CMA Laws and Ethics Quasi Contingent And Discharge Of Contracts Question and Answers

Quasi Contingent And Discharge Of Contracts Chapter At A Glance

Question 1. Quasi Contract
Answer:

• An obligation is imposed by law upon a person for the benefit of another even in the absence of a contract. They are known as quasi-contracts.
• They are based on principles of equity, justice and good conscience.
• They are termed as certain relations resembling those created by contracts.
• It is also known as the Law of Restitution.

It has the following features:

• It does not arise from any agreement between the parties but is imposed by law.
• It is a right only available against a particular person or persons and not against the entire world.

Question 2. Type of Quasi-Contract
Answer:

Responsibility of a finder of goods (Section 71)

• “A person who finds goods belonging to another and takes them into custody is subject to the same responsibility as a bailee”.
• He should act like a man of ordinary prudence i.e.

1. 1. He shall take proper care of goods
   2. He must take reasonable steps to trace the owner
   3. He should sell the goods, if they are in deteriorating condition and remit the proceeds to the owner.

• He is entitled to the reward if any, offered by the owner.
• He is also entitled to a refund of any expenses incurred in protecting and preserving the property.

A person receiving goods or money by mistake (Section 72)

• “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it”
• Mistakes need not be unintentional. It may be even intentional.

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Performance of Contracts (Section 37)

• It is one of the modes of discharging the contract. It is the completion or fulfilment of obligations by the respective parties to a contract.
• As per Section 37 of the Indian Contract Act, the parties to the contract must either-

1. 1. Perform their respective promises, or
   2. Offer to perform the same unless such performance is dispensed with or excused under the provision of any other law.

Question 3. Contingent Contract (Section 31)
Answer:

• It refers to a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
• Example Contracts of insurance, indemnity and guarantee etc.

Question 4. Wagering Agreements
Answer:

• It is void.
• It is a game of chance.
• The future event is the primary factor.
• Consists of reciprocal promises.
• Every wager is essentially contingent.

Question 5. Contracts to be performed by whom.
Answer:

• Promisor himself – Section 40 states that “ if it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it needs to be performed by the promisor himself, such promise must be performed by the promisor. “Contracts involving the exercise of personal skill or diligence, or which are founded on the personal confidence between the parties need to be performed by the promisor himself.
• Agent: If the contract is not founded on personal consideration, the promisor or his representative may employ a competent person to perform it.
• Representatives: A contract involving the use of personal skill or founded on personal consideration comes to an end on the promisor’s death. In other cases, the legal representatives of the deceased partner are bound to perform it unless the contrary intention appears from the contract, but their liability is limited to the value of the property they inherit from the deceased.
• Third person: As per Sec. 41, “if the promisee accepts the performance of the promise by a third person, he cannot afterwards enforce it against the promisor.”
• Joint promisors: In the case of a joint promise, the promisee may compel one more of the joint promisors in the absence of a contract to the contrary. If any of them dies, his legal representatives must perform the promise jointly with the surviving promisors.

Question 6. Who Can Demand Performance?
Answer:

• Promise: Only the promisee can demand the performance of the promise irrespective of the fact that it is for the benefit of the promisee or any other person.
• Third-party: In some cases, like trust, marriage settlements etc. third party can enforce the promise against the promisor even though he is not a party to the contract.
• Representatives: In case of death of the promisee his representative may ask for the performance of the promise under a contract.

Question 7. Types of Performance.it is of the following two types:
Answer:

Actual Performance

• The promisor makes all offers of the performance of the promise and the offer to perform is accepted by the promisee.
• Thus, when both the parties perform their respective obligations, the contract comes to an end.

Attempted Performance (Tender) (Section 38)

• The promisor makes an offer of performance to the promisee, but the offer to perform is not accepted by the promisee.

Question 8. Types of Tender
Answer:

• Tender of goods – attempted performance of a promise to do something.
• Tender of money – attempted performance o! promise to pay something.

