law of contract_Bangladesh

7/29/2019 law of contract_Bangladesh

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Date: 06 April 2012


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We The Group Members Are Miratul Jannat

S.M. Saifur Rahman

Tasnim Faria Anindita Islam

Sabira Chowdhury

Rabeya Tasnim Huq

A.K.M. Mojibul Haque Nahid Rijwan

Shawly Rahman Deep

o 03-10-18-029

o 03-10-19-034

o 03-10-19-027

o 03-10-18-023

o 03-10-18-011

o 03-10-19-013

o 03-09-17-055o 03-09-17-033

o 03-09-16-036


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Contents Background of Law of contract in

Bangladesh

Types of contract

Elements of a valid contract

Consideration

Legality of object

Parties competent to contract Dissolution of contract

Remedies for breach of contract


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Bangladesh

Types of contract


Consideration

Legality of object

Parties competent to contract

Dissolution of contract



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Law of contract in Bangladesh

Contract act 1872 governs the law of contract inBangladesh.

It contains the common rules relating to contractsand differentiates them.

All contracts in Bangladesh are governed basically bythe contract act.

Contractmeans an agreement enforceable by law.


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A Valid Contract

Firstly a proposalhas to be accepted to be a promise;

Secondly then the promise is to be considered toform an agreement;

Finally the agreement should have the enforceabilityof law to form a lawful contract


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Scope of a contract

1. General laws relating to contract

a) Laws relating to formation of contract;

b) Laws relating to performance;

c) Laws of remedy for a breach of contract.

2. Laws relating to some particular types ofcontract

a) Contract of agency;

b) Contract of indemnity and guarantee;

c) Contract of bailment and pledge.


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Contents

Back ground of Law of contract inBangladesh

Types of contract Elements of a valid contract

Consideration

Legality of object




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Types of contract

Contracts depending on the mood of Creation

i. Express contracta) Written contract

b) Oral contract

ii. Implied contract

Contracts as regards the mood of time ofperformance

i. Executed contract

ii. Executory contract


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Types of contract

Contracts as regards the number of parties

i. Bilateral contract

ii. Unilateral contract

Contracts as regards the mood of enforceability andvalidity

i. Valid contract

ii. Voidable contractiii. Void contract


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Types of contractValid Contract

A contract is in law. Such a contract creates an outstandingobligation or legal liability which law steps in to enforce

whenever a party to the agreement breaks it.

Void Contract

Literally the word void means not binding in law.Accordingly the term void contract implies a uselesscontract which has no legal effect at all.

A contract which ceases to be enforceable by lawbecomes void when it ceases to be enforceable[Section 2(j)]


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Distinction between void and

illegal contract

An illegal contract is one whose object is

declared illegal by lawwhereas a void contract does not get the

assistance of law.


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Voidable contract

An agreement which is enforced by law at the

opinion of one or more of the parties thereto, but

not at the opinion of the others, is a voidable

contract [Section 2(i)]

Usually a contract becomes voidable when the

consent of one of the parties to the contract isobtained by coercion, undue influence,misrepresentation or fraud.


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Contracts which are voidable When consent to an agreement is caused by coercion fraud or

misrepresentation

When consent to an agreement is caused by undue influence ormisrepresentation.

An agreement by a parson of unsound mind due to drunkenness is voidable

Certain contracts by minors are voidable either during minority or within areasonable time after the attainment of majority.

When a contract contains reciprocal promises and one party of the contractprevent the other from performing his promise, then the contract becomesvoidable

When a party of the contract promise to perform certain thing within aspecified time, but fails to do it then the contract becomes voidable


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Unenforceable Contract

An unenforceable contract is one which isvalid in itself but is not capable of beingenforced in a court of law because of sometechnical defects such as absent of writing,registration, requisite stamps etc. or time

barred by the law of limitations.


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Unenforceable contracts a contract made on account of natural love and affection

between the parties ,unless it is written and registered;

a contract made between persons whereby one agrees to repaya time-barred debt which was originally due to the other,

a contract between parties to refer their present or futuredisputes to arbitration, unless it is made in writing;

a contract made by a company, unless it is in writing;

Under the Transfer of Property Act, all mortgages, other thanequitable mortgages, where the principal money secured is Tk.100.00 or upwards and gifts-of immovable property, unless

they are in writing and registered.


