INDIAN CONTRACT ACT 1872

INDIAN CONTRACT ACT 1872

Introduction Any Commercial activities require understanding among the party concerned. This
understanding is often expressed in writing which confirms the consensus of the parties. This formal
expression is known as Contract. To complete the contract, parties in contract need to fulfill their
obligation. Hence Law of Contract is considered as a part of Law of Obligation. Some time,
Contract creates self imposed obligation even-though other parties has nothing to perform.
In India, Indian Contract Act, 1872 governs the Contract and it applicability extends to whole of
India except State of Jammu and Kashmir. It came into force on First day of September 1872.

What is a Contract?
Section 2(h) defines Contract as an agreement enforceable by law.
a) A Contract is an agreement; an agreement is a promise and a promise is an accepted proposal.
b) An Agreement which is legally enforceable alone is a contract.
If we decode the above definition it is very important to understand three terms
a) Agreement
b) Promise
c) Accepted Proposal i.e., Offer and Acceptance.
What is Agreement?
Section 2(e) of the act defines the term Agreement as every promise or every set of promises
forming consideration for each other.
An Agreement is a promise or a commitment or set of reciprocal promises or commitments. An
agreement involves an offer or proposal by one person and acceptance of such offer or proposal
by another person.
What is Promise?
Section 2(b) defines term Promise i.e., When a person to whom proposal is made signifies his
assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a promise.
Summary
a) Offer + Acceptance = Promise
b) Promise + Consideration = Agreement
c) Agreement + Enforceable by law = Contract or Voidable Agreement

d) Agreement + Not Enforceable by law = Void Agreement

Now Let's understand the Element of Contract & Later Classification of Contract
Essential Elements of Contract
1. Agreement An Agreement which is legally enforceable alone is a contract. An agreement
which is not enforceable can be either Void Agreement or Voidable contract. In order to
constitute a contract, there must be an agreement in first place. An agreement in turn is
composed of two elements-offer and acceptance. The two important element of agreement
are

Plurality of person: There must be at-least two parties-one making the offer and
another accepting it. A person cannot enter into agreement with himself or with an
inanimate object.

Consensus ad idem: The promisor and promise of the agreement should have agreed
in same sense & on same thing. There should be meeting of minds.

2. Legal Intention: The parties must intend to create a legal relationship. Agreements of social
or domestic nature do not contemplate legal relationship, so they are not contracts. For
example, a husband promising his wife to buy her a necklace on occasion of her birthday is
not a contract.
3. Lawful Consideration: The agreement must be supported by a lawful consideration.
Consideration means something in return. It is not important whether consideration is
adequate or in-adequate. Something in return may be an act or abstinence. But consideration
must be real and lawful.
4. Capacity: The parties to an agreement must be capable of entering into a contract. A person is
considered competent if he is (a) eighteen years of age (b) of sound mind (c) not disqualified
from contracting by any law to which he is subject.
5. Lawful Object: The object of agreement must be lawful.
6. Free Consent: The consent of the parties must be free and genuine i.e. not induced by
coercion, undue influence, fraud or misrepresentation.
7. Void Agreement: The agreement not expressly declared void or illegal by law.
8. Certainty and Possibility of Performance: The terms of agreement must be certain and
capable of performance. For example, D agrees to sell C garments. The type, quality, value
etc are not discussed. The agreement cannot be enforced as terms are uncertain. Similarly, if
A promises B to bring rainfall through magic. Such agreement cannot be enforced.

9. Legal formalities: Where nature of agreement is such that it requires compliance of certain
formalities, such requirements should be fulfilled. A contract may require registration in
addition of being in writing. However as regards to legal effects, an oral contract has same
weight-age as a contract in writing.