Essentials of a Valid Tender

• Must be unconditional
• Must be for the whole obligation
• Must be given at a proper time
• Must be given at a proper place
• Must give a reasonable opportunity for inspection
• The party giving tender must be willing to perform his obligation
• Must be made to the proper person
• Must be made for the exact amount of money.
• Effect of Refusal of party to perform promise (Sec. 39)
• The aggrieved party can-
• Terminate the contract
• Indicate by words or by conduct that he is interested in its continuance.
• If the promisee decides to continue the contract, he would not be entitled to put an end to the contract on this ground immediately.
• In both cases, the promisee would be entitled to claim damages that he suffered as a result of the breach.

Question 9. Joint Promise
Answer:

When two or more persons enter into a joint agreement with one or more persons, it is known as a joint promise.

Devolution

It means to pass over from one person to another – In the case of joint promise, two problems arise-

• who is liable to perform the promise,
• who can demand such performance?
• This problem is solved by devolution.

Liability of Joint Promisors

• Sec. 42: If two or more persons have made a joint promise, ordinarily all of them during their lifetime must jointly fulfil the promise. *After the death of any of them, his legal representative jointly with the survivor or survivors should do so.
• Sec. 43:

1. All the joint promisors are jointly and severally liable. However, the contract between the joint promisor may provide otherwise.
2. A joint promisor may claim contributions from other joint promisors if he is compelled to perform the whole promise.
3. A joint promisor may claim contribution from other joint promisors
   if any other joint promisor makes a default in the performance of his promise.

• Sec. 44: Where one of the joint promisors is released, other joint promisors shall continue to be liable.

Question 10. Rights of Joint Promisees:
Answer:

• U/s Sec. 45:
• When a person has made a promise to several persons, then unless a contrary intention appears from the contract, the right to claim performance rests between him and them during their lifetime.
• When one of the promisees dies, the right to claim performance rests with the legal representatives jointly with the surviving promisees.
• When all the promises die, the right to claim performance rests with their legal representatives jointly.

Question 11. Assignment
Answer:

• The promisee may assign the rights and benefits of the contract.
• The assignee will be entitled to demand performance by the promisor.
• It must be made by an instrument in writing.
• Obligation or liability under a contract cannot be assigned.

Differences Between Succession And Assignment

Question 12. Contracts which need not be performed
Answer:

Sec. 62: If the parties to the contract agree to

1. Substitute a new contract for it, or
2. rescind it, or
3. alter it.

Sec. 63: If the promisee-

1. dispenses with or remits, wholly or in part, the performance of the promise made to him.
2. extends the time for such performance
3. accepts any satisfaction for it.

• Sec. 64: If the person at whose option it is voidable rescinds the contract.
• Sec. 64: If the promisee neglects or refuses to afford the promisor reasonable facilities for the performance of the promise.

Question 13. Discharge of Contracts
Answer:

It means termination of contractual rolalloriu balloon tho parting to a nonunion.

Modes of Discharge of Contract

1. By Performance: It occurs when parties to the contract fulfil their obligations arising under the contract within the turn and In a proscribed manner. It may be
   1. Actual performance
   2. Attempted performance.
2. By Mutual Agreement: The portion may enter Into a trash agreement which proves  for the extinguishment of tailor rights and liabilities of the original contract, Important method of discharge by a froth contract –
   1. Novation: It our when an existing contract is substituted by a new one, colour between one portion or between two new ones,
   2. Rosclnulon: It occurs when only the old contract In cancelled and no new contract comes to the lot In Its place.
   3. Alteration; It occurs when the terms of the contract are not changed by mutual agreement is the option of substituting a new contract for the old one.
   4. Remission: It reforms to of looner fulfilment of tho torn ol promise.
   5. Walvor: It reforms the abundance of the rights by the party who In entitled to claim the performance of the contract.
   6. Acceptance of any other satisfaction: It occurs when the party is entitled to claim performance or any other satisfaction Instead of the performance of the contract.
3. By Lnpso of time: It occurs If a contract Is not performed within a specific period or is proscribed by the Limitation Act, 1963.
4. By Operation of law: It occurs when the contract Is discharged by operation of law which Includes
   1. Material alteration: where it Is done without the knowledge and consent of the other, the contract can be avoided by the other party.
   2. Insolvency: It can be done under certain particular circumstances.
   3. Death of a promisor: contracts Involving the personal skill or expertise of a promisor. When the promisor dies, It cannot be performed by anyone gIbo arid hence corners to an end.
   4. Merger of rights: If an inferior right in a contract fa merged Into a superior right by the party.
5. By Imposolbfllty of performance/frustration (Sec. 56)
   1. Discharge by supervening Impossibility: Discharge by supervening Impossibility  is done In the following ways-
      1. Death or personal Incapacity
      2. Destruction of subject-matter
      3. Non-existence or non-occurrence of certain essential things
      4. Change of Law
      5. Declaration of war
6. Discharge by supervening illegality: If after making the contract, its performance becomes impossible due to alteration of law or act of any person, it is discharged.
7. Cases not covered by the subsequent impossibility
   1. Strikes lockouts
   2. Partial impossibility
   3. Commercial performance
   4. Default Of A Third Party, etc.
8. It Is also known as frustration under English law.

