1. Short title
This Act may be called be the Indian Contract Act, 1872.
Extent, commencement - It extends to the whole of except the State of Jammu and Kashmir;
and it shall come into force on the first day of September, 1872.
Enactment repealed - [***] Nothing herein contained shall affect the provisions of any
Statute, Act or Regulation not hereby expressly repealed, nor any usage or customs of
trade, nor any incident of any contract, not inconsistent with the provisions of this
Act.
2. Interpretation -clause
In this Act the following words and expressions are used in the following senses, unless
contrary intention appears from the context:
(a) 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;
(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal
is said to be accepted. A proposal, when a accepted, becomes a promise;
(c) The person making the proposal is called the "promisor", and the person
accepting the proposal is called "promisee",
(d) When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise is called a consideration for the
promise;
(e) Every promise and every set of promises, forming the consideration for each other, is
an agreement;
(f) Promises which form the consideration or part of the consideration for each other, are
called reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option of one or more of the parties
thereto, but not at the option of the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
3. Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of
proposals and acceptance, respectively, are deemed to be made by any act or omission of
the party proposing, accepting or revoking, by which he intends to communicated such
proposal, acceptance or revocation, or which has the effect of communicating it.
4. Communication when complete
The communication of a proposal is complete when it becomes to the knowledge of the person
to whom it is made.
The communication of an acceptance is complete -as against the proposer, when it is put in
a course of transmission to him so at to be out of the power of the acceptor; as against
the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete -as against the person who makes it, when it
is put into a course of transmission to the person to whom it is made, so as to be out of
the power of the person who makes it;as against the person to whom it is made, when it
comes to his knowledge.
5. Revocation of Proposals and acceptance
A proposal may be revoked at any time before the communication of its acceptance is
complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is
complete as against the acceptor, but no afterwards.
6. Revocation how made
A proposal is revoked -
(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no
time is so prescribed, by the lapse of a reasonable time, without communication of the
acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes
to the knowledge of theacceptor before acceptance.
7. Acceptance must be absolute
In order to convert a proposal into a promise the acceptance must -
(1) be absolute and unqualified.
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted. If the proposal prescribes a manner in which it is
to be accepted; and the acceptance is not made in such manner, the proposer may, within a
reasonable time after the acceptance is communicated to him, insist that his proposal
shall be accepted in the prescribed manner, and not otherwise; but; if he fails to do so,
he accepts the acceptance.
8. Acceptance by performing conditions, or receiving consideration
Performance of the conditions of proposal, for the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
9. Promise, express and implied
In so far as the proposal or acceptance of any promise is made in words, the promise is
said to be express. In so far as such proposal or acceptance is made otherwise than in
words, the promise is said to be implied.
10. What agreements are contracts
All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby
expressly declared to be void. Nothing herein contained shall affect any law in force in
India, and not hereby expressly repealed, by which any contract is required to be made in
writing or in the presence of witnesses, or any law relating to the registration of
documents.
11. Who are competent to contract
Every person is competent to contract who is of the age of majority according to the law
to which he is subject, and who is sound mind and is not disqualified from contracting by
any law to which he is subject.
12. What is a sound mind for the purposes of contracting
A person is said to be of sound mind for the propose 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 effect upon his interest.A person who is usually of unsound mind, but occasionally
of sound mind, may make a contract when he is of sound mind. A person who is usually of
sound mind, but occasionally of unsound mind, may not make a contract when he is of
unsound mind.
13. "Consent" defined
Two or more person are said to consent when they agree upon the same thing in the same
sense.
14. "Free consent" defined
Consent is said to be free when it is not caused by -
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of section 20,21, and 22.
Consent is said to be so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud, misrepresentation, or mistake.
15. "Coercion" defined
"Coercion" is the committing, or threating to commit, any act forbidden by the
Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any
property, to the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement.
16. "Undue influence" defined
(1) A contract is said to be induced by "under influence" where the relations
subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair advantage over
the other.
(2) In particular and without prejudice to the generally of the foregoing principle, a
person is deemed to be in a position to dominate the will of another -
(a) where he hold a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on the evidence
adduced, to be unconscionable, the burden of proving that such contract was not induced by
undue influence shall be upon the person in a position to dominate the will of the other.
Nothing in the sub-section shall affect the provisions of section 111 of the Indian
Evidence Act, 1872 (1 of 1872)
17. "fraud defined
"Fraud" means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agents, with intent to deceive another party
thereto his agent, or to induce him to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to
be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
18. "Misrepresentation" defined
"Misrepresentation" means and includes -
(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that whichis not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or anyone claiming under him; by misleading another to his
prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the
substance of the thing which is subject of the agreement.
19. Voidability of agreements without free consent
When consent to an agreement is caused by coercion, [***] fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent was so caused. A
party to contract, whose consent was caused by fraud or mispresentation, may, if he thinks
fit, insist that the contract shall be performed, and that he shall be put on the position
in which he would have been if the representations made had been true.
Exception : If such consent was caused by misrepreentation or by silence, fraudulent
within the meaning of section 17, the contract, neverthless, is not voidable, if the party
whose consent was so caused had the means of discovering the truth with ordinary
diligence.