Classification of Contract

Contracts can be classified in terms of their

Enforceability or
Form or
Extent of performance

(1). Based on Enforceability.

a) Valid Contract: An agreement enforceable by law is a valid contract. In other words it satisfies

all the requirements of a valid contract as laid down in section 10. If any of the essential
requirements is missing it becomes a void contract.
b) Void Agreement: An Agreement not enforceable by law is void agreement. Void agreement has
no legal consequences. Void agreements are void from ab-intio. Following are few reasons why
an agreement can be termed as Void.
Agreement between incompetent parties.
Agreement under mutual mistakes of fact material to the agreement
Agreement of unlawful consideration or unlawful object i.e., immoral or agreement opposed to
public policy.
Agreement unlawful in part.
Agreement without consideration.
Agreement to restraint of marriage.
Agreement with uncertainty and ambiguous
Agreement by way of wager or wagering agreement.
Agreement to do impossible act.
c) Void contract: Section 2 (j) states as follows: A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable. In simple terms, A contract which is valid
looses its validity on occurrence of certain event.
For Example: X agrees to write a book with a publisher. After a few days, X dies in an accident
here the contract becomes void due to the impossibility of performance of the contract.
d) Voidable contract: An agreement which is enforceable at the option of one or more parties

thereto but not at the option of other or others is a voidable contract. A contract may be voidable
on the following grounds
Fraud,

Mistake,
Misrepresentation,
Lack of capacity,
Duress,
Undue Influence or Abuse of a fiduciary relationship.
A contract that is based on one of these grounds is not automatically void but is voidable at the
option of the party entitled to avoid it. For example, a person who was induced by fraud to enter
into a contract may disclaim the contract by taking some positive action to disaffirm the contract.
Or the victim of the fraud may ratify the contract by his or her conduct or by an express
affirmation after acquiring full knowledge of the facts. Likewise, a contract between a minor and
another party is generally viewed as voidable by the minor. The minor may legally decide to
ratify the contract or disaffirm the contract

e) Unenforceable contracts: These are the contracts which can not be enforced in a court of law

because of some technical defects, these contracts becomes fully enforceable if the technical
defects are removed.
An unenforceable contract or transaction is one that is valid, but out of court interest & will not
enforce. Unenforceable is usually used in contradistinction to void (or void ab initio) and
voidable. If the parties perform the agreement, it will be valid or technically invalid, but the court
will not compel them if they do not.
An example of a transaction which is an unenforceable contract is a contract for prostitution
under English law. Prostitution is not actually a crime under English law, although both soliciting
a prostitute and living off the earnings of a prostitute are criminal offence but so long as the
contract is fully performed, it remains valid. However, if either refuses to complete the bargain
(either the prostitute after being paid or the payer after receiving the services), the court will not
assist the disappointed party.
f) Illegal Contracts: Illegal contracts are those forbidden by law. Hence illegal contract are void
also. Supari provided to kill a person cannot be enforce in court of law.
(2). Based on Method of Formation:
(a) Implied contract: Implied contract comes in to existence by means of Implication of law or
action. For example, A climbs the Bus for travelling. A is bound to pay the fare applicable as per
the rate applicable for route.
(b) Quasi Contract: Even in the absence of a contract, certain social relationships give rise to certain
specific obligations to be performed by certain persons. These are known as Quasi Contracts as
they create same obligation as in the case of regular contract. Quasi contract is based on
principles of equity, justice and good conscience. The obligation is imposed by law. They are
further classified based on five circumstances
(i) Claim for necessaries supplied to person incapable of contracting: Any person supplying
necessaries of life to persons who are incapable of contracting is entitled to claim the price from
the others property.
1. A provides 6000 Rs. P.A for education to B a minor, where Minor has a bank deposit which
fetches 10,000 Rs Interest. A is entitled to be reimbursed from B's property. A is not entitled for
re-imbursement from B as person, however, he is entitle from Bs Property. In this case, property
is Interest received.

(ii) Right to recover money paid for another person: A person who has paid a sum of money which

another is obliged to pay, is entitled to be reimbursed by that other person provided the payment
has been made by him to protect his own interest.
Example: If A pays money to B in order to protect property from auction as his parents are
staying in this house on lease. Here payment made by A can be recovered as he had interest in
the property.
(iii) Obligation of person enjoying benefits of non-gratuitous Act: Where a person lawfully does

