Which case held that an agreement with a minor is void ab initio?

Lalman Shukla v Gauri Dutt (1913)

Satyabrata Ghose v Mugneeram Bangur (1954)

Under the Indian Contract Act 1872, a contract induced by coercion is:

Voidable at the option of the party whose consent was so caused

Assertion (A): In India, a person who is not a party to the consideration may still sue on a contract to which he is a party. Reason (R): Section 2(d) allows consideration to move from the promisee or any other person. Choose the correct option.

Both A and R are true, and R is the correct explanation of A

Both A and R are true, but R is not the correct explanation of A

In Satyabrata Ghose v Mugneeram Bangur & Co (1954), the Supreme Court held that the word "impossible" in section 56:

Includes impracticability that defeats the object of the contract

Is limited to physical impossibility

Includes impracticability that defeats the object of the contract

Does not apply to contracts for the sale of land

Includes any increase in the cost of performance

Which of the following agreements are expressly declared void by the Indian Contract Act 1872? Select all that apply.

An agreement in restraint of marriage of any person other than a minor

An agreement in restraint of trade, other than on the sale of goodwill

An agreement induced by misrepresentation

An agreement in restraint of marriage of any person other than a minor

An agreement in restraint of trade, other than on the sale of goodwill

In Kailash Nath Associates v Delhi Development Authority (2015), the Supreme Court held under section 74 that:

Where no loss at all is caused by the breach, the stipulated sum is not payable

Section 74 applies only to contracts with the government

A penalty clause is enforceable as written

Where no loss at all is caused by the breach, the stipulated sum is not payable

The stipulated sum is always payable in full

Assertion (A): A contract concluded by an exchange of e-mails can be binding in India. Reason (R): Section 10A of the Information Technology Act 2000 provides that a contract is not unenforceable merely because it was formed by electronic means. Choose the correct option.

Both A and R are true, and R is the correct explanation of A

Both A and R are true, but R is not the correct explanation of A

Which of the following are quasi-contractual obligations under sections 68 to 72? Select all that apply.

Obligation to return money paid by mistake

Responsibility of a finder of goods as a bailee

Liability to pay for necessaries supplied to a minor, out of his property

Obligation of a guarantor to pay the principal debt

Obligation to return money paid by mistake

Responsibility of a finder of goods as a bailee

Liability to pay for necessaries supplied to a minor, out of his property

In Central Inland Water Transport Corporation v Brojo Nath Ganguly (1986), a service rule was struck down because it was:

Not communicated to the employee

Commercial Law I: Essential Elements of Contract and E-Contracts, Void and Voidable Agreements, Breach and Frustration, Standard Form Contracts and Quasi-Contracts

Unit VI is "Commercial Law". Its first three items are the general law of contract under the Indian Contract Act 1872: the essential elements and e-contracts; breach, frustration, and void and voidable agreements; and standard form contracts and quasi-contracts. Contract is also taught on this platform in NET Commerce's business-law chapter, which surveys the Act for a commerce student. This chapter works at a lawyer's depth: the exact section, the ratio of the leading case, and the distinctions an examiner builds questions on, such as a proposal versus an invitation to offer, void versus voidable, and liquidated damages versus penalty.

1. Essential elements of a valid contract

Section 2(h) defines a contract as an agreement enforceable by law, and section 10 states when an agreement is a contract: it must be made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and not be expressly declared void. A proposal (section 2(a)) becomes a promise when accepted (section 2(b)); acceptance must be absolute and unqualified (section 7). Communication of a proposal is complete when it comes to the knowledge of the offeree; of an acceptance, as against the proposer when it is put in the course of transmission, and as against the acceptor when it comes to the proposer's knowledge (section 4). A proposal can be revoked until acceptance is complete as against the proposer (section 5).

The elements and their authorities
Element	Rule	Leading authority
General offer	An offer to the world at large can be accepted by anyone who performs its conditions	Carlill v Carbolic Smoke Ball Co (1893)
Knowledge of the offer	One who performs the act without knowing of the offer cannot claim the reward	Lalman Shukla v Gauri Dutt (1913)
Invitation to offer	A display of goods with prices is an invitation to treat, not an offer	Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953); Harvey v Facey (1893)
Intention to create legal relations	Domestic and social agreements are presumed not to be intended to be binding	Balfour v Balfour (1919)
Consideration	Section 2(d): at the desire of the promisor; may move from the promisee or any other person; may be past, present or future	Durga Prasad v Baldeo (1880): an act done at the desire of a third party is not consideration; Chinnaya v Ramayya (1882): consideration may move from a stranger
Capacity	Section 11: a person who is of the age of majority, of sound mind and not disqualified by law	Mohori Bibee v Dharmodas Ghose (1903): a minor's agreement is void ab initio

