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THE INDIAN CONTRACT ACT, 1872
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ARRANGEMENT OF SECTIONS
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SECTIONS
PREAMBLE
PRELIMINARY
- Short title. Extent. Commencement. Saving.
- Interpretation-clause.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
- Communication, acceptance and revocation of proposals.
- Communication when complete.
- Revocation of proposals and acceptances.
- Revocation how made.
- Acceptance must be absolute.
- Acceptance by performing conditions, or receiving consideration.
- Promises, express and implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID
AGREEMENTS
- What agreements are contracts.
- Who are competent to contract.
- What is a sound mind for the purposes of contracting.
- “Consent” defined.
- “Free consent” defined.
- “Coercion” defined.
- “Undue influence” defined.
- “Fraud” defined.
- “Misrepresentation” defined.
- Voidability of agreements without free consent. 19A. Power to set aside contract induced by undue influence.
- Agreement void where both parties are under mistake as to matter of fact.
- Effect of mistakes as to law.
- Contract caused by mistake of one party as to matter of fact.
SECTIONS
- What considerations and objects are lawful, and what not.
Void agreements
- Agreement void, if considerations and objects unlawful in part.
- 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.
- Agreement in restraint of marriage, void.
- Agreement in restraint of trade, void. Saving of agreement not to carry on business of which good-will is sold.
- Agreements in restraint of legal proceeding void. Saving of contract to refer to arbitration dispute that may arise. Saving of contract to refer questions that have already arisen. Saving of a guarantee agreement of a bank or a financial institution.
- Agreements void for uncertainty.
- Agreements by way of wager, void. Exception in favour of certain prizes for horse-racing. Section 294A of the Indian Penal Code not affected.
CHAPTER III
OF CONTINGENT CONTRACTS
- “Contingent contract” defined.
- Enforcement of contracts contingent on an event happening.
- Enforcement of contracts contingent on an event not happening.
- When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.
- When contracts become void which are contingent on happening of specified event within fixed time. When contracts may be enforced, which are contingent on specified event not happening within fixed time.
- Agreement contingent on impossible events void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
- Obligation of parties to contracts.
- Effect of refusal to accept offer of performance.
- Effect of refusal of party to perform promise wholly.
By whom contracts must be performed
- Person by whom promise is to be performed.
- Effect of accepting performance from third person.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
SECTIONS
- Claim for necessaries supplied to person incapable of contracting, or on his account.
- Reimbursement of person paying money due by another, in payment of which he is interested.
- Obligation of person enjoying benefit of non-gratuitous act.
- Responsibility of finder of goods.
- Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
- Compensation for loss or damage caused by breach of contract. Compensation for failure to discharge obligation resembling those created by contract.
- Compensation for breach of contract where penalty stipulated for.
- Party rightfully rescinding contract, entitled to compensation.
CHAPTER VII SALE OF GOODS
- —123. [ Repealed. ]
CHAPTERVIII
OF INDEMNITY AND GUARANTEE
- “Contract of indemnity” defined.
- Rights of indemnity-holder when sued.
- “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.
- Consideration for guarantee.
- Surety‟s liability.
- “Continuing guarantee”.
- Revocation of continuing guarantee.
- Revocation of continuing guarantee by surety‟s death.
- Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other‟s default.
- Discharge of surety by variance in terms of contract.
- Discharge of surety by release or discharge of principal debtor.
- Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor.
- Surety not discharged when agreement made with third person to give time to principal debtor.
- Creditor‟s forbearance to sue does not discharge surety.
- Release of one co-surety does not discharge others.
- Discharge of surety of creditor‟s act or omission impairing surety‟s eventual remedy.
- Rights of surety on payment or performance.
SECTIONS
- Surety‟s right to benefit of creditor‟s securities.
- Guarantee obtained by misrepresentation invalid.
- Guarantee obtained by concealment invalid.
- Guarantee on contract that creditor shall not act on it until co-surety joins.
- Implied promise to indemnify surety.
- Co-sureties liable to contribute equally.
- Liability of co-sureties bound in different sums.
CHAPTER IX
OF BAILMENT
- “Bailment”, “bailor” and “bailee” defined.
- Delivery to bailee how made.
- Bailor‟s duty to disclose faults in goods bailed.
- Care to be taken by bailee.
- Bailee when not liable for loss, etc., of thing bailed.
- Termination of bailment by bailee‟s act inconsistent with conditions.
- Liability of bailee making unauthorized use of goods bailed.
- Effect of mixture, with bailor‟s consent, of his goods with bailee‟s.
- Effect of mixture, without bailor‟s consent, when the good can be separated.
- Effect of mixture, without bailor‟s consent, when the goods cannot be separated.
- Repayment, by bailor, of necessary expenses.
- Restoration of goods lent gratuitously.
- Return of goods bailed, on expiration of time or accomplishment of purpose.
