Part A – Lawsage

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PART – A

Questions 1 – 5 (Each Question Carries 4 Marks – Attempt All)

Q1. Explain the Doctrine of Privity of Contract.

The doctrine of privity of contract means that a contract creates rights and obligations only between the parties who have entered into it. No third person (stranger) can sue upon a contract even if the contract is made for his benefit.

In other words, only the parties to the agreement are entitled to enforce the contract. A person who is not a party has no legal standing to claim performance or damages under that contract.

This doctrine is based on the principle that contractual obligations arise only from the consent of the parties. Since a stranger has not given consent, he cannot acquire rights under the contract.

However, Indian law recognizes certain exceptions such as:
1. Trust – beneficiary can sue.
2. Family settlement – members can enforce.
3. Agency – principal can enforce contracts made by agent.
4. Assignment – rights can be transferred.
5. Acknowledgement or estoppel.

Section: Principle based on Sections 2(h) and 10, Indian Contract Act, 1872.

Simple Explanation: Only the people who make a contract can use it in court. If you are not part of the agreement, you normally cannot demand anything from it.

Q2. Define Consideration.

Consideration is something given in return for a promise. It is the foundation of every valid contract. Without consideration, an agreement generally becomes void.

According to Section 2(d) of the Indian Contract Act, 1872, when at the desire of the promisor, the promisee or any other person has done or abstained from doing something, or promises to do or abstain from doing something, such act or promise is called consideration for the promise.

Consideration may be:
1. Past – something already done.
2. Present – something done now.
3. Future – something promised to be done later.

For a valid contract, consideration must be lawful, real and possible.

Section: Section 2(d), Indian Contract Act, 1872.

Simple Explanation: If one person makes a promise, the other person must give or do something in return. This exchange is called consideration.

Q3. Explain Discharge of Contract by Novation.

Discharge of contract by novation means substitution of a new contract for an old one. When the parties agree to replace the existing contract with a new contract, the old contract is discharged.

According to Section 62 of the Indian Contract Act, 1872, if the parties to a contract agree to substitute a new contract, or to rescind or alter it, the original contract need not be performed.

Novation may take place by:
1. Change in parties.
2. Change in terms.
3. Change in both parties and terms.

Consent of all parties is necessary for novation.

Section: Section 62, Indian Contract Act, 1872.

Simple Explanation: When people cancel the old agreement and make a new one instead, it is called novation.

Q4. What are Voidable Contracts?

A voidable contract is a contract which is enforceable by law at the option of one party but not at the option of the other.

According to Section 2(i) of the Indian Contract Act, 1872, a contract is said to be voidable when one party has the right to either enforce it or reject it.

A contract becomes voidable when consent is not free. Consent is not free when caused by coercion, undue influence, fraud, misrepresentation or mistake under Sections 13 to 19.

The affected party may continue or cancel the contract.

Section: Section 2(i), Sections 13–19, Indian Contract Act, 1872.

Simple Explanation: If someone is forced or cheated into a contract, they can cancel it.

Q5. Explain Capacity to Contract.

Capacity to contract means the legal ability of a person to enter into a valid contract.

According to Section 11 of the Indian Contract Act, 1872, a person is competent to contract if he has attained the age of majority, is of sound mind, and is not disqualified by any law.

A person of sound mind must understand the contract and form a rational judgment. Minors, persons of unsound mind and persons disqualified by law cannot enter into valid contracts.

Section: Section 11, Indian Contract Act, 1872.

Simple Explanation: Only adults who are mentally fit and legally allowed can make contracts.

Questions 6 – 10 (Each Question Carries 4 Marks – Attempt All)

Q6. Explain Express and Implied Contracts.

A contract is an agreement enforceable by law. Contracts may be created either by words or by conduct of the parties.

According to Section 9 of the Indian Contract Act, 1872, a contract may be made by words, spoken or written, or may be implied from the conduct of the parties.

An express contract is a contract in which the terms of the agreement are clearly stated either orally or in writing. Here, the intention of the parties is directly expressed. In an express contract, offer, acceptance, consideration and other terms are clearly communicated.

