendant supplied the coal. But before the lapse
of 12 months they withdrew their offer and refused to supply the
coal any more. The plaintiff thereupon filed the suit against them
for the breach of contract. The court dismissed the suit on the
ground that there was no contract, and it was only a continuing
offer. So defendants have right to revoke it. However they could
not revoke their offer in respect of the orders actually placed.
This principle was affirmed by judicial committee of the privy
council in R Vs Demers 1990. The S.C of India has also laid down
the same principles in UOI Vs Madala Thathiah An offer
should be distinguished from an invitation to receive offers.
Q. 14 Distinguish between:
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(1)
(2)
(3)
(4)
(5)
(6)
Void and Voidable Contract

Void and Illegal Contract
Coercion and Duress
Coercion and Undue influence
Fraud and Misrepresentation
Contract of Indemnity and Contract of Guarantee.
Ans:(1)
Contract
(1)
Distinction
between
Void
and
Voidable
Void contract is not enforceable by law, while voidable contract is

enforceable by law at the option of one of the parties to the
contract.
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(2)
Void contract has no legal binding effect, while voidable contract

continues to be legal till declared void.
(3)
In void contract, the defects are incurable, while in a voidable

contract, the defect is curable and may be condoned.
(4)
The contract becomes void, when it ceases to be enforceable. A

contract becomes voidable only when consent to agreement is
obtained
by
coercion,
undue
influence,
fraud
or
misrepresentation.
(5)
Void contract is defined in sec 2 (j), while voidable contract is

defined in S -2(i) of Contract Act 1872.
(2)
Distinction between void and Illegal Contract
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(1)
All void agreements are not necessarily illegal, while all illegal
contracts are void.
(2)
All collateral contracts to a void contract are not void while all
collateral contracts to illegal contract are void.
(3)
Ground for the voidness has to be proved in case of void contract,

while in case of illegal contract, Court on its own motion may
refuse to enforce it, even though the illegality has not been
pleaded.
(4)
The parties to a void contract are not necessarily liable to penalty,

while parties to an illegal contract are liable to be penalized.
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(3)
Distinction between coercion and Duress
(1)
Coercion can be employed against any person including a

stronger, while Duress can be employed only against party to the
contract or the members of own family.
(2)
Immediate violence need not arise from coercion, but Duress must
be such as to cause immediate violence.
(3)
Coercion need not be such as to affect a man with ordinary

strength of mind; Duress must be such as to affect a man with
ordinary strength of mind.
(4)
Coercion may be employed by any person, while Duress may be

employed only by the party to the contract or his agent.
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(4)
Distinction between Coercion and Undue Influence
(1)
In coercion consent is obtained by threat of an offences while

under undue influence consent is obtained by dominating the will
of the giver.
(2)
Coercion is mainly a physical character, while undue influence is a

moral character.
(3)
In case of coercion relationship between parties is not necessary,

while in case of undue influence there must exist some
relationship between the parties to contact.
(4)
Coercion is of violent character, while undue influence is more

subtle and intangible.
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(5)
Distinction between Fraud and Misrepresentation
(1)
Fraud is more or less intentional wrong, while misrepresentation

may be quite innocent.
(2)
The person making misrepresentation has no knowledge as to its

truth, while the person making fraud statement has full knowledge
as to its truth.
(3)
A party aggrieved by misrepresentation can avoid the contract,

but cannot claim damages, while a party aggrieved by fraud can
avoide the contract and can also claim damages.
(4)
Misrepresentation by itself is not a tort, while fraud by itself is a

tort.
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(6)
Distinction between Contract of Indemnity and Contract of

Guaranty
Contract of Indemnity
Contract of Guarantee
(1)
(1)
It is a contract to save the other

perform the
from the loss caused to him by
the
the conduct of the promisor or
person in case
another person
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It is a contract to
promise or discharge
liability of a third
of his default.
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(2)
The liability of promisor is primary.