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Special Types of contract

Quasi contract

Contingent contract


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Constructive or Quasi-Contract

Contractual obligations are generally created

voluntarily. But there are obligations, which lack

voluntariness such as the obligation to repay a sum ofmoney paid under a mistake of fact. In such cases,

therefore, there is no contract but, nevertheless, the law

treats them as such. Such contracts, existing in Jaw but

not in fact, are called quasi-contract.


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Contingentcontract

A contingent contract is one to do or not to do

something if some contingency happens or does not

happen. "A contingent or as it is called in English law,a conditional promise"

A contingent agreement is not enforceable till the

event on which it was to depend has arisen; but whenthat event has occurred, the contract, for all purpose,

rests on the same footing as if it had been made in

case of a valid contract.


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Contents

Back ground of Law of contract inBangladesh

Types of contract

Elements of a valid contract Consideration

Legality of object




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A contract is an agreement between two parties imposing rights andobligations which may be enforced by law. The courts need some kind ofevidence of this agreement, so they look, through the eyes of a reasonableperson, for external evidence of it. To help identify evidence of agreement, itis conventionally analysed into two aspects: offer and acceptance.

Offer Acceptance Agreement+

Contract


Enforced by law


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Proposal or Offer

Proposal or offer is the starting point to form an agreement.

An expression of willingness to contract on certain terms, made with theintention that it shall become binding as soon as it is accepted by the personto whom it is addressed.

According to Contract Act 1872, proposal or offer is-where one person signifies to another his willingness to do or abstain fromdoing something with a view of obtaining the assent of that other to such actor abstinence he is said to said a proposal. If the above mentioned

definition is analyzed, the following elements of a proposal or off are found:

i) Signification of ones willingness;ii) Willingness is expressed to another person;iii) The willingness may be affirmative or negative;iv) It has a definite object with the intention to create a legal relation.


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Offers can be of two types:

Specific When a offer is made to one person orgroup of people. Then only that particular person orgroup of people can accept.

GeneralWhen a offer is made to the wholeworld (or people generally), particularly seen in the cases

of rewards and other public advertisements.

Proposal or Offercontd


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Rules of a Proposal:

1. The proposer must intent to create legal relations

2. Mere expression of Intention is not sufficient

3. Offer may be made to definite person or some definite

class of person or to the world at large generally4. The proposal must be a definite one

5. Proposal may be expressed or implied

6. The offer must be definite, certain and unambiguous

7. Offer must be communicated to the offeree

8. An offer may be conditional


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Communication of offer:

Communication of the offer is an essential element in a contract.

To complete an offer lawfully the proposal or offer must be

communicated.

A person or entity who makes a specific proposal to another (the

offeree) to enter into a contract is called an offeror.

A person or entity to whom an offer to enter into a contract is made

by another (the offeror) contract is called an offeree. Offer may take different forms, such as a letter, fax, email etc


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Modes of Revocation:

1. By communication of notice

2. By lapse of time

3. After expiry of a reasonable time

4. By non-fulfillment of conditions

5. By death or insanity o f the offeror

6. By counter-offer

7. By refusal

8. By failure to accept in the mode prescribed


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Acceptance Acceptance of a proposal means unconditional agreement to all the terms of that

proposal.

Acceptance may often be oral or in writing, but in some cases an offeree may accept

an offer by doing something, such as delivering goods in response to an offer to buy.

According to Contract Act, 1872, when the person to whom the proposal is made

signifies his assent thereto, the proposal is said to be accepted.

We can divide the definition at least into three constituent parts:

1. Signification of the assent;

2. Assent is signified by the person to whom the proposal was made;

3. The term thereto used in this section implies that the assent must be given to the

offer as it is.


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Voidable contract

An agreement which is enforced by law at the

opinion of one or more of the parties thereto, but

not at the opinion of the others, is a voidable

contract [Section 2(i)]

Usually a contract becomes voidable when the

consent of one of the parties to the contract isobtained by coercion, undue influence,misrepresentation or fraud.


