FREE CONSENT

Free consent of all the parties to a contract is one of the essential element of a valid contract as per requirement of section 10. The parties to a contract should have identity of minds. This is called consensus ad idem in  English Law.

  A contract which s valid in all other respects may still fail because there is no real consent to it by one or both of the parties.

Consent defined

   Two or more person are said to consent when they agree upon the same thing in the same sense. It means that there is no contract if the parties have not agreed upon the same thing in the same sense.

Absence of a contract may arise from a number of causes, namely (1) by reason of an error as to the nature of the contract itself, (2) by reason of an error as to the identity of the party with whom all the cases, there is no contract at all because in the law of contract consensus ad idem is a condition essential to the formation of a contract. 

PERSON DISQUALIFIED FROM CONTRACTING BY ANY OTHER LAW

It refers to statutory disqualification imposed on certain person in respect of their capacity to contract.


1. Alien enemies.
           An alien is competent to contract with citizens of the indian living in India. He can maintain as action on a contract enter onto by him during peace him time. But if a war is declared, an alien enemy cannot enter into a contract with the Indian citizen. Contract entered into before the declaration of war are either stayed or terminated but contract into during the war are unenforceable.


2. Foreign sovereigns and ambassadors.
           These person are immune from the jurisdiction of local courts, unless they voluntarily submit to its jurisdiction. These persons have a right to contract but can claim the privilege of not being sued. The rules regarding suits by or against foreign sovereigns are laid down in section 84 to 87 of Civil Procedure Code.


3. Insolvent.
           An insolvent cannot enter into a contract as his property vests in the official receiver or official assignee. This disqualification of an insolvent is removed after he is discharged.


4. Convict.
           A convict while undergoing imprisonment in incapable of entering into a contract. But this disability comes to an end on the expiry of the sentence.


5. Corporations.
           A Corporation is an artificial person recognised by law. It exists only in the eyes of law. It is competent to enter into a contract only through its agent.


6. Married women.
           A women is competent to enter into a contract. Marriage does not affect the contractual capacity of a women. She can even bind her husband in cases of pressing necessity. A married woman may sue or be sued in her own name in respect of her separate property.


7. Professional persons.
           Doctors and advocates are included in the class. In england barristers are prohibited by the etiquettes of their profession from suing for their fees.


   

PERSON OF UNSOUND MIND

As explained earlier, as per Section 11 of contract Act, for a valid contract each party to the contract must have a sound mind. Contract made by person of unsound mind are void. The reason is that a contract requires assents of two minds but a person of unsound mind has nothing which the law recognize as a mind.


Section 12 deals with the question as to what is a sound mind for the purpose of entering into contract. It lays down that, "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 judgement as to its effects upon his interest."


Unsoundness of mind may arise from:
(a) Idiocy. An Idiot is a person with no intervals of saneness. He is in capable. His mental powers of understanding even ordinary matters are absent because of lack of development of brain. The agreement with an idiot is void.
  
(b) Lunacy or Insanity. It is disease of brain. A lunatic loses the use of his reason due to some mental strain or disease. He may have Lucid Intervals of sanity. He can enter into contract during that period when he is of sound mind.


(c) Drunkenness. It produces temporary incapability till the man is under the effect of intoxication creating impotence of mind. He stands on the same footing as a lunatic.


(d) Hypnotism. It also produce temporary incapability till the person is under the impact of artificially induced sleep.


(e) Mental decay. It is on account of old age etc.


So, an agreement with person of unsound mind is void. But under Section 68, the property of such person is always liable for necessaries supplied to him or to anyone whom he is legally bound to support.

RULES REGARDING MINOR'S AGREEMENT

A minor's agreement being void is wholly devoid of all effects. When there is no contract there should be no contractual obligation on either side.


1. An agreement with or by minor is void
            Section 10 of the Indian Contract Act requires that the parties to a contract must be competent and Section 11 says that a minor is not a competent. BUt either section makes it clear whether the contract entered into by a minor is void or voidable. Till 1903, court in india wee not unanimous on this point the privy council made it perfectly clear that a minor is not competent to a contract and that a contract by minor is void ab initio.
    The leading case is:

MOHRI BIBI V. DHARMO DAS GHOSE (1903)

    "A minor borrowed Rs. 20000 from B and as a security for the same executed a mortgage in his favor. He became    a major a few months later and filled a suit for the declaration that the mortgage executed by him during his majority was void and should be cancelled. It was held that a mortgage by a minor was void and B was not entitled to replacement of money.

