Contract Law

There are several kinds of offers. One of them is counter offer. A counter offer occurs when the offeree varies or modifies the terms of the original offer. A counter offer amounts to rejection of the original offer and puts forward a new offer. A contract can arise only if the counter offer is accepted. As per the settled principle of contract law, a counter-offer amounts to rejection of the original offer.

In the given situation, there was no concluded contract as Brijesh put forward a counter offer to Anil’s offer. Here Anil can sell his property to Pritam. Brijesh will not be able to receive any damages due to breach of contract and his suit would fail.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 1(b)(i) (Syllabus 2022).

A stranger to a contract cannot sue both under the English and Indian law for want of privity of contract. Accordingly, a person who is not a party to a contract cannot sue upon it even though the contract is for his benefit.

In the given situation D supplied tyres to a wholesaler X, on a condition that any retailer to whom X re-supplied the tyres should promise X, not to sell them to the public below D’s price list. X supplied tyres to F upon this condition only, but nevertheless F sold the tyres below the price list.

In the given situation, it can be seen that there was a contract between D and X and a contract between X and F. D cannot claim for damages in the given circumstances as only a party to the contract can claim it and he was not a partyto the contract between X and F. Secondly D had not given any consideration to F and therefore there was no binding contract between these parties and thirdly D was not listed as an agent within the contract and therefore could not be included as a valid third party who had rights to claim on the contract.

In view of the above discussion, it may be concluded that D will not be able to claim damages from F in the given circumstances.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a)(iv) (Syllabus 2022).

The offer made by Azaad’s father through a pamphlet offering a reward of ₹50,000 to anyone who brings his son back is a general offer. This type of offer is made to the public at large and can be accepted by any person who performs the conditions of the offer.

The given situation is similar to the famous case of Harbhajan vs Harcharan Lal (AIR 1925 All.539). In this case a young boy ran away from the home and his father issued a pamphlet offering a reward of ₹ 500 to anybody who would bring the boy home. The plaintiff saw the boy at a railway station and sent a telegram to his father. Later father refused to pay the reward. In this case it was held that the handbill or pamphlet was an offer to the world at large and was capable of acceptance by any person who fulfilled the conditions contained in the offer. The plaintiff substantially performed the conditions and was entitled to the reward offered.

Thus, on the basis of the decision of above mentioned case, Hari would be entitled to the reward announced by Azaad’s father.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 1(b)(iv) (Syllabus 2022).

A gratuitous promise to subscribe to a charitable cause cannot be enforced, but if the promisee is put to some detriment as a result of his acting on the faith of the promise and the promisor knew the purpose and also knew that on the faith of the subscription an obligation might be incurred, the promisor would be bound by promise.

It may be noted that it is not necessary that the promisor should benefit by the consideration, it is sufficient if the promisee has done some act from which a third person is benefited and he would not have done that act but for the promise of the promisor.

The fundamental principle is that consideration is essential in every contract. Every contract must be supported by valuable consideration. Thus, a gratuitous promise as in the case of subscription for charity, is not enforceable.

In the given situation, the management of animal shelter would not be able to take legal action to enforce Alex’s promise to donate ₹ 10,000, as the promise is gratuitous and without consideration.

But if on the basis of the promise made by Alex to donate ₹10,000, the management of the shelter home had initiated some work, Alex would be liable if know the purpose and also know that on the faith of the subscription an obligation might be incurred. This is because the management undertook liability by initiating some work which they would not have done but for the promise of the promisor.

Alternate answer to above paragraph

But, if, based on Alex’s promise to donate ₹10,000, the management of the shelter home initiated some work, but Alex was unaware that an obligation might be incurred in reliance on his promise, he would not be held liable under the Indian Contract Act

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a)(iii) (Syllabus 2022).

International business professionals use the term “modes of entry” to describe the different methods and approaches available to enter markets and conduct business in other countries. Important mode of entriesare joint ventures or foreign collaborations where two or more organizations join together in a cooperative effort to further their business goals. The joint venture or foreign collaborations are the most common and effective means of conducting business internationally.

The joint venture or foreign collaboration documents and agreements are critical to the success of the venture. It is difficult to prepare a set frame of the terms and conditions. The conditions may differ according to the requirements.

While drafting a foreign collaboration agreement, the following factors should be kept in mind:

1.Capability of the collaborator and the requirements of the party are clearly indicated.

2.Clear definitions of technical terms are given.

3.Specify if the product shall be manufactured/sold on exclusive or non-exclusive basis.

4.Terms and conditions regarding nature of technical know-how, disclosure of drawings, specifications and other documents, furnishing of technical information in respect of processes with flow charts etc., plant outlay list of equipment, machinery and tool with specification have to be provided.

