Chapter I - The Indian Contract Act

Lesson 1 – Nature of Contracts

 Chapter I.1: Nature Of Contracts

Contents
• Definition and Features of a
Contract
• Essential Elements of a Valid
Contract
• Classification of Contracts
Objectives
After going through the unit, you should
be able to
• Define a contract
• List the features of a contract
• Summarize the essential elements of
a valid contract
• Classify contracts
 Definition and Features of a Contract
Contract is defined as:
 An agreement between two or more parties which creates an
obligation to do or not to do a particular thing
 An agreement enforceable by law

Requirements:

Legal
Agreement Enforceability Contract

Agreements of personal or social or religious matters are not contracts as it does

not create a duty enforceable by law
(Case law: Balfour vs Balfour)
 Agreement

Proposal/Offer When accepted Promise

Agreement
(Set of promises forming consideration for each other)
 Requirements of Agreement

Plurality of Consensus Agreemen

Persons ad idem t

Two of more persons Meeting of minds of the contracting

parties i.e. agreeing about the same
thing and in the same sense

Example :

Raj has two cars – Swift and Alto. He wants to sell Swift but
Neeraj intends to buy Alto. There is no consensus ad idem.
 Formation of a Contract

Mak Mak Cont

es es ract
Offe an Offe
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ror offe ree
offe crea
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 Agreement vs. Contract
Agreement Contract
Offer coupled with acceptance Agreement coupled with legal
enforceability

May not create a legal obligation Necessarily creates a legal obligation

All agreements are not contracts All contracts are agreements

Does not bind the parties Binds the contracting parties

Elements of Valid Contract
Elements of
valid
contract
Certainty and
possibility of
performance

Legal Offer and

acceptance
object

Lawful Intention to
consideratio create legal
n relationship

Free Capacity
consent to contract
 Classification of Contracts

Validity Method of Formation Extent of Performance

 Contracts Based on Validity

Valid Contract ●
A contract which fulfills all the requirements of the Act

●
It is enforceable at the option of one or more of the parties thereto,
Voidable Contract but not at the option of the other or others

Void Contract ●
A contract which ceases to be enforceable by law

●
If a contract is unenforceable, neither party may enforce the others’
Unenforcea-ble Contract obligations.

●
The object or consideration is unlawful for any of reasons such as forbidden by law, defeat the
Illegal Agreement provisions of law, immoral etc. Illegal agreements and the collateral transactions to the same are
void.
 Contracts based on Method of Formation

Method of Formation

Express contracts: Quasi contracts: Law E-commerce

Implied contracts: it is
creates and enforces
Contracts made orally implied contract when it contracts: Contracts
legal rights and
or in writing are called can be inferred from the which are entered
obligations under certain
express contracts conduct of the parties via the internet.
circumstances.
 Contracts based Performance

Performance

Executed contract: It is a Unilateral contracts: A

contract concluded/ Executory contract: A Bilateral contract: A
contract in which the
completed in toto. For contract in which the contract wherein both
obligation to perform
instance, a person purchases parties have yet to the parties have to
vegetables from a shop by
remains only on one person
perform their promises. at the time of the contract. perform their promise.
paying cash.