2. No ratification

            An agreement with the minor is completely void. A minor cannot ratify the agreement even on attaining majority, because a void agreement cannot be ratified. A person who is not competent authorize an act cannot give it validity by ratifying.

   But If on becoming major, minor makes a new a new promise for fresh consideration, then this new promise will be binding.

3. Minor can be a promise or beneficiary

            If a contract is beneficiary to a minor it can be enforced by him. Their is no restriction on a minor from bring a beneficiary, for example, being a payee or a promisee in a contract. Thus a minor is capable of purchasing immovable property and he may sue to recover the possession of the property upon tender of the purchase money. Similarly a minor in whose favor a promissory note has been executed can enforce it.

4. No estoppel against a minor 

            Where a minor by misrepresenting his age has induced the other party enter into a contract with him, he cannot be made liable on the contract. There can be no estoppel against a minor. It means he is not estoppel from pleading his infancy in order to avoid a contract.

5. No Specific performance Except in certain cases

            A minor's contract being absolutely void, there can be no question of the specific performance of such contract. A guardian of a minor cannot bind the minor by an agreement for the purchase of immovable property ; so the minor cannot ask for the specific performance of the contract which the guardian had no power to enter into.

But a contract entered into by guardian or manager on minor's behalf can be specifically enforced if

(a) The contract is within the authority of the guardian or manager.

(b) It is for the benefit of the minor.

(LALCHAND V. NARHAR 89 IC 896)

6. Liability for torts

            A trot is a civil wrong. A minor is liable in tort unless the tort in reality is a breach of contract. Thus, where a minor borrowed a horse for riding only he was held liable when the he lent the horse to one of his friends who jumped and killed the horse.

   But a minor cannot be made liable for a breach of contract by framing the action on tort. you cannot convert a contract into a tort to enable you to sue an infant.

7. No insolvency

            A minor cannot be declared insolvent as he is incapable of contracting debts and dues are payable from the personal properties of minor and he is not personally liable.

8. Partnership

            A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Indian Contract Act , he can be admitted to the benefits of partnership.

9. Minor can be an agent

            A minor can act as an agent. But he will not to be liable to his principal for his acts. A minor can draw, deliver and endorse negotiable instruments without himself being liable.

10. Minor cannot bind parent or guardian

            In the absence of authority, express or implied, an infant is not capable of binding his parent or guardian, even for necessaries. The parents will be held liable only when the child is acting as an agent for parents.

11. Joint contract by minor and adult

            In such a case, the adult will be liable on the contract and not the minor. In Sain Das Vs Ram Chand, where there was a joint purchase by two purchaser, one of them was a minor. It was held that the vendor could enforce the contract against the major purchaser and not the minor.

12. Surety for a minor

            In a contract of guarantee when an adult stands for a minor then he (adult) is liable to third party as there is direct contract between the surety and the third party.

13. Minor as Shareholder

            A minor, being incompetent to contract cannot be a shareholder of the company. If by mistake he become a member, the company can rescind the transaction and remove his name from register. But, a minor may, acting through his lawful guardian become a shareholder by transfer or transmission of fully paid shares to him.

14. Liability for necessaries

            The case of necessaries supplied to a minor or to any other person whom such minor is legally bound to support is governed by section 68 of the Indian Contract Act. A claim for necessaries supplied to a minor is enforceable by law. But a minor not liable for any price that he may promise and never for more than the value of the necessaries. There is no personal liability of the minor, but only his property is liable.


To render minor's estate liable for necessaries two conditions must be satisfied.
(a) The contract must be for the goods reasonably necessary for his support in his station in life.   

(b) The minor must not have already a sufficent  supply of these necessaries.

MINOR

An infant or a minor is a person who is not a major. According to the Indian Majority Act, 1875, a minor is one who has not completed his or her 18th year of age. A person attains majority on completing his 18th year in India.
In the following two cases, a person continues to be a minor until he completes the age 21 years.
(a) Where a guardian of a minor' person or property has appointed under the Guardians and Wards Act, 1890; or
(b) Where the superintendence  of a minor's property is assumed by a court of wards.


An amendment to this ACt was made by Indian Majority (Amendment) Act 2000 which fixed uniform age of majority as 18 years irrespective of the fact whether any guardian has been appointed but president's assent to kid has yet to be obtained.


To deal with the problem the law provides the following two approaches.
(a) In case of contracts relating to ordinary merchantile transactions, the age of majority is to be determined by the law of place where the contract is made.
(b) In case of contracts relating to land, the age of majority is to be determined by the law of the place where the land is situated.