5.Provisions for making available the engineers and/or skilled workers of the collaborator on payment of expenses relating to their stay per diem etc. are given.

6.Details regarding specification and quality of the product to be manufactured are given.

7.Quality control and trademarks to be used are also specified.

8.Responsibility of the collaborator in establishing or maintaining assembly plants should be clearly determined and provided for.

9.If sub-contracting of the work is involved, clarify if there would be any restrictions.

10.The rate of royalty, mode of calculation and payment etc. Also, make provision as to who will bear the taxes/cess on such pay inents.

11.Use of information and industrial property rights should also be provided for in the agreement.

12.A clause on force majeure should be included.

13.A clause that the collaborating company has to train the personnel of Indian company within a specified period should be incorporated The clause should also specify the terms and conditions of such assistance, place of training, period of training and fees payable.

14.A comprehensive clause on arbitration containing a clear provision as to the kind of arbitrator and place of arbitration should be included.

15.There should be provision in the agreement for payment of interest on delayed payments.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(b) (Syllabus 2022).

Consideration may be of three kinds:

(a)Executory or future which means that it makes the form of promise to be performed in the future, e.g., an engagement to marry someone; or

(b)Executed or present in which it is an act or forbearance made or suffered for a promise. In other words, the act constituting consideration is wholly or completely performed, e.g., if A pays today ₹100 to a shopkeeper for goods which are promised to be supplied the next day, A has executed his consideration but the shopkeeper is giving executory consideration-a promise to be executed the following day. If the price is paid by the buyer and the goods are delivered by the seller at the same time, consideration is executed by both the parties.

(c)Past which means a past act or forbearance, that is to say, an act constituting consideration which took place and is complete (wholly executed) before the promise is made.

According to English law, a consideration may be executory or executed but never past. The English law is that past consideration is no consideration. The Indian law recognizes all the above three kinds of consideration.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a)(v) (Syllabus 2022).

An agent is personally liable in the following cases:

l Where the agent has agreed to be personally liable to the third-party.

l Where an agent acts for a principal residing abroad.

l When the agent signs a negotiable instrument in his own name without making it clear that he is signing it only as agent.

l When an agent acts for a principal who cannot be sued (e.g., he is minor), the agent is personally liable.

l An agent is liable for breach of warranty of authority. Where a person contracts as agent without any authority there is a breach of warranty of authority. He is liable to the person who has relied on the warranty of authority and has suffered loss.

l Where authority is one coupled with interest or where trade, usage or custom makes the agent personally liable, he will be liable to the third-party.

l The agent is also liable for his torts committed in the course of agency.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 1(b)(iv) (Syllabus 2022).

Section 10 of the Transfer of Property Act, 1882(Act) states that when property is transferred, the transferee should not be absolutely restrained from alienating the property. One may transfer property to another subject to a condition, but the condition should not be one which absolutely prevents the transferee from alienating the property. The transfer takes effect and is valid, while the condition to not alienate the property is void.

In the first case, based on the precedent set by Rosher v. Rosher and the principles under the Act, the condition that Rajan imposed on Ravi’s ability to sell the house shall be deemed invalid under the Act, as condition was an absolute restraint. However, the transfer shall be valid and the condition shall be void. It will be presumed that no condition was imposed by the Rajan.

Though absolute restraints are bad in law, partial restraints are valid. A partial restraint is a condition which partially takes away the right of the transferee to dispose of his interest in the property. Here, the right is not taken away completely. Therefore, in second case, conditions which restrain the transferee not to alienate the property outside the family is partial restrain and valid.

There are two exceptions to the rule that absolute restraints are void:

Firstly, in the case of a lease, the lessor can impose a condition that the lessee shall not sublet the property or sell his leasehold interest. Such conditions are valid.

The second exception is made in respect of a woman who is not a Hindu, Buddhist or Muslim.

In such a case, a condition to the effect that she shall not have power during her marriage to transfer the property is valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6(b) (Syllabus 2022).

Meaning of Lease According to Section 105 under the Transfer of Property Act 1882 (Act), a “lease” of immoveable property is a transfer of a right to enjoy property. Since it is a transfer to enjoy and use the property, possession is always given to the transferee. The lease of immoveable property must be made for a certain period. For example, you may give a lease of property for a definite number of years, or for life, or even permanently.

The transferor is called the lessor, the transferee is called the lessee, the price is called premium and the money, share, service or any other thing of value to be so rendered is called the rent.

Duties of the lessee The lessee has the following duties:

(a)The lessee is bound to disclose to the lessor any fact as to nature or extent of the interest that the lessee is about to take, of which the lessee is, and the lessor is not aware and which materially increases the value of such interest.

