INDIAN CONTRACT

ACT,1872

RAMYA RAJENDRAN

CONTENT

Business Law
Business law is a rule which helps us to regulate
and manage our business transactions and activities
system. It has direct relation with trade, industry and
commerce.
e.g. insurance act, contract act, tax act, sale of goods
act, agency act etc.

INDIAN CONTRACT ACT, 1872

Enacted by
Date enacted
Date commenced
Total sections
Extent
Kashmir

Parliament of India
25 April 1872
1 September 1872
238
All States of India except
the State of Jammu &

The Indian Contract Act consists of the following two

parts:

What is a Contract?
An agreement which is legally enforceable alone is
a contract. Agreements which are not legally enforceable
are not contracts but remain as void agreements which
are not enforceable at all or as voidable agreements
which are enforceable by only one of the parties to the
agreement.
All contracts are agreements, But all agreements are
not contracts.

OFFER/PROP
OSAL

ACCEPTANCE

PROMISE

Offer/Proposal sec 2(a) - 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
person either to such act or abstinence, he is said to make
a proposal.
Acceptance sec 2(b) - When the person to whom the
proposal is made, signifies his assent there to , the
proposal is said to be accepted.
Promise sec 2(b) - A Proposal when accepted becomes a
promise. In simple words, when an offer is accepted it
becomes promise.

PROMISE

AGREEMENT

CONSIDERATIO
N

Consideration sec 2(d) - When at the desire of the

promisor, the promisee or any other person has done or
abstained from doing something or does or abstains from
doing something or promises to do or abstain from doing
something, such act or abstinence or promise is called a
consideration for the promise.
Price paid by the one party for the promise of the other
Technical word meaning QUID-PRO-QUO i.e. something in
return.
Agreement sec 2(e) - Every promise and set of promises
forming the consideration for each other.

AGREEME
NT

ENFORCEABLE BY LAW

CONTRA
CT

Contract sec 2(h) - An agreement enforceable by

Law is a contract.

ESSENTIALS OF A VALID CONTRACT

As per Section 10 All agreements are contracts,
if they are made by free consent of the parties,
competent to contract, for a lawful consideration
and with a lawful object, and not hereby expressly
declared to be void .

ESSENTIAL ELEMENTS OF A VALID CONTRACT

Offer and acceptance
Legal relationship
Consensus - ad-idem
Free consent.
Capacity or competency of parties
Lawful object
Lawful consideration
Certainty and possibility of performance
Agreements not declared to be void
Legal formalities

1. Offer and Acceptance: In order to create a valid

contract, there must be an agreement between two
parties. An agreement involves a valid offer by one
party and valid acceptance of the same by the
other party.

2. Legal relationship: When two parties enter into an

agreement, their intention must be to create legal
relationship between them. This means that the parties
must intend that if one of them falls to perform his
promise, he shall be answerable for that failure in law.
[an agreement of a purely domestic or social nature is not
a contract ] - Husband paying household allowance

3. Consensus-ad-idem: The minds of both the parties

must be ad-idem. In other words, the two parties must
have agreed about the subject matter of the
contract at the same time and in the same sense.
4. Free consent (Permission or Willingness): An
agreement must have been made by free consent of the
parties. consent is said to be free when it is not caused
by coercion, undue influence, fraud,
misrepresentation or mistake.

5. Capacity : The parties to a contract must have

capacity (legal ability) to make valid contract.
Section 11:- of the Indian contract Act specify that every
person is competent to contract provided.
Is of the age of majority according to the Law which
he is subject
Who is of sound mind and
Is not disqualified from contracting by any law to
which he is subject.
6. Lawful object :The object(purpose) of agreement should
be lawful and legal.
Consideration or object of an agreement is unlawful if it
Illegal
Immoral
Opposed to a public policy

7.

Lawful

supported

consideration
by

All

consideration.

contracts

Consideration

must

be

means

something in return (quid pro quo). It can be cash,

kind, an act or abstinence (Self denial of doing an
act).

It

can

be

past,

present

or

future.

However,

consideration should be real and lawful.

A consideration must not be unlawful, immoral or opposed
to
8.the
Agreement
public policy
Not
. declared to void
9. Certainty & Possibility of performance
10. Legal formalities
A contract may be oral or in writing

Review

ELEMENTS OF A VALID CONTRACT

AGREEMEN
TwoTparties

REALITY
OF
CONSEN
T

LEGALIT
Y

not valid
OBJECTIVE SUBJEC
FRAUD
T
MISREPRESENTA
Legal
relationship
TION
MATTE
DURESS
R

UNDUE
CONSIDERAT INFLUENCE
MUTUAL
ION
CAPACITY
MISTAKE

OFFER ACCEPTANC
E

LEGAL BARGAINED
DETRIME
FOR
NT/LAWF
UL

not valid
INFANTS
MENTAL
DRUNKARDS
CORPORATIO
NS

WRITING

TYPES OF CONTRACT

ON THE BASIS OF CREATION

Express Contracts: Where the terms of the contract are
expressly agreed upon in words (written or spoken) at the
time of formation, the contract is said to be express
contract.

Implied Contracts: Implied contracts in contrast come

into existence by implication.
Most often the implication is by law and or by action.
Eg: Boarding a Bus.

Tacit Contracts: Tacit contracts are those that are

inferred through the conduct of parties.

Quasi Contracts: A quasi contract is created by law.

Thus, quasi contracts are strictly not contracts as there is
no intention of parties to enter into a contract. It is legal
obligation which is imposed on a party who is required to
perform it

ON THE BASIS OF VALIDITY

Valid contract : An agreement which has all the essential
elements of a contract is called a valid contract. A valid
contract can be enforced by law.
Void

contract

"A

contract

which

ceases

to

be

enforceable by law becomes void when it ceases to be

enforceable". Thus a void contract is one which cannot be
enforced by a court of law.
Eg:

A contract to import goods from a foreign country

becomes void when a war breaks out between the

importing and exporting country.

Voidable contract : Defines that an agreement which is

enforceable by law at the option of one or more parties but
not at the option of the other or others is a voidable
contract.
Result

of

coercion,

undue

influence,

fraud

and

misrepresentation.

Unenforceable contract : Where a contract is good in

substance but because of some technical defect cannot be
enforced by law is called unenforceable contract. These
contracts are neither void nor voidable.
Example: Writing registration or stamping.

Illegal contract : Contracts those which are forbidden

by law. All illegal contracts are hence void also, because
of the illegality of their nature they cannot be enforced
by any court of law. In fact even associated contracts
cannot be enforced. Contracts which are opposed to
public policy or immoral are also illegal.
All illegal agreements are void agreements but all void
agreements are not illegal.

ON THE BASIS OF EXECUTION

Executed contract : An executed contract is one in
which
both the parties have performed their respective
.
obligation.

Executory contract : An executory contract is one

where one or both the parties to the contract have still
to perform their obligations in future. Thus, a contract
which is partially performed or wholly unperformed is
termed as executory contract.

ON THE BASIS OF LIABILITY

Unilateral contract : A unilateral contract is one in
which only one party has to perform his obligation at the
time of the formation of the contract, the other party
having fulfilled his obligation at the time of the contract
or before the contract comes into existence.

Bilateral contract : A bilateral contract is one in which

the obligation on both the parties to the contract is
outstanding at the time of the formation of the contract.
Bilateral contracts are also known as contracts with
executory consideration.

THANK YOU