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Consideration: Importance and Exceptions Under the Contract Act

Shreya Sharma
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0
Consideration: Importance and Exceptions Under the Contract Act

Importance of Consideration

Consideration is an essential element of a valid contract under the Indian Contract Act, of 1872. The doctrine of consideration is based on the principle of “quid pro quo”, meaning “something in return.” It ensures that both parties to a contract derive some benefit and incur a legal obligation. Without consideration, a contract is generally void unless it falls under certain exceptions provided in Section 25 of the Act.

Key Functions of Consideration

  1. Legal Enforceability: For an agreement to become a legally binding contract, consideration must be present. An agreement without consideration is typically void, except in specific situations.
  2. Mutual Obligation: Consideration ensures that both parties contribute something valuable, preventing one-sided obligations.
  3. Prevention of Gratuitous Promises: The law does not enforce promises made without consideration unless they fall under statutory exceptions.
  4. Fairness and Reciprocity: It guarantees fairness in contractual dealings by ensuring that each party receives a benefit or suffers a detriment in return.

Definition of Consideration Under the Act

Section 2(d) of the Indian Contract Act, 1872 defines consideration as:

“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 abstain from doing something, such act, abstinence, or promise is called a consideration for the promise.”

Key Aspects of Consideration

  • Past, Present, and Future Consideration: Consideration may be something already done (past), something being done (present), or something promised to be done (future).
  • Can Move from the Promisee or Any Other Person: Unlike English law, where consideration must move from the promisee, Indian law allows it to come from a third party.

Exceptions to the Rule “No Consideration, No Contract” (Section 25)

Section 25 of the Indian Contract Act lays down exceptions where an agreement is enforceable even without consideration:

(i) Love and Affection (Section 25(1))

If an agreement is made out of natural love and affection between close relatives and is in writing and registered, it is valid even without consideration.

  • Example: A father promises to transfer his property to his son out of love and affection through a registered deed. The agreement is valid even though there is no consideration.

(ii) Compensation for Past Voluntary Services (Section 25(2))

A promise to compensate a person for services already rendered voluntarily, or at the promisor’s request, is valid without fresh consideration.

  • Example: A helps B during an accident without any expectation of payment. Later, B promises to pay A for the help. This promise is enforceable.

(iii) Promise to Pay a Time-Barred Debt (Section 25(3))

A promise to pay a debt barred by the Law of Limitation is enforceable if it is in writing and signed by the debtor.

  • Example: X owes Y ₹10,000, but the debt becomes time-barred. X later signs a written promise to pay Y. The promise is legally enforceable.

(iv) Completed Gifts (Explanation 1 to Section 25)

A gift given voluntarily and accepted by the donee does not require consideration. Once given, it is legally valid and cannot be revoked.

  • Example: A gives B a house as a gift through a registered deed. B accepts it. The transfer is valid despite no consideration.

Conclusion

Consideration is the foundation of a legally binding contract under Indian law. It ensures that agreements are based on reciprocity and legal enforceability. However, the law recognizes exceptions where contracts without consideration are still valid, such as agreements made out of love and affection, compensation for past services, payment of time-barred debts, and completed gifts. Understanding these principles helps in drafting legally sound agreements and recognizing when an agreement remains enforceable despite the absence of consideration.

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Directors’ Duties, Liabilities, and Corporate Governance

Shreya Sharma
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Directors’ Duties, Liabilities, and Corporate Governance

Introduction

Directors play a crucial role in managing a company’s affairs and ensuring compliance with legal and ethical standards. Under Indian law, their duties and liabilities are primarily governed by the Companies Act, 2013, along with principles of corporate governance. Though the Indian Contract Act, of 1872 governs contractual obligations, the responsibilities of directors are mainly regulated by company law.

Duties of Directors

The Companies Act, 2013 (Section 166) lays down statutory duties for directors:

(i) Duty to Act in Good Faith (Section 166(2))

Directors must act in the best interests of the company, shareholders, and other stakeholders.

  • Example: A director should not enter into contracts that benefit personal businesses at the company’s expense.

(ii) Duty to Exercise Due Care, Skill, and Diligence (Section 166(3))

Directors must perform their duties with reasonable care, skill, and diligence to avoid negligence.

