The Act was passed by British India and is based on the principles of English common law. It determines the circumstance in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties on the contracting parties. Hence this legislation, the Indian Contract Act , being of skeletal nature, deals with the enforcement of these rights and duties on the parties in India. History of Indian Contract Act It was enacted mainly with a view to ensure reasonable fulfillment of expectation created by the promises of the parties and also enforcement of obligations prescribed by an agreement between the parties.

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Contract 2 h : An agreement enforceable by Law is a contract. Therefore, there must be an agreement and it should be enforceable by law. Void agreement 2 g : An agreement not enforceable by law is void. Voidable contract 2 i : An agreement is a voidable contract if it is enforceable by Law at the option of one or more of the parties there to i.

Void contract 2 j : A contract becomes void when it ceases to be enforceable by law. Acceptance[ edit ] According to Section 2 b , "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. If the parties are not in ad idem on all matters concerning the offer and acceptance, there is no valid contract. For example, "A" says to "B" "I offer to sell my car for Rs.

This is not acceptance and hence it amounts to a counter offer. It should be Communicated to the offeror. To conclude a contract between parties, the acceptance must be communicated in some prescribed form. A mere mental determination on the part of offeree to accept an offer does not amount to valid acceptance.

Acceptance must be in the mode prescribed. If the acceptance is not according to the mode prescribed or some usual and reasonable mode where no mode is prescribed the offeror may intimate to the offeree within a reasonable time that acceptance is not according to the mode prescribed and may insist that the offer be accepted in the prescribed mode only.

If he does not inform the offeree, he is deemed to have accepted the offer. For example, "A" makes an offer to "B" says to "B" that "if you accept the offer, reply by voice. It will be a valid acceptance, unless "A" informs "B" that the acceptance is not according to the prescribed mode. Acceptance must be given within a reasonable time before the offer lapses. If any time limit is specified, the acceptance must be given within the time, if no time limit is specified it must be given within a reasonable time.

It cannot precede an offer. If the acceptance precedes an offer it is not a valid acceptance and does not result in contract. For example, in a company shares were allotted to a person who had not applied for them. Subsequently, when he applied for shares, he was un aware of the previous allotment. The allotment of share previous to the application is not valid.

Acceptance by the way of conduct. Mere silence is no acceptance. Silence does not per-se amounts to communication- Bank of India Ltd.

It does not even amount to any representation on which any plea of estoppel may be found, unless there is a duty to make some statement or to do some act free and offerer must be consent Acceptance must be unambiguous and definite.

Acceptance cannot be given before communication of an offer. Lawful consideration[ edit ] According to Section 2 d , Consideration is defined as: "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 abstain from doing something, such act or abstinence or promise is called consideration for the promise".

An agreement must be supported by a lawful consideration on both sides. Essentials of valid consideration must include:- It must move at the desire of the promisor. An act constituting consideration must have been done at the desire or request of the promiser.

If it is done at the instance of a third party or without the desire of the promisor, it will not be good consideration. Consideration may move from the promisee or any other person. Under Indian law, consideration may be from the promisee of any other person i. This means that as long as there is consideration for the promisee, it is immaterial who has furnished it. Consideration must be an act, abstinence or forebearance or a returned promise.

Consideration may be past, present or future. Past consideration is not consideration according to English law. However it is a consideration as per Indian law. After a month "B" promises to compensate "A" for service rendered to him earlier. When consideration is given simultaneously with promise, it is said to be present consideration.. For example, "A" receives Rs. The money "A" receives is the present consideration. When consideration to one party to other is to pass subsequently to the maker of the contract, is said to be future consideration.

For example. Consideration must be real. Consideration must be real, competent and having some value in the eyes of law. Consideration must be something which the promiser is not already bound to do. A promise to do something what one is already bound to do, either by law, is not a good consideration.

Consideration need not be adequate. Consideration need not be necessarily be equal to value to something given. So long as consideration exists, the courts are not concerned as to adequacy, provided it is for some value. The consideration or object of an agreement is lawful, unless and until it is: forbidden by law: If the object or the consideration of an agreement is for doing an act forbidden by law, such agreement are void.