Example: A, 18 years old-domiciled in india, endorsed certain negotiable Instrument in Ceylon, by the law of which he was a minor. Therefore, he was held not to be liable as endorser.

CAPACITY OF PARTIES

For a valid contract, the parties to a contract must have capacity i.e. competence to enter into a contract. Every person is presumed to have capacity to contract but there are certain persons whose age, condition or status renders them incapable of binding themselves by a contract. Incapacity must be proved by the party claiming the benefit of it and until proved the ordinary presumptions remains.


Section 11 of the Contract Act deals with the competency of parties and provides that "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 disqualified from contracting by any law to which he is subject."


It follow that the following person are incompetent to contract.
(a) minor 
(b) person of unsound mind, and
(c) Person disqualified by any law to which they are subject.
Contract entered into by the persons mentioned above are void.


Every person is competent to contract:
(a) Who is of the age of majority.
(b) Who is of sound mind.
(c) Who is not disqualified from making a contract.


Therefore the following persons are not competent to contract
(a) A person who is a minor.

(b) A person of unsound mind.

(c) A person who is disqualified from making a contract. 

NO CONSIDERATION NO CONTRACT-EXCEPTIONS

Every agreement to be enforceable at law must be supported by valid consideration. An agreement made without consideration is void and is unenforceable except in certain cases. Section 25 specifies the cases where an agreement though made without consideration will be valid. These are as follow:


1. Natural love and affection [Sec. 25(1)]
           An agreement though made without consideration will be valid if it is in writing and registered and is made on account of natural love and affection between parties standing in a near relation to each other. An agreement without consideration will be valid provided-
(a) it is expressed in writing;
(b) it  is registered under the law for the time being in force;
(c) it is made on account of natural love and affection;
(d) it is between parties standing in a near relation to each other.
  All these essentials must be present to enforce an agreement made without consideration.


2. Compensation for services rendered [Sec. 25(2)]
           An agreement made without consideration will be valid if it is a promise to compensate wholly or in a part a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do.To apply this rule, the following essentials must exist:
(a) The act must have been done voluntarily;
(b) for the promisor or it must be something which was the legal obligation of the promiser;
(c) the promisor must be in existence at the time when the act was done;
(d) the promisor must agree now to compensate the promisee.


3. Time-barred debt [Sec. 25(3)]
           A promise to pay a time-barred debt is also enforceable. But the promise must be in writing and be signed by the promisor or his agent authorized in that behalf. The promise may be to pay the whole or part of the debt. An oral promise to pay a time-barred debt is unenforceable


4. Completed gifts [Exp. 1 to Sec. 25]
           Explanation 1 to section 25 provides that the rule 'No consideration, No contract' shall not affect validity of any gifts actually made between the donor and the donee. Thus if a person gives certain properties to another according to the provision of the Transfer of Property Act, he cannot subsequently demand the property back on the ground that there was no consideration.


5. Agency (Sec. 185)
           There is one more exception to the rule. IT is given in section 185 which says that no consideration is needed to create an agency.


6. Guarantee (Sec 127)
           A contract of guarantee is made without consideration.


7. Remission (Sec 63)
           No consideration is required for an agreement to receive less then what is du. This is called remission in the law. 

IMPORTANCE OF CONSIDERATION

Consideration is the foundation of ever contract. The law insists on the existence of consideration if a promise is to be enforced as creating legal obligations. A promise without consideration is null and void. It is called a naked promise or "Nudum Pactum." Thus if A promise to pay B Rs. 1000 without anything in return, this constitute a bare promise and gives no right of action.

Sir William Anson has brought out the importance of consideration thus, "offer and acceptance brings the parties together, and constitute an outward semblance of a contract, but most systems of law requires some further evidence of the intention of the parties and in default of such evidence, refuse to recognize an obligation.' This further evidence of the intention of the parties is supplied by consideration which is one of the element of a valid contract. Section 25 of the Indian contract Act supports this contention and provides that agreement without consideration is void. 

DIFFERENCE BETWEEN INDIAN LAW AND ENGLISH LAW REGARDING CONSIDERATION

1. In India consideration may move from the promisee or any other person. But under English Law the consideration must move from the promiser. In other words, a stranger to consideration can sue in India but not in England.


2. In England, consideration may be present or future. But in India past consideration can be a good consideration and will support a subsequent promise.


3. In England, consideration means something of some value in the eyes of law moving from the promisor. Nature love and affection is not sufficient in the English law to support a contract. In India, natural love and affection is considered to be a good consideration and may support a contract if it is in writing and registered.