Explanation : A fraud or misrepresentation which did not cause the consent to a contract
of the party on whom such fraud was practised, or to whom such misrepresentation was made,
does not render a contract voidable.
20. Agreement void where both parties are under mistake as to matter of fact
Explanation : An erroneous opinion as to the value of the things which forms the
subject-matter of the agreement,is not be deemed a mistake as to a matter of fact.
21. Effect of mistake as to law
A contract is not voidable because it was caused by a mistake as to any law in force in
India; but mistake as to a law not in force in India has the same effect as a mistake of
fact.
22. Contract caused by mistake of one party as to matter of fact
A contract is not voidable merely because it was caused by one of the parties to it being
under a mistake as to a matter of fact.
23. What consideration and objects are lawful, and what not
The consideration or object of an agreement is lawful, unless -It is forbidden by law;
oris of such nature that, if permitted it would defeat the provisions of any law or is
fraudulent; ofinvolves or implies, injury to the person or property of another; orthe
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.
24. Agreements void, if consideration are objects unlawful in part
If any part of a single consideration for one or more objects, or any one or any part of
any one of several consideration of a single object, is unlawful, the agreement is void.
25. Agreement without consideration, void, unless it is in writing and registered or is
a promise to compensate for something done or is a promise to pay a debt barred by
limitation law
An agreement made without consideration is void, unless -
(1) it is expressed in writing and registered under the law for the time being in force
for the registration of documents, and is made on account of natural love and affection
between parties standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, or something which the promisor was legally compellable
to do; or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith or
by his agent generally or specially authorised in that behalf, to pay wholly or in part
debt of which the creditor might have enforced payment but for the law for the limitation
of suits. In any of these cases, such an agreement is a contract.
Explanation 1 : Nothing in this section shall affect the validity, as between the donor
and donee, of any gift actually made.
Explanation 2 : An agreement to which the consent of the promisor is freely given is not
void merely because the consideration is inadequate; but the inadequacy of the
consideration may be taken into account by the Court in determining the question whether
the consent of the promisor was freely given.
26. Agreement in restraint of marriage, void
Every agreement in restraint of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of trade, void
Every agreement by which anyone is restrained from exercising a lawful profession, trade
or business of any kind, is to that extent void.
Exception 1 : Saving of agreement not to carry on business of which good will is sold -
One who sells the goodwill of a business may agree with the buyer to refrain from carrying
on a similar business, within specified local limits, so long as the buyer, or any person
deriving title to the goodwill from him, carries on a like business therein, provided that
such limits appear to the court reasonable, regard being had to the nature of the
business.[***]
28. Agreements in restrain of legal proceedings, void
Every agreement, by which any party thereto is restricted absolutely from enforcing his
rights under or in respect of any contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may thus enforce his rights, is void
to the extent.
Exception 1 : Saving of contract to refer to arbitration dispute that may arise.This
section shall not render illegal contract, by which two or more persons agree that any
dispute which may arise between them in respect of any subject or class of subject shall
be referred to arbitration, and that only and amount awarded in such arbitration shall be
recoverable in respect of the dispute so referred.[***]
Exception 2: Saving of contract to refer question that have already arisen - Nor shall
this section render illegal any contract in writing, by which two or more persons agree to
refer to arbitration any question between them which has already arisen, or affect any
provision of any law in force for the time being as to reference to arbitration.
29. Agreements void for uncertainty
Agreements, the meaning of which is not certain, or capable of being made certain, are
void.
30. Agreements by way of wager, void
Agreements by way of wager are void; and no suit shall be brought for recovering anything
alleged to be won on any wager, or entrusted to any person to abide the result of any game
or other uncertain event on which may wager is made. Exception on favour of certain prizes
for horse-racing: This section shall not be deemed to render unlawful a subscription or
contribution, or agreement to subscribe or contribute, made or entered into for or toward
any plate, prize or sum of money, of the value or amount of five hundred rupees or
upwards, to be rewarded to the winner or winners of any horse-race.
Section 294A of the Indian Penal Code not affected : Nothing in this section shall be
deemed to legalize any transaction connected with horse-racing, to which the provisions of
section 294A of the Indian Penal Code (45 of 1860) apply.
31. "Contingent contract" defined
A "contingent contract" is a contract to do or not to do something, if some
event, collateral to such contract, does or does not happen.
32. Enforcement of Contracts contingent on an event happening
Contingent contracts to do or not to do anything in an uncertain future event happens,
cannot be enforced by law unless and until that event has happened. If the event becomes
impossible, such contracts become void.
33. Enforcement of contract contingent on an event not happening
Contingent contracts to do or not to do anything if an uncertain future event does not
happen, can be enforced when the happening of that event becomes impossible, and not
before.
34. When event on which contract is contingent to be deemed impossible, if it is the
future conduct of a living person
If the future event on which a contract is contingent is the way in which a person will
act at an unspecified time, the event shall be considered to become impossible when such
person does anything which renders it impossible that the should so act within any
definite time, or otherwise than under further contingencies.
