Unit 4 , Contract
Unit 4 , Contract
Example:
Suppose A agrees to sell a house to B for ₹20 lakh. Later, B fails
to pay the amount within the agreed time.
A can go to court and ask to cancel the contract
(rescission).
If B pays the money later, the court may still allow the
house to be delivered to B.
Purpose: These sections ensure fairness by allowing
cancellation of contracts that are voidable, unlawful, or not
performed properly. It also protects parties who acted in good
faith.
Section 30
What Does Section 30 Say?
Section 30 gives the court the power to:
1. Restore benefits:
o When a contract is cancelled (rescinded), the party
receiving any benefits from the other party must
return them.
o This ensures fairness so no one keeps an unfair
advantage.
2. Order compensation:
o The court can also order one party to pay money
(compensation) if it thinks it is fair and just.
Purpose of Section 30:
It ensures that when a contract is cancelled, both parties
are treated fairly.
It helps restore both parties to their original position, as if
the contract never happened.
Example:
Imagine A and B signed a contract where A paid ₹1 lakh to B for
land, but B failed to transfer the land.
If the court cancels the contract, B must return ₹1 lakh to
A.
If A suffered a loss because of B's failure, the court can
also ask B to pay extra compensation to A.
Section 31
What is Cancellation of Instruments?
Cancellation means declaring a written document (like
contracts or agreements) as void or invalid. This happens
when the document could cause harm if it remains valid.
1. Section 31 – Grounds for Cancellation:
If a person believes a document is void (legally invalid) or
voidable (can be made invalid), and it may harm them, they
can go to court.
The court can decide whether the document is invalid and order
its cancellation.
Example: If a contract was made by fraud, the party who is
harmed can ask the court to cancel it.
Effect on Registered Documents:
If the document has been registered under the law (like
property deeds), the court will inform the registration office.
The registration office will note that the document has been
cancelled.
Section 32 – Partial Cancellation:
If a document has multiple parts, some valid and some invalid,
the court can cancel only the invalid parts while keeping the
rest valid.
Example: If a contract has two clauses and one is unlawful, the
court can cancel just the unlawful part.
Section 33 – Restoration of Benefits and Compensation:
If the court cancels a document, the person who benefited from
it may have to return those benefits or pay compensation.
If someone successfully proves that a document is void and
avoids its enforcement, the court can still ask them to return
any benefits received.
Example: If A gives B ₹5 lakh based on a void contract, the
court can ask B to return the money when the contract is
cancelled.
Purpose of These Sections:
These sections ensure fairness by allowing:
1. Cancellation of harmful documents that are void or
voidable.
2. Partial cancellation when some parts are valid.
3. Restoration of benefits or compensation so no one gains
unfair advantage.
INJUNCTIONS ( SEC 36 – 42)
What is an Injunction?
An injunction is an order given by the court to stop a person
from doing something or to make a person do something.
It is a form of preventive relief given to protect someone’s
legal rights.
Types of Injunctions:
1. Temporary Injunction
o This type of injunction is granted for a specific
period or until further court orders.
o It can be granted at any stage of a suit.
o It is governed by the Code of Civil Procedure,
1908.
2. Perpetual Injunction
o This is a permanent injunction.
o It is granted after the final hearing of the case.
o The defendant is permanently restrained from
doing something that infringes upon the
plaintiff’s rights.
When Can Perpetual Injunctions Be Granted?
1. To prevent breach of an obligation that exists in favor
of the plaintiff.
2. Contract-related cases: The court will follow Chapter II
rules of the Specific Relief Act.
3. Property disputes: If someone invades or threatens
to invade another’s property rights.
4. When:
o The defendant is a trustee of the property for the
plaintiff.
o The damage cannot be determined or
compensated monetarily.
o Monetary relief will not be enough to provide
justice.
o It is needed to prevent multiple legal
proceedings.
Mandatory Injunctions
If the court thinks it is necessary to stop a breach of an
obligation, it can compel someone to perform a specific
act.
Case Law: K.K. Verma v. Union of India (1954 AIR 1092)
Facts:
In this case, the plaintiff had rented out a property.
The defendant used the property in violation of the rental
agreement and began activities that the plaintiff objected
to.
Issue:
The plaintiff sought an injunction to stop the defendant from
misusing the property.
Court’s Decision:
The court granted a perpetual injunction, restraining the
defendant from continuing the misuse of the property. The
court held that violating property agreements can lead to
perpetual injunctions to protect the rights of the plaintiff.
In Simple Words:
If someone tries to harm your rights, like violating a contract or
misusing your property, the court can issue an injunction. A
temporary injunction can stop the harm temporarily, while a
perpetual injunction stops it permanently after the case is
heard. Mandatory injunctions make someone perform a
specific act.
Damages in Addition to or Instead of an Injunction
Under Section 40 of the Specific Relief Act, the court can
award damages either in addition to or instead of granting an
injunction. This applies to cases where perpetual or mandatory
injunctions are sought, and the plaintiff has specifically claimed
damages. The court has the discretion to decide if monetary
relief is appropriate along with the injunction.
Grounds for Refusing an Injunction
Under Section 41, the court can refuse to grant an
injunction under certain circumstances:
1. If it restrains someone from pursuing a pending judicial
proceeding, except to prevent multiple cases.
2. If it stops proceedings in a court that is not subordinate.
3. If it interferes with legislative actions.
4. If it restrains criminal proceedings.
5. If the breach of contract cannot be clearly enforced.
6. If it is based on an alleged nuisance without clear proof.
7. If other legal remedies exist, except in cases of breach of
trust.
8. If it delays infrastructure projects or disrupts public
services.
9. If the plaintiff or their agents have acted unfairly or in bad
faith.
10. If the plaintiff has no personal interest in the matter.
These rules ensure injunctions are not misused or cause
unnecessary harm.
Enforcement of Negative Agreements
Under Section 42, the court can issue an injunction to enforce
a negative agreement in a contract. A negative agreement
refers to a promise "not to do something." If a party violates
this agreement, the court can restrain them from continuing
the breach. However, this applies only when the plaintiff has
not failed to fulfill their part of the contract.
For example, if an employee agrees not to work for a
competitor but violates this agreement, the court can issue an
injunction to enforce the promise.
These provisions under the Specific Relief Act ensure that
injunctions are granted responsibly, balancing legal fairness
with practical considerations.