4. Under the English law, contracts are divided into formal contracts and simple contracts. A formal contract is one which is in writing, signed, sealed and delivered to the other party. All other contract are simple contracts. Formal contracts do not require any consideration but simple contract must be supported by consideration. No such distinction exists in India. All contracts expect those specified in section 25 and 185 must be supported by consideration.

STRANGER TO CONTRACT

It is general law of contract that a person who is not a party to the contract cannot sue upon it. A stranger to a contract cannot sue in English as well as in India through it may be made for his benefit. This means that unless there is a privity of contract, a party cannot sue on it.
The leading case is:

DUNLOP PNEUMATIC TYRE Co. V. SELFRIDGE & Co.(1915)

   A sold a large quantity of tyres to B at a certain price on entering into a covenant not to sell the tyres below the price mentioned in price list supplied by A. B sold the tyres to C a retail dealer under a contract stipulating the same covenant as between A and B. C sold the tyres at less than the list price. A sued C for breach of contract. It was held that A could not sue C as A was not a party to contract between B and C. 

A stranger to a contract cannot sue expect in the following cases-

1. Trust. In the case of trust, the beneficiary may enforce the contract even though he is stranger to contract creating the trust.

2. Where provision is made in a marriage settlement. Where an agreement is made in a connection with marriage and a provision is made for the benefit of a person he may take advantage of that agreement although he is not party to it.

3. Where provision is made in a partition or family settlement. Such members though not parties to the agreement can sue on the footing of the arrangements.

4. Where a charge is created in favour of a stranger on specific immovable property. A stranger to a contract can sue for the money made payable to him by it where the money is charged on immovable properties.

5. Where the promisor has by his conduct privity of contract with the stranger. Thus, if A admits to C for the money, that he had received money from B for payment to c, he constitute himself as the agent of C, who can successfully recover the amount from A.

6. Where it is conductive to justice.

7. Contract entered into by an agent can be enforced by the principal.

8. Covenants Running with the land. At the time of transfer of immovable property, a notice that the owner of the land is bound due to certain obligations created by a agreement relating to land, the new purchaser will be bound by them though he was not a party to the original covenant. [Tulk vs. Moxhay(1919)]

STRANGER TO CONSIDERATION

Under the Indian Contract Act 1872 consideration for a contract may move from the promisee or any other person i.e. a stranger to the consideration can also enforce the contract. But under the English Law the consideration for the contract must move from the promisee and promisee only, therefore a stranger to consideration cannot enforce it.

    

   So, in India the consideration may move from stranger. This law was established in the case of CHINAYYA Vs. RAMAYYA. 

CHINAYYA Vs. RAMAYYA. 

An old lady Laxhmi Rani gifted her property to her own daughter Ramayya, with the directions to pay a certain sum of money annually to chinayya, her maternal uncle. On the same day Ramayya refused to honour the agreement on the ground that there is no consideration. Chinayya sued for the recovery of the annuity. It was held that there was sufficent consideration i.e. the property given to her by the sister of Chinayya.

ESSENTIALS OF VALID CONSIDERATION

1. Consideration must move at desire of the promiser. An act or abstinence must have been done at the desire of the promisor only. Any act performed at the desire of the third party cannot be valid consideration.


2. From the promisor or any other person. To constitute a valid consideration their must be some consideration, it immaterial who furnished it. Consideration can be furnished by contract but stranger to the consideration can sue, because he is party to that contract, though consideration has been given by some third person.


3. Consideration may be past, present or future. 
 (a)  Past Consideration:-A consideration for the act done in past is a past consideration. Past consideration valid in Indian Contract Act, but it is no consideration in English Law.

 (b) Present Consideration:-When both the parties are ready to move consideration at the same time, it is a present consideration.


 (c) Future Consideration:-When a party promises to or abstain from doing something in future, it is a future consideration.


4. Consideration need not to be adequate. Law only requires the presence of consideration in a valid contract, it adequacy is not required in the Act.


5. consideration must be real. Definition of consideration clearly states "Something in return" is consideration which must be of some value in the eyes of law, though need not be adequate. It should not be uncertain, illusory or impossible.


6. Consideration must be lawful. In valid contract it is necessary that the consideration should be lawful, otherwise it will become void and unenforceable.

CONSIDERATION

Consideration is the foundation of every contract. The law enforces only those promises which are made for consideration. Where one party promises to do something, it must get something in return. This 'something in return' is called consideration. Consideration is the very life-blood of every contract. In the absence of consideration  or undertaking is purely gratutious. However, sacred and binding in honor, it is create no legal obligation.

Definition. Consideration has been defined in many ways.

