THE INDIAN CONTRACT ACT, 1872

DEFINATION
 Sec.2(h) “An agreement enforceable
by law.”
 Agreement + enforceability by law =
contract.
 Agreement must create a legal obligation
or duty.
Agreement
 Sec. 2(e), “Every promise and every
set of promises, forming
consideration for each other”
promise
 Sec.2(b), “When a 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.”
 Agreement = Offer + Acceptance.
 Social agreements
 Legal agreements
 Legal agreements are
contracts.
 Essential elements of a valid contract
 Offer and acceptance
 Intention to create legal relationship
 Lawful consideration.
 Capacity of parties – Competency
 Free and genuine consent
 Lawful object
 Agreement not expressly declared void
 Certainty and possibility of performance
 Legal formalities
Classification of Contract
 According to validity
Valid contract,
voidable contract,
void contract,
Illegal contract,
unenforceable contract.
Classification of Contract
o According to formation
Express contract,
Implied contract,
Quasi contract.
Classification of Contract
 According to performance
Executed contract,
Executory contract,
Unilateral and bilateral contracts.
Offer and Acceptance
 For an agreement
There has to be a clear and
definite offer by one person and,

Its unconditional acceptance

by the person to whom the offer is
made.
Offer
 An offer is a proposal by one
party to another to enter in
to a legally binding
agreement with him.
 Offer may be express(spoken or
written words) or
implied.(inferred from conduct)
Constituents of an offer (essential
elements)

 The offer must show the obvious intention

on part of the offerer to be bound by it.
 The offerer must make the offer with the
view to obtain the assent of the offeree.
 It must be definite.
 It must be communicated to the offeree.
 Offer may be conditional
Rules of legal offer
 Offer must be such that as in law it
is capable of being accepted and
giving rise to a legal relationship.
 Terms of offer must be definite,
clear and certain.
 The offer must not thrust a burden
of acceptance on the offeree.
Invitation to offer, a few possibilities

 Display of goods for sale

 Price lists, catalogues
 Advertisements
 Declaration of intention
 Auctions
 Tenders
 Offer of public issue of shares
Termination of offer
 Sec.6 of the Act deals with termination
of offer.
2. Revocation-offer may be revoked at any
time before its acceptance is complete.
3. Lapse of time.(specified time or
reasonable time.)
4. Failure of the acceptor to fulfill the
condition precedent to acceptance.
5. Death or insanity of proposer.
Other instances of termination of offer

 As per sec.6 of the Act.

 Rejection
 Counter offer
 Failure to accept according to the
mode prescribed.
 Subsequent illegality or destruction
of subject matter.
Acceptance
 Acceptance is the act of assenting by the
offeree to an offer.
 It indicates that the person making it is
willing to be bound by the terms of the
offer.
 Acceptance may be express or implied.
 Sec.2(b)’when the person to whom
proposal(offer) is made signifies his
assent thereto, the proposal is said to be
accepted. A proposal when accepted
becomes a promise.(i.e.a contract)
Legal rules as to acceptance
 It must be absolute and unqualified.
 It must be made by the party to whom
the offer is made.
 The acceptance must be expressed in
usual or reasonable manner.
 It must be given in reasonable time.
 It cannot be made in ignorance of offer.
 It must be given before the offer lapses.
 It must be communicated to the offerer.
 Mere mental acceptance is no acceptance.
 (possible cases of acceptance by silence)
Communication of offer, when
complete
 (the spirit of the law is that the
message reaches the concerned party.)
 Sec.4 provides that the communication
of proposal is complete when it comes
to the knowledge of the person for
whom it is made.
 Communication of acceptance, when
complete

 Sec.4 ‘The communication of

acceptance is complete
as against proposer: when it is put in a
course of transmission to him, so as to
be out of power of the acceptor.
as against the acceptor: when it comers
to the knowledge of the proposer.’