35. When contracts become void, which are contingent on happening of specified event
within fixed time
Contingent contracts to do or not to do anything, if a specified uncertain event happens
within a fixed time, become void, if, at the expiration of the time fixed, such event has
not happened, or if, before the time fixed, such event becomes impossible.
When contracts may be enforced, which are contingent on specified event not happening
within fixed time : Contingent contract tutu or not to do anything, if a specified
uncertain event does not happen within a fixed time, may be enforced by law when the time
fixed has expired and such event has not happened, or before the time fixed has expired,
if it become certain that such event will not happen.
36. Agreements contingent on impossible event void
Contingent agreements to do or not to do anything, if an impossible event happens, are
void, whether the impossibility of the event is known or not to the parties to agreement
at the time when it is made.
37. Obligations of parties to contract
The parties to a contract must either perform, or offer to perform, their respective
promises, unless such performance in dispensed with or excused under the provision of this
Act, or of any other law.
Promises bind the representative of the promisor in case of the death of such promisors
before performance, unless a contrary intention appears from the contract.
38. Effect of refusal to accept offer of performance
Where a promisor has made an offer of performance to the promisee, and the offer has not
been accepted, the promisor is not responsible for non-performance, nor does he thereby
lose his rights under the contract.
Every such offer must fulfil the following conditions -
(1) it must be unconditional;
(2) it must be made at a proper time and place, and under such circumstances that the
person to whom it is made may have a reasonable opportunity of ascertaining that the
person by whom it is been made is able and willing there and then to do the whole of what
he is bound by his promise to do;
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a
reasonable opportunity of seeing that the thing offered is the thing which the promisor is
bound by his promise to deliver. An offer to one of several joint promisees has the same
legal consequences as an offer to all of them.
39. Effect of refusal of party to perform promise wholly
When a party to a contract has refused to perform, or disabled himself from performing,
his promise in its entirety, the promisee may put an end to the contract,unless he has
signified, by words or conduct, his acquiescence in its continuance.
40. Person by whom promises is to be performed
If it appears from the nature of the case that it was the intention of the parties to any
contract that any promise contain in it should be performed by the promisor himself, such
promise must be performed by the promisor.
In other cases, the promisor or his representative may employ a competent person to
perform it.
41. Effect of accepting performance from this person
When a promisee accepts performance of the promise from a third person, he cannot
afterwards enforce it against the promisor.
42. Devolution of joint liabilities
When two or more person have made a joint promise, then, unless a contrary intention
appears by the contract, all such persons, during their joint lives, and, after the death
of any of them, his representative jointly with the survivor or survivors, and, after the
death of the last survivor the representatives of all jointly, must fulfil the promise.
43. Any one of joint promisors may be compelled to perform
When two or more persons make a joint promise, the promise may, in the absence of express
agreements to the contrary, compel any one or more of such joint promisors to perform the
whole promise.
Each promisor may compel contribution : Each of two or more joint promisors may compel
every other joint promisor to contribute equally with himself to the performance of the
promise, unless a contrary intention appears from the contract.
Sharing of loss by default in contribution : If any one of two or more joint promisors
make default in such contribution, the remaining joint promisors mus bear the loss arising
from such default in equal shares.
Explanation : Nothing in this section shall prevent a surety from recovering, from his
principal, payments made by the surety on behalf of the principal, or entitle the
principal to recover anything from the surety on account of payments made by the
principal.
44. Effect of release of one joint promisor
Where two or more persons have made a joint promise, a release of one of such joint
promisors by the promisee does not discharge the other joint promisor,neither does it free
the joint promisor so released from responsibility to the other joint promisor or joint
promisors.
45. Devolution of joint rights
When a person has made a promise to two or more persons jointly, then unless contrary
intention appears from the contract, the right to claim performance rests, as between him
and them, with them during their joint lives, and, after the death of any one of them,
with the representative of such deceased person jointly with the survivor or survivors,
and, after the death of the last survivor, with the representatives of all jointly.
46. Time for performance of promise, where no application is to be made and no time is
specified
Where, by the contract, a promisor is to perform his promise without application by the
promisee, and no time for performance is specified, the engagement must be performed
within a reasonable time.
Explanation : The question "what is a reasonable time" is, in each particular
case, a question of fact.
47. Time and place for performance of promise, where time is specified and no
application to be made
When a promise is to be performed on a certain day, and the promisor has undertaken to
perform it without the application by the promisee, the promisor may perform it at any
time during the usual hours of business on such day and at the place at which the promise
ought to be performed.
48. Application for performance on certain day to be at proper time and place
When a promise is to be performed on a certain day, and the promisor has not undertaken to
perform it without application by the promisee, it is the duty of the promisee to apply
for the performance at a proper place within the usual hours of business.
Explanation : The question "what is proper time and place" is, in each
particular case, a question of fact.
49. Place for the performance of promise, where no application to be made and no place
fixed for performance
When a promise is to be performed without application by the promisee, and not place is
fixed for the performance of it, it is the duty of the promisor to apply to the promisee
to appoint a reasonable place for the performance of the promise, and to perform it at
such a place.