Example: A says to B, “I will sell my laptop for ₹40,000.” B agrees. This is an express contract.

An implied contract is formed by the conduct, behavior, or circumstances of the parties and not by spoken or written words. The intention of the parties is understood from their actions.

Example: When a person enters a bus and pays the fare, an implied contract is formed between the passenger and the transport authority.

Both express and implied contracts are valid and enforceable if they satisfy the essentials of a valid contract such as offer and acceptance, lawful consideration, free consent, lawful object and capacity of parties.

Section: Section 9, Indian Contract Act, 1872.

Simple Explanation: If the agreement is clearly spoken or written, it is an express contract. If the agreement is understood from actions, it is an implied contract.

Q7. Explain Liquidated and Unliquidated Damages (Kinds of Damages).

Damages are the money compensation paid to the injured party when a contract is breached. The main purpose of damages is to place the injured party in the same position as if the contract had been properly performed.

Liquidated damages are those damages which are fixed in advance by the parties in the contract itself. The amount payable in case of breach is already decided and mentioned in the agreement. It saves the time of court in calculating the loss.

Example: If a contract says that ₹20,000 shall be paid for delay in delivery, then ₹20,000 is liquidated damages.

Unliquidated damages are not fixed in advance. When breach occurs, the court decides the amount after considering the actual loss suffered by the injured party.

Example: If no amount is mentioned in the contract and breach occurs, the court determines reasonable compensation.

According to Section 74 of the Indian Contract Act, 1872, when a sum is named in the contract as payable on breach, the party complaining of breach is entitled to receive reasonable compensation not exceeding the amount so named.

The object of damages is to compensate the loss, not to punish the party, and to restore the injured party.

Section: Section 74, Indian Contract Act, 1872.

Simple Explanation: If the amount is written earlier it is liquidated damages, and if the court decides the amount later it is unliquidated damages.

Q8. Explain Conditions for Contracts which can be Specifically Enforced.

Specific performance is a legal remedy in which the court orders the party to actually perform the promise instead of paying money compensation. This remedy is governed by the Specific Relief Act, 1963.

Specific performance is granted when monetary compensation is not sufficient to satisfy the injured party.

A contract can be specifically enforced when:
1. There must be a valid contract.
2. The plaintiff has performed or is ready to perform his part of the contract.
3. Compensation in money is not adequate relief.
4. The contract is fair, lawful and reasonable.
5. The terms of the contract are certain and clear.
6. The contract is possible to perform.

Contracts of personal service, illegal agreements, contracts depending on personal skill and uncertain contracts are not specifically enforceable.

Section: Sections 10–14, Specific Relief Act, 1963.

Simple Explanation: When money cannot properly compensate the loss, the court orders the person to actually do what he promised.

Q9. What is a Contingent Contract?

A contingent contract is a contract to do or not to do something if a future uncertain event happens or does not happen.

According to Section 31 of the Indian Contract Act, 1872, a contingent contract is a contract dependent on the happening or non-happening of a collateral event. The performance of the contract depends on that event.

The event must be uncertain and collateral to the contract. The contract becomes enforceable only on the happening of the event. If the event becomes impossible, the contract becomes void.

Examples include insurance contracts, accident compensation agreements and payment on winning a case.

Section: Sections 31–36, Indian Contract Act, 1872.

Simple Explanation: The contract works only when a future uncertain event happens.

Q10. Explain Agreement in Restraint of Legal Proceedings.

An agreement which restricts a person from enforcing his legal rights through a court of law is called an agreement in restraint of legal proceedings.

According to Section 28 of the Indian Contract Act, 1872, every agreement which absolutely restricts a party from enforcing his rights under a contract through usual legal proceedings is void. Such agreements are against public policy because they prevent access to justice.

However, arbitration agreements and agreements limiting the time for filing a suit are valid exceptions.

The object of law is to protect legal rights, ensure justice and allow people to approach courts freely. No person can be stopped from going to court for protection of rights.

Section: Section 28, Indian Contract Act, 1872.

Simple Explanation: No agreement can stop a person from going to court to protect his legal rights.