Indian Contract Act, 1872

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INDIAN CONTRACT ACT, 1872 ASHISH BAHETY ACA, CS, LLB

Preamble


WHEREAS it is expedient to define and amend certain parts of the law relating to contracts ; It is hereby enacted as follows




This Act may be called the Indian Contract Act,1872.




It extends to the whole of India *[except the State of Jammu and Kashmir]; Shreeyash Carrer Academy

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What is Contract ?


SECTION 2 (h)




“An agreement enforceable by law is a contract”.




Contract = Agreement + Enforceability at Law

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What is Agreement ?


Section 2(e)




Every promise and every set of promises, forming the consideration for each other, is an agreement. Promise/(s)

Promise/(s) = Agreement

In exchange for each other

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What is Promise ?


When a person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted.




A proposal, when accepted, becomes a promise.




Promise = Proposal/Offer + Acceptance Shreeyash Carrer Academy

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What is Proposal ?


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.




Proposal = Willingness + To seek assent of other Shreeyash Carrer Academy

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What is Acceptance ?


When a 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.

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What agreements are contracts?


All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.




Contract = Consent + Competency + Consideration + Object. Shreeyash Carrer Academy

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What is Consent ?


Two or more person are said to consent when they agree upon the same thing in the same sense.

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What is Free Consent ? Consent is said to be free when it is not caused by 1. Coercion, 2. Undue Influence 3. Fraud 4. Misrepresentation 5. Mistake Shreeyash Carrer Academy

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Who are Competent to Contract?


Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is sound mind and is not disqualified from contracting by any law to which he is subject.




Competency = Age + Sound Mind + No Disqualification Shreeyash Carrer Academy

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What is Consideration?


“When at the desire of the promisor, 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, some thing, such act or abstinence or promise is called a consideration for the promise.”

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Lawful Object & Consideration






The consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Shreeyash Carrer Academy

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Essentials of a Valid Contract 1. 2. 3. 4. 5. 6. 7. 8.

Intention to create legal relationship. Lawful object Agreement not expressly declared void Proper offer and it s acceptance Free Consent Capacity of parties to contract Certainty of meaning. Possibility of performance. Shreeyash Carrer Academy

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Essentials of a Valid Contract 9. 10.

Lawful consideration Legal formalities

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1. Intention to Relationship








Create

Legal

The parties entering into a contract must have an intention to create a legal relationship. If there is no intention to create a legal relationship, that agreement cannot be treated as a valid contract. Generally there is no intention to create a legal relationship in social and domestic agreements. Shreeyash Carrer Academy

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2. Lawful Object





The objective of the agreement must be lawful. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract. A rents out his house for the business of making bomb, the acts performing there are unlawful. Hence such agreement cannot be treated as a valid contract. Shreeyash Carrer Academy

3. Agreement not declared void









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expressly

Section 24 to 30 specify certain types of agreement which have been expressly declared void. For example Agreement in restraint of legal proceedings, Agreement in restraint of trade, Agreement in restraint of marriage and Agreement by way of wager. Shreeyash Carrer Academy

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4. Proper offer acceptance










and

its

There must be two or more parties. One person cannot make an offer and accept it. The offer must be clear and properly communicated. Similarly proper and unconditional acceptance must be communicated to the offerer. Proper offer and proper acceptance should be there to treat the agreement as a contract which is enforceable by law. Shreeyash Carrer Academy

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5. Free Consent








Consent is said to be free when it is not caused by (i) coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by any of the above four reason, at the option of the aggrieved party it could be treated as a void contract. An agreement can be treated as a invalid contract when the consent of the parties are not free or under any undue influence, fear or pressure etc. Shreeyash Carrer Academy

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6. Capacity of parties to contract







Parties entering into an agreement must be competent and capable. Ex, If A agrees to sell Taj Mahal, is he capable & competent ? If any of the party is not competent or capable of entering into the agreement, that agreement cannot be treated as a valid contract Every person is competent to contract o o o

the age of majority who is of sound mind, and not disqualified from contracting Shreeyash Carrer Academy

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7. Certainty of meaning









Wording of the agreement must be clear and not uncertain or vague. Suppose Dhoni agrees to sell 500 Balls to Kallis. But, what kind of ball is not clear. So on the ground of uncertainty, this agreement stands void. If the meaning of the agreement can be made certain by the circumstances, it could be treated as a valid contract. For example, if Dhoni and Kallis are sole trader of tennis ball, the meaning of the agreement can be made certain by the circumstance and in that case, the agreement can be treated as a valid contract. Shreeyash Carrer Academy

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8. Possibility of performance








If the act is impossible of performance, physically or legally, the agreement cannot be enforced by law. Impossible agreements like one claims to run at a speed of 100km/hr or take 7 wickets in an over. would not create a valid agreement. In essence, there must be possibility of performance must be there to create a valid contract. Shreeyash Carrer Academy

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9. Lawful consideration







Quid Pro Quo - An agreement must be supported by a consideration of something in return. Agreement must be supported by some type of service or goods in return of money or goods. It can be a promise to act (doing something) or forbearance (not doing something). Consideration may be present, future or can be past Agreement is valid only when the acts are legal Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as a valid agreement. Shreeyash Carrer Academy

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10. Legal formalities









The contract act does not insist that the agreement must be in writing, it could be oral. But, in some cases the law strictly insist that the agreement must be in writing like agreement to sell immovable property must be in writing and should be registered. These agreement are valid only when they fulfill the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract. Shreeyash Carrer Academy

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Thank You “ You cannot teach a man anything; you can only help him to find it within himself.” Galileo Galilei.

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