50. Performance in manner or at time prescribed or sanctioned by promise
The performance of any promise may be made in any manner, or at any time which the
promisee prescribes or sanctions.
51. Promisor not bound to perform, unless reciprocal promisee ready and willing to
perform
When a contract consists of reciprocal promises to be simultaneously performed, no
promisor need perform his promise unless the promisee is ready and willing to perform his
reciprocal promise.
52. Order of performance of reciprocal
promises
Where the order in which reciprocal promises are to be performed is expressly fixed by the
contract, they shall be performed in that order, and where the orders is not expressly
fixed by the contract, they shall be performed in that order which the nature of
transaction requires.
53. Liability of party preventing event on which contract is to take effect
When a contract contains reciprocal promises and one party to the contract prevents the
other from performing his promise, the contract becomes voidable at the option of the
party so prevented; and he is entitled to compensation from the other party for any loss
which he may sustain in consequence of the non-performance of the contract.
54. Effect of default as to the promise which should be performed, in contract
consisting or reciprocal promises
When a contract consists of reciprocal promises, such that one of them cannot be
performed, or that its performance cannot be claimed till the other has been performed,
and the promisor of the promise last mentioned fails to perform it, such promisor cannot
claim the performance of the reciprocal promise, and must make compensation to the other
party to the contract for any loss which such other party may sustain by the
non-performance of the contract.
55. Effect of failure to perform a fixed time, in contract in which time is
essential
When a party to a contract promises to do a certain thing at or before a specified time,
or certain thins at or before a specified time and fails to do such thing at or before a
specified time, and fails to do such thing at or before a specified time, the contract or
so much of it as has not been performed, becomes voidable at the option of the promisee,
if the intention of the parties was that time should be of essence of the contract.
Effect of such failure when time is not essential: If it was not the intention of the
parties that time should be of the essence of the contract, the contract does not become
voidable by the failure to do such thing at or before the specified time; but the promisee
is entitled to compensation from the promisor for any loss occasioned to him by such
failure.
Effect of acceptance of performance at time other than agreed upon: If, in case of a
contract voidable on account of the promisor's failure to perform his promise at the time
agreed, the promisee accepts performance of such promise at any time other than agree, the
promisee cannot claim compensation of any loss occasioned by the non-performance of the
promise at the time agreed, unless, at the time of acceptance, he give notice to the
promisor of his intention to do so.
56. Agreement to do impossible act
An agreement to do an act impossible in itself is void. Contract to do act afterwards
becoming impossible or unlawful: A contract to do an act which, after the contract is
made, becomes impossible or, by reason of some event which the promisor could not prevent,
unlawful, becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful:
Where one person has promised to be something which he knew or, with reasonable diligence,
might have known, and which the promisee did not know to be impossible or unlawful, such
promisor must make compensation to such promise for any loss which such promisee sustains
through the non-performance of the promise.
57. Reciprocal promise to do things legal, and also other things illegal
Where persons reciprocally promise, firstly to do certain things which are legal, and,
secondly under specified circumstances, to do certain other things which are illegal, the
first set of promise is a contract, but the second is a void agreement.
58. Alternative promise, one branch being illegal
In the case of an alternative promise, one branch of which is legal and other other
illegal, the legal branch alone can be enforced.
59. Application of payment where debt to be discharged is indicated
Where a debtor, owing several distinct debts to one person, makes a payment to him, either
with express intimation, or under circumstances implying, that the payment is to be
applied to the discharge of some particular debt, the payment if accepted, must be applied
accordingly.
60. Application of payment where debt to be discharged is not indicated
Where the debtor has ommitted to intimate, and there are no other circumstances indicating
to which debt the payment is to be applied, 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 limitations of suits.
61. Application of payment where neither party appropriates
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 the law in force for the
time being as to the limitation of suits. If the debts are of equal standing, the payment
shall be applied in discharge of each proportionably.
62. Effect of novation, rescission, and alteration of contract
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.
63. Promise may dispense with or remit performance of promise
Every promise may dispense with or remit, wholly or in part, the performance of the
promise made to him, or may extend the time for such performance, or may accept instead of
it any satisfaction which he thinks fit.
64. Consequence of rescission of voidable contract
When a person at whose option a contract is voidable rescinds it, the other party thereto
need to perform any promise therein contained in which he is the promisor. The party
rescinding a voidable contract shall, if he have received any benefit thereunder from
another party to such contract restore such benefit, so far as may be, to the person from
whom it was received.
65. Obligation of person who has received advantage under void agreement, or contract
that becomes void
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.
66. Mode of communicating or revoking rescission of voidable contract
The rescission of a voidable contract may be communicated or revoked in the same manner,
and subject to some rules, as apply to the communication or revocation of the proposal.
67. Effect of neglect or promise to afford promisor reasonable facilities for
performance
If any promisee neglects or refuses to afford the promisee reasonable facilities for the
performance of his promise, the promisor is excused by such neglect or refusal as to
non-performance caused thereby.