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Types of Acceptance

Acceptance typically can come in one of three types:

1. Express:A direct and absolute outward manifestationof the agreement, such as I accept your offer.

2. Implied: The acts of the parties show that the offer hasbeen accepted, such as when both parties to a contractbegin to perform the terms of the contract.

3. Conditional:Acceptance is conditional on thehappening of something, such as, I accept your offer solong as you trim my tree in the next two days. By itsterms, a conditional acceptance is a counter-offer.


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Rules of a valid acceptance:

1. Acceptance must be absolute and unqualified2. The acceptance must be unconditional

3. Acceptance might be conditional

4. Mere enquiries do not count as rejection

5. The acceptance must be expressed in some usual and reasonable manner

6. A counter-offer may become a terms of the agreement if it is accepted:7. The acceptance must be communicated to the offeror

8. Silence can never amount to an acceptance

9. The postal rule

10. Modern methods of communication

11. The mode of acceptance12. Time of acceptance

13. Before offer

14. The Acceptance must be made when the offer in force


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Counter offer

Counter offer is an offer made in response to a previous offer by the other

party during negotiations for a final contract.

Making a counter offer automatically rejects the prior offer and requires an

acceptance under the terms of the counter offer or there is no contract.

This happens when, for example, A sends B an offer and B amends it

slightly and then send it back signed but amended. This action destroys the

original offer and is not acceptance. It is a new offer entirely, called a

counter-offer.


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Revocation of Acceptance

Revocation or cancellation may happen before the acceptance reaches the

offeror, the acceptor can revoke the acceptance and thus prevent the contract.

Thus A makes a proposal to B. B sends his acceptance by post. The

communication of the acceptance is complete as against A when the letter is

posted, and as against B when the letter is received by A.


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Agreement

According to Section 2 (e) of the Contract Act, 1872, Everypromise and every set of promises, forming theconsideration for each other, is an agreement.

It is also said that in the act that as agreement enforceable

by law is a contract. So the term agreement is veryimportant in the discussion of contract law.

From the definition of the agreement, it is found that to bean agreement three elements are necessary-

a. it will be promiseb. it will form a considerationc. the consideration will be formed for each other of theparties


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Classification of Agreement

Agreement

Void Voidable Unenforceable Illegal


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Void AgreementA Void agreement is one that is entirely destitute of legal effect. It confers

no right on any person and creates no obligations. According to Section

2 (g) of the Act says, An agreement not enforceable by law is said to bevoid.

For example, an agreement made by a minor, agreement withoutconsideration (with the exception of section 25 of the Act) or theagreements against the public policy can be stated.

Voidable AgreementA voidable agreement is one that is capable of being affirmed or rejected

at the option of one of the parties, but which is binding on the other. Itis binding if he chooses to affirm it and is of no effect if he chooses toreject it. The other party has no say in the manner.

For example, there may be a contract into which one of the parties hasinduced the other to enter by means of fraud. The latter may repudiatethe contract, or if he sees fit, he may waive the fraud, and hold theformer to his bargain.


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Unenforceable Agreement

An unenforceable contract is one that is valid, butincapable of being sued upon or proved. A contractwhich is unenforceable cannot be set aside at the

option of one of the parties to it. The obstacles to itsenforcement do not touch the existence of thecontract, but only set difficulties in the way of actionbeing brought or proof given.


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Illegal Agreement

An illegal agreement, under the common law ofcontract, is one that the court will not enforce becausethe purpose of the agreement is to achieve an illegal

end. The illegal end must result from performance ofthe contract itself, however. A contract that requiresonly legal performance, such as the sale of packs ofcards to a known gambler, where gambling is illegal,

will nonetheless be enforceable.


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Free consent

Section 10 of the Contract Act outlines the elements of a valid contract thus: "Allagreements 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."

Section 13 of the Contract Act defines consent thus: "Two or more persons are said

to consent when they agree upon the same thing in the same sense."

Section 14 of the Act says that consent is free when it is not caused by:

Mistake

Misrepresentation

Fraud

Coercion and

Undue influence


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(1) Mistake

Section 20 of the Contract Act lays down thus: "When both the parties to anagreement are under a mistake as to a matter of fact essential to the agreement, the

agreement is void".