- Bailee‟s responsibility when goods are not duly returned.
- Termination of gratuitous bailment by death.
- Bailor entitled to increase or profit from goods bailed.
- Bailor‟s responsibility to bailee.
- Bailment by several joint owners.
- Bailee not responsible on re-delivery to bailor without title.
- Right of third person claiming goods bailed.
- Right of finder of goods. May sue for specific reward offered.
- When finder of thing commonly on sale may sell it.
- Bailee‟s particular lien.
- General lien of bankers, factors, wharfingers, attorneys and policy-brokers.
Bailments of pledges
- “Pledge”, “Pawnor” and “Pawnee” defined.
- Pawnee‟s right of retainer.
- Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances.
Revocation of authority SECTIONS
- Termination of agency.
- Termination of agency, where agent has an interest in subject-matter.
- When principal may revoke agent‟s authority.
- Revocation where authority has been partly exercised.
- Compensation for revocation by principal, or renunciation by agent.
- Notice of revocation or renunciation.
- Revocation and renunciation may be expressed or implied.
- When termination of agent‟s authority takes effect as to agent, and as to third persons.
- Agent‟s duty on termination of agency by principal‟s death or insanity.
- Termination of sub-agent‟s authority.
Agent’s duty to principal
- Agent‟s duty in conducting principal‟s business.
- Skill and diligence required from agent.
- Agent‟s accounts.
- Agent‟s duty to communicate with principal.
- Right of principal when agent deals, on his own account, in business of agency without principal‟s consent.
- Principal‟s right to benefit gained by agent dealing on his own account in business of agency.
- Agent‟s right of retainer out of sums received on principal‟s account.
- Agent‟s duty to pay sums received for principal.
- When agent‟s remuneration becomes due.
- Agent not entitled to remuneration for business misconducted.
- Agent‟s lien on principal‟s property.
Principal’s duty to agent
- Agent to be indemnified against consequences of lawful acts.
- Agent to be indemnified against consequences of acts done in good faith.
- Non-liability of employer of agent to do a criminal act.
- Compensation to agent for injury caused by principal‟s neglect.
Effect of agency on contracts with third persons
- Enforcement and consequences of agent‟s contracts.
- Principal how far bound, when agent exceeds authority.
- Principal not bound when excess of agent‟s authority is not separable.
- Consequences of notice given to agent.
- Agent cannot personally enforce, nor be bound by, contracts on behalf of principal. Presumption of contract to contrary.
- Rights of parties to a contract made by agent not disclosed.
- Performance of contract with agent supposed to be principal.
- Right of person dealing with agent personally liable.
SECTIONS
- Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable.
- Liability of pretended agent.
- Person falsely contracting as agent, not entitled to performance.
- Liability of principal inducing belief that agent‟s unauthorized acts were authorized.
- Effect, on agreement, of misrepresentation or fraud by agent.
CHAPTER XI
OF PARTNERSHIP
239. —266. [ Repealed .]
SCHEDULE—[ Repealed .]
( b ) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; ( c ) The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “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. CHAPTER I OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3. Communication, acceptance and revocation of proposals. —The communication of proposals
the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate 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 comes
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 as 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. Illustrations ( a ) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. ( b ) B accepts A‟s proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is post; as against B, when the letter is received by A. ( c ) A revokes his proposal by telegram. The revocation is complete as against A when the telegram is despatched. It is complete as against B when B receives it. B revokes his acceptance by telegram. B‟s revocation is complete as against B when the telegram is despatched, and as against A when it reaches him.
5. Revocation of proposals and acceptances .—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 not afterwards.
Illustrations A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not 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 his death or insanity comes to the knowledge of the acceptor 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 a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
9. Promises, 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.
CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
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 1 [India] and not hereby expressly repealed
- Subs. by Act 3 of 1951, s. 3 and Sch., for “Part A States and Part C States” which had been subs. by the A.O. 1950, for “the Provinces”.
( 2 ) In particular and without prejudice to the generality of the foregoing principle, a person is deemed
to be in a position to dominate the will of another—
( a ) where he holds 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 lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).
Illustrations ( a ) A having advanced money to his son, B, during his minority, upon B‟s coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence. ( b ) A, a man enfeebled by disease or age, is induced, by B‟s influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services, B employs undue influence. ( c ) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence. ( d ) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.]
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 agent^1 , with intent to deceive another party thereto of 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.
Explanation .—Mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak^2 , or unless his silence is, in itself, equivalent to speech.
Illustrations ( a ) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse‟s unsoundness. This is not fraud in A. ( b ) B is A‟s daughter and has just come of age. Here, the relation between the parties would make it A‟s duty to tell B if the horse is unsound. ( c ) B says to A—“If you do not deny it, I shall assume that the horse is sound.” A says nothing. Here, A‟s silence is equivalent to speech.
( d ) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B‟s willingness to proceed with the contract. A is not bound to inform B.
