Comprehension
In Kapilaben v. Ashok Kumar Jayantilal Sheth, (2020) 20 SCC 648, the Supreme Court has considered that the assignment of a contract might result in a transfer of either rights or obligations thereunder. The transfer of obligations is not possible without the consent of the other party. However, the transfer of rights is permissible, except in cases where the contract is of a personal nature. “It is well-settled that the term ‘representative-in-interest’ includes the assignee of a contractual interest. Though the provisions of the Contract Act do not particularly deal with the assignability of contracts, the court has opined time and again that a party to a contract cannot assign their obligations or liabilities without the consent of the other party. A Constitution Bench in Khardah Co. Ltd. v. Raymon & Co. (India) (P) Ltd. [AIR 1962 SC 1810], has laid out this principle as follows: “An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. However, there is a well-recognised distinction between these two classes of assignments. As a rule, obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand, rights under a contract are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the parties.”
[Extracted with edits from Indira Devi v. Veena Gupta, (2023) 8 SCC 124]
Question: 1

‘A’, the absolute owner, with the consent of his family members, executed a conditional sale deed in favour of his tenant. The conditional sale deed contained a clause empowering the vendors to repurchase the property within seven years on repayment of the sale consideration. Which of the following statements regarding the agreement is true?

Updated On: Jan 13, 2026
  • The agreement is invalid
  • The agreement is not valid because a conditional sale deed containing a clause for repurchase cannot be executed
  • The agreement is not valid because the time period provided for repurchase by the vendor is very long, i.e., seven years
  • The agreement is valid
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The Correct Option is D

Solution and Explanation

In accordance with the Indian Contract Act, a conditional sale deed permitting repurchase within a reasonable timeframe, even up to seven years, is legally sound if both parties consent and it complies with all relevant laws.

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Question: 2

Which of the following is correct regarding the assignability of the contract?

Updated On: Jan 13, 2026
  • The assignment of contracts is expressly governed by the provisions outlined in Sections 130 to 137 of the Indian Contract Act, 1872
  • A party to a contract can transfer his liabilities under the contract without the consent of the other party
  • A party to a contract cannot transfer his liabilities under the contract without the consent of the other party
  • Transfer of obligation can be made to anyone without permission of anyone
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The Correct Option is A

Solution and Explanation

Statement A: Correct. Contract assignment provisions are detailed in Sections 130-137 of the Indian Contract Act, 1872, covering the transfer of contractual rights and obligations.
Statement B: Incorrect. Liability transfer requires the other party's consent, unless the contract specifies otherwise.
Statement C: Incorrect. Transferring liabilities without consent is generally forbidden under the Indian Contract Act, though exceptions may exist in the contract.
Statement D: Incorrect. Obligation transfer typically demands the other party's consent.

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Question: 3

Who among the following is not ‘representative-in-interest’ for the purpose of obtaining specific performance?

Updated On: Jan 13, 2026
  • The person to whom the interest in the contract is transferred for a valuable consideration
  • The person to whom the interest in the contract devolves by succession
  • The person to whom the interest in contract is gifted by a gift deed
  • Rank trespasser, as an intermeddler
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The Correct Option is D

Solution and Explanation

An "intermeddler" (a person with no legal right) cannot legally force someone to fulfill a contract because they have no valid claim or stake in it.

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Question: 4

Consider the following statements:
I. The benefit of a contract is assignable in ‘cases where it can make no difference to the person on whom the obligation lies to which of two persons, he is to discharge it’
II. A contract which is such that the promisor must perform it in person, viz. involving personal considerations or personal skill or qualifications (such as his credit), are by their nature not assignable
III. The contractual rights for the payment of money or to building work do not involve personal considerations and are not contracts of a personal nature
Choose the correct answer:

Updated On: Jan 13, 2026
  • I and II are correct
  • II and III are correct
  • Only III is correct
  • I, II and III are correct
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The Correct Option is C

Solution and Explanation

To determine the correct answer, we must evaluate the accuracy of the provided statements regarding contract assignability, based on the given context.
  • Statement I: "The benefit of a contract is assignable when it doesn't matter to the obligated party which person receives the performance." This statement is accurate, reflecting the principle that contract rights can be transferred if the obligor isn't affected.
  • Statement II: "Contracts requiring personal performance, skill, or qualifications are not assignable." This statement is correct and consistent with legal principles, which prohibit the assignment of contracts involving personal considerations.
  • Statement III: "Rights to receive money or building work do not involve personal considerations and are not inherently personal contracts." This is accurate, as these types of contracts generally do not require personal performance and are therefore typically assignable.
Evaluating the statements within the context of contract assignability, which emphasizes that rights are transferable unless the contract is personal in nature, we conclude:
The correct answer is Only Statement III is correct.
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Question: 5

Consider the following statements:
I. Where a party to the contract has obtained substituted performance of the contract as per law, such contract is not specifically enforceable
II. A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise, is not specifically enforceable
III. After the Amendment Act of 2018, a contract for non-performance for which compensation is an adequate relief is not specifically enforceable Choose the correct answer:

Updated On: Jan 13, 2026
  • All are correct
  • I and II are correct
  • II and III are correct
  • Only II is correct
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The Correct Option is C

Solution and Explanation

This question assesses three statements concerning the specific enforceability of contracts, evaluated using legal principles.

I. Statement: A contract with legally obtained substituted performance is not specifically enforceable.
Analysis: The 2018 Amendment Act, under Section 20 of the Specific Relief Act, allows a party to use a third party for contract performance. If substituted performance is used, the original obligation is not specifically enforceable.
Conclusion: This statement is incorrect.

II. Statement: Contracts with continuous duties that a court cannot oversee are not specifically enforceable.
Analysis: Section 14(c) of the Specific Relief Act states contracts needing continuous, unsupervised performance are not specifically enforceable. This statement aligns with legal doctrine and is correct.
Conclusion: This statement is correct.

III. Statement: After 2018, a contract for non-performance, with sufficient compensation, is not specifically enforceable.
Analysis: Section 14(b) of the Specific Relief Act states that specific performance isn't granted when compensation is adequate. The 2018 amendment reinforced this, making the statement consistent with the law.
Conclusion: This statement is correct.

Therefore, statements II and III are correct.

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Top Questions on Contract Law

Questions Asked in CLAT PG exam

An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
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Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
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The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
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