  • Example: If a director negligently approves a risky investment without proper assessment, they may be held liable.

(iii) Duty to Avoid Conflicts of Interest (Section 166(4))

Directors should disclose conflicts of interest and refrain from transactions where personal interests may conflict with company interests.

  • Example: If a director owns shares in a vendor company and approves contracts with it without disclosure, it is a breach.

(iv) Duty Not to Achieve Undue Gain (Section 166(5))

Directors must not make personal gains at the company’s expense. Any profit made must be returned.

  • Example: If a director misuses insider information for stock trading, it is illegal.

(v) Duty to Ensure Compliance with Laws

Directors must ensure the company follows laws such as taxation, labour laws, and regulatory guidelines.

Liabilities of Directors

Directors can be held civilly and criminally liable for various breaches under company law, contract law, and other statutes.

(i) Contractual Liability

Directors are generally not personally liable for company contracts unless:

  • They sign contracts in their capacity.
  • They provide personal guarantees.
  • They act beyond their authority (ultra vires acts).

(ii) Civil Liability

Directors may be liable for mismanagement, fraud, or negligence, leading to financial losses. Shareholders and creditors can sue for damages.

  • Example: If directors knowingly approve false financial statements, they can be held liable.

(iii) Criminal Liability

Under the Companies Act, 2013, directors face criminal liability for fraud, insider trading, or non-compliance with statutory provisions.

  • Example: Under Section 447, fraud by directors can lead to imprisonment (up to 10 years) and fines.

(iv) Liability for Tax and Regulatory Non-Compliance

Directors can be penalized for violations under the Income Tax Act, SEBI Act, FEMA, and other regulations.

Corporate Governance

Corporate governance refers to the framework ensuring ethical management, accountability, and transparency. Key principles include:

(i) Board Independence

Companies must have independent directors to provide unbiased oversight.

(ii) Disclosure and Transparency

Financial reports, shareholder communications, and board decisions must be disclosed honestly.

(iii) Shareholder Rights Protection

Directors must act in a way that protects minority shareholders’ rights and prevents oppression.

Conclusion

Directors in India have fiduciary, legal, and ethical duties to act in the company’s best interest. Failure to comply can lead to civil and criminal liabilities. Good corporate governance ensures transparency, accountability, and investor confidence. Hence, directors must adhere to legal obligations and ethical business practices to maintain corporate integrity.

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

DOCTRINE OF FRUSTRATION: WHEN A CONTRACT BECOMES IMPOSSIBLE TO PERFORM

Vanshika Sharma
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0
DOCTRINE OF FRUSTRATION: WHEN A CONTRACT BECOMES IMPOSSIBLE TO PERFORM

INTRODUCTION

The doctrine of frustration is also known as the doctrine of supervening impossibility. In this doctrine, a party makes a contract for a certain purpose in mind; however, when the contract becomes impossible, the purpose for which the party is mind is frustrated, and the other party is excused from performing a contract.

This doctrine is only relevant for those situations involving natural disasters, government actions, or destruction of subject matter. In India, this doctrine is given in section 56 of the Indian Contract Act, of 1872.  Which clearly states that the contract becomes void or impossible to perform due to unlawful circumstances or beyond the control of both parties.

LEGAL BASIS OF THE DOCTRINE OF FRUSTRATION

  1. Section 56 of the Indian Contract Act of 1872.

The doctrine of frustration is of two types, which are given in section 56, which states that;

  • Initial impossibility: The impossibility which exists at the time of making the contract is known as initial impossibility. In case of initial impossibility, the contract can never be performed so it becomes void.
  • For example: A promises to sell his horse to B on 08/03/2025. Unknown to both parties, the horse is dead at the time of contract. This is the case of initial impossibility.
  • Subsequent impossibility: In the subsequent impossibility, sometimes the contract becomes void or impossible when it was made, but due to some subsequent event, the performance becomes impossible, this is known as subsequent impossibility, due to subsequent impossibility, the contract becomes void.
  • For example: On 08/03/2025, A promised to sell his car to B for Rs 1 Lakh. The car is to be delivered on 09/04/2025. But on 27/03/2025 the car was stolen. Now A can’t deliver his car to B on 9/04/2025. This is known as a subsequent impossibility. Now the contract becomes void.
  1. English law and common law doctrine

The English law evolved the strict principle of absolute contracts, where the parties are bound to perform their obligations.

