NEPALESE CONTACT LAW

CONCEPT OF CONTRACT : (करार को अवधारणा)

 Contract is the mutual agreement between two party to do or not to do something is

called contract.

 According to salmond “A contract is an agreement creating and defining obligation

between parties”.

 According to indian contract act 1872 section 2(ja) “ An agreement enforceable by law
is a contract.

On the basic of above definition it is clear that, valid contract must have following basic
two element.

1. An agreement.

2. Enforceable of agreement by state.

Muluki civil code 2074 section 504(1) defines contract as a mutual agreement between parties to
do or not to something which is enforceable by law.

५०४. करार ि एको मामननाेाः(१) दईु वा दईु ि न्दा बढी व्यशिि रूबीच कुनै काम गनन नकन ा लामग कानून बमोशिम
कायानन्वयन गनन सहकनकुनै सम्झौता ि एमा करार ि एको मामननछ ।

 Essential element of valid contract वैध करार का अवश्यक तत्वहरू

Essential element of valid contract are mentioned below.

1) Offer and acceptance ( प्रस्ताव र स्वीकृती)

A contract must have proposal from one party and acceptance of the same
proposal by other party.

Offer and acceptance must be valid.

Eg: party A offer party B to purchase watch at Rs 500. If party B accept the
proposal of part B. Then there is valid offer and acceptance. Here party A is
offerer or promisor and party B is offeree or promisee.

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Muluki civil code 2074 section 508 Explains legal provision about offer and
acceptance.

2) legal relationship कानुनी सम्वन्ध:

A contract must have an intention to create legal relationship. If there is lack of legal
relationship that contract cannot be enforceable by law.

3) Free Consent (स्वतन्र सहमती)

A contract will only be valid if there exist free consent. The term free consent free
consent refer to meeting of free and fresh mind of two parties of an agreement when two
parties take and understand ,purpose, subject matter and term and condition of the
agreement in the same sense. They must not understand the same matter in different way.

Free consent should not include following term.

 Coercion (करकाप).

 Undue influence(अनुचीत प्रभाव)

 Fraud(जालसाज)

 Misrepresentation( गलत व्याख्या)

 Mistake(

4) Competent Parties (सक्षम पक्ष)

The parties in the contract must be capable in the eye of law. No all people are free to enter
into the valid contract.

Minor person ,lunatic person ,insolvent person , a person disqualified in the eye of law is not
qualified in the eyes of law for making contract valid.

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Section 506 of muluki civil code 2074. मुलुकी दे वानी सहहता २०७४ को दफा ५०६

Persons competent to concluded contract: (1) Every person other than the following persons
shall be competent to conclude a contract:

(a) One who is a minor, नाबालक

(b) One who is of unsound mind. होस ठगान मा नभएको

Explanation:

(1) A person who is usually of unsound mind, but occasionally of sound mind, may conclude
a contract when he or she is of sound mind.

(2) A person who is usually of sound mind, but occasionally of unsound mind, may not
conclude a contract when he or she is of unsound mind.

(2) Notwithstanding anything contained in sub-section (1), any person who is deemed
incompetent to conclude a particular contract under the law shall not be deemed to be a
competent to conclude such a contract.

(3) In concluding a contract on behalf of a person who is incompetent or quasi-competent,

his or her guardian or curator may conclude such a contract.

(4) In concluding a contract on behalf of a legal person, it shall be conclude by a decision of

the director or directors authorized for the management and operation of such a person or by
a person authorized by such a director or directors.

(5) Notwithstanding anything contained elsewhere in this Section, if a person deemed to be

incompetent to conclude a contract under this Chapter on any particular matter is competent
by other law to conclude a contract on such a matter, such a person shall be deemed to be
competent to conclude a contract on that matter.

5) contractual capacity : करारीय क्षमता

Any party involving in the contract must be competent and qualified in the eye of law.
Incompetent and disqualified person has not contractual capacity to perform contract. If any
contract is performed in presence of disqualified and incompetent parties then that contract is
deemed to be void.

6) Lawful consideration वैधानीक प्रतीफल

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Consideration is the price for the promise of the other party. The objective contracted
between two parties must be legal and not to oppose the public policy.

For example: An agreement between two parties for gambling purpose, prostitution purpose
is illegal in the eyes of law.