anything for another person, or delivers anything to him, not intending to do so gratuitously, and
such another person enjoys the benefit thereof, the letter is bound to make compensation to the
former in respect of, or to restore, the thing so done or delivered.
Illustrations:
1. A, a tradesman, leaves goods at B's house by mistake. B treats the goods as his own. He is bound
to pay A for them.
2. A saves B's property from fire. A is not entitled to compensation from B, if the circumstances
show that he intended to act gratuitously
(iv) Responsibility of Finder of goods: A person who finds goods belonging to another, and takes
them into his custody, is subject to the same responsibility as a Bailee.
Thus a Finder of lost goods has to
(i) To take care of property as men of ordinary prudence would take
(ii) No right to appropriate the goods
(iii) To restore the goods if the owner is found.
For Example: A finds a Mobile on public road. Until the mobile owner is found, A is deemed to
be owner. Now, it is A responsibility to take reasonable care. He must also ensure reasonable
steps to trace the real owner.
However, a finder is also bestowed with certain rights as follows:
Right to retain the goods until the true owner compensates him for the money spent in
preserving the goods and finding the owner. The finder, however, cannot sue for compensation.
However, if the owner has declared specific reward, the finder can sue him for the same.
(ii)
Right to sell: If the owner cannot be found after due search, or he refuses to pay lawful charges
of the finder, the finder may sell the goods ifa. the goods are of perishable nature;
b. lawful charges of the finder amounts to 2/3rd of the value of goods.
(i)

(v) Liability Of Person To Whom Money Is Paid, Or Thing Delivered By Mistake Or Under Coercion:

A person to whom money has been paid, or anything delivered, by mistake or under coercion,
must repay or return it.
Illustrations:

(i)

A and B jointly owe 100 rupees to C. A alone pays the amount to C, and B, not knowing this
fact, pays 100 rupees over again to C. C is bound to repay the amount to B.

(ii)

A railway company refuses to deliver up certain goods to the consignee, except upon the
payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain
the goods He is entitled to recover so much of the charge as was illegally excessive.
(3). Based on Performance:

(i)

Executed Contracts: An executed contract is one which has been completely completed by both
the parties.
(ii)
Executory Contracts: It is a contract which is wholly unperformed. If one party has performed
his part of obligation but the other party has not yet completed his obligation on the contract, the
contract still remains executory contract.
(iii)
Unilateral Contracts: Under this type of contract there is an obligation only on the part of only
one party when the contract is concluded.
(iv)
Bilateral Contracts: Here there is an obligation on both the parties to the contract.
a. Formal contracts or Expressed Contract: This term is usually found in English laws. Validity of
these contracts depends upon their form. They are valid even if they lack consideration. These
contracts are of two types:
i. Contract under seal: Contract under seal which derives its binding
force from its form alone. It is in writing, duly signed and sealed and delivered to parties. It also
refers a deed of specialty contract.
ii. Contract of Records includes the court judgments and
recognizance; obligations in such cases arise out of judgment and not under the contract.
b. Simple Contract : All contracts other than formal are called simple contracts or parole contracts

COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS - INDIAN

CONTRACT ACT, 1872
Invitation to Offer:
An offer and Invitation of offer are not same. An offer is made with an intention to obtain assent
of another to enter contract where as invitation of offer is a act precedent to Offer with an
intention to negotiate. In simple terms, there is not willingness expressed by the offeror to bind
by his offer. Here Intention plays the important role distinguish the offer and Invitation to
offer.
Proposal or Offer:
Under Section 2(a) the term Proposal is defined as, when one person signifies to another his
willingness to do or abstain from doing anything, with a view to obtaining the assent of that other
to such act or abstinence, he is said to make a proposal.
1. It must be an expression of willingness to do or to abstain from doing an act.

2. The willingness must be expressed with a view to obtain the assent of the other party to
whom the offer is made.
For Example: Where A and B that he desires to buy Bs Car for a value of 2 Lakhs.
Please note an Offer can be conditional
Classification of Offer: Offers are classified in to following types
1. General Offer: It is an offer made to public at large.
2. Specific Offer: It is an offer made to specific or particular person.
3. Cross Offer: An offer made by A to B to sell some goods where in B without knowledge
of A offer, B sends proposal to buy goods.
4. Counter Offer
5. Standing or Continuing Offer: It is an offer made to public at large and kept open for
certain period is know as standing offer.
ACCEPTANCE
A proposal or offer is said to be accepted when the person to whom the proposal is made
signifies his assent to the proposal to do or not to do some thing
Invitation for Offer
Offer made generally to
induce and negotiate
Intention of Offer
differentiate between offer
and Invitation to offer.