68. Claim for necessaries supplied to person incapable of contracting, or on his
account
If a person, incapable of entering into a contract, or anyone whom he is legally bound to
support, is supplied by another person with necessaries suited to his condition in life,
the person who has furnished such supplies is entitled to be reimbursed from the property
of such incapable person.
69. Reimbursement of person paying money due by another, in payment of which he is
interested
A person who is interested in the payment of money which another is bound by law to pay,
and who therefore pays it, is entitled to be reimbursed by the other.
70. Obligation of person enjoying benefit of non-gratuitous act
Where a person lawfully does anything for another person, or delivers anything to him, not
intending to do so gratuitously, and such another person enjoys the benefit thereof, the
letter is bound to make compensation to the former in respect of, or to restore, the thing
so done or delivered.
71. Responsibility of finder of goods
A person who finds goods belonging to another, and takes them into his custody, is subject
to the same responsibility as a bailee.
72. Liability of person to whom money is paid, or thing delivered, by mistake or under
coercion
A person to whom money has been paid, or anything delivered, by mistake or under coercion,
must repay or return it.
73. Compensation of loss or damage caused by breach of contract
When a contract has been broken, the party who suffers by such breach is entitled to
receive, form the party who has broken the contract, compensation for any loss or damage
caused to him thereby, which naturally arose in the usual course of things from such
breach, or which the parties knew, when they made the contract, to be likely to result
from the breach of it.
Such compensation is not to be given for any remote and indirect loss of damage sustained
by reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract :
When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the
same compensation from the party in default, as if such person had contracted to discharge
it and had broken his contract.
Explanation : In estimating the loss or damage arising from a breach of contract, the
means which existed of remedying the inconvenience caused by non-performance of the
contract must be taken into account.
74. Compensation of breach of contract where penalty stipulated for
When a contract has been broken, if a sum is named in the contract as the amount be paid
in case of such breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether or not actual damage or
loss or proved to have been caused thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the amount so named or, as the case may be,
the penalty stipulated for.
Explanation : A stipulation for increased interest from the date of default may be a
stipulation by way of penalty.
Explanation :When any person enters into any bail bond, recognisance or other instrument
of the same nature or, under the provisions of any law, or under the orders of the Central
Government or of any State Government, gives any bond for the performance of any public
duty or act in which the public are interested, he shall be liable, upon breach of the
condition of any such instrument, to pay the whole sum mentioned therein.
75. Party rightfully rescinding contract, entitled to compensation
A person who rightfully rescinds a contract is entitled to consideration for any damage
which he has sustained through the nonfulfillment of the contract.
124. "Contract of indemnity" defined
A contract by which one party promises to save the other from loss caused to him by the
contract of the promisor himself, or by the conduct of any other person, is called a
"contract of indemnity".
125. Right of indemnity-holder when sued
The promisee in a contract of indemnity, acting within the scope of his authority, is
entitled to recover from the promisor-
(1) all damages which he may be compelled to pay in any suit in respect of any matter to
which the promise to indemnify applies;
(2) all costs which he may be compelled to pay in any such suit, if in bringing of
defending it, he did not contravene the orders of the promisor, and acted as it would have
been prudent for him to act in the absence of any contract of indemnity, or if the
promisor authorised him to bring or defend the suit;
(3) all sums which he may have paid under the terms of any compromise of any such suit, if
the compromise was not contract to the orders of the promisor, and was one which it would
have been prudent for the promise to make in the absence of any contract of indemnity, or
if the promisor authorised him to compromise the suit.
126. "Contract of guarantee", "surety", "principal
debtor" and "creditor"
A "contract of guarantee" is a contract to perform the promise, or discharge the
liability, of a third person in case of his default. The person who gives the guarantee is
called the "surety", the person in respect of whose default the guarantee is
given is called the "principal debtor", and the person to whom the guarantee is
given is called the "creditor". A guarantee may be either oral or written.
127. Consideration for guarantee
Anything done, or any promise made, for the benefit of the principal debtor, may be a
sufficient consideration to the surety for giving the guarantee.
128. Surety's liability
The liability of the surety is co-extensive with that of the principal debtor, unless it
is otherwise provided by the contract.
129. Continuing guarantee
A guarantee which extends to a series of transaction, is called, a "continuing
guarantee".
130. Revocation of continuing guarantee
A continuing guarantee may at any time be revoked by the surety, as to future
transactions, by notice to the creditor.
131. Revocation of continuing guarantee by surety' death
The death of the surety operates, in the absence of any contract to the contrary, as a
revocation of ma continuing guarantee, so far as regards future transactions.
132. Liability of two persons, primarily liable, not affected by arrangement between
them that one shall be surety on other's default
Where two persons contract with third person to undertake a certain liability, and also
contract with each other that one of them shall be liable only on the default of the
other, the third person not being a party to such contract the liability of each of such
two persons to the third person under the first contract is not affected by the existence
of the second contract,although such third person may have been aware of its existence.
133. Discharge of surety by variance in terms of contract
Any variance made without the surety's consent, in the terms of the contract between the
principal [debtor] and the creditor, discharges the surety as to transactions subsequent
to the variance.