(b)The lessee is bound to pay or tender at the proper time and place, the premium or rent to the lessor or his agent in this behalf. We have already seen that in case the lessee does not pay the rent, he may incur forfeiture of the tenancy. The liability to pay the rent commences from the date the tenant is put into possession.

(c)The next duty of the lessee is that he uses the property as a person of ordinary prudence would make use of. But he shall not permit another person to use the property for purposes other than that for which it was leased.

(d)He should not do any act which is destructive of or permanently injurious to the property.

(e)The lessee must not, without the lessor’s consent, erect on the property any permanent structure except for agricultural purpose. If he wants to erect certain fixtures or chattel on the leased property, it must be done without causing any damage to the property. Before the termination of the lease, he can remove all the things attached to the earth. If permanent fixtures are to be made, the lessee must obtain the consent of the landlord.

(f)If the lessee comes to know of any proceedings by way of suit to recover the property of the lessor, the lessee should immediately inform the lessor. Since, the tenant is in possession of the property he is the person who is not likely to know of any encroachment on the landlord’s property and he should therefore inform the landlord.

(g)The lessee should hand over the property at the end of the lease.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(c) (Syllabus 2022).

According to Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor, unless the contract provides otherwise.

A creditor is not bound to proceed against the principal debtor. He can sue the surety without suing the principal debtor. As soon as the debtor has made default in payment of the debt, the surety is immediately liable. But until default, the creditor cannot call upon the surety to pay. In this sense, the nature of the surety’s liability is secondary. Section 128 only explains the quantum of a surety’s obligation when terms of the contract do not limit it. Conversely, it does not follow that the surety can never be liable when the principal debtor cannot be held liable. Thus, a surety is not discharged from liability by the mere fact that the contract between the principal debtor and creditor was voidable at the option of the former, and was avoided by the former. Where the agreement between the principal debtor and creditor is void as for example in the case of minority of principal debtor, the surety is liable as a principal debtor; for in such cases the contract of the so-called surety is not collateral, but a principal contract. [Kashiba v. Shripat (1894) 19 Bom. 697].

In view of the above discussion it may be said that the Gold Leaf Wholesalers are legally entitled to initiate recovery proceedings against Mr. X.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 1(b)(i) (Syllabus 2022).

Under Indian Contract Act, 1872, a surety may be discharged from liability under the following circumstances:

(a)By notice of revocation in case of a continuing guarantee as regards future transaction (Section 130.)

(b)By the death of the surety as regards future transactions, in a continuing guarantee in the absence of a contract to the contrary (Section 131).

(c)Any variation in the terms of the contract between the creditor and the principal debtor, without the consent of the surety, discharges the surety as regards all transactions taking place after the variation (Section 133).

(d)A surety will be discharged if the creditor releases the principal debtor, or acts or makes an omission which results in the discharge of the principal debtor (Section 134). But where the creditor fails to sue the principal debtor within the limitation period, the surety is not discharged.

(e)Where the creditor, without the consent of the surety, makes an arrangement with the principal debtor for composition, or promises to give time or not to sue him, the surety will be discharged (Section 135).

(f)If the creditor does any act which is against the rights of the surety, or omits to do an act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged (Section 139).

(g)If the creditor loses or parts with any security which at the time of the contract the debtor had given in favour of the creditor, the surety is discharged to the extent of the value of the security, unless the surety consented to the release of such security by creditor in favour of the debtor. It is immaterial whether the surety was or is aware of such security or not (Section 141).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6A(iv) (Syllabus 2022).

The definition of Fraud has been provided under section 17 of the Indian Contract Act,

1872. 'Fraud' is an untrue statement made knowingly with the intent to deceive. The party defrauded can avoid the contract and also claim damages. The chief ingredients of fraud are: a false representation or assertion, of fact (and not mere opinion), made with the intention that it should be acted upon, the representation must have actually induced the other party to enter into the contract and so deceived him, the party deceived must thereby be indemnified, for there is no fraud without damages, and the statement must have been made either with the knowledge that it was false or without belief in its truth or recklessly without caring whether it was true or false. It is immaterial whether the representation takes effect by false statement or with concealment.

Therefore, Tarun can recover advance payment paid from Brju because it is voidable contract on account of 'fraud' committed by Brju. Thus, Tarun can rescind/ cancel/ avoid the contract and can sue to recover the advance paid to Brju. Also Tarun has right to claim compensation for any damage which he has sustained through non-fulfilment of the contract.

Alternate answer to above paragraph

A voidable contract is initially considered legal and enforceable but can be rejected by one party if the contract is discovered to have defects. If a party with the power to reject the contract chooses not to reject the contract despite the defect, the contract remains valid and enforceable.

Now, in the given situation Brju defrauded Tarun to enter into contract. But later on Tarun found that contract was entered into by fraud. Tarun could have avoided the contract at that time and can recover advance paid.