Offer
Offer should be made with
intention to create legal
relationship.
Offer should clear and
definite

Acceptance
Acceptance signifies offer into promise

Offer can be expressed or

Implied.
Offer must be communicated

Mere silence cannot be acceptance.

Communication when complete Section 4

Acceptance should be Absolute

Acceptance must be communicated

within reasonable time

Proposal: The communication of a proposal is complete when it becomes to the knowledge of the
person to whom it is made. Normally communication is made using following medium like, Fax,
Mail, Telephone, courier etc. Knowledge of the offer would materialize when the receiver
confirms by doing an act or rejecting. However Mere silence does not confirms acceptance.
Example for Proposal Communication completion:
Mr. A proposes, by letter, to sell a house to B at a certain price on 23rd Jan. The communication
of the proposal is complete when B receives the letter on 25th of Jan.

Acceptance:
The communication of Acceptance is viewed from the point of Proposer and Acceptor.
The communication of an acceptance is said to be complete
As against the proposer, when it is put in a course of transmission to him so at to be out of the
power of the acceptor to withdraw the same;
As against the acceptor, when it comes to the knowledge of the proposer.
The very important point to be noted from proposer angle is that Proposer is bound by acceptor
even in case of delay or lost in transit; however acceptor need to ensure that letter is correctly
addressed.
From Acceptor angle, he will be bound by his acceptance only when the letter of acceptance
reaches the proposer.
Example for Acceptance Communication completion: B accepts As proposal by a letter sent by
post on 27th. The communication of the acceptance is completeas against Mr. A, when the
letter is posted on 27th Jan; as against B, when the letter is received by A on 28th Jan.

Communication of Revocation as per Section 5:

The communication of a revocation is complete
As against the person who initiates it, when it is put in a course of transmission to the other
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
In simpler words, the communication of a revocation is complete with respect to proposal and
acceptance as follows:

Revocation of Proposal: A proposal may be revoked at any time before the

communication of its acceptance is complete as against the proposer, but not afterwards.
A proposal is also said to be revoked as per section 6 in following cases-

(a) by the communication of notice of revocation by the proposer to the other party;
(b) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so

prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(c) by the failure of the acceptor to fulfill a condition precedent to acceptance; or
(d) by the death or insanity of the proposer, if the fact of the death or insanity comes to the
knowledge of the acceptor before acceptance

Law of Contract (1872)

1.1 Nature of contract
The Contract came into force on 1 September 1872.
1. The Indian Contract Act was passed and implemented to control various kinds of
commercial and business contracts.
2. This act is not complete code of contracts.It deals with general principles of The Law of
Contract and special Contract.
3. The act is applicable to the whole India except for the state of Jammu and Kashmir.
4. The Contract Act only provides rules and regulations for the purpose of contract. It does
not list any rights and liabilities between parties to the contract.
5. Rights and liabilities and their manner of performance are decided by the parties
themselves under the contract but it is within the purview of the act.
1.2 Some Fundamental definitions
1.2.1 Contract
Section 2(h) of the Indian Contract Act,1872 states that an agreement enforceable by law is
contract.
1.2.2 Agreement

Section 2(e) of the act defines it as: Every promise and every set of promises forming the
consideration for each other is an agreement.
1.2.3 Promise
As per Section 2(b) of the Contract Act,a proposal when accepted becomes a promise.
1.2.4 Proposal
Section 2(a) states that when one person signifies another person his willingness to do or abstain
from doing anything with a view to obtaining the assent of that other to such an act or
abstinence,he is said to make a proposal.A proposal is also known as an offer.
1.2.5 Defendent
A peson against whom a suit has been filed in court and who has to defend himself against the
charges of breach of contract is called the defendant.
1.2.6 Palintiff
A prson who files a suit in a court of law against another for breach of contract is called the
plaintiff.
1.2.7 Promiser and Promisee
According to Section 2 of the Act,the person making the proposal is called the promisor and
the person accepting the proposal is called the promisee.
1.2.8 Acceptance and Promise
According to Section 2(b) of the Indian Contract Act: When the person to whom the proposal is
made signifies his assent thereto,the proposal is said to be accepted.Aproposal,when
accepted,becomes a promise.
1.2.9 Void Agreement
Section 2(g) of the Act defines a void agreement as an agreement not enforceable by law.
1.2.10 Voidable Contract
An agreement which is enforceable by law at the option of one or more of the parties thereto,but
not at the option of others,is a voidable contract-Section 2(i).
1.3 Classification of Contract/Types of contract
1. On the basis of the mode of formation