Quasi Contingent And Discharge Of Contracts Short Notes Question And Answers

Question 1. Write short notes on

1. Quasi contract
2. Discharge of contract

Answer:

Quasi Contract:

• A Quasi contract is a fictitious contract in which the concerned parties do not intend to create a contract between them.
• In such a contract, there is no regular offer and acceptance and no agreement between the parties, even then there exists a contract which is imposed by the Court of Law.
• Even in the absence of a contract, social relationships require certain duties to be performed by a certain person.
• If a person finds some goods belonging to another person, he is required to return those goods to the actual owner even though there is no contract between the owner of goods and the finder of goods. This is an example of quasi contract.
• Quasi-contracts create the same obligation (duty, responsibility, commitment) as the regular contract. Quasi-contracts are based on the principles of equity, justice and good conscience.
• Quasi-contracts are also called Constructive contracts or Implied-in-law contracts.
  The basic principle lying behind a quasi-contract is that no person should be allowed to gain something at the expense of some other person.
• This type of contract is designed to remedy the cases of unjust enrichment or unjust benefits.

Features of Quasi contract:

• It is imposed by law. It does not arise by offer, acceptance and agreement.
• It is based on the duty of a party and not the promise of that party.
• It is a right which is available not against the whole world, but against a particular person or persons only. In this respect, it is similar to a regular contract.
• It can be sued in a Court of law.
• This way it is also similar to a regular contract.

Discharge of Contracts: A contract can be discharged or terminated by any of the following eight ways :

Question 2. Write a short note on the Contingent Contract
Answer:

Section 31 defines ‘contingent contract’ as a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. The following are the essentials of a contingent contract-

• Uncertainty and futurity of the event to which it is related;
• Uncertain future events must be collateral to the contract.

An agreement to sell an unspecified half share in the property is not a contingent contract as held in ‘Harbakhash Singh Gill V. Ram Rattan’AIR 1988 P And H 60. In ‘Bhairon Prasad Chaurasiya V. Smt. Tara Devi’ – AIR 1980 All.

• It was held that an agreement to sell a house is by no means a ‘contingent contract’. An agreement to purchase a property is neither a contingent contract nor can it be characterized as a mere possible right or interest.
• It was contended that the contract is a ‘contingent contract’ because either of the parties to the contract may refuse to perform his part of the contract.
• The Court held that the argument is fallacious. Such a contingency would not be collateral to a contract. An agreement to purchase a property is neither a ‘contingent contract’ nor can it be characterized as a mere possible right of interest.
• Reciprocal promises are not contingent contracts as they cannot be said to be collateral to each other.
• The law allows the enforcement of a contingent contract after the event upon which it was contingent has happened.
• The contingency which is the essence of a condition must be distinguished from mere futurity.
• An obligation is not to be classified as conditional because its performance is not yet due.
• A contingent contract need not necessarily be independent of any external event. It may be conditional on the voluntary act or the future conduct of one of the parties or a third person.