But Brju conviced Tarun that he shall obtain the license within reasonable time, this means Tarun does not rejected the contract and agreed to continue an illegal agreement, as buying & selling of explosive chemical without licence has been prohibited by Government.

In view of the above, Tarun cannot recover advance paid if Brju failed to obtain the license as illegal agreement is not enforceable at law.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 3(b) (Syllabus 2022).

According to Section 170 of the Indian Contract Act 1872, where the goods are bailed for a particular purpose and the bailee in due performance of bailment, expands his skill and labour, he has in the absence of an agreement to the contrary a lien on the goods, i.e., the bailee can retain the goods until his charges in respect of labour and skill used on the goods are paid by the bailor.

The section expresses the common law principle that if a man has an article delivered to him on the improvement of which he has to bestow trouble and expenses, he has a right to detain it until his demand is paid. The right of lien arises only where labour and skill have been used so as to confer an additional value to the article.

In the given situation Munshi, who is bailee here, in due performance of bailment expanded his skill and labour and in the absence of an agreement to the contrary has a lien on the goods, i.e., he can retain the goods until his charges in respect of labour and skill used on the goods are paid by Sameer who is bailor here.

If Sameer still refuses to pay, Munshi may also file a civil suit to recover the agreed extra amount as consideration for the urgent service rendered.

Lien is of two kinds: Particular lien and General lien. A particular lien is one which is available only against that property of which the skill and labour have been exercised. A bailee’s lien is a particular lien. A general lien is a right to detain any property belonging to the other and in the possession of the person trying to exercise the lien in respect of any payment lawfully due to him.

Thus, a general lien is the right to retain the property of another for a general balance of accounts but a particular lien is a right to retain only for a charge on account of labour employed or expenses bestowed upon the identical property detained.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6(a) (Syllabus 2022).

By virtue of section 173 of the Indian Contract Act, 1872, no property in goods pawned passes to the pawnee, but the pawnee gets a “special property to retain possession even against the true owner until the payment of the debt, interest on the debt, and any other expense incurred in respect of the possession or for preservation of the goods pledged”. The pawnee must return the goods to the pawnor on the tender of all that is due to him. The pawnee cannot confer a good title upon a bona fide purchaser for value. Upon default by the pawnor in payment or performance, the pawnee may exercise the following remedies:

l file a suit for the recovery of the amount due to him while retaining the goods pledged as collateral security; or l sue for the sale of the goods and the realisation of money due to him; or l himself sell the goods pawned, after giving reasonable notice to the pawnor, sue for the deficiency, if any, after the sale.

Thus, Gold Leaf Wholesalers can sell the luxury car of Mr. Y after giving reasonable notice to Mr. Y and appropriate the proceeds toward the outstanding liability.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 1(b)(ii) (Syllabus 2022).

Provisions related to the acceptance of offer under the Indian Contract Act, 1872 l According to section 2(a) of Indian Contract Act, 1872(the Act), when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

l In general understanding the words “proposal” and “offer” are used interchangeably.

l According to section 2(b), when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

l According to section 3, the communication of the acceptance of proposals is deemed to be made by any act or omission of the party accepting by which he intends to communicate such acceptance, or which has the effect of communicating it.

l According to Section 4, the communication of an acceptance is complete, – as against the proposer, when it is put in a course of transmission to him, so as to be out

of the power of the acceptor; – as against the acceptor, when it comes to the knowledge of the proposer.

l Section 7 states that an Acceptance must be absolute and unqualified and must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

l According to section 9, an acceptance may be express i.e., by words spoken or written or implied from the conduct of the parties.

Rules Governing Acceptance

(a)Acceptance may be express i.e., by words spoken or written or implied from the conduct of the parties.

(b)If a particular method of acceptance is prescribed, the offer must be accepted in the prescribed manner.

(c)Acceptance must be unqualified and absolute and must correspond with all the terms of the offer.

(d)A counter offer or conditional acceptance operates as a rejection of the offer and causes it to lapse, e.g., where a horse is offered for ₹ 1,000 and the offeree counter-offers ₹ 990, the offer lapses by rejection.

(e)Acceptance must be communicated to the offeror, for acceptance is complete the moment it is communicated. Where the offeree merely intended to accept but does not communicate his intention to the offeror, there is no contract. Mere mental acceptance is not enough.

(f)Mere silence on the part of the offeree does not amount to acceptance.

(g)If the offer is one which is to be accepted by being acted upon, no communication of acceptance to the offeror is necessary, unless communication is stipulated for in the offer itself.

(h)Acceptance must be given within a reasonable time and before the offer lapses or is revoked. An offer becomes irrevocable by acceptance.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 1(b)(ii) (Syllabus 2022).

