Contract Act, 1872

Sk. Nazibul Islam Faculty Member, Bangladesh Institute of Bank Management

Contract Act, 1872

Section 1 75 Section 76 123 Section 124 147 Section 148 181 Section 182 238 Section 239 266 : Preliminaries of Contract : (Repealed, Sale of Goods Act, 1930) : Indemnity and Guarantee : Bailment : Agency : (Repealed, Partnership Act, 1932)

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 The law of contract is the most important part of commercial law because every commercial transaction starts from an agreement between two or more persons.

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Definition of Contract
An Agreement enforceable by law (Sec. 2h) An Agreement and The agreement must be enforceable by law An agreement comes into an existence whenever one or more persons promise to one or others, to do or not to do something. Every promise and every set of promises, forming the consideration for each other, is an agreement- Sec. 2(e). Some agreements cannot be enforced through the courts of law, e.g., an agreement to play cards or to go to a cinema. An agreement, which can be enforced through the courts of law, is called a contract.
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The essential elements of a contract

Offer and Acceptance Intention to create Legal Relationship Lawful consideration Capacity of parties Free consent Legality of the object Certainty Possibility of performance Writing, Registration and Legal formalities
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Competent to Contract (Sec. 10)

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 of sound mind , and is not disqualified from contracting by any law to which he is subject.
Major: Sound Mind: If he is capable of understanding the consequence of contract. Not Disqualified:

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Classification of Contract
1. 2. 3. 4. The Method of Formation of a Contract The time of Performance the Parties f the contract Legality or Validity of the contract

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1. Method of Formation
a) b) c) Express Contract: Which is expressed in words spoken or written. Implied Contract: Understood from the acts, the conduct of the parties and /or the course of dealing between them. Quasi Contract: Which are not contracts strictly, though the parties act as if there is a contract.

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2. Time of Performance
a) Executed Contract: The parties perform their obligations immediately, i.e., as soon as the contract is formed.

b) Executory Contract: Obligations are to be performed at a later time.

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3. Parties of the Contract

a) Bilateral Contracts: There must be at least two parties to the contract. Therefore all contracts are bilateral or multilateral. Unilateral Contracts: One party has to fulfill his obligations whereas the other party has already performed his obligations.

a)

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4. Legality or Validity
a) b) c) d) e) Valid Contract Void Contract Voidable Contract (Sec. 2i) Illegal Contract Unenforceable Contract

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 Valid agreement: An agreement which fulfills all the

essential elements of a contract. , and which is enfoceable through the courts . Void agreement: a void agreement has no legal effect. It confers no rights on any person and creates no obligations. An agreement not enforceable by law is said to be void.- sec.2(g) Example- An agreement made by a minor.
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 Voidable agreement: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.-Sec.2(I). A voidabe agreement can be avoided. Until it is avoided, it is a good contract. Example- Contracts brought about by coercion, undue infuence, misrepresentation etc. X coerces Y into entering into a contract for the sale of Ys house to X. This contract can be avoided by Y. X cannot enforce the contract. But Y, if he so desires, can enforce it against X.
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 Unenfoceable agreement: An agreement which cannot be enforced in a court of law one or both of the parties, because of some technical defect, eg., want of registration or non-payment of the requisite stamp duty. Illegal Agreement: An illegal agreement is one which is against a law in force. Example- an agreement to commit murder, robbery or cheating.
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Lawful Offer
a) b) c) d) e) f) g) Express or Implied (Sec. 9) To a Definite Person Legal Relationship is required The Terms must be certain, definite, not vague Must be communicated A mere statement of intention May be Conditional
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Lawful Acceptance (Sec. 7)

a) Absolute and unqualified b) Conditional acceptance c) Must be expressed in some usual or reasonable manner d) Mental acceptance or uncommunicated assent e) Time of Acceptance f) When Acceptance is complete g) Before offer
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Communication (Sec. 4)
a) b) Proposal: When it comes to the knowledge of the person to whom it is made. Acceptance:
As against the proposer, when it put in the course of transmission to him, so as to be out of the power of the acceptor. As against the acceptor, when it comes to the knowledge of proposer.

c)

Revocation:
As against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it As against the person to whom it is made, when it comes to his knowledge.
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Lawful Consideration
a) Past Consideration b) Present Consideration c) Future Consideration

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Consideration-Exceptions (Sec. 25)

a) Natural Love & Affection
By a written & registered document Natural love and affection Near relation to each other

b) c) d) e)

Voluntary Compensation Time-barred debt Agency Completed gift

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Void Agreements
An Agreement so made must not have been expressly declared to be void. Restraint to Marriage (Sec. 26) Restraint of Trade (Sec. 27) Restraint of Proceedings (Sec. 28) Having Uncertain Meaning (Sec. 29) Wagering Agreement (Sec. 30) Every Contract is an agreement but all agreements are not contracts.
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Revocation (Sec. 5,6)

A proposal may be revoked at any time before the communication of its acceptance is completed as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is completed as against the acceptor, but not afterwards.
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Termination of Contract
By performance of the promise of all parties By mutual consent canceling the agreement or substituting a new agreement in place of the old Subsequent impossibility of performance By operation of law death, insolvency, or merger By lapse of time By material alteration without the consent of the other party By beach made by one party
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Remedies of Breach of Contract

Free from obligation Suit for damages Specific performance Injunction

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