The mistake which is necessary to make a contract void must be mutual and not of

one of the parties.

Every mistake does not vitiate a contract. The following among others may bepicked up:

a) Mistake as to the nature of transaction.

b) Mistake as to the identity of the party to a contract.

c) Mistake as to the subject-matter of the contract.d) Mistake by one party as to the intention of the other does not render a contract void.

Exceptions


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(1) Mistake (Contd.) Bangladeshi Law

The Contract Act provides that, "where both the parties to an agreement are under amistake as to a matter of fact essential to the agreement, the agreement is void ".

Though a mistake of fact vitiates a contract, a mistake of law does not.

Bangladeshi Relief may, however, be available in the following cases of mistake of

law:

I. Where a mistake is so fundamental that it prevents the formation of a realagreement between the parties, it will vitiate the contract though, after all, it is amistake of law.

II. A mistake as to the existence of a private right has to be treated as a mistake offact.

III. If a contract is brought about by deliberate misrepresentation of law, it can be setaside.

IV. Mistake as to any foreign law is a mistake of fact.


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(2) Misrepresentation

Misrepresentation is the positive assertion of something, which is not true though the person

making it believes it to be true.

Condition and Warranty

Bangladeshi Law:

In Bangladeshi Law, as laid down by Section 18 of the Contract Act, misrepresentation means and

includes:

I. "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".

II. "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 theprejudice of any one claiming under him".

III. "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".


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(3) Fraud

Fraud has been defined by Anson as "a false representation of fact made with the knowledge of its falsehoodor recklessly without belief in its truth, with the intention that it should be acted upon by the complainingparty and actually inducing him to act upon it". So,

I. Fraud is a representation of fact which is false.

II. The false statement must be made with the knowledge of Vs falsehood or recklessly.

III. The false statement must be made with an intention to deceive.

IV. The person to whom the false statement has been made must be actually deceived.

Bangladeshi Law:

In Bangladeshi law, as laid down by Section 17 of the Contract Act, fraud means and includes any of thefollowing acts:

"The suggestion as a fact of that which is not true by one who does not believe it to be true ".

"The active concealment of a fact by one having knowledge or belief of the fact". This duty to disclose is notenforceable in all cases of contract. It arises only in the following cases:

a) Statutory obligation to disclose.b) Contracts uberrimae fidei.

Explanation: silence as fraud

Distinction between Fraud and Misrepresentation


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(4) Coercion

Coercion or duress consists in actual or threatened violence or imprisonment. Where the consent of a party toa contract can be shown to have been obtained by coercion, it is voidable at the option of the party whose

consent was so obtained.

Bangladeshi Law

Section 15 of the Contract Act defines coercion as "the committing or threatening to commit, any actforbidden by the Penal Code or the unlawful detaining or threatening to detain any property to the prejudice

of any person whatever with the intention of causing any person to enter into an agreement''.

Effect of coercion on contract

An agreement vitiated by coercion is voidable at the option of the party coerced. But if he finds it profitableto uphold the contract, he can enforce specific performance of it. The party employing coercion has,

however, no right under the contract.


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(5) Undue influence

Undue influence is a subtle and improper pressure brought to bear upon a person to induce him to enter intoa contract which, in the absence of the said pressure, he would not do.

Bangladeshi law:

Section 16(1) of the Contract Act lays down thus: "A contract is said to be induced by 'undue influence'

where the relation subsisting between the parties are such that one of the parties is in a position to dominatethe will of the other and uses that position to obtain an unfair advantage over the other".

According to Section 16(2) of the Contract Act, "a person is deemed to be in a position to dominate the will

of another":

I. Where he holds real or apparent authority over the other, or where he stands in a fiduciary relation to the

other; or

II. 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.

Burden of proof

Contract with a Pardanashin lady


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Bangladesh

Types of contract


Legality of object




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Consideration (Bangladeshi Law)

Section 2 of the Contract Act :

When at the desire of the promissor, the promise or anyother person, has done or abstained from doing, does orabstains from doing, promises to do or to abstain from

doing something, such act, abstinence or promise iscalled a consideration for the promise"


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Consideration Rules in English Law

Real and not sham.

Must not be illegal.

Must not be past.