Section 2(d) of the Indian Contract Act, 1872 defines consideration as, “when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise”

In English law, consideration must move from the promisee, so that a stranger to the consideration cannot sue on the contract. A person seeking to enforce a simple contract must prove in court that he himself has given the consideration in return for the promise he is seeking to enforce. However, in Indian law, consideration may move from the promisee or any other person, so that a stranger to the consideration may maintain a suit. (Chinnaya v.

Ramaiya, (1882) 4 Mad. 137)

In the given situation, Sita had asked her daughter Gita to pay an annuity to her sister in return of the gift of certain property to her. Gita was also paying to Mita before this gift. When Sita died, Gita declined to pay Mita saying that no consideration had moved from her. In this situation, Mita could sue Gita even though no part of the consideration was received by her niece from her. The property transferred by the mother (Sita) was sufficient consideration.

Therefore, in India, a promise is enforceable even if consideration moves from any person, not just the promisee.

In view of the above discussion, Mita can recover annuity from Gita.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(c) (Syllabus 2022).

Section 2(d) of the Indian Contract Act, 1872 (Act) defines consideration. According to it “when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise”.

The following observation can be made with regard to the question-

(a)Consideration at the desire of the promisor: Section 2(d) of the Act begins with the statement that consideration must move at the desire or request of the promisor. This means that whatever is done must have been done at the desire of the promisor and not voluntarily or not at the desire of a third party.

(b)Consideration may move from the promisee or any other person: In English law, consideration must move from the promisee, so that a stranger to the consideration cannot sue on the contract. But in Indian law, consideration may move from the promisee or any other person, so that a stranger to the consideration may maintain a suit.

The leading case on this judgement is the case of Chinnaya v. Ramaya (1882) 4 Mad. 137, where the court held that consideration moving from a third party is sufficient to enforce a contract.

In the given situation, Ram executed a deed of gift, transferring certain property to his daughter, Mira. He instructed her to pay an annuity to his brother Raj, just as Ram had been doing before gifting the property. On the same day, Mira signed a written agreement in favor of her uncle Raj, committing to pay the annuity.

Later on, Mira refused to honor her promise to pay Raj, claiming that no consideration had been provided to her by him.

According to Section 2(d) of the Indian Contract Act, 1872, consideration may come from the promisee or any other person, meaning that a third party can maintain a suit. Therefore, it can be concluded that Raj has the right to sue Mira, even though she did not receive any consideration directly from him. The consideration provided by Ram when he transferred the land to Mira is sufficient. Mira’s promise to pay Raj forms part of the consideration for the property she received.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a)(i) (Syllabus 2022).

The general rule is that an agreement made without consideration is void. But Section 25 of the Indian Contract Act, 1872 lays down certain exceptions which make a promise without consideration valid and binding.

Section 25(1) inter alia provides an exception to this general rule. It states that an agreement made without consideration is void, unless it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other.

According to the case Poonoo Bibi v. FyazBuksh, (1874) 15 Bom L.R. 57, a registered agreement between a husband and his wife to pay his earnings to her is a valid contract, as it is in writing, is registered, is between parties standing in near relation, and is for love and affection.

However, according to the case Rajluckhy Deb v. Bhootnath (1900) 4 C.W.N. 488, where a husband by a registered document, after referring to quarrels and disagreement between himself and his wife, promised to pay his wife a sum of money for her maintenance and separate residence, it was held that the promise was unenforceable, as it was not made for love and affection.

In accordance with the above cases and provision, it can be said that an agreement that is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other, is a valid contract in the given situation.

However, in the second situation, where a husband by a registered document, after referring to quarrels and disagreement between himself and his wife, promised to pay his wife a sum of money for her maintenance and separate residence, the promise is unenforceable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6(d) (Syllabus 2022).

The general rule is that an agreement made without consideration is void. But Section 25 of the Indian Contract Act, 1872 lays down certain exceptions which make a promise without consideration valid and binding. Thus, an agreement without consideration is valid:

1.If it is expressed in writing and registered and is made out of natural love and affection between parties standing in a near relation to each other; or

2.If it is made to compensate a person who has already done something voluntarily for the promisor, or done something which the promisor was legally compellable to do; or

3.If it is a promise in writing and signed by the person to be charged therewith, or by his agent, to pay a debt barred by the law of limitation.

Nothing in section 25 shall affect the validity, as between the donor and donee, of any gift actually made.

An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

Alternate Answer

The general rule is that an agreement made without consideration is void. But Section 25 of the Indian Contract Act, 1872 lays down certain exceptions which make a promise without consideration valid and binding. It states that an agreement made without consideration is void, unless–

(1)it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless

(2)it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless;

(3)it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract.

Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a)(ii) (Syllabus 2022).