An e-contract is valid in India. Section 10A of the Information Technology Act 2000, inserted in 2008, provides that a contract is not unenforceable merely because its proposal, acceptance or revocation was expressed in electronic form or by electronic records. Click-wrap and browse-wrap agreements are judged by the ordinary rules of offer, acceptance and notice of terms. In Trimex International FZE v Vedanta Aluminium (2010) the Supreme Court held that a contract concluded through an exchange of e-mails was binding although a formal document was never signed. An electronic signature is recognised by section 5 of the IT Act, and electronic records are proved under the Bharatiya Sakshya Adhiniyam, 2023, which replaced the certificate procedure of section 65B of the Evidence Act (on which Arjun Panditrao Khotkar v Kailash Kushanrao Gorantyal, 2020, had insisted) with a corresponding provision in section 63.

⚠️ Consideration in India is wider than in England

Under section 2(d), consideration may move from "the promisee or any other person", so a stranger to the consideration can sue if he is a party to the contract (Chinnaya v Ramayya). What India still requires is privity of contract: a stranger to the contract itself generally cannot sue. Past consideration, which English law rejects, is good consideration in India.

2. Free consent, and void and voidable agreements

Factors affecting free consent
Vitiating factor	Section	Effect
Coercion	s.15: committing or threatening any act forbidden by the Indian Penal Code (now the BNS), or unlawfully detaining property, to cause a person to agree	Voidable (s.19)
Undue influence	s.16: a party in a position to dominate the will of the other uses that position to obtain an unfair advantage	Voidable (s.19A); the court may set it aside absolutely or on terms
Fraud	s.17: a false suggestion or active concealment with intent to deceive; mere silence is not fraud unless there is a duty to speak	Voidable (s.19), with damages
Misrepresentation	s.18: an innocent false statement believed to be true	Voidable (s.19)
Mistake	s.20: both parties mistaken as to a matter of fact essential to the agreement; s.21: a mistake of Indian law does not make it voidable; s.22: a unilateral mistake does not	Bilateral mistake of fact makes the agreement void

A void agreement (section 2(g)) is not enforceable by law from the start; a voidable contract (section 2(i)) is enforceable at the option of one party until avoided; a contract becomes void when it ceases to be enforceable (section 2(j)), as on frustration. The Act declares several agreements void: those with an unlawful consideration or object (section 23: forbidden by law, fraudulent, injurious to person or property, immoral or opposed to public policy), agreements without consideration (section 25, with exceptions for a written and registered promise made out of natural love and affection, compensation for a past voluntary act, and a written promise to pay a time-barred debt), agreements in restraint of marriage (section 26), in restraint of trade (section 27, except on the sale of goodwill), in restraint of legal proceedings (section 28), uncertain agreements (section 29), wagers (section 30) and agreements to do impossible acts (section 56).

🎯 Why a minor's agreement is void, not voidable

Section 11 makes a minor incompetent to contract, and in Mohori Bibee v Dharmodas Ghose (1903) the Privy Council held that a mortgage executed by a minor was void ab initio, so the lender could not recover the advance. The protection is for the minor: he cannot ratify on attaining majority, but he can be a beneficiary (a promisee), and necessaries supplied to him can be paid for out of his property under section 68.

3. Breach, frustration and remedies

Section 56 contains the doctrine of frustration: an agreement to do an impossible act is void, and a contract to do an act that afterwards becomes impossible or, by reason of some event the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. In Satyabrata Ghose v Mugneeram Bangur & Co (1954) the Supreme Court held that "impossible" is not confined to literal impossibility but includes an act that has become impracticable and useless from the point of view of the object the parties had in view, and that section 56 is exhaustive of the doctrine in India. The English cases illustrate the idea: Taylor v Caldwell (1863), a music hall destroyed by fire; Krell v Henry (1903), rooms hired to view a coronation procession that was cancelled. Commercial hardship or a rise in cost does not frustrate a contract.