The landmark judgement TAYLOR V. CALDWELL [1863]

In this case, A agreed with B to give him a music hall and garden rent for holding a concert [program] and B agreed to pay rent. Before the date of the performance [concert] arrived, the music hall was destroyed by fire. B sued A for breach of contract.

Court held that the contract became void under the doctrine of frustration and A was excused that is he was not liable for the breach of contract.

ESSENTIAL ELEMENTS OF DOCTRINE OF FRUSTRATION

  1. EXISTENCE OF A VALID CONTRACT- A valid contract exists when there are two or more parties in a legally enforceable obligation. The key elements involved in a valid contract are offer, acceptance, consideration, capacity, legality, and free consent.
  1. UNFORESEEN EVENTS BEYOND THE CONTROL OF THE PARTIES –The unforeseen events must be unexpected, and it is out of the control of both parties and not due to their fault.
  2. THE FRUSTRATING EVENT MUST OCCUR WITHOUT ANY FAULT OF EITHER PARTY

If one party is responsible for the event, frustration does not apply and the liability may arise for breach of contract.

WHEN DOES THE DOCTRINE OF FRUSTRATION APPLY?

  1. Destruction of subject matter
  2. Changing in law, rendering performance unlawful
  3. Death or incapacity in personal service contract.

WHEN WILL THE DOCTRINE OF FRUSTRATION NOT APPLY?

  1. Temporary difficulties or delays
  2. Hardship or increased cost
  3. Self-induced frustration
  4. Completed transfers or executed contacts
  5. Failure of one of the objects
  6. Act of the third party

LANDMARK CASES OR JUDICIAL INTERPRETATIONS

  1. Case- Taylor V. Caldwell [1863]

In this case, A agreed with B to give him a music hall and garden rent for holding a concert [program] and B agreed to pay rent. Before the date of the performance [concert] arrived, the music hall was destroyed by fire. B sued A for breach of contract.

The court held that the contract became void under the doctrine of frustration, and A was excused, that is, he was not liable for the breach of contract.

  1. Case- Krell V. Henry [1903]

In this case, a flat was hired to view the coronation procession, but the procession was cancelled due to the king’s illness. Thus, the contract became impossible.

  1. Satyabrat Ghose V. Mugneeram Bangur & Co. [1954]

In this case, the Supreme Court of India ruled that impossibility does not mean literal impossibility but includes the situation where performance becomes impractical due to unforeseen changes in circumstances. The court held that frustration is a matter of law not fact and must be determined based on the contract’s nature and the impact of the event.

CONCLUSION

The doctrine of frustration is a principle ensures that fairness in contract law when there are unforeseen events that make the performance impossible. It prevents one party from being unjustly burdened by circumstances beyond their control while maintaining integrity.

Compelling wife to discontinue studies is cruelty, ground for divorce: Madhya Pradesh HC

Shubhangi Singh
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0
Compelling wife to discontinue studies is cruelty, ground for divorce: Madhya Pradesh HC

The bench consisting of Justice Vivek Rusia and  Justice Gajendra Singh of the Madhya Pradesh High Court held that compelling a wife to discontinue her studies amounts to mental cruelty and can be a ground for divorce under the Hindu Marriage Act.

The court granted divorce to a woman whose husband and in-law’s  denied her from continuing her education after Class 12th.

The court observed that education has been recognised by the Supreme Court as an essential element of life and is an integral part of Right to life.