Express contract

Implied contract

Quasi-contract

2. On the basis of performance

Executed contract

Executory contract

Partly executed and partly executory

Unilateral contract

Bilateral contract

3. On the basis of Validity or Enforceability

Valid contract

Void contract

Voidable contract

Illegal agreement

Unenforceable contract

1. On the basis of the Mode of Formation

Express Contracts : A contract would be an express contract if the terms are expressed by
words or in writing. Section 9 of the Act provides that if a proposal or acceptance of any
promise is made in words the promise is said to be express.

Implied Contract: An implied contract is a contract which is made otherwise than by the
words spoken or written. It came into existence on account of an act or conduct of the
parties.

Quasi contract:Even in the absence of a contract, certain social relationships give rise to
certain specific obligations to be performed by certain persons. These are known as quasi

contracts as they create same obligations as in the case of regular contract. Quasi
contracts are based on principles of equity, justice and good conscience.
2. On the basis of performance

Executed contract:The consideration in a given contract could be an act or forbearance.

When the act is done or executed or the forbearance is brought on record, then the
contract is an executed contract.

Executory contract: In an executory contract the consideration is reciprocal promise or

obligation. Such consideration is to be performed in future only and therefore these
contracts are described as executory contracts.

Partly executed and partly executory: In a partly executed and partly executory
contract,one party has already performed his promise and the other party has yet to
execute his promise.

Unilateral contract: Unilateral contract is a one sided contract in which only one party has
to perform his duty or obligation.

Bilateral contract: A Bilateral contract is one where the obligation or promise is

outstanding on the part of both the parties.

3. On the basis of Validity or Enforceability

Valid contract: If the contract entreed into by the parties and satisfies all the elements of
a valid contract as per the act, it is said to be a valid contract.

Void contract: A contract which ceases to be enforceably by law is known as a void

contract.A void contract is not enforceable by the court.Generally,a valid contract ceases
to be enforceable on the change in circumstances or on the change of provisions of an act.

Voidable contract: When the contract is entered into without the free consent of party,it is
considered as a voidable contract.The definition of the act states that a voidable contract
is enforceably by law at the option at the option of one or more parties but not at option
of the other parties.

Illegal Agreement: An illegal agreement is one which is forbidden by law.It cannot be

enforced by any court.Not only that any associated or collateral transaction to an illegal
agreement is also void.No action is allowed on an illegal agreement.No action can be
taken for the recovery of the money paid under illegal agreement or for the breach of the
illegal agreement.

Unenforceable contract: A contract which satisfies all the requirements of the contract but
has technical defects is called an unenforceable contract.A contract is said to have a

technical defect when it does not fulfil the legal formalities required by some other
act.When such legal formalities are compiled with later on,the act becomes enforceable.

1.4 Offer and Acceptance

i. Proposal or Offer
According to Section 2(e) of the Indian Contract Act,When one person signifies to another his
willingness to do job,or to abstain from doing,anything with a view to obtaining the assent of the
other to such act or abstinence,he is said to make a proposal.
1.4.1 Elements/Main features of a Proposal
1. Existence of two parties
For a valid offer,there must be two parties.A person cannot make an offer to himself.