Move from the promise

Need not be adequate


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Bangladesh

Types of contract


Legality of object




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Legality of Object

It is essential to the validity of a contract that itsobject is lawful, a contract, otherwise is void if theobject of the agreement is unlawful. It can happenthat the object of a contract is illegal though itsconsideration is perfectly lawful.

Example:

A takes the lease of a house belonging to B formonthly rent of Tk. 15,000. There is nothingunlawful in this. But if A intends to set up anillicit distillery in the house, the contract is voidas its object is unlawful.


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Unlawful objects (English law)

When the object of an agreement contravenesprovisions of any Act, the object becomes illegal.

A contract the object of which is to be defraud others,

becomes illegal.An object that contravenes public policy.


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Unlawful objects (Bangladeshi law)

Contracts forbidden by law

Contract defeating the provisions of any law

Fraudulent

Injury to property or person of another

Immoral

Against Public policy


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Bangladesh

Types of contract


Legality of object




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Contracts by Minors

According to the English law, a minor (called an infant) is aHen who is below the age of 21 years.

But after the passing of the Infants Relief Act, 1874, aminor's wafts net have come to be divided into threeclasses:

a) Validb) Voidablec) Void


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How far a minor be held liable for contract by suing

him in an action of tort?

Minors and Estoppels

Contract by lunatics and drunken persons

Married Women

Corporation


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Legal Practitioners

Doctors

Independent Sovereign

Alien

Convicts



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Bangladesh

Types of contract


Legality of object




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Dissolution of Contract

Dissolution or discharge of contract means terminationof the contractual relationship between the parties.

A contract may be dissolved or discharged in any of the

following ways: By Performance.

By Agreement or Consent

By Frustration or Impossibility of Performance

By Breach of Contract. By Operation of Law


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Discharge by Performance

Performance is the most natural and common mode ofdischarging a contractual liability.

As soon as the parties to a contract have performed

their shares of the promises, the contract is dissolved Must distinguish between

Performance which discharges one of the two partiesfrom his liabilities under a contract and

Performance which dissolves the contract as a whole.


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Tender of Performance

Tender means an offer of performance. Contract may also be discharged by a valid tender.

Bangladeshi Law on Tender: (Section 38 of the Contract Act)

Where a promissor has made an offer of performanceto the promisee, and the offer has not been accepted,the promissor is not responsible for non-performance,nor does he thereby lose his rights under the contract


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Essentials of a Valid Tender

It must be unconditional It must be made at proper time and place It must be for the entire obligation as contained in the

contract

The tenderer must be able and willing to perform it thenand there only The tender must be made to proper person Tender of goods must be made in such a manner that a

reasonable opportunity is available to the buyer to inspect

the goods If there is more than one promisee, then tender may bemade to any one of them


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Time and Place of Performance

Section 46:When, the promissor is to perform his promisewithout application by the promisee, and if no time forperformance is specified, the engagement must beperformed within a reasonable time.

Section 47: When a promise is to be performed on a

certain day, and the promissor has undertaken to performit without application by the promisee, the promissor mayperform it at any time during the usual hours of businesson such dayand at the place at which the promise ought tobe performed.

Illustration: A promises to deliver goods at B'swarehouse on the 1st January. On that day A brings thegoods after the usual hour for closing it, A has notperformed his promise.


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Time and Place of Performance

Section 48: If a promise need to perform on a certain day, andthe promissor has not undertaken to perform it withoutapplication by the promisee it is the duty of the promisee to applyfor performance at a proper place and on certain time within theusual hours of business.

"proper time and place", to be determined by reference to thefacts and circumstances of the case.

Section 49: When a promise is to be performed withoutapplication by the promisee, and no place is fixed for theperformance of it, it is the duty of the promissor to apply to thepromisee, to appoint a reasonable place for the performance ofthe promise, and to perform it at such place.

Section 50: The performance of any promise may be made in anymanner or at any time which the promisee prescribes.


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Performance of Reciprocal Promise

Section 51: When a contract consists of reciprocalpromises to be simultaneously performed, nopromissor need to perform his promise unless thepromisee is ready and willing to perform his promise.

