INDIAN CONTRACT ACT 1872

INTRODUCTION
We enter into contracts day after day. Taking a seat in a bus amounts to entering into a contract. When you put a coin in the slot of a weighing machine, you have entered into a contract. You go to a restaurant and take snacks, you have entered into a contract. In such cases, we do not even realize that we are making a contract. In the case of people engaged in trade, commerce and industry, they carry on business by entering into contracts. The law relating to contracts is to be found in the Indian Contract ct, !"#$.

 The law of contracts differs from other branches of law in a very important respect. It does not lay down so many precise rights and duties which the law will protect and enforce% it contains rather a number of limiting principles, sub&ect to which the parties may create rights and duties for themselves, and the law will uphold those rights and duties. Thus, we can say that the parties to a contract, in a sense make the law for themselves.

WHAT IS A CONTRACT?
Indian Contract ct, !"#$ defines a contract as an agreement enforceable by law. Contract ' n agreement ( enforceable by law n agreement means )a promi e an! a reciprocal forming con i!eration for eac" ot"er.# et of promi e

greement ' *romise ( reciprocal promise ( consideration n *romise means a propo al w"en accepte! become a promi e *romise ' proposal by one person ( its acceptance by another person *roposal means +w"en one per on ignifie anot"er per on "i willingne to !o ab tain from !oing anyt"ing wit" a $iew to obtaining t"e a ent of t"at ot"er to %c" an act or ab tinence & "e i ai! to ma'e a propo al (. A propo al i al o 'nown a an offer.

,efinitions --.
*ollock . /very agreement and promise enforceable at law is a contract. 0ir William nson . legally binding agreement between two or more persons by which rights are ac1uired by one or more to acts or forbearances 2abstaining from doing something3 on the part of the others.

*arties to an agreement 5 a contract

*romisor 6 a person making the proposal 2offer3 is known as a promisor .7e is also known as an offeror or proposor. *romisee 6 person accepting the proposal 2offer3 is known as a promisee . 7e is also known as an offeree or acceptor.

The two elements of an agreement are8 2i3 offer or a proposal% and 2ii3 an acceptance of that offer or proposal. What agreements are contracts? ll agreements are not studied under the Indian Contract ct, as some of them are not contracts. 9nly those agreements which are enforceable at law are contracts. The Contract ct is the law of those agreements which create obligations, and in case of a breach of a promise by one party to the agreement, the other has a legal remedy. Thus, a contract consists of two elements8

2i3 an agreement% and 2ii3 legal obligation, i.e., it should be enforceable at law.

)SS)NTIA* )*)+)NTS O, A -A*ID CONTRACT

We have seen above that the two elements of a contract are8 2!3 an agreement% 2$3 legal obligation. 0ection !: of the ct provides for some more elements which are essential in order to constitute a valid contract. It reads as follows8 ) ll agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful ob&ect and are not hereby e;pressly declared to be void.<

 Examples 2!3 A invites . for dinner in a restaurant. . accepts the invitation. 9n the appointed day, . goes to the restaurant. To his utter surprise A is not there. 9r A is there but refuses to entertain .. . has no remedy against A. In case A is present in the restaurant but . fails to turn.up, then A has no remedy against .. 2$3 A gives a promise to his son to give him a pocket allowance of =upees one hundred every month. In case A fails or refuses to give his son the promised amount, his son has no remedy against A. In the above e;amples promises are not enforceable at law as there was no intention to create legal obligations. 0uch agreements are social agreements which do not give rise to legal conse1uences.

/ssential elements of a valid contract

!. greement. $. Intention to create legal relationship. >. ?ree and genuine consent. @. *arties competent to contract. 4. Aawful consideration. B. Aawful ob&ect. #. greements not declared void or illegal. ". Certainty of meaning. C. *ossibility of performance. !:. Decessary Aegal ?ormalities.

/. Agreement
To constitute a contract there must be an agreement. n agreement is composed of two elementsEoffer and acceptance. The party making the offer is known as the offeror, the party to whom the offer is made is known as the offeree. Thus, there are essentially to be two parties to an agreement. They both must be thinking of the same thing in the same sense.

)0ample

+AF who owns $ cars ; and y wishes to sell car +;F for =s. >:,:::. +.F, an ac1uaintance of +AF does not know that +AF owns car +;F also. 7e thinks that +AF owns only car +yF and is offering to sell the same for the stated price. 7e gives his acceptance to buy the same. There is no contract because the contracting parties have not agreed on the same thing at the same time, +AF offering to sell his car +;F and +.F agreeing to buy car +yF. There is no consensus.ad.idem.

1. Intention to create legal relation "ip

There should be an intention on the part of the parties to the agreement to create a legal relationship. n agreement of a purely social or domestic nature is not a contract. )0ample husband agreed to pay rupees >:,::: to his wife every month while he was abroad. s he failed to pay the promised amount, his wife sued him for the recovery of the amount. 0he could not recover as it was a social agreement and the parties did not intend to create any legal relations

2. ,ree an! gen%ine con ent

The consent of the parties to the agreement must be free and genuine. The consent of the parties should not be obtained by misrepresentation, fraud, undue influence, mistake. If the consent is obtained by any of these flaws, then the contract is not valid.

