THE INDIAN CONTRACT ACT, 1872

CONTRACT - Section 2(h) An agreement enforceable by law is a contract. AGREEMENT Section 2(e) Every promise or set of promises forming consideration for each other. PROMISE Section 2(b) when a person made a proposal to another to whom proposal is made, if proposal is assented there to.

OFFER Section 2(a) When a 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.

Writing & Registra tion

Offer & Accept ance

Possibility of Performa nce

Intention to create legal relation ship

Legality of Object

ESSENTIAL ELEMENTS OF A VALID CONTRACT (Sec.10)

Consensu s

ad idem

Free Consent Capacity to Contract

Consider ation

TYPES OF CONTRACTS VOIDABLE CONTRACT A contract which is valid unless until avoided by either party. e.g. A promises to sell his car to B for Rs. 20000. His consent is obtained by u se of force. The contract is avoidable at the option of A. He may avoid the c ontract or elect to be bound by it. VOID AGREEMENT Section 2(g) An agreement not enforceable by law is said to be void. A void agreement does not create any legal rights or obligations. e.g. An agreement with a minor or an agreement without consideration. VOID CONTRACT A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. e.g. A contract to import goods from a foreign country. It may subsequently become void.

ILLEGAL AGREEMENT An agreement which involves the transgression of some rule of basic public policy and is criminal in nature or immoral. It is not only void as between the immediate parties but it also taints the collateral transactions with illegality. e.g. B borrows Rs. 5000 from A and enters into a contract with an alien to import prohibited goods. A knows of the purpose of the loan. The transactions between B and A is collateral to the main agreement. It is Illegal since the main agreement is illegal. UNENFORCEABLE CONTRACT It is valid but due to some technical defect the contract becomes void. In case defects are removed the contract is enforceable.(lack of registration, lack of si gnature etc.,) EXPRESS CONTRACT A contract in which the terms are stated in words (written or spoken) by the parties. e.g. The landlord presents Ram with a preprinted lease on the apartment Ram wants and Ram agrees to the terms and signs it. This is an express written contract.

IMPLIED CONTRACT When contracts are neither in writing nor in oral. e.g. A fire broke out in Ps farm. He called upon the Upton Fire Brigade to put out the fire which the latter did . Ps farm did not come under the free service zone although he believed to be so. Held, he was liable to pay for the service rendered as the service was rendered on an implied promise to pay.

QUASI CONTRACT It is an obligation created by law, regardless of agreement. A Quasi Contract is not intentionally entered into. e.g. If TMC delivers a new television to Katrina that she did not order and she keeps the television and does not attempt to return it to the company that mistakenly shipped it to her, a judge could impose a quasi-contract to force her to pay for the television. Katrina did not intend to purchase the TV. And the TV company did not intend to sell her a TV, but since she chose to benefit from the TV at the companys expense, the court requires her to reimburse the TV Company to make the situation fair.

EXECUTED CONTRACT Executed contract - In a contract where both the parties have performed their obligation, there is remaining nothing to perform. e.g. A agrees to paint a picture of B for Rs.100 . When A paints the picture and B pays the price i.e. when both the parties perform their obligations, the contract is said to be executed. EXECUTORY CONTRACT In a contract where both the parties are yet to perform their obligation. e.g. Abel orally has agreed to buy Bakers land, and Bakers attorney has drafted a contract. At this stage it is executory because neither Abel nor Baker has signed it. UNILATERAL CONTRACT In a contract one party has performed his obligation and other person is yet to perform his obligation. e.g. A permits a railway coolie to carry his luggage and place it in a carriage. A contract comes into existence as soon as the luggage is placed in the carriage. But by that time the coolie has already performed his obligation. Now only A has to fulfill his obligation i.e. pay the reasonable charges to the coolie.

OFFER AND ACCEPTANCE

OFFER Section 2(a) An offer is a proposal by one party to another to enter into a legally binding agreement with him. When a 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. Types of Offer:

1. Specific Offer 2. General Offer (offer made to the world at large)

LEGAL RULES AS TO OFFER 1. Offer must be such as in law is capable of being accepted and giving rise to legal relationship. 2. Terms of offer must be definite, unambiguous and certain and not loose and vague. 3. Offer must be communicated.

4. Offer must be made with a view to obtaining the assent. 5. Offer should not contain a term the non-compliance of which may be assumed to amount to acceptance. 6. A statement of price is not an offer.

ACCEPTANCE
Acceptance is the act of assenting by the offeree to an offer. It is to an offer what a lighted match is to a train of gunpowder. It produces something which cannot be recalled or undone.

Acceptance may be express or implied.

LEGAL RULES AS TO ACCEPTANCE

1. It must be absolute and unqualified. e.g. A says to B, I offer to sell my car for Rs. 50,000. B replies, I will purchase it for rs. 45,000. This is no acceptance and amounts to a counter-offer. 2. It must be communicated to the offeror.

e.g. A draft agreement relating to the supply of coal was sent to the manager of a railway company for his acceptance. The manager wrote the word approved, and put the draft in the drawer of his table intending to send it to the companys solicitor for a formal contract to be drawn up. By some oversight the document remained in a drawer. Held, there was no contract [Brogden Vs. Metropolitan Rail Co., (1877)]. 3. It must be according to the mode prescribed or usual and reasonable mode. Example: A makes an offer to B and says If u accept the offer, reply by wire. B sends the reply by post. It will be a valid acceptance unless A informs B that the acceptance is not according to the mode prescribed. 4. It must be given with in a reasonable time. e.g.ex. On June 8 M offers to take shares in R company. He received a letter of acceptance on November 23. He refused to take the shares. Held, M was entitled to refuse as his offer had lapsed as the reasonable period during which it could be accepted had elapsed. [Ramsgate Victoria Hotel Co. Vs. Montefiore (1886)]. 5. It cannot precede an offer.

6. It must show an intention on the part of the acceptor to fulfill terms of the promise. 7. It must be given by the party or parties to whom the offer is made.
8.

It must be given before the offer lapses or before it is withdrawn.

9. It cannot be implied from silence. e.g. Three telegrams were exchanged between Harvey and Facey. 1. Will you sell us your Bumper Hall Pen? Telegraph lowest cash price - answer paid. (Harvey to Facey). 2. Lowest price for Bumper Hall Pen 900. (Facey to Harvey). 3. We agree to buy Bumper Hall Pen for the sum of 900 asked by you. (Harvey to Facey). Held, there was no concluded contract between Harvey and Facey. [Harvey Vs. Facey, (1893)]. The first telegram asked two questions : (i) the willingness of Facey to sell and (ii) the lowest price. Facey replied only to the second question and gave the lowest price, i.e., he supplied mere information and no offer had been made by him to sell. There could be a contract only if he had accepted Harveys last telegram.