Except in the certain case there must be certain consideration.

So long as consideration exists, the court will not question its adequacy, provided that it is of
same value.

There may be not consideration in love affair and relationship.

7 Two parties दइु पक्ष

There must be more than two party to be a contract. Contract will not be valid if there is only one
party.

8 possibility of performance पुरा गनन सककने part 5, chapter 4.

Possibility of performance is another essential element of valid contract. If there is contract

between two party for doing the works that is not possible for man to perform it becomes void.

Eg: Ram promise to pay Rs 1000000, if hari built home in the sky. Here both the party get
consideration but it is impossible to hari to built home in sky hence, there is no possibility for
performance of contract. Hence, the contract is void.

9 Certanity ननश्चतता

Both the parties involves in the contarct must clearly know about all the terms and condition
associated in any contract. Terms and condition mentioned in the contract should be clearly
illustrated.

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Void and voidable contract : दे वानी सहहता २०७४ को दफा ५१७,५१८

Void contract: muluki civil code 2074 section 517. शन्

ु य करार।

(1) A contract which is not valid according to law shall be deemed to be a void
contract.

(2)The following contracts shall be void:

(a) A contract that restraints anyone from exercising any profession, trade or
business which is not prohibited by law, Provided that a contract shall not be
deemed to be made in restraint of any profession, trade or business .
(b) A contract in restraint of a marriage other than one prohibited by the law.
(c) A contract restraining any one from enjoying the facilities being enjoyed by the
public.
(d) A contract restraining legal right of any person from being enforced by a court.
(e) A contract concluded contrary to law or on a matter prohibited by the law in
force.
(f) A contract made for an immoral purpose or against public order or public
interest.
(g) A contract which cannot be performed because the parties there to do not
exactly ascertain or know about the matter in relation to which it has been
concluded.
(h) A contract the performance of which is impossible at the time of its conclusion
or a fictitious contract.
(i)A contract which is vague because of its subject matter being incapable of giving
a reasonable meaning,
(j)A contract concluded by a person not competent to make contract,
(k) A contract with an illegal purpose,
(l)A contract concluded by mistake of both parties as to the essential fact of the
contract at the time of its conclusion.
(3)A void contract is invalid ab initio and it shall create neither any legal
consequence nor any right and obligation of its parties.
(4)Even if any part of a contract becomes void, its remaining parts shall be
enforceable according to law.

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Voidable contract: muluki civil code 2074 section 518. शुन्यकरणीय करार।

(1) A contract which, at the initiation of its party, may be declared void by the court shall be deemed to be
a voidable contract

(a) A contract concluded by coercion,

(b) A contract concluded by undue influence,

(c) A contract concluded by fraud,

(d) A contract concluded by misrepresentaton,

(4) A voidable contract shall, before it is voided, be enforceable as if it were a lawful contract.

(5) If a voidable contract under this Section is voided by the court, it shall not affect the act done under
such contract before the voidance.

Types of contract करार का प्रकार

A. On the basic of mode of craeting contract. करार तर्म

ुन ा गनन तररका को
अनस
ु ार

1. Expressed and implied contract. व्यत्त र अव्यत्त करार.

That type of contract is said to be expressed contract in which parties involved in the
contract have made oral and written declaration of their intention. All the term associated
in the contract are written or done orally.

Parties A informs parties B that A is selling his car RS 5000000.if B replies that he will
purchase his car at RS 500000. Then the contract between A & B is said to be expressed
contract.

Implied contract , which is also called as Tactic contract does not formed by oral or written
declaration. In this contract agreement and mutual intention between two party normally
formed implied contract.

Stopping public vechile by giving hand signal.

Getting money from ATM.

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2. Simple and formal contract. साधारण र

अैपचाररक करार

If a contract is made in a written form duly sealed,properly signed and transferred to the
other party, it is called formal contract.

If the contracted on the other hand is created in the absence of any of the above element, it
is called simple contract.

Verbal or written contract without sealed and signature are simply contract. A simple
contract sometimes called a parol contracts. In this contract it doesnot require any
formality.

B. On the basic of performance of contract.

1. Executed and Executory contract: कायानन्वनयत र कायानन्वयन गनुन

पनन करार

When the contract is completely performed it is called as an Executed contract. In other

words an executed contract is the one under the term of which nothing to be done by either
party.

