THE INDIAN CONTRACT ACT, 1872

Chapter 1
Establishing The Contract

Contract: Inseparable Part of Ones Life

You. Buy groceries Board a train Hire a cab Consult a doctor or solicitor Give your any household gadget for repair

Ever realised!
In each of the above and numerous such situations you enter into a contractual obligation.

Contract Defined Under The Act

An agreement enforceable by law is a contract.
Section 2(h)
Agreement: Every promise and every set of promises, forming the consideration for each other. A proposal (offer) when accepted becomes a promise. Thus, a promise implies an accepted Mutuality is the very base of an agreement. Legal obligation: To become a contract , an agreement must be enforceable by law.

Forming a Contract: Essential Steps

1. A contract, essentially , is an agreement. 2. An agreement is a set of two promises, one flowing from the offeror and the other from the offerors counterpart i.e. acceptor. 3. A promise is an accepted offer or proposal. 4. An offer is a promise of performance, which is, however, contingent upon a return promise or an act of forbearance being received in exchange of it. Offer Acceptance Promise AgreementContract

Contract Distinguished From Agreement

Elements. An agreement consists of an offer and its
subsequent acceptance, whereas a contract is composed of an agreement and its legal enforceability. Essence of a legal relationship. An agreement may not create legal relationship. Parties entering into a contract essentially have a common intention of entering into legal obligation. Scope. All agreements may not be contracts but all contracts are primarily agreements. Enforceability by law. A contract is legally enforceable, whereas an agreement is not necessarily so.

Essential Elements of Establishing a Valid Contract

Agreement Intention to create legal relations Legitimate consideration Capacity of parties Genuineness of consent Lawful object Certainty Possibility of performance Agreements not expressly declared void

Types of Contracts
Valid contracts, void contracts, and voidable contracts
Unenforceable contracts and illegal contacts

Executed contracts and executory contracts

Express contracts and implied contracts

Unilateral contracts and bilateral contracts

Quasi contracts

Difference Between Void and Voidable Contracts

S. Point of No. difference 1 Definition Void contract Voidable contract
A contract, which ceases to be enforceable A voidable contract is an agreement which is by law, becomes void when it ceases to be enforceable by law at the option of one or more of enforceable [Section 2 (j)]. the parties thereto, but not at the option of the other(s) [Section 2 (i)].

Nature & validity

A void contract is valid and binding upon A voidable contract is repudiatble at the option of the parties when entered into, but the aggrieved party. It remains a valid contract until subsequent to its formation, it becomes it is set aside or rescinded by the party entitled to unenforceable due to certain reasons. do so. undue influence, error, fraud,

3.

Factors responsible

A valid contract may become void due to Coercion,

supervening impossibility; change of law; a misrepresentation are the main factors responsible contingent contract due to emergence of for rendering a contract voidable. an uncertain event etc.

Enforceability

It cannot be enforced by either party.

It may be enforced or set aside at the option of the aggrieved party.

Difference Between Void and Voidable Contracts

5. Relationship
A void contract under in no When a voidable contract is rejected by the a aggrieved party it results in a void contract. circumstances voidable contract. results

6.

Rights of third party

A void contract confers no rights or Rights acquired under voidable contract by an legal remedies to the third party. innocent third party are not wiped out by such subsequent avoidance of the contract.

7.

Compensation

In case of void contract question of In

case

of

voidable

contract, can

the also

party claim

compensation or damages does not rescinding arise on the non-performance of such damages. contract.

the

contract

8.

Effect of lapse of time

Lapse of reasonable time does not If a voidable contract is not rescinded by the render a void contract enforceable. It aggrieved party within reasonable time it may always remains void i.e., become enforceable at the option of the other

unenforceable.

party (i.e, who induced the contract).

Chapter 2 Offer And Acceptance

A contract is an agreement which is reducible to an offer by one party and its valid acceptance by the other.

Chapter Objectives
Defining an offer Essentials of a valid offer

Offers classified
Revocation, termination of offer Defining acceptance

Legal rules governing a valid acceptance

Communication of offer, acceptance, and their revocation Contracts over phone

DEFINING AN OFFER
An offer is a medium through which a person expresses his intention to enter into a contractual obligation against a promise or an act of forbearance. When one person signifies to another person his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such an act of abstinence, he is said to have made a proposal. Section 2(a)

Three Properties of an Offer

Expression of readiness to do or not to do something. Thus, an offer may involve a positive act or forbearance.

Presence of second party. An offer by a person to himself will ne a nullity.

Intention of obtaining a response. It is made with the intention that the other person accepts it. Mere expression of willingness will constitute no offer.

Characteristics of a Valid Offer

Must intend to create and be capable of creating legal obligations Its terms must be certain

Must be made to obtain the assent of the other party

Must be communicated

May be conditional

Must be distinguished from a query

Firm Offer Vs Invitation to Treat

Examples of Invitations to Treat

Auctions Display of goods for sale in shelf An invitation for tenders

Red herring prospectus

General advertisement of goods

Termination of Offer: Modes of

Revocation/withdrawal/cancellation of offer before the offeree accepts it Failure to fulfil a condition precedent to acceptance

Death or insanity of either party

Refusal or counter-offer

Acceptance differs from the prescribed one

Subsequent illegality or destruction of subject matter

Acceptance
An acceptance is a manifestation of assent to the terms of the offer. 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. Section 2(b) Acceptance to an offer is what a lighted match to is to a train of gunpowder. Thus, an offer becomes irrevocable upon its acceptance.

Legal Rules Governing a Valid Acceptance

Must be made by the offeree Must be unconditional Must be communicated to the offeror May be in any form, oral or written Must be in the mode prescribed by the offeror Must be given within a reasonable time, if no time limit is set Must be given while the offer is in force