Remedies for breach
Remedy	Rule	Authority
Compensation for loss	Section 73: for loss that naturally arose in the usual course of things from the breach, or that the parties knew when they made the contract to be likely to result; not for remote or indirect loss	Hadley v Baxendale (1854): a delayed crankshaft; the mill's lost profits were not recoverable because the carrier did not know the mill would stand idle
Liquidated damages and penalty	Section 74: where a sum is named or a penalty stipulated, the injured party gets reasonable compensation not exceeding that sum, whether or not actual loss is proved	Kailash Nath Associates v Delhi Development Authority (2015): proof of loss is dispensed with only where it is difficult to prove; where no loss is caused, nothing is payable
Anticipatory breach	Section 39: refusal to perform before the due date lets the promisee put an end to the contract and sue at once	Hochster v De La Tour (1853)
Specific performance	Under the Specific Relief Act 1963 as amended in 2018, specific performance is the general rule, no longer a discretionary remedy available only where damages are inadequate	Specific Relief (Amendment) Act 2018

🧠 Section 73 and section 74 in one line

Section 73 measures loss; section 74 caps it. Indian law does not enforce a stipulated penalty as such, nor does it award the named sum automatically: the court awards reasonable compensation up to the stipulated figure.

4. Standard form contracts and quasi-contracts

A standard form contract is drafted by one party, usually a corporation or the State, and offered on a take-it-or-leave-it basis. Courts protect the weaker party in three ways: the terms must be brought to the other party's notice before or at the time of contracting; exemption clauses are construed strictly against the party relying on them (contra proferentem); and unconscionable terms are void. In Central Inland Water Transport Corporation v Brojo Nath Ganguly (1986) the Supreme Court struck down a service rule allowing a government company to terminate a permanent employee on three months' notice as unconscionable and opposed to public policy under section 23. The Consumer Protection Act 2019 now empowers the State and National Commissions to declare unfair contract terms void.

Quasi-contracts: sections 68 to 72
Quasi-contract	Section	Rule
Necessaries supplied to a person incapable of contracting	s.68	The supplier is reimbursed from the incapable person's property, not personally
Payment by an interested person	s.69	One who pays money another is bound to pay, being interested in the payment, is entitled to be reimbursed
Non-gratuitous act	s.70	A person who lawfully does something for another, not intending to do so gratuitously, where the other enjoys the benefit, must be compensated; the State can be liable under it (State of West Bengal v B.K. Mondal and Sons, 1962)
Finder of goods	s.71	A finder who takes goods into custody has the responsibility of a bailee
Payment by mistake or under coercion	s.72	Money paid or thing delivered by mistake or under coercion must be repaid or returned

ℹ️ Why "quasi-contract" is a misnomer

These obligations are not contracts at all; the Act calls them "certain relations resembling those created by contract". They rest on the principle of unjust enrichment: no one should be allowed to keep a benefit at another's expense where justice requires restitution. Section 73 applies the same measure of compensation to breach of such an obligation.

Key takeaways

Section 10: free consent, competent parties, lawful consideration and object, not expressly void; a general offer can be accepted by performance (Carlill, 1893) but only with knowledge of it (Lalman Shukla, 1913).
A minor's agreement is void ab initio (Mohori Bibee, 1903); e-contracts are valid under section 10A of the IT Act 2000 (Trimex, 2010).
Coercion, undue influence, fraud and misrepresentation make a contract voidable; a bilateral mistake of fact makes it void; sections 23 to 30 and 56 list void agreements.
Frustration is exhaustively governed by section 56 (Satyabrata Ghose, 1954); section 73 follows Hadley v Baxendale (1854); section 74 caps compensation at the stipulated sum (Kailash Nath, 2015).
Unconscionable standard terms are void under section 23 (Brojo Nath Ganguly, 1986); quasi-contracts are sections 68 to 72, resting on unjust enrichment.