Section 52: The order in which reciprocal promises areto be performed is expressly fixed by the contract, theyshall be performed in that order; and, where the order

is not expressly fixed by the contract, they shall beperformed in that order which the nature of thetransaction requires.


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Performance of Reciprocal Promise

Section 53:In case of reciprocal promises when one partyprevents the other from performing his promise, thecontract becomes voidable at the option of the party soprevented; and he is entitled to compensation from theother party for any loss.

Section 54: When a contract consists of reciprocalpromises, such that one of them cannot be performed orthat its performance cannot be claimed till the other hasbeen performed and the promissor of the promise lastmentioned fails to perform it, such a promissor cannotclaim the performance of the reciprocal promise, and mustmake compensation to the other party for any loss.


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Discharge by Breach

Breach of contract means a breaking of the obligationwhich a contract imposes.

It occurs when a party to the contract, without lawfulexcuse does not fulfill his contractual obligation

Every breach of contract by one party does not entitlethe other party to rescind the contract

If a contract is to be avoided on the ground of breach,

the breach must relate to the essential terms of thecontract.

A breach of contract may be of two kinds:


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Discharge by Breach

1. An actual or present breach This happens when a party does not perform his

promise in the manner and at the time stipulated bythe contract.

Illustration:A covenants to deliver a horse to B on orbefore the 3rd March, 1963, in consideration of B'spromise to pay him Tk. 1,000.00. A fails to fulfill thecontract. A has committed actual or present breach ofthe contract. This breach entitles B to rescind thecontract, and also of suing him for damages.


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Discharge by Breach

2. Constructive or anticipatory breach This happens when before the time for performance a

party shows by his conduct or words his unwillingness toperform his part of the contract.

It is called anticipatory breach because the contract is notyet broken but circumstances suggest beyond doubt thatit is unlikely of being performed.

Illustration: A contracts to deliver to B his black horse

within three months from date. One month after thecontract, A sells his black horse to C. There has beenanticipatory or constructive breach of the contract. This isan example of anticipatory breach by impossibility ofperformance.


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Discharge by Agreement

A contract can also be dissolved by a fresh agreementbetween the parties.

Such an agreement may take one of the following

forms:a) Release

b) Accord and Satisfaction

c) Rescission

d) Alteration

e) Novation


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Release or waiver

Means the surrender of a contractual right. Thus, A who has advanced a loan of money to B gives

up, by an agreement, the right to recover the debtfrom B. This surrender of a right is called release or

waiver.An agreement of release must be made under seal.

One exception to this rule: The holder of apromissory note may waive his rights without

consideration, either by writing or surrender of thenote.


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Accord and satisfaction

Accord : the agreement of discharge

Satisfaction: the consideration moving from thedischarged party to the other.

A owes to B Tk. 5,000.00. A pays B, and B accepts Tk.2,000.00 in satisfaction of the whole debt at the timeand place at which the sum of Tk. 5,000.00 waspayable. The whole debt is discharged.


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Rescission

Rescission: cancelling the original contract bymutual agreement

And the old contract ceases to be binding on any ofthe parties.

The contract must, be executory on both sides.

Illustration: A promises to paint for B a picture inconsideration of B's promise to pay Tk. 100.00. This

contract can be rescinded by an agreement in whichA surrenders his right to Tk. 100.00 and B to thepicture promised to be painted by A.


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Alteration

Alteration: substituting a fresh contract withaltered or different terms from the original one.

Illustration:A agrees to supply B 1,000 Kgs of salt at

Tk. 23.00 a Kg within 3 months from date. Later on, Aand B alter the agreement in the following way: Aagrees to supply 800 Kgs of salt at the same ratewithin 2 months instead of three. The latter

agreement puts an end to the former.


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Novation

Novation takes place when-o A new contract is substituted for an existing one between

the same parties, or

o A contract between two parties is rescinded inconsideration of a new contract being entered into on the

same terms between one of the parties and a third party. In the second type of novation a creditor at the request

of the debtor agrees to take another person as his debtorin place of the original debtor.

There must be the mutual consent of all the partiesconcerned.


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Discharge by Frustration

By frustration is meant impossibility of performance.

A contract to do an impossible thing, such as to bringa dead man back to life, is void as the object of thecontract is impossible to be performed.