 

Essentials of a Valid Contract Under the Indian Contract Act, 1872

Shreya Sharma
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0
Essentials of a Valid Contract Under the Indian Contract Act, 1872

Essentials of a Valid Contract Under the Indian Contract Act, 1872

A contract, as defined under Section 2(h) of the Indian Contract Act, 1872, is an agreement enforceable by law. For any contract to be valid under Indian law, certain essential elements must be present. The contract may be void or unenforceable if any of these elements are missing or defective. These essentials form the foundation for the creation of binding obligations between parties. Below are the key essentials of a valid contract:

1. Offer and Acceptance

A contract is formed when one party accepts a valid offer, and the other party accepts the offer. The offer should be clear, definite, and communicated properly to the other party. Acceptance must be unequivocal and correspond exactly to the terms of the offer (also known as the “mirror image rule”). An offer can be revoked any time before acceptance unless it is made irrevocable by a provision like an option contract.

2. Intention to Create Legal Relations

For an agreement to become a contract, there must be an intention to create legal relations. In domestic or social agreements, the intention is generally not to create enforceable legal obligations. For example, an agreement between family members for a casual meal would not typically be considered a contract. In contrast, commercial agreements are presumed to have the intention to create legal relations, making them enforceable in a court of law.

3. Lawful Consideration

Section 2(d) of the Indian Contract Act stipulates that a valid contract must be supported by lawful consideration. Consideration refers to something of value that is exchanged between the parties to the contract. It can be either in the form of money, goods, services, or promises. However, the consideration must be lawful and not illegal, immoral, or against public policy. A promise to do something that is prohibited by law, such as selling illegal drugs, cannot form a valid contract.

4. Capacity to Contract

The parties entering into the contract must have the legal capacity to do so. According to Section 11 of the Indian Contract Act, the following persons are competent to contract:

  • A person who is of the age of majority (18 years or older).
  • A person of sound mind.
  • A person not disqualified by law (such as a person adjudicated as insolvent). If either of the parties lacks the capacity to contract, the agreement is voidable at their discretion, and in some cases, void.

5. Free and Informed Consent

Consent of the parties involved must be free and not obtained through coercion, undue influence, fraud, misrepresentation, or mistake. If consent is obtained through any of these means, the contract becomes voidable at the option of the affected party. The Indian Contract Act ensures that both parties enter the agreement voluntarily and with a clear understanding of the terms.

6. Lawful Object

The object of the contract must be lawful and not against public policy. If the subject matter of the contract is illegal, such as an agreement to commit a crime, it is void. For example, a contract to smuggle goods is not enforceable as it violates legal and moral standards.

7. Certainty of Terms

The terms of the contract must be certain, definite, and clear. If the terms are vague or ambiguous, the contract may fail. For instance, an agreement to sell goods without specifying the price or quantity would not form a valid contract because the terms are uncertain.

8. Not a Void Agreement

Finally, the agreement should not be void or voidable. A void agreement is one that is not enforceable by law from the outset, while a voidable agreement is one where one party has the right to enforce or rescind the agreement due to issues like misrepresentation or undue influence.

Conclusion

The Indian Contract Act, 1872 provides a clear framework for determining the validity of a contract. For an agreement to become a legally enforceable contract, it must include a valid offer and acceptance, mutual intention to create legal relations, lawful consideration, capacity to contract, free consent, lawful object, and certainty of terms. Only when these essentials are present can a contract be considered valid and enforceable under Indian law.

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Offer and Acceptance :The Foundation of a Contract

Asha Manjhi
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0
Offer and Acceptance :The Foundation of a Contract

Introduction :

The concepts of offer and acceptance are the cornerstone of contract law, providing the legal framework for agreements between parties. These elements are crucial in establishing legally binding obligations and ensuring all parties understand their rights and responsibilities. This article will explore the intricacies of offer and acceptance, their historical background, legal context, relevant laws, judicial precedents, and practical implications.

Historical Background and Legal Context :

Historically, the principles of offer and acceptance have evolved from common law traditions, particularly in jurisdictions influenced by English law. The Indian Contract Act, 1872, for instance, was based on these principles and has been a foundational piece of legislation governing contracts in India since its enactment. The Act defines a proposal as an expression of willingness to enter into a contract, while acceptance is the assent to such a proposal, transforming it into a promise.

Relevant Laws and Regulations :

In many legal systems, including those under the Indian Contract Act, 1872, a valid contract requires a clear offer and acceptance. An offer must be definite and communicated to the offeree, while acceptance must be unconditional and communicated in the manner specified by the offeror or as agreed upon by the parties. The United Nations Convention on Contracts for the International Sale of Goods (CISG) also addresses these concepts in international transactions.

