Some requisites need to be fulfilled to be a contract. In this law note, you will learn about some of the important doctrines under the Indian Contract Act, 1872.
Doctrine of Privity of Consideration
Section 2(d) of the Indian Contract Act defines consideration:
When at the desire of the promisor, 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.
In a layman’s language, anything in return for something is called consideration, also known as quid pro quo in Latin legal maxim. Consideration is the most essential ingredient of a contract and besides that, some of the essentials of consideration are:
1. Consideration should move at the desire of the promisor only. Otherwise, it will not be acknowledged in the eyes of the law if decided voluntarily by the third party.
2. Consideration must be given by the promisee or any of his entities or person. (The person who makes the promise to another person is called the promisor, whereas the person to whom the promise is made is called the promisee.)
3. Consideration must be lawful in nature. If found unlawful, the contract becomes void.
Circumstances where consideration is considered unlawful are enshrined under section 23 of the Indian Contract Act. They are as follows:
- It is forbidden by law; or
- Is of such a nature that, if permitted, it would defeat the provisions of any law; or
- Is fraudulent, or
- Involves or implies injury to the person or property of another; or
- The court regards it as immoral or opposed to public policy.
Consideration should be real in nature. It should not be something impossible to attain. Impossibility covers physically impossible, unrealistic as well as illegal considerations.
Types of Consideration
Consideration can be of three types – past, present, and future:
- Past consideration: When the act to be performed is still left, and the consideration that needs to be paid is paid, it is known as past consideration. Earlier, past consideration was not considered, but now it is acknowledged as a consideration.
- Present consideration: When the act and the consideration both are done and paid simultaneously, it is called present consideration.
- Future consideration: When the act to be performed is performed, and the consideration that needs to be paid is still left, it is called future consideration.
Doctrine of Privity of Contract
The doctrine of privity of contract is not explicitly mentioned in the Indian Contract Act. The doctrine of privity of contract protects the obligation of two people towards each other in the contract by debarring strangers from enforcing their rights and holding the contracting parties liable as well. Only the parties to a contract can sue each other in the case of breach of contract and enforce their rights and liabilities in a court of law.
However, some exceptions to the doctrine are:
If a person is a direct beneficiary of a contract between two people, then although being a stranger to the party, he will be entitled to sue and claim his right. For example, Mr A promises Mr B to pay monthly maintenance to Mr C, Mr B’s son. But after some time, Mr A stops paying the amount to Mr C. In this case, Mr C, despite being an outsider, can claim his right because he is the direct beneficiary of the contract.
Acknowledgement or Admission
When a party considers the admission of a third party in the contract, then the third party can file a case against that party. For example, Mr A promises Mr C (third party) to pay Rs. 1000 by considering his admission to the contract. Then, in any case, Mr A cannot back off from his promise. This exception is based on the principle of promissory estoppel.
If a person enters the contract with some contractual right given to him by the parties to the contract, then he has the power to enforce his rights as a party to the contract. For example, Mr A and Mr B are in a contract. Both parties have given the right to Mr C to enforce his rights if any problem arises in the performance of the contract. Then the interference of a third party would be valid as he is given the contractual right to do so.
Read Full Law Note: Privity of Contract Under English Law and Indian Law
Doctrine of Promissory Estoppel
As per the doctrine of promissory estoppel, if a party makes a promise to the other party and the other party performs its duty as said by the former party, then the former party gets legally bound to perform his part of the promise. The former party cannot back off the contract, as he made the promise intending to form a legal relationship. The doctrine of promissory estoppel is not applied in the case of minors.
For example, Mr A promised the workers that he would build a residential area for them if they completed the given work in a month. Workers did so, and now Mr A cannot refuse his promise.
Doctrine of Restitution
Section 65 of the Indian Contract Act lays down the rule of restitution. It says that any benefit incurred from the void agreement or contract must be restored by the beneficiary. The doctrine of restitution applies only to those agreements or contracts which subsequently become void and not those which are void ab initio (void from the beginning). This principle is based on the rule of consideration, where one pays consideration when one gets something in return (quid pro quo).
For example, Mr A orders pizza, but the delivery boy mistakenly delivers it to Mr B. Now, Mr B is bound to return the pizza to Mr A.
Doctrine of Absolute Acceptance
Doctrine of absolute acceptance is laid down under section 7 of the Indian Contract Act. It states how the acceptance of the proposal should be. As per the section, acceptance should be absolute and unqualified in nature (without any conditions and restrictions). Acceptance should be made as prescribed by the proposer, and if not made, the proposer, after the acceptance, may ask to be made in the prescribed form within a reasonable time. If the other person fails to do so, the proposer may continue with the same.
For example, Mr A asked Mr B to send him the letter of acceptance by Tuesday, via XYZ courier service and to his address only. But Mr B did not adhere to the mentioned address. So, here Mr A can accept or reject the same at his discretion.
Doctrine of Expressed and Implied Contracts
Section 9 of the Indian Contract Act states the expressed and implied contracts. If communication of proposal and acceptance is done through the medium of words, whether written or oral, contracts are known as expressed. And if the same is done through conduct, without the involvement of words are implied contracts.
- Mr A entered a restaurant. It is implied that he has to pay the bill for the food he ordered.
- Mr A is asked to pay the interest along with the principal amount he took as a loan from the bank. All the terms are expressly written on the documents. Hence, it is expressed contract.
Doctrine of Necessity
Section 68 of the Indian Contract Act lays down the definition of the doctrine of necessity. It states that if a person is incapable of entering into a contract or is legally bound by a person to be supported is liable to compensate or reimburse everything from his property, for whatever necessities he has been supplied with, as per his condition of life.
Here, necessity does not mean the bare or basic necessities of life (food, cloth, and shelter) but the necessities or requirements to sustain during that condition of life. Necessity also depends upon the status of a person.
Note: Minor is an exception in the doctrine of necessity. Hence, the minor will also be liable to compensate.
For example, besides the basic needs, the requirements of a boy are books and stationery, and a person supplies the boy with his needs along with a bike (which is not a need for him). So, under this doctrine, he would only be liable to compensate the person with books and not with the bike.
Doctrine of Frustration
The doctrine of frustration is given in section 56 of the Indian Contract Act as an agreement to do an impossible act. It says that “an agreement to do an act impossible in itself is void.”
A couple of scenarios where this section is dealt with are:
- Subsequent impossibility: When an agreement was enforceable by law at a point in time, but at a later stage, due to some issues, illegality, or impossibility, it became void. For example, there was a contract to deliver rice from state A to B, but the government later banned such inter-state dealing. So, such a contract would come under the Doctrine of Frustration.
- Non-performance of an act: When the promisor promises something to the promisee which he already knows, with reasonable diligence, is impossible to perform, or is unlawful, due to which the promisor suffers damages, then the promisor gets liable to compensate the promisee. Compensation is done on the basis of non-performance of an act that was already void, but the promisee was ignorant about it.
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