Indian Contract Act,1872

INDIAN CONTRAC CONTRACT T ACT,1872 ACT,1872

Definition of Contract

Acc to Sec. 2 (h) " A contract is therefore is an agreement the object of which is to create a legal obligation .“ .“ Contract essentially contains two elements: (1) An agreement, and (2) Legal obligation i.e., a duty enforceable by law

Agreement.

As per Section 2(e): "Every " Every promise and every set of promises, forming the consideration for each other, is an agreement."  What ts a 'promise'? 'promise' ? Section 2(b) which defines the term:" 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."  (a) Plurality of persons persons.. There must be two or more persons to make an agreement because one person cannot enter into an agreement with himself. (b) Consensus-ad-idem. Consensus-ad-idem . Both the parties to an -agreement must agree about the subject-matter of the agreement in the same sense and at the same time.

2. Legal obligation. . "All contracts are agreements but all  agreements are not contracts."  " Agreements which create obligations, and  those obligations, which have their  source in agreements" agreements"

Essential Elements of a Valid Contract A contract has been defined in Section 2(h) as "an agreement enforce-able by  law"  . The essential elements of a valid contract are as follows: 1. Offer-and acceptance. There must be a 'lawful offer' and a 'lawful acceptance' of the offer, thus resulting in an agreement. The adjective 'lawful' implies that the offer and acceptance must satisfy the requirements of the Contract Act in relation thereto. 2. Intention to create legal relations. There must be an intention among the parties that the agreement should be attached by legal conse-quences and create legal obligations.

3. Lawful consideration. "The 'consideration' may be an act (doing something) or  forbearance (not doing s"ometnlhg)or a promise to do or  not to do something. It may be past, present or future. But  only those considerations are valid which are 'lawful'. The consideration is 'lawful' , unless—it is forbidden by law; or is of  such a nature that, if permitted it would defeat the provisions of  any law^ or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (Sec. 23).

4. Capacity of parties. parties. The parties to an agreement must be competent to contract, otherwise it cannot be enforced by a court of law. In order to be competent to contract the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject (Sec subject (Sec II). If any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness, etc., the agreement is void 

5. Free consent . Free consent of all the parties to an agreement is another essential element of a valid contract.'Cor.sent1 means that the par-ties must have agreed upon the same thing in the same sense (Sec. 13). There is absence of 'free consent1, if the agreement is induced by (/) coercion, (//) undue influence , (///) fraud,  /v) mis-representation, or  (v) mistake (Sec. 14). If the agreement is vitiated by any of the first four factors, t he contract would be yiodable and cannot be enforced by the party guilty of coercion, undue influence etc 6.

Lawful object. For the formation of a valid contract it is also nec-essary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another (Sec. 23).

7.

Writing and registration. According to the Indian Contract Act, a contract may be oral or in writing. But in certain special cases it lays down that the agreement, to be valid, must be in writing or/and registered.

8.certainty. Section 29 of the Contract Act provides that "Agree-ments, the meaning of which is not

KINDS OF CONTRACTS 1.

Valid contract. A valid contract is an agreement enforceable by law. An agreement becomes enforceable by law when all the essential elements of a valid contract as enumerated above are present.

2.

Voidable contract. According to Section 2(i), "an agreement which is enforceable by law at the option of one or more of the parties thereto, t hereto, but not at the option option of the other or others, is a voidable contract." Thus, a, voidable contract is one which' is enforceable by law at the option of one of  the parties.

3. Void contract. contract. Literally the word 'void' means 'not binding in law'. Section S ection 2(j) defines: "A contract which ceases c eases to be enforce-able by law becomes void, when it ceases to be enforceable.“ 4. Unenforceable contract. An unenforceable contract is one which is valid in itself, but is not capable of being enforced in a court of law because of some technical defect such as absence of \vriting, \ vriting, registration, requisite stamp, etc., or time barred by the law of limitation.

5. Illegal or unlawful contract contract.. The word 'illegal' means 'contrary to law' and the term 'contract' means 'an agreement enforceable by law.' As such to speak of an 'illegal contract' involves a contradiction in terms, because it means something like this—an agreement enforceable by law and contrary to law. An agreement is illegal and void if i f its object or consideration: (a) is forbidden by law; or  (b) is of such a nature that, if permitted, it would defeat the provisions of any law; or  (c) is fraudulent; or  (d) involves or implies injury to the person or property of another; or  (e) the court regards it as immoral, or opposed to public policy (Sec.23).B Illegal and void agreements distinguished. distinguished. Despite the similarity be-tween an illegal and a void agreement that in either case the agreementt is void ab-initio and cannot be enforced by law, the two differ from each agreemen other in the following two respects: (i)An illegal agreement is narrower in scope than a void agreement. 'All il legal agreements are void but all void agreements are not necessarily ill egal.' (ii) An illegal agreement is wider in effect in relation to collateral transactions than a void agreement. agreemen t. When an agreement is illegal, other 

6. Express Contract 7. Implied Contract 8. Quasi Contract :- contracts have little or  no affinity with contract 9. Executed contracts 10. Executory contract

THE PROPOSAL OR OFFER The words 'proposal' and 'offer' are synonymous and are used interchangea-bly. Section 2(a) of the Indian Contract Act defines a 'proposal' as, "when "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"., This definition reveals the follow-ing three essentials of a 'proposal': (i) It must be an expression of the willingness to do or to abstain from doing something. (ii) The expression of willingness to do or to abstain from doing some-thing must be to another person. (///") The expression of willingness to do or to abstain from fr om doing some-thing must be made with a view to obtaining the assent of the other person to such "act or abstinence.