According to pollock "Consideration is the price for which the promise of some other is brought and the promise thus given for value is enforceable."

It is something which is of some value in the eyes of law.

According to Section 2 (d) of the Indian Contract Act defines consideration as-

(a) when at the desire of the promisor,

(b) the promise or any other person,

(c) has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing,

(d) something, such act or abstinence or promise is called a consideration for the promise.

Example:- A agrees to dell his horse to B for Rs. 1000. Here A's promise to sell his horse is for B's consideration to pay Rs. 1000 is A's consideration to sell his horse to B. 

MODES OF REVOCATION OF OFFER (SECTION 6)

1. By notice of revocation.  Offer may be revoked by a communication of a notice of revocation by the offeree to the other party before acceptance is complete against the offeror himself. An offer made in writing may be revoked by words of mouth. The notice of revocation may not always be express. A notice of revocation to be effective must be communicated to the offeree.


2. By lapse of time. A proposal will come to an end by the lapse of time prescribed in such proposal for its acceptance or, if no time is so prescribed by the lapse of time of reasonable time is a question of fact depending upon the circumstances of each case. Where the subject matter of the contract is an article, like gold, the parties of which fluctuate daily in the market, very short period will be regarded as reasonable made late in november.


3. By non-fulfillment of condition precedent. A proposal is revoked when the acceptor fails to fulfill a condition precedent to the acceptance of the proposal which was conditional offer. Thus, X may offer to sell certain goods to Y on a condition that Y pays a certain amount before a certain date.


4. By death or insanity. A proposal is revoked 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.


5. By counter offer. An offer comes to end when the offeree makes a counter offer or rejects the offer. Where an offer is accepted with some modification in the terms of the offer or with some other condition not forming part of the offer, such qualified acceptance amount to a counter offer.


6. By the non-acceptance of the offer according to the prescribed or usual mode. The offer will also stand revoked if it has not been accepted according to the prescribed.


7. By subsequent illegality. An offer lapses if it become illegal after it is made and before it is accepted. Thus, where an offer is made to sell 10 bags of wheat for Rs. 2500 and before it is accepted, a law prohibiting the sale of wheat by private individual is entered, the offer comes to end. 

Effect of silence on acceptance

Generally speaking the person to whom the proposal is made need not reply. His silence cannot be regarded as an acceptance of the proposal. Proposal made to another cannot ripen into an agreement merely because the  offeree   makes no reply even through the proposal states that silence will be taken to amount to acceptance. Thus mental acceptance is no acceptance.


Acceptance of a proposal may be sometime be inferred from silence or inaction.
As a rule silence does not imply acceptance, but in the following cases silence may be indicative of assent to the proposal.

1. Where the offeree having responsibility opportunity to reject the offered goods or services takes the benefits of them, it will amount to acceptance.
2. Where because of previous dealings the offeree has given the proposer reason to understand that the silence was intended by the offeree as a manifestation of assent and the offeror does so understand. 

ESSENTIAL ELEMENTS OF A VALID ACCEPTANCE

1.             Acceptance must be absolute and unconditional. An acceptance must be unconditional and unqualified. Accepting an offer with conditions, variations and reservations amounts to counter offer and rejection of the original offer. The accepter must comply with the terms of the offer. A variations or alteration, however, small of the offer, will make the acceptance invalid.

2.             Acceptance must be communicated to the offeror. If the offeror remains silent and does nothing to show that he has accepted the offer, no contract is formed. The acceptor should do something to signify his intention to accept. Thus, where a person accepts an offer but fails to post the letter of acceptance, it is no acceptance.

3.             Acceptance must be within a reasonable time. Acceptance to be valid must be made within the time allowed by the offeror and if no time is specified, it must be made within a reasonable time.

4.             It must be according to the mode prescribed or usual or reasonable mode. Acceptance has to be made in the manner prescribed, the proper may within a reasonable time after the acceptance is communicated to him, insist that the acceptance must be made in the manner prescribed. Failure on the part of the offeror to do so, will imply that he has accepted the acceptance although it is not in the desired manner.

5.             The acceptor must be aware of the proposal at the time of the offer. Acceptance follows offer. It the acceptor is not aware of the existence of the offer and conveys his acceptance, no contract comes into being.

6.             Acceptance must be given before the offer lapses or before the offer is revoked. It means that acceptance must be made within the offer is in force i.e. before the offer has been revoked or offer has lapsed.

      7.      Acceptance cannot be implied from silence. No contract is formed if the offeree remains silent and does nothing to show that he has accepted the offer