Indian contract Act- Easy explanation for District Judge Interview

1. Big Picture of the Indian Contract Act

Think of the Act in 3 layers:

1. General contract (foundation) – ss.1–75

   • Offer & acceptance (3–9)

   • Essentials of a valid contract, capacity, consent, unlawful objects, void agreements (10–30)

   • Contingent contracts (31–36)

   • Performance, discharge, impossibility (37–67)

   • Quasi‑contracts (68–72)

   • Breach and damages (73–75)

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Termination of contract as per Indian contract Act

 Contract termination under the Indian Contract Act, 1872 refers to the legal ending of contractual obligations between parties. The Act provides several mechanisms through which contracts may be terminated, each with specific legal implications and procedures.

Key Modes of Contract Termination

1) Performance of Contract

The most natural way a contract terminates is through completion, where all parties fulfill their contractual obligations. Section 37 of the Act mandates that "the parties to a contract must either perform or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act"

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Whether the court can partially set aside an arbitration award if it is in violation of provisions of The Indian Contract Act?

 Thus, to summarize where a debtor, owing several distinct debts to one person, makes a payment indicating that the payment is to be applied to the discharge of some particular debt, the payment must be applied accordingly in terms of S. 59 of the Contract Act. However, where the debtor omits to so intimate, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits, according to S. 60.Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by limitation in terms of Section 61 of the Contract Act. {Para 51}

52. In the present case, there is neither any averment nor any evidence that the respondent while making payments to the appellant in terms of the Contract ever indicated the manner of apportionment. When neither party specifies the manner of apportionment, then the amount has to be first adjusted towards earlier debts irrespective of limitation as indicated by Section 61 Contract Act. Thus, the money which was continuously being received from the respondent was to be apportioned to the previous amounts that were due in the earlier Agreements as has been reflected in the ledger accounts. The amount as due in 2018 was the claimed amount of Rs. 2,64,99,671/-.

53. The learned Arbitrator while was correct in observing that the arbitration had been invoked pursuant to the Contract of 12.11.2012 renewed in 2015, but he overlooked the statutory provisions under Contract Act for apportionment of money received from the Respondent from time to time. Rather the documents of Respondent especially the confirmation letters and also the Reply to the Legal Notice, not only reflect his own admissions of the outstanding liability but also that the apportionment of money was done in accordance with Section 61 of the Contract Act.

III. Award suffers from patent illegality as is based on no evidence and in contravention of substantive Law:

54. Section 28(1)(a) of the A&C Act, 1996 mandates the arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India.

55. Section 28(1)(a) and (3) of the AC Act, 1996, which reads as follows-

“28. Rules applicable to substance of dispute.—(1) Where the place of arbitration is situate in India,—

(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;

.—(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.”

56. Hence, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, it necessarily suffers from patent illegality and has to be set aside.

57. The Ld. Arbitrator, in the present case has not only based his findings overlooking the admissions of the respondent coupled with no evidence being led by the respondent but has completely overlooked the statutory provisions of the Contracts Act, 1996 which is a substantive law applicable in the present proceedings. It is also evident that the admission/acknowledgement of the outstanding dues was in reference to the two Agreements dated 12.11.2012 and 31.03.2015. Therefore, the conclusions arrived at by the learned Arbitrator that the claim did not pertain to the two Agreements under which the arbitration had been invoked is based on non-appreciation of the evidence and ignoring the admissions which were on record and also in contravention of the statutory provisions of law.

 In the High Court of Delhi at New Delhi

(Before Neena Bansal Krishna, J.)

Amazing Research Laboratories Ltd. Vs  Krishna Pharma 

O.M.P. (COMM) 376/2020

Decided on March 13, 2023

Citation: 2023 SCC OnLine Del 1498

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Whether surrender of tenancy by one co-lessee to the landlord will bind other co-lessee?

1) The appellant/plaintiff, on 6th June, 1984 instituted the suit from which this appeal arises, pleading (i) that the appellant/plaintiff and the respondent/defendant No. 1 Rakesh Kumar, vide Deed dated 3rd September, 1975 entered into a partnership, to start a firm in the name and style of M/s. Neel Jewellers, to carry on business of repair and sale of silver jewellery and repairing and making of gold ornaments, at Shop No. 47 U.B., Jawahar Nagar, Delhi which was jointly taken, on rent by the appellant/plaintiff and the respondent/defendant No. 1 Rakesh Kumar for partnership business, from the respondent/defendant No. 2 Maya Devi, who was the mother of the respondent/defendant No. 1 Rakesh Kumar.

2) A lease is nothing but a contract between the lessor/landlord and the lessee/tenant. Law relating to leases of immovable property is otherwise codified in the Transfer of Property Act. Section 4 of the Transfer of Property Act, which was enacted later in point of time, provides that the Chapters and Sections of the Transfer of Property Act which relate to contract shall be taken as part of the Contract Act. Chapter V, titled "Of Leases of Immoveable Property", of the Transfer of Property Act does not provide for relations inter se lessee, if more than one i.e. of performance of obligations of a lessee under the lease. However the same under Section 111 titled "Determination of Lease" provides for termination of lease inter alia by express or implied surrender. However it does not provide, whether surrender of lease, in the event of lease in favour of more than one person, has to be by all or even one of them is capable of so surrendering the lease and which surrender would bind the others as well. Mention may also be made of Section 108 titled "Rights and Liabilities of Lessor and Lessee", in the absence of a contract to be contrary, and which vide Section 108(B)(q) provides it to be a liability/obligation of the lessee to, on determination of lease, put the lessor into possession of the property. Here, there is no pleading or evidence of any contract between the appellant/plaintiff and the respondent/defendant No. 1 as lessees on the one hand and respondent/defendant No. 2 as lessor on the other hand, having contracted to the contrary. I had during the hearing also referred the counsels to Section 45 of the Transfer of Property Act which provides that when immovable property is transferred for consideration to two or more persons, they are, in the absence of a contract to the contrary, entitled to interests in such property equivalent to the proportion of the consideration paid by them and in the absence of evidence thereof, to equal interest in the property. A lease of property is a contract of transfer of property within the meaning of Section 45 of the Act.

