Legality of Object & Remedies for Breach of Contract | Legal Reasoning for CLAT PDF Download

Legality of Object

If it is forbidden by law

An act or an undertaking is forbidden by law when it is punishable by the criminal law of the country or when it is prohibited by special legislation derived from the legislature.

Examples- 

• A loan granted to the guardian of a minor to enable him to celebrate the minor’s marriage in contravention of the Child Marriage Restraint Act is illegal and cannot be recovered.
• A partnership entered into for the purpose of doing business in arrack on a licence granted only to one of the partners, is void ab-initio whether the partnership was entered into before the licence was granted or afterwards as it involved a transfer of licence, which is forbidden and penalised by the Akbari Act and the rules .
• A promises to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful

If it is of such a nature that if permitted, it would defeat the provisions of any law

If the object or the consideration of an agreement is of such a nature that, though not directly forbidden by law, it would defeat the provisions of the law, the agreement is void.

Examples

• A’s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law.
• A let a flat to B at a rent of £1200 a year. With a view to reduce the municipal tax A made two agreements with B. One, by which the rent was stated to be £450 only and the other, by which B agreed to pay £750 for services in connection with the flat.

Held: A could not recover £750 since the agreement was made to defraud the municipal authority and thus void

If it is fraudulent

An agreement with a view to defraud other is void.

Examples-

• A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void as its object is unlawful.
• A, being an agent for a landed proprietor, agrees, for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void as it implies a fraud by concealment by A, on his principal

If it involves or implies injury to the person or property of another

If the object of an agreement is to injure the person or property of another it is void.

Examples-

• A borrowed Rs. 100 from B. He (A) executed a bond promising to work for B without pay for 2 years and in case of default agreed to pay interest at a very exhorbitant rate and the principal amount at once.

Held : The contract was void

Remedies for Breach of Contract

Rescission of the Contract

Example-

• A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her Rs. 100 for each night’s performance. On the sixth night, A wilfully absents herself from the theatre, and B in consequence, rescinds the contract. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

Damages for the loss sustained or suffered

Example-

• A railway passenger’s wife caught cold and fell ill due to her being asked to get down at a place other than the Railway Station. In a suit by the plaintiff against the railway company, held that damages for the personal inconvenience of the plaintiff alone could be granted, but not for the sickness of the plaintiff’s wife, because it was a very remote consequence.

A decree for specific performance

Specific performance will not be granted where:

• Monetary compensation is an adequate relief.
• The contract is of a personal nature, e.g., a contract to marry.
• Where it is not possible for the Court to supervise the performance of the contract, e.g., a building contract.
• The contract is made by a company beyond its objects as laid down in its Memorandum of Association.

An injunction

Examples-

• G agreed to buy the whole of the electric energy required for his house from a certain company. He was therefore, restrained by an injunction from buying electricity from any other person.

Suit on Quantum Meruit

A argument on quantum merit is a redress for a breach of contract open to an injured party against the guilty party. Literally, the term quantum merit means “as much as is earned” or “in proportion to the job done.” A right to use on quantum merit typically occurs if there is a breach of contract after part performance of the contract by one party, or the contract is considered invalid or becomes void. This remedy for breach of a contract will be used either without claiming damages (i.e. claiming fair compensation only for the work done) or in addition to claiming damages for the violation (i.e. claiming reasonable compensation for the performance of the part and damages for the remaining part not performed).