2. Communication
The offer must be communicated to the offence.If it is never communicated to the offence,it
cannot be accepted and no valid contract comes into existence.
3. Willingness
The offer must show willingness of the offeror. Mere telling or sharing a plan is not an offer.
4. Intention of Obtaining Assent
The offer must be made with a view to obtain the assent of the offeree. The offer made out of a
prank or as a joke is not valid offer,and therefore if accepted,it can never make the valid contract.
5. May be positive or Negative
The offer may involve doing something or not doing something-Section 2(o).The offer to do
something is a positive offer or not to do something is a negative offer.
1.4.2 Legal Rules as to Offer
1. Offer Must be definite,Unambiguous and certain
They must be vague or indefinite. If the terms are vague, it is not capable of being accepted as
the vagueness would not create any contractual relationship.
2. Offer should not bind the other party to reply
The offer should not bind the other party to reply.In the same way,if the offer should not contain
terms,non- compliance of which may be assumed as acceptance.
3. Offer must be made to create legal relationship
While making the offer,the aim of the offerer should be to primarily create a legal obligation.An
offer that creates only social or moral obligations does not constitute a valid agreement or
contract.
4. The offer may be general or specific
An offer is called specific when it is made to an individual or a group of individuals.In case of a
specific offer,only the person or group of persons to whom the offer is made can accept or reject
the offer.
5. The offer may be express or implied.

An offer does not necessarily need to be express.it can also be implied.According to Section 9,a
specific offer can be made in words-written or oral.
6. The offer should be a request and not an order.
The person making the offer has the right to set conditions to the acceptance of the offer,but he
does not have any right to set conditions to the non-acceptance of the offer.
7. The offer must be for a possible act
Man can do only what is possible,and the laws accepts that.An offer or a proposal to do
impossible is devoid of practicality or meaning.To make an offer which is humanly impossible is
not recognized by law and as such there can be no compliance.
8. The offer must be communicated
An offer,to be complete,must be communicated to the person to whom it is made so that he can
accept or not accept the offer.Unless the offer is communicated by the offerer (or by his agent) to
the offeree,there can be no acceptance of the offer and as such,no agreement can be reached.
ii. Acceptance
A proposal or offer is said to have been accepted when the person to whom the proposal is made
signifies his assent to the proposal to do or not to do something [Section 2 (b)].
Rules governing acceptance
1. Acceptance must be absolute and unqualified: As per section 7 of the Act, acceptance is valid
only when it is absolute and unqualified and is also expressed in some usual and reasonable
manner unless the proposal prescribes the manner in which it must be accepted. If the proposal
prescribes the manner in which it must be accepted, then it must be accepted accordingly.
2. The acceptance must be communicated
An acceptance must be communicated to the person who made the offer. An offer made by the
intended offeree without the knowledge that an offer has been made to him cannot be deemed as
an acceptance thereto.
3. Acceptance must be in the prescribed mode
Where the proposal prescribes the mode of acceptance, it must be accepted in that manner.
Where the proposal does not prescribe the manner, then it must be accepted in a reasonable
manner.

4. Mere silence is not acceptance

The acceptance of an offer cannot be implied from the silence of the offeree or his failure to
answer, unless the offeree has in any previous conduct indicated that his silence is the evidence
of acceptance.
5. The proposer cannot prescribe the method of refusal
The proposer needs to be informed if the offer made by him is accepted,but he cannot insist on
him being informed of its non-acceptance.It is the right of the offeree to accept the proposal or
not to accept it.
6. An offer once rejected cannot be accepted until it is renewed.
A rejected offer is dead offer and needs to be revived before it can be considered for acceptance.
7. Acceptance may be express or implied
Express acceptance may be written or by word of mouth whereas implied acceptance Could be
reflectes by the action or behavior of the person accepting the offer.The later is also called tacit
acceptance. According to Section 8 of the Act,tacit acceptance can be acceptance by performing
conditions or acceptance by receiving consideration.
8. An action without the knowledge of the proposal is no acceptance
Without the knowledge of the proposal,even if the action conforms to the conditions of the
proposal,it does not constitute an acceptance.Acceptance can be given only by the person to
whom the proposal is made.
9. Acceptance can only be given by the person to whom the offer is made
This is true of a specific proposal which can only be accepted by the person to whom it is made.
10. Acceptance must be made before the lapse or withdrawal of an offer.
If the person making the offer has set a time limit for its acceptance,the offer must be accepted
within that time.

Difference between Fraud and Misrepresentation

Difference between Coercion and Undue influence

1. Express Offer
The offer made by using words spoken or written is known as an express offer.
2. Implied Offer
The offer which could be understood by a conduct of parties or circumstances of case is called
the implied offer.
3. Specific Offer
The offer made to a specific person or a particular person or two or more than two specific
persons.The specific offer is made to an ascertained person.
4. General Offer
It is not necessary that the offer should be made to a specific person.The offer can bemade to the
world at large.If the offer is made to the world at large,it is known as the general or public offer.