In executory contract is that types of contract in which one or both parties are under an
obligation to do or not to do certain thing mentioned in the contract.

C. On the Basic of Nature of contract. करारको प्रकृती

अनुसार

a) Unilateral and bilateral contract: एकपक्षीय र दइु पक्षीय

करार

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Unilateral contract is said to be that type of contract is which creates legal obligation to only one
party. Unilateral contract is also called one -sided contract.

Contract comes in existence when both the party exchange of promise with each other
party.Bilateral contract is also called two sided contract, here legal obligation is created in both
the party.

Offer and Acceptance प्रस्ताव र स्वीकृती

S. W Anson Defines: offer is an intimation , by word or conducts of a willingness

to enter into a legally binding contract.

Indian contract act 1872 section 2(ka): when one person signifies to another his
willingness to do or to abstain from doing anything with a view to obtaining
the assent of the other to such act or abstinence,he is said to make a proposal.

Muluki civil code 2074 section 503(3)(1):“Offer” means an offer made by one
person to another person with the intent of obtaining his or her acceptance to do or
abstain from doing any act.

A says to B that A wants to sell his house to B fro Rs 100000. Here to sell house as
an offer, A who has made an offer is called offerer or promisor. B to whom offer
has been made is called offeree or promisee.

Requirement of an offer or rules regarding to offer प्रस्ताव

सम्वन्धी ननयम

Valid offer must should contains following requirement.

 Expressed or implied offer. (व्यत वा पररलक्षीत प्रस्ताव) : offer can be presented on both
Expressed or implied form. The offer presented to other party In Expressed or implied form
both are valid.

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 Intention to create legal relationship. कानुनी सम्वन्ध स्थापपत गनन मनसाय :

Offer presented to other party may be expressed or implied but offer thus presented must have
an intention to create legal relationship or contractual relation ship.

 Certain or Definiteness: ननश्श्चता :

Offer present to other part must be Certain. Offer should not present to other party which should
given dual meaning.

 Communication to the offeree:

An offer must be communicated to the offeree. Until the offeree has a knowledge
of a matter, it is supposed to be void. Therefore, before accepting a porposal, the
offeree must have a knowledge about the proposal made to him/her.

Types of offers: प्रस्ताव का प्रकार

 Expressed offer: व्यत्त प्रस्ताव

Offer presented in written or oral form is Expressed offer

 Implied offer: अव्यत्त प्रस्ताव

 Specific offer: ननश्चत प्रस्ताव

That types of offer which is can only be accepted by specific person or particular group is called
Specific contract.

 General offer: साधारण प्रस्ताव

That types of offer which is made to public at large, it is called general offer.

 Counter offer: प्रनत-प्रस्ताव

An offer, instead of accepting a proposal put to him , if he makes his own offer that repalce the
original offer, it is called offer counter.

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 Cross offer: दोहरो प्रस्ताव

Cross offer is also called identical offer. Both the parties are not known about proposal of each
party.

 Standing offer: श्स्थर प्रस्ताव

Termination of offer प्रस्ताव को अन्त्य or Revocation and lapse of offer .

Withdrawl of the offer by the offerer is called Revocation of offer.

When the offer end automatically other then by intention of offerer it is called lapse of offer.

An offer may go lapse because of following condition.

 An offer lapses after stipulated time. An offer does not remains open indefinitely. An offer
is supposed to be lapsed immediately after expiry of stipulated time.

 An offer lapses by the death or insanity of offerer or offeree before acceptance: By

the death or insanity of the offerer or the offeree before the acceptance of offer, the offer
automatically comes to end.

 An offer is lapsed by subsequent illegality: An offer is lapsed if the performance of the

contract become illegal after the offer is made. An offer may be illegal due to change in law
government order.

 An offer lapse by offeree rejection: An offer is lapsed if the offeree does not accept it.

 An offer lapse by counter offer: An offeree should accept the offer as it is. While
accepting the offer , the offeree cannot make any change in the term and condition.

 By Expiry of resonable time:

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Meaning of Acceptance:

When offeree Signifies his assent to the term of offer, it is called acceptance. In other word
acceptance means the consent given to offer.

Muluki civil code 2074 section 504(2): Acceptance is an assent given by the offeree in the sense
of the offeror has intended.