3. 4artie competent to contract

The parties to a contract should be competent to enter into a contract. ccording to 0ection !!, every person is competent to contract if he 2i3 is of the age of ma&ority, 2ii3 is of sound mind, and 2iii3 is not dis1ualified from contracting by any law to which he is sub&ect. Thus, there may be a flaw in capacity of parties to the contract. The flaw in capacity may be due to minority, idiocy, drunkenness or status. If a party to a contract suffers from any of these flaws, the contract is unenforceable e;cept in certain e;ceptional circumstances.

5. *awf%l con i!eration

The agreement must be supported by consideration on both sides. /ach party to the agreement must give or promise something and receive something or a promise in return. Consideration is the price for which the promise of the other is sought. 7owever, this price need not be in terms of money. In case the promise is not supported by consideration, the promise will be 2a bare promise3 and is not enforceable at law. Goreover, the consideration must be real and lawful.

6. *awf%l ob7ect
The ob&ect of the agreement must be lawful and not one which the law disapproves.

8. Agreement not !eclare! illegal There are certain agreements which have been e;pressly declared illegal . In such cases, even if the agreement possesses all the elements of a valid agreement, the agreement will not be enforceable at law.

9. Certainty of meaning
The meaning of the agreement must be certain or capable of being made certain otherwise the agreement will not be enforceable at law. )0ample A agrees to sell !: meters of cloth. There is nothing whatever to show what type of cloth was intended. The agreement is not enforceable for want of certainty of meaning. If, on the other hand, the special description of the cloth is e;pressly stated, say Terrycot 2": 8 $:3, the agreement would be enforceable as there is no uncertainly as to its meaning..

:. 4o

ibility of performance

The terms of the agreement should be capable of performance. n agreement to do an act impossible in itself cannot be enforced. The agreement cannot be enforced.

/;. Nece

ary legal formalitie

contract may be oral or in writing.

If, however, a particular type of contract is re1uired by law to be in writing, it must comply with the necessary formalities as to writing, registration and attestation, if necessary. If these legal formalities are not carried out, then the contract is not enforceable at law.

Types of contracts 5 classification of contract

It is classified in three types 9n the basis of the mode of formation 9n the basis of performance 9n the basis of validity or enforceability

9n the basis of the mode of formation

)0pre contract n e;press contract is a contract made by the use of spoken or written Implie! Contract n implied contract is a contract which is made otherwise than by the words spoken or written .It came into e;istence on account of an act or conduct of the parties. <%a i =contract 1uasi contract is a fictitious contract created under legal obligations, similar to a valid contract. These contracts are also known as implied.in.law contracts )> contract n e.contract is a contract made through the electronic mode.

9n the basis of performance

)0ec%te! contract both the parties have performed their promises under a contract . It is a contract where , under the terms of contract , nothing remains to be done by the parties. )0ec%tory contract both the parties are yet to perform their promises .it is a contract where parties have to still perform their promises in the future. 4artly e0ec%te! an! partly )0ec%tory In this one party has already performed his promise and the other party has yet to e;ecute his promise . Unilateral contract It is contract where only one party has to perform his promise. .ilateral contract . Hoth parties have to perform their respective promises.

9n the basis of validity or enforceability

-ali! contract If the contract entered into by the parties and satisfies all the elements of a valid contract as per the act , it is said to be valid contract. -oi! contract contract which ceases to be enforceable by the law is known as a void contract . -oi!able contract When the contract is entered into without the free consent of party , it is considered as a voidable contract. Illegal agreement n illegal agreement is one which is forbidden by law. Unenforceable contract contract which satisfies all the re1uirement of the contract but has technical defects is called an Inenforceable contract Certain contract in writing

,istinguish between void and voidable contract

$oi! contract
+eaning 6 it means contract which ceases to be enforceable Nat%re. valid when made but subse1uently becomes unenforceable Rig"t or reme!y> Do legal remedy is available for the void contract. 4erformance of contract 6 *arty cannot demand the performance of contract . Rea on 6 Contract becomes void due to change in law or circumstances Damage 6 *arty cannot claim damages.

$oi!able contract
+eaning. an agreement enforceable by law , by one or more parties. Nat%re 6 it remains as voidable until cancel the contract. Rig"t or reme!y 6 ggrieved party has a remedy to cancel the contract. 4erformance of contract 6 If aggrieved party does not cancel it within a reasonable time , performance can be demanded Rea on 6 If consent is not obtained freely then it is regarded as a voidable contract. Damage 6 party can demand damages in certain cases.

,istinguish between void an illegal agreements

$oi! agreement

illegal agreement What 6 it is prohibited by law. /ffect on collateral transaction 6 ny agreement or transaction which is collateral to illegal agreement is not enforceable . *unishment 6 It is punishable Joid ab initio 6 always void ab initio

What 6 void agreement is not prohibited by law . /ffect on collateral transaction 6 ny agreement which is collateral to the void agreement is enforceable . *unishment 6 it is not punishable . Joid ab initio 6 Gay not void ab initio.