The Indian Contracts Act, 1872

MEMBER INTRODUCTION

Riya Agrawal
Rohan Sai Raj
Siddharth Shankar
Salil Aryan
Shalini Singh
The Indian Contract Act,
1872
Contract

Essentials of a valid
Elements of a Contract Types of Contracts
Contract

Agreement Enforceability at law

Offer Acceptance

Legal rules of a Essentials of a Communication Legal rules of a Communication of

Kinds of offer
valid offer Proposal of offer valid acceptance acceptance
What is a Contract?
• The term contract is defined under section 2(h) of the Indian contract
Act, 1872 as –
“an agreement enforceable by law”.
The contract consists of two essential elements:
1) an agreement, and
2) Its enforceability by law.

Agreement: The term ‘agreement’ given in section 2(e) of the Act is

defined as –”every promise and every set of promises, forming the
consideration for each other”.
Agreement = Offer/Proposal + Acceptance
Enforceability by law: An agreement to become a contract must give rise to
a legal obligation which means duly enforceable by law.
Contract = Accepted proposal/Agreement + Enforceability by law
Difference between Agreement and Contract

Agreement Contract
• Every promise and every set of promises, forming
• Agreement enforceable by law. Agreement + Legal
the consideration for each other. Offer +
enforceability.
Acceptance.
• It is used in a narrow sense with the specialization
• It’s a wider term including both legal and social
that contract is only legally enforceable agreement.
agreement.
• Creates a legal obligation. A contract always grants
• It may not create legal obligation. An agreement
certain rights to every party.
does not always grant rights to the parties.
• All contracts are agreements.
• All agreement are not contracts.
 Essentials of a valid Contract
• Two Parties: A contract involves at least two parties- one party making the offer and the other
party accepting it.
• Intention to create legal relationship: There must be an intention of the parties to create legal
relationship, legal obligation between the parties. Agreements of a social or domestic nature do
not contemplate a legal relationship, and as such, they do not give rise to a contract.
Jones v. Padvattan– In this case, it was held that domestic agreements are presumed not to be
legally binding unless there is a clear intention.
• Offer and Acceptance of an agreement:There must be a lawful offer and acceptance for the
formation of an agreement.
Lalman Shukla v Gauri Dutt – In this case, it was held that
‘The mere knowledge of an offer does not imply acceptance by the offeree.
• Free Consent: Two or more persons are said to consent when they agree upon the same thing in
the same sense. Consent would be considered as free consent if it is not caused by coercion,
undue influence, fraud or, misrepresentation or mistake.
• Capacity of the parties: Capacity to contract means the legal ability of a person to enter into a
valid contract. Section 11 of the Indian Contract Act specialties that every person is competent to
contract who (a) is of the age of majority according to the law to which he is subject and (b) is of
sound mind and (c) is not otherwise disqualified from contracting by any law to which he is
subject.

• Consideration: It is referred to as ‘quid pro quo’ i.e. ‘something for something.

Example:- A agrees to sell his books to B for ` Rs100, B’s promise to pay ` Rs100 is the
consideration for A’s promise to sell his books.

• Lawful object: For the formation of a contract, it is necessary that the parties to an agreement
must agree to a lawful object. The object must not be fraudulent, illegal, immoral, against the
public policy or must not imply injury to the any person.

• Not expressly declared to be void: The agreement entered into must not be one of those, which
the law declares to be either illegal or void. An illegal agreement is an agreement expressly or
impliedly prohibited by law. A void agreement is one without any legal effects.
Contracts on the basis of Validity or Enforceability
• Valid Contract – It is an agreement which is binding and enforceable.

• Void Contract – A contract which ceases to be enforceable by law becomes void when it ceases by
enforceable

• Voidable Contract – An agreement which is enforceable by law at

the option of one or more parties but not at option of the
other parties.

• Illegal Contract – It is a contract which the law forbids to be made.

• Unenforceable Contract – Where a contract is good in substance but because of some technical
defect i.e absence in writing, barred by limitation etc.one or both parties cannot sue upon it, it is
described as an unenforceable contract.
Coercion and Undue Influence
COERCION
• Coercion is an act of threatening
which involves the use of
physical force
• It is governed by Sec 15 of the
Indian Contract Act,1872
• The relationship between
parties is not necessary
UNDUE INFLUENCE
• Undue Influence is an act of
influencing the will of the other
party
• It is governed by Sec 16 of the
Indian Contract Act,1872
• The act is done only when the
parties to the contract are in
relationship
Offer vs Invitation to Offer
• Offer – Definite and capable of converting an intention into a contract.
• Defined under Sec 2(a) of The Indian Contracts Act, 1872
• Party making the offer must express willingness ‘TO DO’ or
‘NOT TO DO’ something.

• Example: Marriage Proposal

• However, mere expression does not constitute an offer. Should be made
to obtain the assent.

• Invitation to Offer – Precedes an offer and is only a circulation of an offer.

Acceptance leads to Offer. (Un-defined)
• Example: Lifetime free Credit card

• Offer or Invitation to Offer depends on the INTENTION.

Remedies to Breach of Contract
• Breach of Contract – Contract has been rendered ineffective due to non-
performance

• Remedies – Duty to mitigate the loss caused by breach of contract

• Rescission of Contract – To break/end the contract – rendered ineffective

Example: Delivery of Cement for construction

• Suit upon Quantum Meruit – ‘According to the quantity of work done’

• Suit for Specific Performance – Carry out promise according to Contract

• Suit for Injuction – Exclusiveness – Restrain from doing what was promised to not
be done
Mohori Bibee v/s Dharmodas Ghose(1903)
• Dharmodas, a minor, mortgaged his property to Brahmo Dutt.
• Minor’s mother informed mortgagee’s attorney about the age issue.
• In 1895, Dharmodas initiated for declaration of mortgage as void.

VOID AB INITIO

MINOR WAS INCOMPETENT TO MAKE SUCH MORTGAGE

CANNOT RETURN MONEY SINCE NOT BOUND BY THE PROMISE EXECUTED

IN THE CONTRACT
Thank you!
Special Contracts
• Bailment - Bailor - Bailee - Transfer of MOVABLE goods for some purpose and returned identically thereafter
purpose accomplished - Based on trust - possession is transferred and ownership is not transferred.

• Gratituous - Bailor/Bailee - No remuneration/charge.

• Non-gratituous - Bailor/Bailee - Remuneration/Related Charges

• Termination of Bailment - Time, Purpose accomplished, Additional Expenses, Destruction of Subject matter,
Death of Bailer/Bailee, Gratituous Bailment

• Pledge - Bailment of good as security - payment of debt or performance of promise. Bailor - Pledgor, Bailee -
Pawnee/Pledgee

• Mortgage - Immovable - Owner possession - Home loan

• Pledge - Movable - Lender possession - Gold Loan
• Hypothecation - Movable - Owner Possession - Car loan