Indian contract act 1872: When a person to whom the proposal is made signifies his assent
thereto the proposal is said to be accepted.

Requirement of the Acceptance.

 Acceptance only by the offeree: only the person to whom the proposal is made can accept
the offer. A person other then offeree can not accept an offer public offer can be accepted by
any person having knowledge about such offer.

 Offeree must have a knowledge of offer before acceptance.

 Acceptance must be absolute and unconditional. Offeree should accept the contract
without any condition. If an offeree accepts the proposal in a sense different from what the
offerer has thought it, it can not be valid acceptance.

 Acceptance must be made before revocation or lapse of offer. An offer must be accepted
before it is revocked or lapsed.

 Acceptance must be made within reasonable time:

 Acceptance must be communicated by the offeree:

 Mere silence is not a valid acceptance :

Revocation or lapse of Acceptance.

Like offer Acceptance may be revoked or lapsed in following condition .

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 By notice of revocation : By giving the notice to the offere, the offeree can revoke the offer
however such revocation must be before valid acceptance.

 By death or insanity of Offeree:

 Time limit:

Contractual capacity :

Contractual capacity is another element of valid contarct. For a contract to ba valid both the
parties must be capable in the eyes of law. If the contract is made with incompetent person, it
will be void.

According to muluki civil code 2074, any person other then below are competent for concluding
a contract.

 Minor.

 Person of unsound mind.

 Any person not qualified to enter into specific contract under the prevailing law shall be
deemed to be incompetent to conclude that contract.

Any person who has not attained th age of 18 year is known as minor. Minor person is not
capable to enter in legally binding contract. Contract with minor can not be enforceable by law.

Rules regarding agreement with the minor

 The contract is not void if the contract is beneficial fro minor.

 A contract with the minor can not be ratify after attaining majority of his age.

 Doctrine of Estoppels does not applied to a minor.

 A contract with a minor is absolutely void from the beginning. There is no question of
specific performance for the minor.

 Minor act can not bind his parents.

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 Unsound mind :

 Sound mind is such a mental state at which a person is capable of understanding a case
correctly and can make a rational judgement as to its impact on him.

 A person of a sound mind is a person who can decide what is wrong and what is right.

 A contract will be only valid if the parties involving in the contract are of sound mind.

Rules regarding person of unsound mind:

 A person who is usually of unsound mind but occasionally of sound mind may make a
contract, when he/she is of sound mind.

 A person who is usually of sound mind but occasionally of unsound mind may not make a
contract when he/she is unsound mind.

 The test of soundness of mind is on the capacity to understand the business concern and the
ability of rational judgment as to it effect on the person interest.

Disqualified person in the eye of law

Those person who are not capable to enter into the contract due to the various reason .The person
who are disqualified in the eye of law are not considered to perform valid contract.

1. Drunkard

2. Insolvent person

3. Alien Enemy

4. Foreign sovereigns

5. Convict

6. Corporations.

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Consideration प्रतीफल
Consideration is a promise, performance, or forbearance bargained by a promisor in exchange
for their promise. Consideration is the main element of a contract. Without consideration by both
parties, a contract cannot be enforceable.

 Current muluki civil code 2074 is not clear regarding to the consideration.

 Consideration need not necessarily be adequate. A person can sell his object at Rs 500.
However the actual price of object is Rs 5000.

 Consideration should tangible in Nature, depending on the condition consideration may

be intangible in nature.

Types of consideration : प्रतीफल को प्रकार

1. Future or Executory Consideration भावी प्रतीफल

Form of promise to be performed in future. Both the party involved in the contract
will get consideration in future when contract is performed.

A promise to deliver 5 Bags of wheat after 10 days to B, and B promise to pay the
price after the delivery of wheat.

2. Executed or present consideration. वतनमान प्रतीफल

If the consideration moves simultaneously with the promises with offerer and
offeree, it is called present consideration.

A Buys a book from a shop by paying price at the same time.

3. Past consideration: भुत प्रतीफल

It include the works without promises. In this consideration on party has already
moved before the date of promises.

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Requirement of the consideration or Rule regarding consideration.

1) At desire of the promisor प्रस्तावक को इच

If the offerer does something without desire or request of offeree that will be regarded as a
voluntary service and such voluntary service cannot be regarded as consideration. Therefore
desire of offeree is essential for consideration.