3) I fail to see, that when under Section 43 of the Contract Act one of the two persons who have together taken a premises on rent, by making payment to the landlord is in a position to discharge the liability of the other tenant also, why the surrender of tenancy by respondent/defendant No. 1 herein, who along with the appellant/plaintiff had taken the premises on rent, would not bind the appellant/plaintiff. The appellant/plaintiff, if had intended to the contrary, considering that the landlord was none else but the mother of the respondent/defendant No. 1, ought to have contracted to the contrary and which was not done. In the absence of a contract to the contrary, under Section 43 of the Contract Act, the respondent/defendant No. 1 was entitled to surrender the tenancy.

IN THE HIGH COURT OF DELHI

RSA 146/2005

Decided On: 09.05.2020

 Gauri Shankar Vs.  Rakesh Kumar and Ors.

Hon'ble Judges/Coram:

Rajiv Sahai Endlaw, J.

Citation:  MANU/DE/1023/2020

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Whether guarantor can waive rights granted under contract Act?

"We are of the view that as the provisions contained in Chapter VII of the Act relating to Indemnity and Guarantee, they deal with one subject and they are to be read together. The liability of the surety as stated in general terms in section 128 of the Act is no doubt coextensive with that of the principal debtor, but this liability is also subject to the terms of the contract; because section 128 of the Act itself specifically provides that the liability of a surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. Thus the liability of the surety is subject to the terms of the contract as may be arrived at between the parties. The words "unless it is otherwise provided in the contract" occurring in section 128 of the Act will also govern the other provisions contained in Chapter VIII of the Act and enable the surety to give up the rights available to him under sections 133, 134, 135, 139 and 141 of Act. It is a settled legal position of law that a legal right can be given up provided such giving up of a legal rights under any contract is not hit by section 23 of the Act. Section 133 of the Act makes it clear that any variance made in the contract between the principal debtor and the creditor without the consent of the surety, discharges the surety as to the transactions subsequent to variance. This consent of the surety can be obtained either at the time the contract is made between the principal debtor and the creditor to which the surety gives the guarantee for making any change or alteration in the contract to be made or not to claim any right or benefit under Chapter VIII of the Act. In other words, in the surety-bond/guarantee-bond itself the surety can agree to waive his rights available to him under the various provisions contained in Chapter 8 of the act. Such waving of his right by the surety is permissible under sections 133 read with section 128 of the Act."

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Miscellaneous First Appeal No. 4140 of 2010 (SFC)

Decided On: 25.02.2019

Karnataka State Industrial Investment and Development Corporation Limited Vs  G.C. Lohia and Ors.

Hon'ble Judges/Coram:

Ravi V. Malimath and B.M. Shyam Prasad, JJ.

Citation: AIR 2019 Karn 80

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What constitute consideration for passing of compromise decree?

 Section 2(d) of the Indian Contract Act, 1872 defines consideration. It is something done or promised to be done or something not done or something promised not to be done by the promisee at the desire of the promiser. This definition clearly shows that the consideration could be monetary as well as in kind or in the nature of some sacrifice made by the promisee at the desire of the promiser. Having understood the concept of consideration under the Indian Contract Act, now we would have to take a look at the compromise application signed and executed by the parties.

7. It is seen from the compromise application that even though there is no mention in it about payment of price of the suit properly, the deficiency is made up by what is stated in it's paragraph 3(1). Contents of this para disclose that the defendant (applicant-judgment debtor) has shown his readiness to execute the sale deed in respect of 1/4th share out of his 1/3rd share from the property bearing Khasra No. 81/2, RH. No. 46 situated at mouza Isasani. So, this is an act promised to be done by the defendant or the applicant who is the promisee in the instant case. The respondent or the decree holder is the promiser in this case and as seen from the prayer clause, has expressed a desire that in lieu of the promise so given by the promisee, the Court be pleased to grant a compromise judgment and decree as per the terms and conditions mentioned in the application. These mutual acts performed or promised to be performed by both parties from the consideration for what each of the parties to the compromise application has agreed to do in the present case. Therefore, this is not a case wherein one can surely say that the compromise application was devoid of any consideration, as the term is defined in law.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Civil Revision Application No. 86 of 2017

Decided On: 13.09.2017

Suresh Daulatrao Wirulkar Vs.  Ganesh Rajaram Bodkhe

Hon'ble Judges/Coram:

S.B. Shukre, J.

Citation: 2018(3) MHLJ 112

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Good infographic on Pledge And Agency (Indian Contract Act, 1872)

Pledge And Agency (Indian Contract Act, 1872) [Infographics]

Click The Images For Larger Size.

Pledge

Rights Of Pawnee

Agency1

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