5. Cross Offer
When two parties exchange identical offers in ignorance at the time of each others offer, the
offers are called cross offers. There is not binding contract in such a case, as ones offer cannot
be construed as acceptance by the other.
6. Continuous Offer
It is the offer which is open for a continuous period of time,it is also known as the open offer or
the standing offer.
7. Counter Offer
When the offeree offers to qualified acceptance of the offer subject to modifications and
variations in the terms of original offer, he is said to have made a counter offer. Counter-offer
amounts to rejection of the original offer.
Consideration
Section 2 (d) of the Indian Contract Act, 1872 defines consideration 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 an act
or abstinence or promise is called consideration for the promise.
From the above definition it can be inferred that,
1. Consideration must be at the desire of the promisor.
(2) Consideration may move from one person to any other person
(3) Consideration may be past, present or future and
(4) Consideration should be real though not adequate.
Type of Consideration
1. Past Consideration
It is alos known as executed consideration.One party to contract has received the benefit
before formation of contract.
2. Present Consideration
It is received at the time of formation of the contract.It is in process of execution.

3. Future Consideration
It will be received by a party after the formation of the contract.It is also called as executory
consideration.
Legal Requirements Regarding Consideration
1. Considration means doing or not doing something
The consideration is some act or abstinence.Some act means doing something while
abstinence means not to do something.Thus, a consideration can be positive or negative.To
do something is known as positive consideration while not to do something is known as
negative considetation.
2. Consideration must move at the desire or Promisor
The consideration must move at the desire of the promisor.However,it is not necessary that
it must for the benefit of the promisor. It can be for the benefit of a third person also.
3. Consideration can flow either from the promisee or any other person:
The consideration for a contract can move either from the promisee or from any other
person. This point is made clear even by the definition of the word consideration,
according to which at the desire of the promisor, the promisee or any other person, doing
something is consideration.
4. Consideration may be inadequate
Consideration need not necessarily be of the same value as of the promise for which it is
exchanged. But it must be something which can be inadequate as well. Inadequate
consideration would not invalidate an agreement but such inadequate consideration could
be taken into account by the court in deciding whether the consent of the promisor was
freely given.
5. Consideration may be Past,Present or Future
The consideration may be past,present or future.A past consideration is valid in India while
it is not regarded as valid in many other countires.
Past consideration:
When a consideration by a party for a present promise was given in the past i.e. before the
date of the promise,it is said to be a past consideration.

Present Consideration:
A consideration to do or abstain from doing something given simultaneously with the
promise is a present present consideration.
Future Consideration:
When the consideration from one party to the other is to pass subsequent to the act of
doing or abstaining from doing something ,it is called a future consideration.
6. Act Promisor bound to do is not consideration
If the promisor is legally bound or required to perform something as a part of his duty,and he
agrees to do so,it is not a valid consideration.The consideration must be something different
from promisors existing obligation.
7. Consideation must be lawful
The consideration must be lawful.Lawful means as per the provisions of an act.An unlawful
act or benefit received in an unlawful manner is not regarded as the consideration.
8. Consideration should be possible to perform
The consideration must be real and not illusory.It means the consideration should not be
impossible to perform.An act does not recognize impossible performance.It may be
physically impossible or can be legal impossible.
Validity of an Agreement without Consideration/Agreement without
consideration-Exceptions
An agreement without consideration is void. Not only that, even inadequate consideration
would render the enforceability of the contract quite difficult as the free consent of the
parties would become suspect. The Act however contains certain exceptions to this
important rule. These are:
i. On account of natural love and affection:
According to Section 25, An agreement made without consideration is void unless it is
expressed in writing,and registered under the law for the time being in force fot the
registeration of documents,and is made on account of natural love and affection between
parties standing in a near relation to each other.
It follows,therefore,that the following four elements are essential for scuh agreement:

a)The agreement must be written.

