Case Law: Mr. X vs. Hospital Z
- Principle: “Not revealing information is also an act of contract.”
- Question: What determines whether a proposal has been communicated?
Key Points
- If a person receives any communication that gives them knowledge of the proposal, it counts as communication.
- Section 3, ICA, 1872 governs communication.
- Read with Sections 11, 12, 13 of the IT Act, 2000 → accommodates electronic mediums (SMS, calls, emails).
- Section 2 of ICA depends on communication (based on Section 3).
- Communication by any act = valid communication.
Proposals – Section 9, ICA, 1872
- Two Types of Proposals:
- Express:
- Oral, written, sign, lingual, braille.
- Words used = “express” promise.
- Implied:
- Conduct, customs, silence in certain cases.
- Promises made otherwise than in words.
- Express:
Express & Implied in Practice
- Every express contract includes implied terms.
- Oral contracts → shaped by traditions, customs, expectations.
- Example: Ordering tea → implied that it must be hot, served in a cup.
- Implied rights:
- Right of inspection in sale of goods/services.
- If inspection denied before payment → right of return exists.
Question: How do implied contracts and implied terms within express contracts work?
Implied Contracts in Different Laws
1. Debt & Loans (Sec. 126–145, ICA)
- Guarantor relationship:
- If debtor defaults, lender can demand from guarantor.
- Guarantor paying → contract shifts; debtor now owes guarantor.
- Types:
- Pledge
- Mortgage
- Guarantee
- Debt
2. Agency of Contract (Sec. 182–238, ICA)
- Person may be explicit agent or implied agent.
3. Sale of Goods Act
- Covers movable goods.
- Sale types:
- By sample
- By description
- By auction
4. Transfer of Property Act
- Deals with immovable property.
- Rent vs. Lease:
- ≤ 11 months → Rent
- 11 months → Lease
5. Implied by Law (Sec. 68–72, ICA)
- Relations resembling contracts but not formally created.
- Declared as contracts by law itself.
Evidence & Contractual Proof
- Proof in contracts = Indian Evidence Act, 1872 (now Bharatiya Sakshya Adhiniyam, 2023).
- Law is never proved; it is argued.
- Implied terms = implied facts.
Implied Terms in Express Contracts
- Derived from:
- Customs of trade.
- Place of transaction.
- Nature of goods.
- Managing unnecessary implied terms:
- Contracts may explicitly state:
“No other implied terms shall be considered, except those necessary for performance.”
- Contracts may explicitly state:
Examples:
- Custom of Trade:
- Place → local practices influence implied terms.
- Nature of goods → expectations tied to goods/services.
Constitutional Aspect
- Article 299, Constitution:
- No implied contract can exist between any person and the Government.
Breach of Contract – Sec. 73, 74, 75 ICA
- Occurs when: Contract not performed.
- Forms of remedy:
- Compensation.
- Price reduction.
- Return of goods.
- Key Points:
- Breach of terms (oral/written/implied) ≠ Breach of entire contract.
- Even implied terms, if necessary for performance, must be fulfilled.
- Litigation Strategy:
- Link implied terms with custom of trade (place & goods).
Summary
- Proposals: Express (spoken/written) & Implied (conduct/customs).
- Contracts: Always carry implied terms unless excluded.
- Implied rights: Inspection, return, fair performance.
- Debt & Guarantee: Liability shifts from debtor → guarantor.
- Other Laws: Sale of Goods (movables), TPA (immovables), Agency, Implied by law.
- Breach: Compensation available even for implied terms.
- Constitution: No implied contracts with Govt (Art. 299).
- Takeaway: Law of contracts is essentially the law of obligations, balancing express and implied duties.