Key Judicial Precedents :

Several landmark cases have shaped the understanding of offer and acceptance:

  • Hyde v/s Wrench (1840): This case established that an offer must be accepted in its entirety; any alteration constitutes a counteroffer.
  • Felthouse v/s Bindley (1862): Highlighted that silence or inactivity cannot be considered acceptance unless explicitly agreed upon by the parties.
  • Lucy v/s Zehmer (196 Va 493 84 S.E. 2d 516): Demonstrated the importance of objective intent in determining acceptance.

Legal Interpretation and Analysis:

Legally, acceptance is judged by an objective standard, focusing on the conduct of the offeree rather than their subjective intent. This ensures that contracts are based on mutual understanding and clear communication. The “meeting of the minds” concept, often misunderstood as requiring a subjective agreement, actually refers to a consensus on the terms of the contract.

Comparative Legal Perspectives :

Comparatively, different legal systems emphasize similar principles of offer and acceptance. For instance, the CISG provides guidelines for international sales contracts, ensuring consistency across borders. In contrast, common law jurisdictions like the U.S. and U.K. rely on judicial precedents to interpret these concepts.

Practical Implications and Challenges:

Practically, understanding offer and acceptance is crucial for businesses and individuals to avoid disputes. Challenges arise when offers are ambiguous or when acceptance is not clearly communicated. Ensuring that both parties are aware of their obligations helps prevent misunderstandings and potential legal conflicts.

Recent Developments and Trends :

Recently, there has been an increased focus on electronic communications in contract formation. This has raised questions about the validity of digital acceptances and the need for clear guidelines on electronic contract formation. The use of technology in contract law is evolving rapidly, with many jurisdictions adapting their laws to accommodate digital transactions.

Recommendations and Future Outlook :

To navigate the complexities of offer and acceptance effectively, parties should ensure that offers are clear and specific and that acceptance is communicated unequivocally. As technology continues to influence contract law, legal frameworks will need to adapt to address emerging issues in digital contract formation. Future developments are likely to focus on clarifying the rules for electronic communications and ensuring that contracts remain enforceable in a rapidly changing legal landscape.

Conclusion and References:

In conclusion, offer and acceptance are fundamental to contract law, providing the basis for legally binding agreements. Understanding these concepts is essential for both legal practitioners and individuals involved in contractual relationships. As legal systems evolve, the principles of offer and acceptance will continue to play a central role in shaping contractual obligations.

Also Read: 
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Collegium recommends elevation of Justice Joymala Bagchi

Shubhangi Singh
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0
Collegium recommends elevation of Justice Joymala Bagchi

The collegium has recommended the elevation of Justice Joymala Bagchi of Calcutta High Court to the Supreme Court.

Justice Bagchi will have a considerably short term as CJI and will become the CJI in May 2031 after the retirement of Justice KV Vishwanathan. He is set to retire in October 2031. He is 11th in All india seniority list of HC Judges.

Justice Bagchi has served as the High Court Judge for 13 years. Starting his career in June 2011 with the Calcutta HC and later transferred to Andhra Pradesh in 2021 , then again repartied back to Calcutta HC.

No caste can claim ownership of a Temple: SC

Shubhangi Singh
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0
No caste can claim ownership of a Temple: SC

The Madras High Court in a recent case (C Ganesan v The Commissioner, HR & CE Department) observed that no caste can claim the ownership of a temple and temple administration based on the caste identity as, it is not a protected religious practice under the Constitution of India.

Justice B. Chakravarthy of Madras HC opined that a cast by itself is not a protected religious denomination and emphasized that caste is a social evil and any move towards the perpetuation of caste will be condemned by the court of law.

Contingent and Quasi-Contracts: Concepts and examples

Sakshi Singh
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1
Contingent and Quasi-Contracts: Concepts and examples

Contingent and Quasi-Contracts: Concepts and Examples

Contracts are, in essence, rights of parties intending to carry out business, trade, and personal dealings. These cannot always, however, be of the common form whereby two parties mutually agree to certain prescribed terms, for there are those that depend on future events. In contrast, others arise by some legal obligations for preventing unjust enrichment. These two types of contracts- contracting and quasi-contracts- are very dependent on mechanisms of the law itself found in various countries around the world.