134. Discharge of surety by release or discharge of principal debtor
The surety is discharged by any contract between the creditor and the principal debtor, by
which the principal debtor is released, or by any act or omission of the creditor, the
legal consequence of which is the discharge of the principal debtor.
135. Discharge of surety when creditor compounds with, gives time to, or agrees not to
sue, principal debtor
A contract between the creditor and the principal debtor, by which the creditor make a
composition with, or promises to give time, or not to sue, the principal debtor,
discharges the surety, unless the surety assents to such contract.
136. Surety not discharged when agreement made with third person to give time to
principal debtor
Where a contract to give time to the principal debtor is made by the creditor with a third
person, and not with the principal debtor, the surety is not discharged.
137. Creditor's forbearance to sue does not discharge surety
Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any
other remedy against him, dies not, in the absence of any provision in the guarantee to
the contrary, discharge the surety.
138. Release of one co-surety does not discharge other
Where there are co-sureties, a release by the creditor of one of them does not discharge
the others neither does set free the surety so released from his responsibility to the
other sureties.
139. Discharge of surety by creditor's act or omission impairing surety's eventual
remedy
If the creditor does any act which is inconsistent with the right of the surety, or omits
to do any act which his duty to the surety requires him to do, and the eventual remedy of
the surety himself against the principal debtor is thereby impaired, the surety is
discharged.
140. Rights of surety on payment or performance
Where a guaranteed debt has become due, or default of the principal debtor to perform a
guaranteed duty has taken place, the surety upon payment or performance of all that he is
liable for, is invested with all the rights which the creditor had against the principal
debtor.
141. Surety's right to benefit of creditor's securities
A surety is entitled to the benefit of every security which the creditor has against the
principal debtor at the time when the contract of suretyship entered into, whether the
surety knows of the existence of such security or not; and if the creditor loses, or
without the consent of the existence of such security or not; and if the creditor loses,
or without the consent of the surety, parts with such security, the surety, the surety is
discharged to the extent of the value of the security.
142. Guarantee obtained by misrepresentation, invalid
Any guarantee which has been obtained by means of misrepresentation made by the creditor,
or with his knowledge and assent, concerning a material part of the transaction, is
invalid.
144. Guarantee on contract that creditor shall not act on it until co-surety
joins
Where a person gives a guarantee upon a contract that the creditor shall not act upon it
until another person has jointed in it as co-surety, the guarantee is not valid that other
person does not join.
145. Implied promise to indemnify surety
In every contract of guarantee there is an implied promise by the principal debtor to
indemnify the surety, and the surety is entitled to recover from the principal debtor
whatever sum he has rightfully paid under the guarantee, but no sums which he has paid
wrongfully.
146. Co-sureties liable to contribute equally
Where two or more persons are co-sureties for the same debt or duty, either jointly or
severally, and whether under the same or different contract, and whether with or without
the knowledge of each other the co-sureties, in the absence of any contract to the
contrary, are liable, as between themselves, to pay each an equal share of the whole debt,
or of that part of it which remains unpaid by the principal debtor.
147. Liability of co-sureties bound in different sums
Co-sureties who are bound in different sums are liable to pay equally as far as the limits
of their respective obligations permit.
148. "Bailment", "bailor" and "bailee" defined
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 the direction of the person delivering them. The person
delivering the goods is called the "bailor". The person to whom they are
delivered is called the "bailee".Explanation: If a person already in possession
of the goods of other contracts 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.
149. Delivery to bailee how made
The delivery to be bailee may be made by doing anything which has the effect of putting
the goods in the possession of the intended bailee or of any person authorised to hold
them on his behalf.
150. Bailor's duty to disclose faults in goods bailed
The bailor is bound to disclose to the bailee faults in the goods bailed, of which the
bailor is aware, and which materially interfere with the use of them, or expose the bailee
to extraordinary risk; and if he does not make such disclosure, he is responsible for
damage arising to the bailee directly from such faults.
151. Care to be taken by bailee
In all cases of bailment the bailee is bound to take as much care of the goods bailed to
him as a man of ordinary prudence would, under similar circumstances, take of his own
goods of the same bulk, quantity and value as the goods bailed.
152. Bailee when not liable for loss, etc, of thing bailed
The bailee, in the absence of any special contract, is not responsible for the loss,
destruction or deterioration of the thing bailed, if he has taken the amount of care of it
described in section 151.
153. Termination of bailment by bailee's act inconsistent with conditions
A contract of bailment is voidable at the option of the bailor, if the bailee does any act
with regard to the foods bailed, inconsistent with the conditions of the bailment.
154. Liability of bailee making unauthorised use of goods bailed
If the bailee makes any use of the goods bailed which is not according to the conditions
of the bailment, he is liable to make compensation to the bailor for any damage arising to
the goods from or during such use of them.
155. Effect of mixture with bailor's consent, of his goods with bailee's
If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own
goods, the bailor and the bailee shall have an interest, in proportion to their respective
shares, in the mixture thus produced.
156. Effect of mixture, without bailor's consent, when the goods can be separated
If the bailee, without the consent of the bailor, mixes the goods of the bailor with his
own goods and the goods can be separated or divided, the property in the goods remains in
the parties respectively; but the bailee is bound to be bear the expense of separation or
division, and any damage arising from the mixture.