The rule is based on the following maxims:

o the law does not recognize what is impossible, and

owhat is impossible does not create an obligation.


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Supervening Impossibility

A common circumstance is that parties to a contractagree to perform certain things which are notimpossible at the time when the contract is madebut which become impossible to be performed

subsequently due to causes beyond their control.

In such case, the contract is discharged as havingbecome void.


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Supervening Impossibility [cont.]

It may arise in the following ways:

o Impossibility arising due to change of law.

o Impossibility due to the destruction of a specific thingessential for the performance of a contract.

o Impossibility arising out of the death or incapacitatingillness of one of the parties to the contract.

o Impossibility due to the absence of a fundamentalcondition. A condition is said to be fundamental to acontract when the whole contract rests on it.


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Bangladeshi law

Section 56: a contract to do an act which, after the contractis made, becomes void when the act becomes impossible orunlawful.

supervening impediments must not have arisen by reason

of some event which the promissor could prevent. In such case, compensation may be obtained against the

person who is unable to perform it.

Section 65: when a contract becomes void, any person

who has received any advantage under such agreement orcontract is bound to restore it or to make compensation forit to the person from whom he received it.


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Discharge by Operation of Law A valid contract may be discharged by the operation of law.

A contract can be discharged by the operation of law in thefollowing ways:

Merger: It means the assimilation of a smaller contract by alarger one by reason of the fact that they meet and coincide inone and the same person.

Insolvency:When an insolvent is discharged by the InsolvencyCourt, he is released from all his debts provable under theBankruptcy.

Alteration: When a written contract is altered by way ofaddition or erasure in a material part, it is dissolved. Suchalteration must be affected without the consent of the otherparty.


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Bangladesh

Types of contract


Legality of object


Dissolution of contract



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Breach of Contract


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What Follows the Breach?

Action for Damages

Action for Recession

Action for Specific Performance

Action for Injunction

Contractual Limitations of

Remedy or Provision for

Liquidated DamagesRemedy Specified in Contract

Waiver of BreachContract Continues

as Though There Were No Breach

Contract Continues as ModifiedDefective Performance

Accepted with Reservation

of Right to DamagesContract Performed but at Reduced

Price or, in Suit for Full Price,Counterclaim for Damages

Breach of

Contract


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Parties involved in breach of

contract

Partiesinvolved inbreach ofcontract

Committing breach

Guilty party

Suffered for breach

Aggrieved party


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Suit for damages

A breach of contract may put theaggrieved party to some

disadvantage or inconvenience or

may cause a loss to him.

The court would desire theguilty party to acceptresponsibility for any such loss

of the aggrieved party andcompensate him adequately.


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Types of damages (entitled to plaintiff)Keeping the view of the provision of Sec 73 off the act and the court

judgments

G l D


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General Damages

Which can be seen as arising naturally and directlyout of the breach in the usual course of the things..

They would be unavoidable and logical consequencesof the breach.

An aggrieved partys right to damages applies mostnaturally for the direct or general losses. There can beno damages for indirect or remote losses.


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General Damage- Example

Company A delivered the wrong kind of furniture toCompany B. After discovering the mistake later in theday, Company B insisted that Company A pick up thewrong furniture and deliver the right furniture.

Company A refused to pick up the furniture and saidthat it could not supply the right furniture because itwas not in stock. Company B successfully sued forbreach of contract through general damages.

Back


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Special Damages

Special damages (also called consequential damages)cover any loss incurred by the breach of contractbecause of special circumstances or conditions that arenot ordinarily predictable.

At the time of making contract, a part may placebefore the other party some information aboutsome special circumstances affecting him and alsocommunicate the consequences for not meeting it.

To obtain damages for this type of loss, the non-breaching party must prove that the breachingparty knew of the special circumstances orrequirements at the time the contract was made


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Punitive Damages

Generally, punitive damages, which are alsotermed exemplary damages in the UnitedKingdom, are not awarded in order tocompensate the plaintiff, but in order to reform or

deter the defendant and similar persons frompursuing a course of action such as that whichdamaged the plaintiff.