b)The agreement must be registered under the prevailing law.
c)The parties to the agreement must be intimately related
d)There must belove and affection between the parties.
ii. Compensation paid for past voluntary services:
A promise to compensate wholly or in part for past voluntary services rendered by
someone to promisor does not require consideration for being enforced. However the past
services must have been rendered voluntarily to the promisor. Further the promisor must
have been in existence at that time and he must have intended to compensate.
iii. Promise to pay debts barred by limitation:
Where there is a promise in writing to pay a debt, which was barred by limitation, is valid
without consideration.
iv. Creation of Agency:
In term of section 185 of the Act, no consideration is necessary to create an agency
v. In case of completed gifts, no consideration is necessary.
This is clear from the Explanation (1) to section 25 of the Act which provides that nothing in
this Section shall affect the validity as between donor and done of any gift actually made.
Legality of object
According to section 10 of The Indian Contract Act, all agreements are contracts if they are
made by the free consent of parties competent to contract,for a lawful consideration and
with a lawful object and are not hereby expressly declared to void.It should be for lawful
consideration and with a lawful object.
What consideration and objects are lawful and what not (Section 23)
The consideration or object of an agreement is lawful,unless:
1. It is forbidden by law
When something is forbidden by law, an agreement to do that is unlawful. Anagreement to
do what has been prohibited by the Indian Penal Code or by someother law cannot be
enforced.

2. Defeat the provisions of law

If the object or consideration of an agreement is of such a nature that, if it ispermitted, it
would defeat the provisions of any law, such an agreement is void.Certain acts may not be
expressly forbidden by law, but if they result incircumventing any law, they cannot be
encouraged
3. Is fraudulent
If the consideration or object of an agreement is to commit a fraud, the agreement is void.
An agreement to avoid competition with one another cannot be considered to be either
fraudulent or opposed to public policy.
4. Agreemen injurious to the person or property of another
If the consideration or the object of an agreement is to cause an injury to theperson or
property of another, the agreement is unlawful, and therefore void.Injury here means harm
which is unlawful, for example, an agreement to commitfraud or a tort
5. Immoral or opposed to public policy
If the consideration or object of an agreement is regarded by a court to be immoral or
opposed to public policy, the agreement is unlawful and void. Public policy means the policy
of the law at a stated time. An act which is injurious to the interest of the society is against
public policy. If an agreement is prejudicial to social or economic interest of the community,
it will be against public policy to enforce such an agreement. On the one hand a persons
right of contractual freedom should be maintained, on the other hand if the contract is
against public policy the law must not allow that to be enforced.
Agreement declared void
As per Section 2(g) of The Indian Contract Act , 1872 An agreement not enforceable by law
is said to be void, and as per Section 2(j) of The Act A Contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable.
Types of agreements expressly declared void:
1. Agreements by or with persons incompetent to contract.
A contract can also be void due to the impossibility of its performance. E g: If a contract is
formed between two parties A & B but during the performance of the contract the object of
the contract becomes impossible to achieve (due to action by someone or something other
than the contracting parties), then the contract cannot be enforced in the court of law and is
thus void.
2. Agreement entered into through a mutual mistake of fact between the parties.

Any agreement with a bilateral mistake is void.(Section 20) :- Where both the parties to an
agreement are under a mistake as to matter of fact essential to agreement , the agreement
is void.
Agreement , the object or consideration of which is unlawful(Section 23)
A consideration is unlawful if It is forbidden by law
It would defeat the provisions of any law.
It is fraudulent
It causes injury to the person or property of another
The court regards it as immoral
The court regards it as opposed to Public Policy.
Agreement made without consideration
4. Agreement in restraint of marriage
Every agreement in restraint of marriage of any person other than a minor, is void(Section
26)
5. Agreement in restraint of trade.
Every agreement by which anyone is restrained from exercised a Lawful profession, trade
or business of any kind is void(Section 27)
6. Agreement in restraint of legal proceedings.(Section 28)
Every Agreement:
1. By which any party is restricted absolutely from enforcing his legal rights
under any contract is void.
2. Which limits the time within which an action may be brought is void.
7. Wagering agreements (Section 30)
An agreement between two persons under which money or moneys worth is payable by
one person to another on the happen or non happening of a future uncertain event is called
a wagering agreement.(Section 30)
8. Impossible agreements (Section 36)
Such an agreement cannot be enforced since it is void whether the impossibility of the
event was known to the parties or not is immaterial.