157. Effect of mixture, without bailor's consent, when the goods cannot be
separated
If the bailee, without the consent of the bailor, mixes the foods of the bailor with his
own goods in such a manner that it is impossible to separate the goods bailed from the
other goods, and deliver them back, the bailor is entitled to be compensated by the bailee
for the loss of the goods.
158. Repayment, by bailor, of necessary expenses
Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to
have work done upon them by the bailee for the bailor, and the bailee is to receive no
remuneration, the bailors shall repay to the bailee the necessary expenses incurred by him
for the purpose of the bailment.
159. Restoration of goods lent gratuitously
The lender of a thing for use may at any time require its return, if the loan was
gratuitous, even through he lent it for a specified time or purpose. But if, on the faith
of such loan made for a specified time or purpose, the borrower has acted in such a manner
that the return of the thing lent before the time agreed upon would cause him losses
exceeding the benefit actually derived by him from the loan, the lender must, if he
compels the return. indemnify the borrower for the amount in which the loss so occasioned
exceeds the benefits so derived.
160. Return of goods bailed, on expiration of time or a accomplishment of purpose
It is the duty of the bailee to return, or deliver according to the bailor's directions,
the goods bailed, without demand, as soon as the time for which they were bailed has
expired, or the purpose for which they were bailed has been accomplished.
161. Bailee's responsibility when goods are not duly returned
If by the fault of the bailee, the goods are not returned, delivered or tendered at the
proper time, he is responsible to the bailor for any loss, destruction or deterioration of
the goods from that time.
162. Termination of gratuitous bailment by death
A gratuitous bailment is terminated by the death either of the bailor or of the bailee.
163. Bailer entitled to increase or profit from goods bailed
In the absence of any contract to the contrary, the bailee is bound to deliver to the
bailer, or according to his directions, any increase or profit which may have accrued from
the goods bailed.
164. Bailor's responsibility to bailee
The bailor is responsible to the bailee for any loss which the bailee may sustain the
reason that the bailor was not entitled to make the bailment, or to receive back the
goods, or to give directions, respecting them
165. Bailment by several joint owners
If several joint owners of goods bail them, the bailee may deliver them back to, or
according to the directions of, one joint owner without the consent of all in the absence
of any agreement to the contrary.
166. Bailee not responsible on redelivery to bailor without title
If the bailor has no title to the goods, and the bailee, in good faith, delivers them back
to, or according to the directions of the bailor, the bailee is not responsible to the
owner in respect of such deliver.
167. Right of third person claiming goods bailed
If a person, other than the bailor, claims goods bailed he may apply to the court to stop
delivery of the goods to the bailor, and to decide the title to the goods.
168. Right to finder of goods may sue for specified reward offered
The finder of goods has no right to use the owner for compensation for trouble and
expense, voluntary incurred by him to preserve the goods and to find out the owner; but he
may retain the goods again the owner until he receive such compensation; and where the
owner has offered a specific required for the return of goods lost, the finder may sue for
such reward, and may retain the goods until he received it.
169. When finder of thing commonly on sale may sell it
When thing which is commonly the subject of sale is lost, if the owner cannot with
reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of
the finder, the finder may sell it -
(1) when the thing is in danger of perishing or of losing the greater part of its value,
or
(2) when the lawful charges of the finder, in respect of the thing found, amount to
two-thirds of its value.
170. Bailee's particular lien
Where the bailee has, in accordance with the purpose of the bailment, rendered any service
involving the exercise of labour or skill in respect of the goods bailed he has in the
absence of a contract to the contrary, a right to retain such goods until he receives due
remuneration for the services he has rendered in respect of them.
171. General lien of bankers, factors, wharfinger, attorneys and policy brokers
Bankers, factor, wharfingers, attorneys of a High Court and policy brokers may, in the
absence of a contract to the contrary, retain as a security for a general balance of
account, any goods bailed to them; but no other person have a right retain, as a security
for which balance, goods, bailed to them, unless is an express contract to that effect.
172. "Pledge", "Pawnor", and "Pawnee" defined
The bailment of goods as security for payment of a debt or performance of a promise is
called "pledge". The bailor is in this case called "pawnor". The
bailee is called "pawnee".
173. Pawnee's right of retainer
The pawnee may retain the goods pledged, not only for payment of the debt or the
performance of the promise, but for the interests of the debt, and all necessary expenses
incurred by him in respect to the possession or for the preservation of the goods pledged.
174. Pawnee not to retain for debt or promise other than for which goods pledged -
presumption in case of subsequent advances
The pawnee shall not, in the absence of a contract to that effect, retain the goods
pledged for any debt or promise of other than the debtor promise for which they are
pledged; but such contract, in the absence of anything to the contrary, shall be presumed
in regard to subsequent advances made by the pawnee.
175. Pawnee's right as to extraordinary expenses incurred
The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him
for the preservation of the goods pledged.