This blog seeks to discuss these two types of contracts; contingent and quasi Contracts basic principles, examples, and differences from normal contracts.

Understanding Contingent Contracts

A contingent contract is a sort of contract that can depend on the occurrence or non-occurrence of a future event that is uncertain. According to Section 31 of the Indian Contract Act, of 1872:

A contingent contract is a contract to do or not to do something upon the occurrence or non-occurrence of an event, collateral to such contract.

In layman’s terms, a contingent contract can only be enforced when a certain event occurs. Until that designated event occurs (or does not occur), the contract is suspended.

Characteristics of Contingent Contracts

  • Condition on a Future Event: A condition to the performance of the contract refers to any event that may or may not happen in the future.
  • Uncertainty: Whether or not the event occurs is uncertain.
  • Collateral Event: The occurrence of the event must not be in the hands of either of the contracting parties and should be external.
  • Conditional Enforceability: The contract shall only be enforceable after the event has taken place.

Examples of Contingent Contracts

  • Insurance Contracts: A car insurance policy is a contingent contract. The insurance company agrees to compensate the policyholder only if an accident occurs. If no accident happens, the company has no obligation.
  • Lottery and Betting Agreements: A person buying a lottery ticket enters into a contingent contract, as they will receive the prize money only if their ticket number is drawn.
  • Performance-Based Agreements: A football coach may sign a contract stating that he will receive a bonus only if the team wins the championship.

Types of Contingent Contracts

  • Contracts Dependent on an Event Happening: A shipping company agrees to pay a bonus if goods arrive safely at the destination. If the goods arrive without damage, the contract is fulfilled.
  • Contracts Dependent on an Event Not Happening: A construction firm agrees to build a bridge only if the government does not impose new environmental regulations.
  • Contracts Based on the Conduct of a Third Party: A company agrees to buy land if a government authority grants approval for its use.

Enforceability of Contingent Contracts

A contingent contract is legally binding only if the event occurs within a reasonable time. If the event becomes impossible (e.g., a promised reward for the discovery of a lost item, but the item is destroyed), the contract becomes void.

Understanding Quasi-Contracts

A quasi-contract is not an actual contract, but an obligation set up by law to prevent unjust enrichment. It arises where one party benefits at the expense of another by some unfairness, and it does so even if there is no formal contract between the parties.

Quasi-contracts are an expression of the legal precept aiming at equity to ensure that between the parties nobody shall be benefited from enjoying an unfair advantage unless the aggrieved party has been compensated for the loss sustained.

Legal Basis of Quasi-Contracts

Section 68-72 of the Indian Contract Act, of 1872, outlines various quasi-contractual obligations. These obligations are recognized under common law as well, where courts impose a duty on one party to compensate another to avoid unjust enrichment.

Characteristics of Quasi-Contracts

  • Absence of Agreement: Unlike regular contracts, there is no prior agreement between the parties.
  • Legal Obligation: The obligation is created by law rather than by mutual consent.
  • Unjust Enrichment Prevention: The purpose is to prevent one party from unfairly benefiting at another’s expense.
  • Monetary Compensation: The party receiving an unfair advantage must compensate the affected party.

Examples of Quasi-Contracts

  • Supply of Necessities: When a person incapable of giving consent is provided food, shelter, or medical aid, the supplier may recover reasonable expenses from his or her estate.
  • Payment Made Under Mistake: Where a person mistakenly pays the bill of another person, that person shall be entitled to claim back the sum so paid.
  • Finder of Lost Goods: A person who finds someone’s lost wallet has the legal obligation to return the wallet, whereas the owner must pay for those reasonable costs of keeping the property.
  • Non-Gratis Services: When a person unknowingly receives a service, he/she may be obligated to compensate the service provider.