The agreement is void as the procuring government job through unlawful means is prohibited. If it involves injury to a person or property of another: For example, "A" borrowed rs. In case of default, "A" owes to pay the principal sum at once and huge amount of interest. This contract was held void as it involved injury to the person. If courts regards it as immoral:An agreement in which consideration ir object of which is immoral is void.

For example, An agreement between husband and wife for future separation is void. Is of such nature that, if permitted, it would defeat the provisions of any law: is fraudulent, or involves or implies injury to the person or property of another, or Is opposed to public policy. An agreement which tends to be injurious to the public or against the public good is void.

For example, agreements of trading with foreign enemy, agreement to commit crime, agreements which interfere with the administration of justice, agreements which interfere with the course of justice, stifling prosecution, maintenance and champerty. Agreements in restrained of legal proceedings: This deals with two category. One is, agreements restraining enforcement of rights and the other deals with agreements curtailing period of limitation.

Trafficking in public offices and titles: agreements for sale or transfer of public offices and title or for procurement of a public recognition like Padma Vibhushan or Padma Shri etc. Agreements restricting personal liberty: agreements which unduly restricts the personal liberty of parties to it are void as being opposed by public policy.

Marriage brokerage contact:Agreements to procure marriages for rewards are void under the ground that marriage ought to proceed with free and voluntary decisions of parties. Agreements interfering marital duties: Any agreement which interfere with performance of marital duty is void being opposed to public policy.

An agreement between husband and wife that the wife will never leave her parental house. Contract Opposed to Public Policy can be Repudiated by the Court of law even if that contract is beneficial for all of the parties to the contract- What considerations and objects are lawful and what not-Newar Marble Industries Pvt.

This consideration or object is clearly opposed to public policy and hence the compounding agreement is unlawful and void under Section 23 of the Act. It is unenforceable as against the Petitioner-Company. Competent to contract[ edit ] Section 11 of The Indian Contract Act specifies that every person is competent to contract provided: He should not be a minor i.

He should be of sound mind while making a contract. A person cannot who is usually of unsound mind, but occasionally of sound mind, can make a contract when he is of sound mind. Similarly if a person is usually of sound mind, but occasionally of unsound mind, may not make a valid contract when he is of unsound mind.

He is not disqualified from contracting by any other law to which he is subject There are other laws of the land that disqualify certain persons from contracting. They are:- -Alien enemy -Foreign sovereigns, diplomatic staff etc.

According to Section 14, Consent is said to be free when it is not caused by coercion or undue influence or fraud or misrepresentation or mistake. Elements Vitiating free Consent 1. Coercion Section 15 : "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal Code under 45, , or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

Since the release has been brought about by coercion, such release is not valid. Undue influence Section 16 : "Where a person who is in a position to dominate the will of another enters into a contract with him and the transaction appears on the face of it, or on the evidence, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other.

For example, an employer may be deemed to be having authority over his employee. Where he stands in a fiduciary relationship to other, For example, the relationship of Solicitor with his client, spiritual advisor and devotee. Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by the reason of age, illness or mental or bodily distress" 3.

Fraud Section 17 : "Fraud" means and includes any act or concealment of material fact or misrepresentation made knowingly by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract. Mere silence is not fraud. There are two exceptions where even mere silence may be fraud, one is where there is a duty to speak, then keeping silence is fraud.

Misrepresentation Section 18 : " causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement". Mistake of fact Section 20 : "Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void". A party cannot be allowed to get any relief on the ground that he had done some particular act in ignorance of law.

Mistake may be bilateral mistake where both parties to an agreement are under mistake as to the matter of fact. The mistake must relate to a matter of fact essential to the agreement. Agency[ edit ] In law, the relationship that exists when one person or party the principal engages another the agent to act for him, e. The law of agency thus governs the legal relationship in which the agent deals with a third party on behalf of the principal.


Indian Contract Act, 1872



Indian Contract Act, 1872



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