176. Pawnee's right where pawnor makes default
If the pawnor makes default in payment of the debt, or performance, at the stipulated
time, or the promise, in respect of which the goods were pledged, the pawnee may bring as
suit against the pawnor upon the debt or promise, and retain the goods pledged as a
collateral security; or he may sell the thing pledged, on giving the pawnor reasonable
notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or
promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are
greater that the amount so due, the pawnee shall pay over the surplus to the pawnor.
177. Defaulting pawnor's right to redeem
If a time is stipulated for the payment of the debt, or performance of the promise, for
which the pledged is made, and the pawnor makes default in payment of the debt or
performance of the promise at the stipulated time, he may redeem the goods pledged at any
subsequent time before the actual sale of them; but he must, on that case, pay, in
addition, any expenses which have arisen from his default.
178. Pledge by mercantile agent
Where a mercantile agent is, with the consent of the owner, in possession of goods or the
documents of title to goods, any pledge made by him, when acting in the ordinary course of
business of a mercantile agent, shall be as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the pawnee acts in good faith and
has not at the time of the pledge notice that the pawnor has not authority to pledge.
Explanation : In this section, the expression "mercantile agent" and
"documents of title" shall have the meanings assigned to them in the Indian Sale
of Goods Act, 1930 (3 of 1930).
178A. Pledge by person in possession under voidable contract
When the pawnor has obtained possession of the other goods pledged by him under a contract
voidable under section 19 of section 19A, but the contract has not been rescinded at the
time of the pledge, the pawnee acquired a goods title to the goods, provided he acts in
good faith and without notice of the pawnor's defect of title.
179. Pledge where pawnor has only a limited interest
Where person pledges goods in which he has only a limited interest, the pledge is valid to
the extent of that interest.
180. Suit by bailor or bailee against wrong-doer
If a third person wrongfully deprives the bailee of the use of possession of goods bailed,
or does them any injury, the bailee is entitled to use such remedies as the owner might
have used in the like case if no bailment has been made; and either the bailor or the
bailee may bring a suit against a third person for such deprivation or injury.
181. Appointment of relief or compensation obtained by such suit
Whatever is obtained by way of relief of compensation in any such suit shall, as between
the bailor and the bailee, be dealt with according to their respective interests.
182. "Agent" and "principal" defined
An "agent" is a person employed to do any act for another, or to represent
another in dealing with third persons. The person for whom such act is done, or who is so
represented, is called the "principal".
183. Who may employ agent
Any person who is of the age of majority according to the law to which he is subject, and
who is of sound mind, may employ an agent.
184. Who may be an agent
As between the principal and third persons, any person may become an agent, but no person
who is not of the age of majority and sound mind can become an agent, so as to be
responsible to the principal according to the provisions in that behalf herein contained.
185. Consideration not necessary
No consideration is necessary to create an agency;
186. Agent's authority may be expressed or implied
The authority of an agent may be expressed or implied.
187. Definitions of express and implied
An authority is said to be express when it is given by words spoken or written. An
authority is said to be implied when it is to be inferred from the circumstances of the
case; and things spoken or written, or the ordinary course of dealing, may be accounted
circumstances of the case.
188. Extent of agent's authority
An agent, having an authority to do an act, has authority do every lawful thing which is
necessary in order to do so such act.An agent having an authority to carry on a business,
has authority to do every lawful thing necessary for the purpose, or usually done in the
course, of conducting such business.
189. Agent's authority in an emergency
An agent has authority, in an emergency, to do all such acts for the purpose of protecting
his principal from loss and would be done by a person or ordinary prudence, in his own
case, under similar circumstances.
190. When agent cannot delegate
An agent cannot lawful employ another to perform acts which he has expressly or impliedly
undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may,
or, from the nature or agency, a sub-agent must, be employed.
191. "Sub-agent" defined
A "sub-agent" is a person employed by, and acting undue the control of, the
original agent in the business of the agency.
192. Representation of principal by sub-agent properly appointed
Where a sub-agent is properly appointed, the principal is, so far as regards third
persons, represented by the sub-agent, and is bound by and responsible for his acts, as if
he were an agent originally appointed by the principal.Agent's responsibility for
sub-agent: The agent is responsible to the principal for the acts of the
sub-agent.Sub-agent's responsibility: The sub-agent is responsible for his acts to the
agent, but not to the principal, except in cases of fraud, or wilful wrong.
193. Agent's responsibility for sub-agent appointed without
authorityWhere an agent, without having authority to do so, has appointed a person to act
as a sub-agent stands towards such person in the relation of a principal to an agent, and
is responsible for his act both to the principal and to third person; the principal is not
represented, by or responsible for the acts of the person so employed, nor is that person
responsible to the principal.
194. Relation between principal and person duly appointed by agent to act in business
of agency
When an agent, holding an express or implied authority to name another person to act for
the principal in the business of the agency, has named another person accordingly, such
person is not a sub-agent, but an agent of the principal for such part of the business of
the agency as is entrusted to him.
195. Agent's duty in naming such person
In selecting such agent for his principal, an agent is bound to exercise the same amount
of discretion as a man or ordinary prudence would exercise in his own case; and, if he
does this, he is not responsible to the principal for the acts of negligence of the agent
so selected.
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