According to section 27(1) of the Indian Contract Act, 1872, every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

However, an agreement of service by which a person binds himself during the term of the agreement not to take service with anyone else is not in restraint of lawful profession and is valid.

The facts of the given situation are similar to the case of Niranjan Shanker Golikari v. The Century Spinning and Manufacturing Co. Ltd., AIR 1967 S.C. 1098. In this case, the Supreme Court upheld a similar clause, ruling that a contractual restraint during the term of employment, especially after specialized training, is not void if it protects the employer’s legitimate interests.

In the given situation, the bond restrains Rakesh only during the employment term and aims to protect the company’s investment in his training. Such a clause, being reasonable and in line with the above mentioned ruling, would not be void under Section 27. Therefore, the agreement is valid, and the company may be entitled to damages for breach.

In view of the above, it may be said that this agreement is valid as the restraint was necessary for the protection of the company’s interests.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(a) (Syllabus 2022).

The literal meaning of the word “wager” is a “bet”. Wagering agreements are nothing but ordinary betting agreements. The essence of gaming and wagering is that one party is to win and the other to lose upon a future event which at the time of the contract is of an uncertain nature that is to say, if the event turns out one way A will lose; but if it turns out the other way he will win.

In India except Mumbai, wagering agreements are void (Section 30 of the Indian Contract, 1872). In Mumbai, wagering agreements have been declared illegal by the Avoiding Wagers (Amendment) Act, 1865. Therefore, in Mumbai a wagering agreement being illegal, is void not only between the immediate parties, but taints and renders void all collateral agreements to it. If wagering is illegal, collateral transactions are also void. If wagering is only void, collateral transactions remain valid.

Here in this case, Anil entered into a betting agreement with Bhushan in the city of Delhi and lost ₹40,000. To discharge this liability, Anil had borrowed the amount from Kapil who directly paid to Bhushan. Later, Anil refused to repay Kapil. Kapil can recover the amount from Anil as wagering transaction took place in Delhi and here wagering is only void. But if the betting agreement took place in Mumbai, Kapil cannot recover the amount from Anil if the wagering transaction is illegal and the loan is inseparably connected with that illegal transaction.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 2(c) (Syllabus 2022).

The case is related to the doctrine of Lis pendens [Section 52 of the Transfer of Property Act, 1882(T.P.

Act)]. Lis means dispute, Lis pendens means a pending suit, action, petition, or the like. Section 52 of the T.P. Act incorporates the doctrine of Lis pendens. It states that during the pendency of a suit in a Court of Law, property that is subject to litigation cannot be transferred.

Essential requirements:

To constitute a Lis pendens, the following elements must be present-

1.There must be a suit or proceeding in a court of competent jurisdiction.

2.The suit or proceeding must not be collusive.

3.The litigation must be one in which the right to immovable property is directly and specifically in question.

4.There must be a transfer of or otherwise dealing with the property in dispute by any party to the litigation.

5.Such transfer must effect the rights of the other party that may ultimately accrue under the terms of the decree or order.

The rule is based on the doctrine of expediency i.e., the necessity for final adjudication. A plea of lis pendens will be allowed to be raised even though the point is not taken in the pleadings or raised as an issue.

When an application to sue in forma pauperis is admitted, the suit is pending from the time of presentation of the application to the Court but not if it is rejected.

A suit in foreign Court cannot operate as lis pendens. The doctrine of lis pendens does not apply to moveables. It is the essence of the rule that a right to immoveable property is directly and specifically in question in the suit. The doctrine is not applicable in favour of a third-party.

Effect If the parties to the litigation, are completely prevented from transferring the property in litigation, it would cause unnecessary delay and hardship, as they would have to wait till the final disposal of the case. So, Section 53 creates a limitation over the transfer by making it subject to the result of the litigation. The effect of this doctrine is not to invalidate or avoid the transfer, or to prevent the vesting of title in the transfer, but to make it subject to the decision of the case, and the rule would operate even if the transferee pendente lite had no notice of the pending suit or proceeding at the time of the transfer.

In the given situation, A and B are litigating in a Court of law over property X and during the pendency of the suit A transfers the property X to C. The suit ends in B’s favour.

Here C who obtained the property during the time of litigation cannot claim the property. He is bound by the decree of the Court wherein B has been given the property. Section 52 lays down the Indian rule of Lis pendens being the legislative expression of the Maxim- “ut lite pendente nihil innovetur” ‘During litigation nothing new should be introduced’.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(a) (Syllabus 2022).

Section 55 of the Indian Contract Act, 1872 provides for the effect of failure to perform at the time fixed in a contract in which time is essential:

If time is of the essence, the party not at fault may void the contract. Even if the contract is not voided, the non-defaulting party is entitled to claim compensation for any loss caused by the delay.

