Indian Contract Act 1872 Indian Contract Act 1872

Indian Contract Act, 1872 Indian Contract Act 1872 1

Indian Contract Act, 1872 � The term “Contract” in ordinary sense means an agreement between two persons. � The law of contract seeks to regulate the behavior of persons who make contracts, so that any conflict arises between these persons later may be resolved. Meaning of Contract: Sec. 2 (h) defines a contract: “ An agreement enforceable by law is a contract. ” e. g. C makes an agreement with D to sell him some goods for Rs. 25000. 2

Indian Contract Act, 1872 -B invites a friend S to dinner. He makes elaborate preparations. S fails to turn up for dinner and all the preparation made by B go waste. Since this was a contract between the parties, B cannot take S to court for legal action against him for breaking the commitment to come for the dinner. � How could it be said that the above was not a contract although it was clearly an agreement between the two friends? 3

Indian Contract Act, 1872 Essential of a Valid Contract 1. An Agreement, proposal/ offer and acceptance: • Agreement = Proposal + their acceptance • Must made by two persons, one is making offer and another is accepting this offer. 2. Intention to create legal relation • Court would like to measure the degree of seriousness. • Not every loose conversation, not any exchange of pleasantries, not a casual social commitment, consider as a contact. 4

Indian Contract Act, 1872 3. Competency of Parties � � � Everybody is able to make contract except Minor, Person of Unsound mind, Person who are disqualified by any other law. 4. Consideration “Something in Return” B promise to S that he will buy his bike for Rs. 35000. 5. Free Consent Understanding of mind and there is no pressure or undue influence in entering into contract 5

Indian Contract Act, 1872 6. Lawful object and consideration 7. Not expressly declared void (Cancelled) 8. Legal Formalities 6

Indian Contract Act, 1872 Case � A invite B to for a dinner in a restaurant. B accepts the offer. A hires a taxi but B does not turn up. Can A recover it from B? �R tells S that he would sell his computer for Rs. 15000/- to S. This is clear offer from R to S. Agreement= Offer + their acceptance 7

Indian Contract Act, 1872 Requirements for Valid Offer 1. Offer must be express or implied -Must be made in a manner which leave no doubt about it. -Proposal made in words, the promise is said to be express, and proposal made otherwise than in words, it is said to be implied. e. g. B tells S : “Can you repair my computer? ” – Express offer A street seller of photo-albums quietly extends a piece before a passer –by who takes it in his possession. -Implied offer to sell. 2. Offer must intend to create legal relation 3. Offer must be certain and not vague in meaning 4. Offer must be definite and certain in meaning 8

Indian Contract Act, 1872 5. Offer may be specific or General There must be destination of offer. -If offer is targeted for one specific person, it is called a specific offer. -If it is targeted for the whole world at large, it is called general offer. e. g. Advertisement 6. Offer must be communicated 7. Offer must be distinguished from invitation to offer Availability of Books in Book Store being available for letting out. All are example of invitation to offer. Advertiser may or may not sell this. e. g. Publishing of Time Table by railways are example of expression of an intention. 9

Indian Contract Act, 1872 The Acceptance Sec. 2 (b) “When a person to whom the proposal is made , signifies his assent thereto, the proposal is said to be acceptance. ” A proposal , when accepted become a promise. Requirements for Valid Acceptance 1. By a proper person-The proper person to accept the offer is the one to whom it is targeted. -Offeror cannot be forced to be bound in a contract with a person with whom he did not want to be involved. 2. . Within proper time Time specified by Offeror. e. g. Advertisement of IPO 10

Indian Contract Act, 1872 Classification of Contracts Enforceability • Voidable • Void • Illegal or unenforceable Performance Formation • Express • Implied • Quasi • • Executed Executory Unilateral Bilateral

Indian Contract Act, 1872 1. a. Classification of Contract on the basis of Enforceability: a. Valid Contract: Contract which satisfy all the essential elements of a valid contract as laid down by Section 10. b. Voidable contract A contract which is enforceable by law at the option of one party but not at the option of the other or others is a voidable contract [Sec. 2(i)]. c. Void Contract: An agreement may be enforceable at the time when it was made but later on, due to certain reason, it become void and unenforceable. d. Illegal Contract: All illegal agreement are void but all void agreement are not necessarily illegal. e. g. An agreement with minor is void but not illegal. e. Unenforceable Contract: Certain contract become void because the court will not enforce them due to non fulfillment of certain formalities. 12

Indian Contract Act, 1872 2. Classification of Contract on the basis of Mode of formation a. Expressed Contract: Contract is made by words spoken or written. b. Implied Contract: Contract which come into being on account of the act of the parties and not by their express words, written or spoken. c. Quasi contract- Contract exists by the order of the court and not by agreement of parties 3. Classification of Contract on the basis of Extent of Execution a. Executed Contract Where both the parties to the contract have fulfilled their respective obligation, the contact said to executed. b. Executory Contract Where one or both the parties to the contact are still to perform certain things in future or under the terms of the contract something remains to be done, the contract is termed as an executory contract. 13

Indian Contract Act, 1872 Bilateral Unilateral • Both the parties make the promise. • One party makes the promise and other party can accept by doing something. 14