- Cf. s. 238, infra.
- See s. 143, infra.
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 which is 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 any one 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 the subject of the agreement.
19. Voidability of agreements without free consent .—When consent to an agreement is caused by
coercion, 1 *** fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception .—If such consent was caused by misrepresentation or by silence, fraudulent within the
meaning of section 17, the contract, nevertheless, 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.
Illustrations ( a ) A, intending to deceive B, falsely represents that five hundred maunds of indigo are made annually at A‟s factory, and thereby induces B to buy the factory. The contract is voidable at the option of B.
( b ) A, by a misrepresentation, leads B erroneously to believe that, five hundred maunds of indigo are made annually at A‟s factory. B examines the accounts of the factory, which show that only four hundred maunds of indigo have been made. After this B buys the factory. The contract is not voidable on account of A‟s misrepresentation.
( c ) A fraudulently informs B that A‟s estate is free from incumbrance. B thereupon buys the estate. The estate is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and the mortgage debt redeemed.
( d ) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore from A. Through A‟s ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A.
( e ) A is entitled to succeed to an estate at the death of B, B dies: C, having received intelligence of B‟s death, prevents the intelligence reaching A, and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A.
2 [ 19A. Power to set aside contract induced by undue influence .—When consent to an agreement is
caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.
Illustrations ( a ) A‟s son has forged B‟s name to a promissory note. B under threat of prosecuting A‟s son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
- The words “undue influence” rep. by Act 6 of 1899, s. 3.
- Ins. by Act 6 of 1899, s. 3.
( b ) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are lawful considerations. ( c ) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here, A‟s promise is the consideration for B‟s payment and B‟s payment is the consideration for A‟s promise, and these are lawful considerations. ( d ) A promises to maintain B‟s child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations. ( e ) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful. ( f ) A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. ( g ) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void. as it implies a fraud by concealment, by A, on his principal. ( h ) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful. ( i ) A‟s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law. ( j ) A, who is B‟s mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1, rupees to A. The agreement is void, because it is immoral. ( k ) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (45 of 1860).
Void agreements
24. Agreement void, if considerations and 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 considerations for a single object, is unlawful, the agreement is void.
Illustration A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A‟s promise, and the consideration for B‟s promise, being in part unlawful.
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 1 [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 authorized in that behalf, to pay wholly or in part a 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.
- Subs. by Act 12 of 1891, s. 2 and Sch. II, Pt. I, for “assurances”.
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.
Illustrations ( a ) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement. ( b ) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract. ( c ) A finds B‟s purse and gives it to him. B promises to give A Rs. 50. This is a contract. ( d ) A supports B‟s infant son. B promises to pay A‟s expenses in so doing. This is a contract. ( e ) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract. ( f ) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A‟s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. ( g ) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A‟s consent 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 any one 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 good-will 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 good-will 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. (^1) * * * * *.
28. Agreements in restraint of legal proceedings, void .—^2 [Every agreement,—
( a ) 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; or ( b ) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing 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 a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. (^3) * * * * *
Exception 2.— Saving of contract to refer questions 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 references to arbitration^4.
- Exceptions 2 and 3 rep. by Act 9 of 1932, s. 73 and Sch. II.
- Subs. by Act 1 of 1997, s. 2, for certain words (w.e.f. 8-1-1997).
- The second clause of Exception 1 to section 28 rep. by Act 1 of 1877, s. 2 and Sch.
- Cf. the Arbitration Act, 1940 (10 of 1940) and the Companies Act, 1956 (1 of 1956), s. 389.
Exception in 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 awarded 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.
CHAPTER III OF CONTINGENT CONTRACTS
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.
Illustration A contracts to pay B Rs. 10,000 if B‟s house is burnt. This is a contingent contract.
32. Enforcement of contracts contingent on an event happening .—Contingent contracts to do or
not to do anything if 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. Illustrations ( a ) A makes a contract with B to buy B‟s horse if A survives C. This contract cannot be enforced by law unless and until C dies in A‟s lifetime.
( b ) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.
( c ) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.
33. Enforcement of contracts 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.
Illustration A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.
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 he should so act within any definite time, or otherwise than under further contingencies.
Illustration A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B.
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 contracts to do 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 becomes certain that such event will not happen.
Illustrations ( a ) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.
( b ) A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year.
36. Agreement contingent on impossible events 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 the agreement at the time when it is made.
Illustrations ( a ) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void. ( b ) A agrees to pay B 1,000 rupees if B will marry A‟s daughter C. C was dead at the time of the agreement. The agreement is void.
CHAPTER IV OF THE PERFORMANCE OF CONTRACTS Contracts which must be performed
37. Obligation of parties to contracts .—The parties to a contract must either perform, or offer to
perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.
Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.
Illustrations ( a ) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A‟s representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A‟s representatives.
( b ) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A‟s representatives or by B.
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 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.