Section 73 of the Indian Contract Act, 1872, deals with unliquidated damages. Where the amount of compensation claimed for a breach of contract is left to be assessed by the Court, damages claimed are called unliquidated damages. According to Section 73, when a contract has been broken, a party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage, caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Unliquidated damages are of several kinds including ordinary damages.

Ordinary Damages:

These are restricted to pecuniary compensation to put the injured party in the position he would have been had the contract been performed. It is the estimated amount of loss actually incurred.

Thus, it applies only to the proximate consequences of the breach of the contract and the remote consequences are not generally regarded. For example, in a contract for the sale of goods, the damages payable would be the difference between the contract price and the price at which the goods are available on the date of the breach.

Thus, in this case ordinary damages may be given, that is, the measure of the compensation payable to Bhavesh by Aamir will be the difference between the price which Bhavesh could have obtained for the cargo at Aligarh at the time when it would have arrived if forwarded in due course and its market price at the time when it actually arrived.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(b) (Syllabus 2022).

Discharge by Impossibility or Frustration (Section 56 of the Indian Contract Act, 1872).

A contract that is entered into to perform something that is clearly impossible is void. For instance, A agrees with B to discover treasure by magic. The agreement is void by virtue of Section 56 para 1 which lays down the principle that an agreement to do an act impossible in itself is void.

Sometimes subsequent impossibility (i.e. where the impossibility supervenes after the contract has been made) renders the performance of a contract unlawful and stands discharged; as for example, where a singer contracts to sing and becomes too ill to do so, the contract becomes void. In this connection, para 2 of Section 56 provides that a contract to do an act, which after the contract is made, becomes impossible or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

If the impossibility is not obvious and the promisor alone knows of the impossibility or illegally then existing or the promisor might have known as such after using reasonable diligence, such promisor is bound to compensate the promisee for any loss he may suffer through the non-performance of the promise inspite of the agreement being void ab-initio (Section 56, para 3).

Cases in which there is no supervening impossibility In the following cases contracts are not discharged on the ground of supervening impossibility-

(a)Difficulty of performance: The mere fact that performance is more difficult or expensive than the parties anticipated does not discharge the duty to perform.

(b)Commercial impossibilities do not discharge the contract. A contract is not discharged merely because the expectation of higher profits is not realised.

(c)Strikes, lockouts and civil disturbances like riots do not terminate contracts unless there is a clause in the contract providing for non-performance in such cases. Supervising impossibility or illegality is known as frustration under English Law.

The facts of the given situation are similar to that of case of Satyabarta Ghose v. Mugnuram A.I.R. 1954 S.C. 44. In this case, the Supreme Court interpreted the term impossible appearing in second paragraph of Section 56. The Court observed that the word impossible has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain; it can very well be said that the promisor found it impossible to do the act which he promised to do. In this case, A undertook to sell a plot of land to B but before the plot could be developed, war broke out and the land was temporarily requisitioned by the Government. A offered to return earnest money to B in cancellation of the contract. B did not accept and sued A for specific performance. A pleaded discharge by frustration. The Court held that Section 56 is not applicable on the ground that the requisition was of a temporary nature and there was no time limit within which A was obliged to perform the contract.

The impossibility was not of such a nature which would strike at the root of the contract.

In view of the above discussion, it can be said that the doctrine of frustration will not be applicable in this case.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(c) (Syllabus 2022).

The mortgaged referred to in the question is Mortgage by deposit of title deeds. This type of mortgage is called equitable mortgage in English law. In this transaction, a person delivers to the creditor or his agent documents of title of his immoveable property with an intention to create a security, and obtains a loan. The requisites of such a mortgage are (i) a debt, (ii) deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt.

In order that a valid mortgage on an immoveable property should be effected, it must be in writing and attested by two witnesses and the document must be registered. But in case of a mortgage by deposit of title deeds, it need not be registered and an oral agreement between the person and the creditor followed by the delivery of the documents of title to the property is enough. The creditor will have the possession of the documents and he will advance the money at the stipulated rate of interest. In case the mortgagor does not repay the loan, the creditor on the basis of having the title deeds in his possession can sue the debtor to recover the money. This type of mortgage has been recognized due to expediency. Many persons, especially the business people, may need money urgently and they cannot wait till a formal document is written, signed, attested and then registered. So, they will simply approach the creditor and hand over the title deeds of their property and borrow money. This avoids delay and other formalities for effecting a valid mortgage.