2) Person rendering consideration: indian contract act section 2(gha) , if promisor get
consideration from any in behalf of promisee then consideration is treated as valid.

3) Consideration need not necessarily be adequate. consideration is essential element of

valid contract, consideration need not be adequate, it must have certain value.

4) Consideration must be real and competent. Though consideration may not be adequate
but it may not be real and competent.

5) Consideration must be lawful. Object which is consideration as a object in contract

should be lawful. Unlawful object cannot be exchanged as a consideration. If any
contract involves any unlawful object as a consideration, then that types of contract
cannot be enforceable by law.

6) Consideration may be tangible or intangible. Depending upon the circumstances the

consideration may be tangible or intangiable.

7) Consideration may be past present or future.

8) Contract whether oral or written must be supported by consideration:

9) Mere request of the promisor is not enough.

 No consideration No contract:
muluki civil code 2074 is silent regarding to the consideration of the contract, But contract made
without consideration is considered as void, this provison is mentioned in section 25 of indian
contract act

Salmond and Winfield says “ A promise without consideration is a gift, one made for a
consideration is a bargin”.

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Exception to rule “No consideration –No contract”.

 Natural love and Affection:

 Promise to compensate.

 Completed gift.

 Promise to pay time barred debt.

 Charity.

 Agreement specified by law.

 Contract under seal.

 Agency.

Contingent contract: Muluki civil code 2074 section 513

 It is the contract between two parties by which a party promises to do

something to another on the happening or non- happening of an event
mentioned in the contract.

 The event mentioned in the contract is always uncertain event ,the

promisor is liable to perform only when the event happen otherwise he
is free from his liabilities.

 Contract of insurance and contract of indemnity and guarantee are

popular instance of contingent contract.

 Contingent contract are also called conditional contract..

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Rules regarding contingent contract.

 On the future uncertain Event Happening: section 513(1):

 Event linked with human control: section 513(2):

 On future uncertain event not happening: section 513(3):

 On event happening within a fixed time : section 513(4):

 On event not happening within a fixed time: section 513(5):

 Impossible event:

Difference between contingent and wagering contract.

Quasi-contract:

Muluki civil code chapter 15.

 Valid contract in absence of offer, acceptance and other element which
are required to make the contract enforceable.
 A quasi contract is a retroactive remedy between two parties who have no
contract with one another.

 It is created by a judge to correct a circumstance in which one party

acquires something at the expense of the other.

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 The plaintiff must have furnished an asset, item, benefit, or service to

another party such that the defendant should have known to pay for it.

 Quasi contracts outline the obligation of one party to a second when the
first receives a benefit or property from the second. A person might
knowingly or unknowingly give something of value to another without an
agreement being made. It is assumed that a reasonable person would pay
for it.

 Contract act 2023 section 9, contract act 2056 section 11.

 Muluki civil code 2074, chapter 15, Section 648-section 663

Rule regarding Quasi contract.

 Person managing others person business at his own will cannot waive
unfinished. Muluki civil code Section 649.
 Taking care of or managing property by a person who takes its
responsibility. Muluki civil code Section 650
 No freedom to person delegating authority. Muluki civil code Section 651.
 Reasonable expenses to be paid for saving property during calamities.
Muluki civil code Section 652.
 Reimbursement from the benefited. Muluki civil code Section 653.
 Claim for maintenance. Muluki civil code Section 654.
 Reimbursement of the expense incurred in obsequies of the deceased.
Muluki civil code Section 655.
 Liability for the expenses in maintenance of weak person. Muluki civil code
Section 656.
 Reimbursement of the expenses of treatment. Muluki civil code Section 657.
 liability if the expenses made by the public body. Muluki civil code Section
658.
 Payment by the related person. Muluki civil code Section 659.

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Performance of the contract : करार को परीपालना

 Performance of the contract means the fulfillment of the respective promises

by the concern parties as mentioned in the contract.
 There are basically four types of the performance.

a. Actual performance.When the promisor have made the offer of the

performance to the promisee and the offer has been accepted by the
promise, it is called actual performance.
b. Attempted Performance.. When promisor has made an offer of
performance to the promise and the offer has not been accepted by
the promise, it is called attempted performance.
c. Substantial performance. This types of performance is attractive
when work is almost finished,
d. Partial performance : That types of performance is said to be
partial performance in which one of the parties has performed the
contract, but not completely and other side has shown willingness to
accept the part performed.