Quasi Contingent And Discharge Of Contracts Descriptive Question And Answers

Question 1. Explain the meaning of ‘Quasi-Contracts’. State the circumstances which are identified as quasi-contracts by the Indian Contract Act 1872.
Answer:

• Even in the absence of a contract, certain social relationships give rise to certain specific obligations to be performed by certain persons.
• These are called – quasi-contracts as they create some obligations as in the case of regular contracts.
• Quasi-contracts are based on the principles of equity, justice and good conscience.

The salient features of quasi-contracts are:

Firstly, such a right is always a right to the money and generally, though not always, to a liquidated sum of money

Secondly, it does not arise from any agreement between the parties concerned the obligation is imposed by law

Thirdly, the rights available are not against the world but against a particular person or persons only, so in this respect, it resembles a contractual right.

Circumstances identified as quasi-contracts:

1. Claim for necessaries supplied to persons incapable of contracting (Sec.-68): Any person supplying necessaries of life to persons who are incapable of contracting is entitled to claim the price from the other person’s property. Similarly, where money is paid to such persons for the purchase of necessaries, reimbursement can be claimed.
2. Flight to recover money paid for another person (Sec.-69): A person who has paid a sum of money which another person is obliged to pay, is entitled to be reimbursed by that other person provided that the payment has been made by him to protect his interest.
3. Obligation of person enjoying benefits of non-gratuitous Act (Sec.-70): Where a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously and such other person enjoys the benefit thereof, the latter is bound to pay compensation to the former in respect of, or to restore, the thing so done or delivered.
4. Responsibility of finder of goods (Sec.-71): A person who finds goods belonging to another person and takes them into his custody is subject to the same responsibility as if he were a bailee.
5. Liability for money paid or things delivered by mistake or by coercion (Sec.-72): A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it. In all of the above cases, contractual liability arises without any agreement between the parties.

Quasi-Contingent And Discharge Of Contracts Practical Question And Answers

Question 1. X agrees to pay Y a sum of money if Y marries Z. Z however marries F, who dies subsequently. After the death of F, Z marries Y. Whether X is legally bound to pay the agreed sum of money to Y? Comment.
Answer:

Any contract restraining the marriage is invalid. The original contract was dead at the time when Z married F. X is not legally bound to pay any sum to Y.

Question 2. Mr. P and Mr. Q bet as to whether there would be rain on a particular day of December. Mr. P promises to pay $ 5,000 to Mr. Q if there is rain on that day and Mr. Q promises an equal amount to Mr. P if there is no rain on the day. Suppose, there is no rain on that specific day of December and Mr. Q filed a suit for recovery of $ 5,000 from Mr P. Can Mr Q recover the amount under the Indian Contract Act, of 1872?
Answer:

• In this case, Mr. P bet with Mr. Q on the possibility of having rain on a specific day in December. Section 30 provides that agreements by way of wager are void and no suit
• shall be brought for recovering anything alleged to be won on any wager or entrusted to any person to abide by the result of any game or other uncertain event on which any wager is made.
• Therefore, the agreement between Mr. P and Mr. Q is wagering and hence void.
• Thus, despite no rain on a specific day in December, Mr. Q cannot recover the amount of $5,000 from Mr. P for the reason of agreeing on a wagering nature.

Question 3. Mr. X, a businessman has been fighting a long-drawn litigation with Mr. Y, another businessman. To support his legal campaign Mr. X enlists. the services of Mr. Z, a legal expert, stating that an amount of $ Two lakhs would be paid, if Mr. Z does not take up the brief of Mr. Y. Mr. Z agrees, but at the end of the litigation, Mr. X refuses to pay.

1. Decide whether Mr Z can recover the amount promised by Mr X under the provisions of the Indian Contract Act, of 1872.
Answer:

• The problem as asked in the question is based on one of the essentials of a valid contract. Accordingly, one of the essential elements of a valid contract is that the agreement must not be one which the law declares to be either illegal or void.
• Further Contract Act specifies that any agreements in restraint of trade, marriage, legal proceedings etc. are void agreements.
• Thus Mr, Z cannot recover the amount of $ 10 lakhs promised by Mr X because it is an illegal agreement and cannot be enforced by law.