It should be noted that this type of mortgage can be created only in certain towns and not everywhere in India. By virtue of this case, it is clear that the facility to create a valid mortgage is available in the following towns in India: Calcutta, Madras, Bombay, Adoni, Ajmer, Allahabad, Alwar, Bangalore, Bellary, Cochin, Coimbatore, Delhi, Jaipur, Jodhpur, Kanpur, Rajahmundry, Udaipur, Vellore, Ellora, Pali, Bhilwara, Bikaner, Kakinada, Narayanganj, Mysore, and Madurai.

Though this type of mortgage is limited to specific cities it is at par with any other legal mortgage (K.J. Nathan v. S.V. Maruthi Rao, A.I.R. 1965 S.C. 443).

Title deeds should be delivered in these areas, the property of the person may be situated elsewhere.

If the deposit of title deeds has taken place in any other town, it will not be a valid mortgage.

Similarly, if the property is situated in any one of the towns mentioned above, but the deposit of title deeds is made in other towns or areas then again it will not be a valid mortgage.

Neelam had a property situated in Prayagraj. She was in urgent need of money for business purposes and therefore approached the creditor, showed her documents and borrowed money.

But she delivered the title deed in the city of Lucknow. This is not a valid mortgage by deposit of title deeds because title deeds should be delivered in the above-mentioned areas, the property of the person may be situated elsewhere. If the deposit of title deeds has taken place in any other town, it will not be a valid mortgage.

Alternate Answer

The mortgage referred to in the question is a Mortgage by deposit of title deeds, governed by Section 58(f) of the Transfer of Property Act, 1882. This type of mortgage is also referred to as an equitable mortgage in English law.

In this transaction, a person delivers to the creditor or his agent documents of title of his immoveable property with an intention to create a security, and obtains a loan. The requisites of such a mortgage are (i) a debt, (ii) deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt.

However, an exception is carved out under Section 58(f) of the Transfer of Property Act, allowing a mortgage without registration where the title deeds are deposited in notified towns.

But in case of a mortgage by deposit of title deeds, it need not be registered and an oral agreement between the person and the creditor followed by the delivery of the documents of title to the property is enough. The creditor will have the possession of the documents and he will advance the money at the stipulated rate of interest. In case the mortgagor does not repay the loan, the creditor on the basis of having the title deeds in his possession can sue the debtor to recover the money. This type of mortgage has been recognized due to expediency. Many persons, especially the business people, may need money urgently and they cannot wait till a formal document is written, signed, attested and then registered. So, they will simply approach the creditor and hand over the title deeds of their property and borrow money. This avoids delay and other formalities for effecting a valid mortgage.

It should be noted that this type of mortgage can only be created by depositing title deeds in certain notified towns as specified by the State Government through a Gazette Notification under Section 58(f) of the Transfer of Property Act.

The facility to create such a mortgage is available only in towns that have been officially notified by the State Government in the Gazette. Merely being a large or important city is not sufficient unless it is a notified town.

Title deeds should be delivered in these areas, the property of the person may be situated elsewhere.

If the deposit of title deeds has taken place in any other town, it will not be a valid mortgage.

Similarly, if the property is situated in any one of the towns mentioned above, but the deposit of title deeds is made in other towns or areas then again it will not be a valid mortgage.

Though this type of mortgage is limited to specific cities it is at par with any other legal mortgage (K.J. Nathan v. S.V. Maruthi Rao, A.I.R. 1965 S.C. 443).

Neelam had a property situated in Prayagraj, which is a notified town under Section 58(f).

However, she delivered the title deed in the city of Lucknow. If it is shown that Lucknow is a notified town under Section 58(f), then the mortgage will be valid even though the property is situated in Prayagraj. Thus, the validity of this mortgage depends on whether Lucknow is a notified town under the relevant notification.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(b) (Syllabus 2022).

A proposal may be revoked in different ways. Revocation may be done either by act or by omission.

Section 6 of the Indian Contract Act, 1872 provides the following modes for revocation:

(1)by the communication of notice of revocation by the proposer to the other party.

(2)by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance.

(3)by the failure of the acceptor to fulfil a condition precedent to acceptance.

(4)by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 1(b)(iii) (Syllabus 2022).

Section 6 of the Transfer of Property Act, 1882 (TPA) contains some exceptions to the general rule that property of any kind may be transferred. According to section 6(a) of TPA, the chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like nature, cannot be transferred.

Thus, A cannot sell property of B as it is mere chance of an heir apparent succeeding to an estate.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(c) (Syllabus 2022).

Section 70 of the Indian Contract Act, 1872 enables a person who actually supplies goods or renders some services not intending to do gratuitously, to claim compensation from the person who enjoys the benefit of the supply made or services rendered. Section 70 is not based on any subsisting contract between the parties but is based on quasi-contract. If the requirements of Section 70 are fulfilled even the Government becomes liable to pay compensation for the work actually done or services rendered by the State.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(b)(iii) (Syllabus 2022).