Unjustified dishonor of cheque

Breach of promise of marriage

Failure of vendor of real estate to make title CASE:Jackson v Horizon Holidays [1975]


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Nominal Damages

If the breach of contract causes no loss to theaggrieved party, no damages need to beawarded to him. However, in order to recordthe fact of breach of contract by guilty party,the courts may award nominal or token ofdamages, i,.e. compensation of Tk.50. they

would be called nominal damages

In Charter v Sullivan case (1957) 2 QB 117, the buyer repudiated acontract to buy a Hillman Minx, which was then sold by thedealers to another customer. The dealers manager admitted thatcould sell all of the Hillman Minx cars they could get, and the

court of the Appeal held that they were entitled to nominaldamages only since they could not show any profit or lossaccount.

Li id d d d l


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Liquidated damages and penalty

(sec 74)Liquidated damages, i.e. a sum payable asdamages the amount of which determined by theparties beforehand, instead of being left to the

court by a fair and honest estimate of probablelosses likely to be caused by the breach

A penalty, i.e. a sum which has no relation to

probable loss which may arise and which hasbeen stipulated by the parties ad in terrorem i.e.for the purpose of penalizing a party for notperforming the contract.


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Illustration

Dunlop sued its tyre retailer, New Garage, forbreaching an agreement to not resell Dunlop tyres at aprice lower than that listed in the contract. Theagreement then said if that did happen, New Garage

would pay 5 per tyre by way of liquidated damagesand not as a penalty.

The judge held the 5 sum was liquidated damagesand enforceable. The Court of Appeal held the clausewas a penalty and Dunlop could only get nominaldamages. Dunlop appealed.

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Rescission of contract

Strictly speaking the equitable right to rescind an agreement isnot a remedy for breach of contract, it is a right which exists incertain circumstances, such as where a contract is voidable dueto misrepresentation, duress and undue influence

When one party to the contract breaches the contract, theother party need not perform his part of the obligations. Theaggrieved party may rescind the contract.

In such cases, the injured / aggrieved party can either cancelthe contract of file a suit for damages. It is possible if theparties can restore their original contract.

S i f Q M i


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Suit for Quantum Meruit

as much as earned . In implies a payment deserved by a person for thereason of actual work done

When a party has done some work under a contract, and the other partyrejected the contract or somehow the full performance of the contractbecomes impossible, then the party who has done the work can claimremuneration for the work under a suit for quantum meruit

In order to successfully recover under a quantum meruit theory, the plaintiffgenerally must demonstrate to the court

the performance of the services in good faith,

the acceptance of the services by the person to whom they are rendered,

an expectation of compensation for those services, and

the reasonable value of the services.

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Suit for specific performance

In certain cases of breach of contract,damages may not an adequate remedy. Thenthe Court may direct the party in breach ofcarry out his promise according to the termsof contract. But in general, Courts do not wishto compel a party to do that which he hasalready refused to do.

CASE: Ryan v Mutual Tontine WestminsterChambers Assoc [1893]

C h ifi f


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Cases where specific performance

may be ordered:Where there exist no standard for ascertaining the actual damagecaused to the aggrieved party by the non-performance

Where monetary compensation will not be adequate relief.

Where plaintiff s property is held by the defendant in the capacityof his agent or trustee

Where the act to be done is in performance of trust



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may NOT be ordered:

Where monetary compensation is adequate relief

Where contract in made by the agent or trustee in violation of his powers

Where the contract is of personal nature

Where cannot supervise the performance of promise as it involves performanceof a continuous duty

Where the contract is in nature revocable

Where the contract is made by a company in excess of its powers as laid downin its Memo of Association

S it f i j ti


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Suit for injunction

An aggrieved party can sue for an injunction i.e., an order of the courtrestraining the wrong doer from doing or continuing the wrongful actcomplained of.

Injunctions are usually granted to enforce negative stipulations in caseswhere damages are not adequate relief.

Injunction is a preventive relief. It is particularly appropriate in cases of anticipatory breach of contract.

Example: N, a film actress agreed to act exclusively for Warner Bros forone year. During the year she contracted to act forX. It was held that shecould be restrained byan injunction from acting forX. [Warner Bros. v.

Nelson. (1937) I.K.B. 209J.


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law of contract_Bangladesh

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