Types of Quasi-Contracts

  • Obligation of a Person Receiving Benefits Without Intent: If someone receives money or goods mistakenly, they must return them or compensate the rightful owner.
  • Responsibility of a Finder of Goods: A person who finds lost property must take reasonable care of it and attempt to return it.
  • Payment of Money by Mistake or Coercion: If someone is forced to make a payment they were not legally required to, they can claim a refund.

Differences Between Contingent and Quasi-Contracts

Contracts are all about transactions and agreements, they make sure the parties involved do what they were supposed to. Nonetheless, some contracts are not simple agreements with two parties. Some contracts depend on future events; some are concerned with the behaviour that has to be carried into effect only by law, so as not to gain an unfair advantage. The two types of contracts are contingent contracts and quasi-contracts, serving different legal purposes.

Both of these agreements are recognized in contract law as more or less the same but differ widely in their nature enforceability and legal consequences. This article explores the key differences between contingent contracts and quasi-contracts to provide a clear understanding of their applications.

1. Definition and Nature

A contingent contract is a formal commitment in which the performance of the obligations is dependent upon an uncertain future event or non-event. Such a contract is, in other words, a conditional one- it will be enforceable only if a certain event occurs or does not occur. For example, in an insurance contract, the insurer undertakes the payment to the insured only in the case of the occurrence of specified events (accident or fire).

On the other hand, a quasi-contract is not a real contract but a legal obligation imposed by law. A quasi-contract arises in such a situation if one party has been unfairly enriched at the expense of another; hence an obligation to compensate the affected party to prevent unjust enrichment arises within the law. To illustrate, if one person has mistakenly been paid money that was not intended for him, he must return it.

2. Formation and Legal Basis

A contingent contract is one, that is created through mutual agreement between the parties, the enforceability of which, however, depends on some event that is uncertain to occur in future. They fall under Section 31 of the Indian Contract Act, of 1872, where they are defined as contracts that depend upon the occurrence of collateral events.

Quasi-contracts are not naturally created in contracts but are imposed by law for the sake of justice. The legal nature of quasi-contracts is found in Sections 68-72 of the Indian Contract Act, 1872, involving obligations such as supply with necessities, payment by mistake, and the finders of lost goods.

3. Dependency on an Event

One of the major differences between the two lies in the fact that contingent contracts are founded specifically on a future event, while quasi-contracts are not. A contingent contract cannot be acted upon until the event concerning the contract takes place; if it does not take place, the contract never becomes effective.

On the other hand, quasi-contracts have no such uncertain event to rely on. Instead, they come into play at the instant the presence of a benefit is discovered and deemed to be of unjust advantage to one. The law gives redress to the beneficiary party a noncontractual one so that the unjust enrichment ceases.

4. Example Scenarios

To better understand the differences, consider the following examples:

  • Contingent Contract Example: A company enters into a contract with a supplier stating that they will.
  • Quasi-contracts prevent unjust enrichment by imposing legal obligations in the absence of a formal contract.

Conclusion

Contingent contracts and quasi-contracts are of vast importance in contract law in cases when standard contracts are insufficient. Though contingent contracts are dependent on future events and mutually agreed upon, quasi-contracts arise from obligations imposed by the law to prevent unjust enrichment.

If these legal concepts are firmly understood, businesses, individuals, and the legal community will be in a better position to navigate their contractual relationships with insight. Rectitude and reason should bolster all parties’ standing daily game and should ensure fair and legal transactions.

Would you like to explore specific case laws or real-world examples of contingent and quasi-contracts? Let us know in the comments!

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Calling someone Miyan-Tiyan and Pakistani would be in poor taste but doesn’t amount to offence of hurting religious sentiments:SC

Shubhangi Singh
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0
Calling someone Miyan-Tiyan and Pakistani would be in poor taste but doesn’t amount to offence of hurting religious sentiments:SC

The Supreme Court held that calling someone Miyan-Tiyan and Pakistani would be in poor taste but would not amount to offence of hurting his religious sentiments.

The bench consisting of Justice BV Nagarathna and Satish Chandra Sharma discharged the accused of the charge under Section 298 of the Indian Penal Code (Uttering words etc., with deliberate attempt to wound religious feelings).

The FIR was lodged by the complainant as he alleged that the religious abuses were inflicted upon him when he went to furnish information relating to his RTI application .

 

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