is of princNo secondary liability.
of
(2)
The primary liability
ipal debtor and the liability

surety is secondary.
(3)
The contract between the

between the surety
indemnifier and the indemnity
is implied
holder is express and specific.
creditor and prin-
(3)
The contract
and principal debtor
and between
cipal debtor is express.
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(4)
(5)
(6)
In contract of indemnity there is only

Guarantee there is
one agreement
(4)
Contract of indemnity protects the

guarantee is for the
promisee from the loss
creditor.
(5)
In contract of
three agreement
Contract of
surety of the
In case of contract of indemnity the

(6) In case of contract of
guarantee
promisor cannot file the suit against
the surety does not
require any
third person until and unless the
subrogation for filing a suit
promise subrogate his rights in favour
of the promisor.
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Model Q. Ans For The Indian Contract Act 1872

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Model Q & Ans.

for Judicial Service Main Exam

S.S. Law Academy, Civil & judicial,

A proposal, when accepted, becomes promise and that is

S.S. Law Academy, Civil & judicial,

that person can insist on buying an article by saying I accept

S.S. Law Academy, Civil & judicial,

S.S. Law Academy, Civil & judicial,

S.S. Law Academy, Civil & judicial,

(2) A makes promise to put life in dead body is void agreement,

S.S. Law Academy, Civil & judicial,

The statement in question is made by Sir William Anson in the

S.S. Law Academy, Civil & judicial,

is applied to train carrying gun powder, the train is destroyed.

S.S. Law Academy, Civil & judicial,

S.S. Law Academy, Civil & judicial,

Thus an offer before it is accepted unconditionally it can be

S.S. Law Academy, Civil & judicial,

in light of provision and illustration made U/S -5 of ICA

Q. 4 Mention the circumstances in which a contract by a

S.S. Law Academy, Civil & judicial,

contract. However a minor can still derive benefit there under.

Voidable: When a contract is enforceable by law at the option

(iii) Valid: Vide S -2(h) agreement enforceable by law is contract.

S.S. Law Academy, Civil & judicial,

of a minor in respect of necessaries supplied to him. Such a

S.S. Law Academy, Civil & judicial,

is of such a nature, if permitted, it would defeat the provisions of

involves or implies injury to the person or property of another; or

The court regards it as immoral or opposed to public policy.

S.S. Law Academy, Civil & judicial,

(2) A is to obtain for B an employment in the public service and B

S.S. Law Academy, Civil & judicial,

S.S. Law Academy, Civil & judicial,

A proposal when accepted becomes a promise. So when a

S.S. Law Academy, Civil & judicial,

Similarly only when A accepts the offer conveyed to him by

Each party to a valid contract is legally bound to perform their

S.S. Law Academy, Civil & judicial,

after the contract is arrived at, the contract, itself becomes

S.S. Law Academy, Civil & judicial,

Section 56 of the I.C. Act 1872, deals with the doctrine of

An agreement to do an act impossible in itself is void.

A contract to do an act, which, after the contact is made, becomes

S.S. Law Academy, Civil & judicial,

Destruction of the subject matter of contract

Non-happening of an event contemplated by the parties.

Intervention or restriction by the government

S.S. Law Academy, Civil & judicial,

However, it is noteworthy that frustration should not be self

S.S. Law Academy, Civil & judicial,

(2) A contracts to sing for B at a concert for Rs. 10,000/-, which

S.S. Law Academy, Civil & judicial,

only of the contract through a Court of law. If the agreement is

S.S. Law Academy, Civil & judicial,

by way of penalty. In such a situation, the party complaing of the

S.S. Law Academy, Civil & judicial,

S.S. Law Academy, Civil & judicial,

realization would have the effect of invalidating the agreement

S.S. Law Academy, Civil & judicial,

Q. 10A stranger to contract cannot sue on it. Explain this

Doctrine of privity of contract

The doctrine of privity of contract had its genesis in English