Termination or Discharge of contract. करार को समाप्ती.

At the time of formation of the contract both parties create some legal
obligations, which must be fulfill by them. Both the parties should perform their
respective promises on time. Until the contract is terminated parties involve in
the contract cannot get free from contractual obligation. .

Mode of termination /discharge of contract.

A contract may be terminated in the following ways:

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1) By performance of contract: when the parties involved in the contract fulfill

their obligation then contract get automatically terminated.
2) Impossibility of the performance: A contract may be terminated if it is
impossible to perform. A contract when made was possible to perform, but
because of happening of some event,work further is difficult to conduct.
Regarding to impossibility of performance of contract following to case
basically occurs.

 Initial impossibility:
 Supervening impossibility:

3) Termination by mutual agreement: making re-arrangement between

the parties with their mutual consent terminates the contract. If the first
agreement is replaced by another agreement upon their mutual consent,
the first agreement existence comes to an end.
4) By operation of law: In the following condition, a contract may be
terminated by operation of law.

 By death of parties
 By insolvency of the parties.
 By merging on contract with other.

5) Termination by breach of contract : if one parties fails or denies

performing his contractual liabilities created by contract, it is said to be breach
of contract. When one party breach the contract other party will also get relief
from contractual liabilities. In such a case contract is terminated.
6) Termination of contract by material alternation: if one party change the
material in the contract without the consent of other party the contract is
terminated.
7) Termiantion By lapse of time:
8) Termiantion by recession of contract:

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Breach of contract:

if one party fails or deny to performing his contractual liabilities created by

contract it is said to be beaches of contract.

Muluki civil code 2074 chapter 5 section 535.

535 Breach of contract deemed to occur: करार उल्लङ्घन गरे को मनीने

(1) If any party to a contract fails to fulfill the obligation under the contract or gives a notice to
the other party that he or she will not perform the act to be performed by him or her under the
contract or his or her action and conduct demonstrate that he or she is incapable of performing the
act under the contract, the party shall be deemed to have breached the contract.

(2) If one party commits a breach of the contract pursuant to sub-section (1) or action or conduct
of that party demonstrates non-performance of the contract in a material respect or demonstrates a
material breach of the contract by the conduct or action of a party, the other party may rescind the
contract by giving a notice to such a party.

(3) In the case of the rescission of the contract pursuant to sub-section (2), the party rescinding
the contract shall not be bound to perform the contract.

536. Indivisible nature of the authority to rescind contract: करार रद्द गनन अश्ततयारी को
अभभभाज्य प्रकृती

If either party of a contract consists of two or more persons, the contract may be rescinded only if
all of such persons rescind it or if the rescission is applicable to all of them.

537. Compensation for breach of contract: करार उल्लङ्घन भएमा त्यसको क्षतीपुनतन

(1) In the case of breach of a contract under Section 535, the party aggrieved by it shall be
entitled to recover from the party in breach of the contract damages for the actual loss or damage
caused by the breach or such loss or damage which the contracting parties knew when they made
the contract to be likely result from the breach.

Remedies for breach of contract

When the contract is breach by one party then aggrieved party can enjoy
with following remedies as mentioned in muluki civil code 2074.

Narayan Prasad Awasthi

NEPALESE CONTACT LAW

a. Right to withdraw the contract: Breach of contract entitles the

aggrieved party to withdraw or cancel the contract. If one party
breaches the contract, another party can cancel the contract.
b. Right to claim compensation : Breach of contract entitles the
aggrieved party to claim compensation suffered by him. The
compensation can be claim in following way. If actual loss is found
then same amount of loss occur. If mentioned in the contract then
amount as per mentioned in the contract. If the compensation amount
is not mentioned in the contract then reasonable amount suffered by
him.
c. Right to get usual performance: if the party is not satisfy with the
compensation, then the party has a right to demand for usual
performance.
d. Right to sue for injunctions: ननषेधाज्ञा र्ारी गनन अधधकार: suit for
injunction means demanding court to stay order. injunction is the
order of court which prohibits a person to do particular acts.
e. Right to claim quantum meruit: मनाभसव रकम पाउने अधधकार :

Narayan Prasad Awasthi