Practice questions (10)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

Which case held that an agreement with a minor is void ab initio?
1. Lalman Shukla v Gauri Dutt (1913)
2. Satyabrata Ghose v Mugneeram Bangur (1954)
3. Durga Prasad v Baldeo (1880)
4. Mohori Bibee v Dharmodas Ghose (1903)
Show answer
Answer: D — Mohori Bibee v Dharmodas Ghose (1903)
The Privy Council in Mohori Bibee held a minor's mortgage void, not voidable. Lalman Shukla concerns knowledge of an offer, Durga Prasad consideration at the promisor's desire, and Satyabrata Ghose frustration.
Under the Indian Contract Act 1872, a contract induced by coercion is:
1. Voidable at the option of the party whose consent was so caused
2. Illegal and punishable
3. Valid but unenforceable
4. Void ab initio
Show answer
Answer: A — Voidable at the option of the party whose consent was so caused
Section 19 makes contracts caused by coercion, fraud or misrepresentation voidable at the option of the party whose consent was so obtained. Void ab initio applies, for example, to a minor's agreement or a bilateral mistake of fact.
Assertion (A): In India, a person who is not a party to the consideration may still sue on a contract to which he is a party. Reason (R): Section 2(d) allows consideration to move from the promisee or any other person. Choose the correct option.
1. Both A and R are true, and R is the correct explanation of A
2. Both A and R are true, but R is not the correct explanation of A
3. A is true, but R is false
4. A is false, but R is true
Show answer
Answer: A — Both A and R are true, and R is the correct explanation of A
Both are true and R explains A. Because consideration may come from a third person, Chinnaya v Ramayya (1882) allowed the promisee to sue although the consideration had been furnished by someone else. Privity of contract, as distinct from privity of consideration, is still required.
In Satyabrata Ghose v Mugneeram Bangur & Co (1954), the Supreme Court held that the word "impossible" in section 56:
1. Is limited to physical impossibility
2. Includes impracticability that defeats the object of the contract
3. Does not apply to contracts for the sale of land
4. Includes any increase in the cost of performance
Show answer
Answer: B — Includes impracticability that defeats the object of the contract
The Court read "impossible" in a practical sense: an act becomes impossible when it is impracticable and useless in view of the parties' object. A mere rise in cost does not frustrate a contract, and on the facts the requisition of land in wartime did not frustrate the development contract.
Which of the following agreements are expressly declared void by the Indian Contract Act 1872? Select all that apply.
1. An agreement induced by misrepresentation
2. An agreement in restraint of marriage of any person other than a minor
3. An agreement in restraint of trade, other than on the sale of goodwill
4. An agreement by way of wager
Show answer
Answer: B — An agreement in restraint of marriage of any person other than a minor; C — An agreement in restraint of trade, other than on the sale of goodwill; D — An agreement by way of wager
Sections 26, 30 and 27 declare agreements in restraint of marriage, wagers and restraint of trade void. An agreement induced by misrepresentation is voidable under section 19, not void.
In Kailash Nath Associates v Delhi Development Authority (2015), the Supreme Court held under section 74 that:
1. Section 74 applies only to contracts with the government
2. A penalty clause is enforceable as written
3. Where no loss at all is caused by the breach, the stipulated sum is not payable
4. The stipulated sum is always payable in full
Show answer
Answer: C — Where no loss at all is caused by the breach, the stipulated sum is not payable
Section 74 gives reasonable compensation up to the stipulated amount; proof of actual loss is dispensed with only where loss is difficult to prove, and where no loss is caused nothing is recoverable. Indian law does not enforce penalties as such.
Assertion (A): A contract concluded by an exchange of e-mails can be binding in India. Reason (R): Section 10A of the Information Technology Act 2000 provides that a contract is not unenforceable merely because it was formed by electronic means. Choose the correct option.
1. Both A and R are true, and R is the correct explanation of A
2. Both A and R are true, but R is not the correct explanation of A
3. A is true, but R is false
4. A is false, but R is true
Show answer
Answer: A — Both A and R are true, and R is the correct explanation of A
Both are true and R explains A. Section 10A, inserted in 2008, removes any doubt about electronic formation, and Trimex International v Vedanta Aluminium (2010) held an e-mail contract binding although no formal document was signed.
Which of the following are quasi-contractual obligations under sections 68 to 72? Select all that apply.
1. Obligation of a guarantor to pay the principal debt
2. Obligation to return money paid by mistake
3. Responsibility of a finder of goods as a bailee
4. Liability to pay for necessaries supplied to a minor, out of his property
Show answer
Answer: B — Obligation to return money paid by mistake; C — Responsibility of a finder of goods as a bailee; D — Liability to pay for necessaries supplied to a minor, out of his property
Necessaries (s.68), money paid by mistake (s.72) and the finder's responsibility (s.71) are quasi-contractual. A guarantor's liability arises from an actual contract of guarantee under section 126.
In Central Inland Water Transport Corporation v Brojo Nath Ganguly (1986), a service rule was struck down because it was:
1. Unconscionable and opposed to public policy under section 23
2. Uncertain under section 29
3. Not communicated to the employee
4. Made without consideration
Show answer
Answer: A — Unconscionable and opposed to public policy under section 23
The rule let a government company end a permanent employee's service on three months' notice. The Court held that an unconscionable term in a contract between parties of grossly unequal bargaining power is opposed to public policy and void under section 23.
Which section of the Indian Contract Act 1872 contains the doctrine of frustration? Type the section number.
Numerical answer — type the value.
Show answer
Answer: 56
Section 56 declares agreements to do impossible acts void and provides that a contract becomes void when performance becomes impossible or unlawful after it is made; Satyabrata Ghose (1954) held it exhaustive in India.