Legal rules for valid Offer 

1. 2. 3. 4. 5. 6. 7. 8. 9.

An offer may be Express or Implied Must contemplate to give rise to legal consequences and be capable of creating legal relations Terms must be certain Invitation to offer is not an offer  May be specific or general Must be communicated to the offeree Should not contain a term the non compliance of which would amount to acceptance Can be made subject to any terms and conditions To identical cross offers do not make a contract

Acceptance

. Section 2(b) states that " A proposal when accepted becomes a  promise" and  promise"  and defines' 'acceptance' as "when the "person to whom the proposal is made signifies his assent thereto, the  proposal is said to be accepted ." accepted ." Legal rules regarding a valid Acceptance 1. 2. 3. 4. 5. 6. 7.

Must be given only by the person to whom the offer was made Must be absolute and unconditional Must be in some usual and reasonable manner  Must be communicated by the acceptor  Must be given within reasonable time Must succeed the offer  Rejected offers can be accepted only if renewed

Consideration

Definition Section 2(d) of the Indian Contract Act defines consideration as follows: "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."  Essentials of valid consideration 1. Must move at the desire of the promisor  2. May move from promise or any other person ( A stranger to a contract can not sue 3. May be past, present or future 4. Must be something of value

Capacity of Parties An essential ingredient of a valid contract is that the contracting parties must be 'competent to contract' (Sec.10). Section 11 lays down that "Every " Every person is competent to contract  who has attained the age of majority according to the law to which he is subject, and who is of sound mind,, and is not  disqualified from contracting by any Saw to which he is subject." Thus subject."  Thus the Section declares that a person is incompetent to contract under the following circumstances: I. if he is a minor, according according to the law to which he is subject, II. if he is of unsound mind, and  III. if he is disqualified from contracting by any law to which he is subject.

Disqualified persons 

Alien Enemies

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Foreign sovereigns band ambassadors

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Convict

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Married Women

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Insolvent

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Joint stock company

"Consent" defined Two or more person are said to consent when they agree upon the same thing in the same sense. Free consent" defined Consent is said to be free when it is not caused by (1) coercion, as defined in section 15, or  (2) undue influence, as defined in section 16, or  (3) fraud, as defined in section 17, or  (4) misrepresentation, as defined in section 18, or  (5) mistake, subject to the provisions of section 20,21, and 22. Consent is said to be so caused when it would not have been given but for  the existence of such coercion, undue influence, fraud, misrepresentation, or  mistake

Voidability of agreements without free consent

When consent to an agreement is caused by coercion, fraud or  misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to contract, whose consent was caused by fraud or mispresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put on the position in which he would have been if the representations made had been true. Exception : If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, neverthless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence. Explanation : A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a

Void agreements  An agreement not enforceable by law is said to be void" (Sec.2(g)]. Thus a void agreement does not give rise to any legal consequences and is void ab initio. 1.Agreements by a minor or a person of unsound mind_ Sec.l 0 2. Agreements made under a bilateral mistake mistake of fact material to the the agreement (Sec. 20) 3. Agreements of which the consideration or object is unlawful unlawful (Sec. 23) 4. Agreements of which the consideration or object is unlawful unlawful in pan, and the illegal part cannot be separated from the legal part (Sec. 24) 5. Agreements made without without consideration (Sec. 25)

EXPRESSLY DECLARED VOID AGREEMENTS The last essential of a valid contract as declared by Section 10 is that it must not be one which is 'expressly declared' to be- void . 1. Agreements in restraint of marriage (Sec. 26). 2. Agreements in restraint of trade (Sec. 27). 3. Agreements in restraint of legal legal proceedings proceedings (Sec. 28). 28). 4. Agreements the meaning of of which is uncertain uncertain (Sec.29). 5. Agreements by way of wager_ (Sec. 30). 6. Agreements contingent on impossible events (Sec.36). 7. Agreements to do impossible acts (Sec. 56).

Performance of Contract 1.

By the promisor himself 

2.

By the promisor or his agent

3.

By the legal representative

4.

Performance by a third party

Discharge of contracts 1.

By performance

2.

By mutual consent

3.

By supervening impossibility

4.

By lapse of time

5.

By the operation of law

6.

By the breach of contract