INDIAN CONTRACT ACT, 1872

By: Mrs. Kshema Shrivastava

PRESENTATION FLOW
Introduction
Definitions/Interpretations/ terms
Contract: Flow of Events
Types of Contract
Essentials Elements of Valid Contract

INTRODUCTION
We enter into contracts so many times in a day that the
word contract has become an indespensible part of our
life.
Its so much infused in our daily lives that it affects all of
us , for every purchase one does, or take a ride in a bus
, or a company purchasing a whole business etc, all are
examples of such contracts.
Any Business is, in essence, a series of contracts made
on regular basis.

 The Indian Contract Act, seeks to regulate the behavior

of the persons who make such contracts.
It determines the circumstances under which the
agreement or promise shall be legally binding on the
persons making it.
It Also provides remedies, available in the court of Law
against the person who fails to fulfill his contract.
Thus this Law is ubi jus, ibi remedium i.e where there is
a right there is a remedy.

DEFINITIONS/ INTERPRETATIONS/ TERMS

Offer(i.e. Proposal) [section 2(a)]:When one person signifies to
another his willingness to do or to
abstain from doing anything, with a
view to obtaining the assent of that
other person either to such act or
abstinence, he is said to make a
proposal.

Proposal and
offer mean one
and the same
thing and thus
these words can
be used
interchangeably.

Offer [section 2(a)]

When one
person
signifies
his
willingness

to do or to
abstain
from doing
anything

with a view
to
obtaining
the assent
of that
other
person

The
person is
said to
have
made an
offer

for such
act or
abstinence

Examples:
Expression of willingness
To do Something: Renault offers Kwid for Rs 4,00,000 on road price. This is the
offer given by Renault in the open market that the Company/ their dealers will
sell the car for that amount..
Not to do Something: Bank offers not to file a suit if the borrower pay the
outstanding amount.
With a view to obtaining the assent of that other person

 Acceptance 2(b):- When the person to whom the

proposal is made, signifies his assent there to, the
proposal is said to be accepted.
Promise 2(b) :- A Proposal when accepted becomes a
promise. In simple words, when an offer is accepted it
becomes promise.
Promisor and promise 2(c) :- When the proposal is
accepted, the person making the proposal is called as
promisor and the person accepting the proposal is called
as promisee.

 Consideration 2(d):- When at the desire of the

promisor, the promisee or any other person has done or
abstained from doing something or does or abstains
from doing something or promises to do or abstain
from doing something, such act or abstinence or
promise is called a consideration for the promise.
Price paid by the one party for the promise of the other
Technical word meaning QUID-PRO-QUO i.e. something
in return.

 Agreement 2(e) :- Every promise and set of promises

forming the consideration for each other.
AGREEMENT = OFFER + ACCEPTANCE.

Example:

Renault offers Kwid for Rs 4,00,000 on

road price. This is the offer given by
Renault in the open market that the
Company/ their dealers will sell the car
for that amount.

You as the customer accepts this offer.

This offer after acceptance becomes
promise and this promise is treated as
an agreement between the Dealer and
you.

Therefore, an agreement consists of an

offer by one party and its acceptance
by the other.

Agreement = Offer + Acceptance of

offer

 Contract 2(h) :- An agreement enforceable by Law is a

contract

Legal Obligation

Agreement
Contract

All contracts are agreements but all agreements are not contracts.
CONTRACT = AGREEMENT + ENFORCIBILITY BEFORE LAW

 Agreements of moral, religious or social nature are

not contracts
they are not likely to create a duty enforceable by law
parties never intend to create a legal obligation.
In commercial agreement an intention to create legal
relation is presumed to exist unless it is specifically
provided that it does not exist.

Void agreement 2(g):- An agreement not enforceable

by law is void.
Voidable contract 2(i):- An agreement is a voidable
contract if it is enforceable by Law at the option of one
or more of the parties there to (i.e. the aggrieved party),
and it is not enforceable by Law at the option of the
other or others.
Void contract :- A contract which ceases to be
enforceable by Law becomes void when it ceases to be
enforceable.

Contract: Flow of Events

Proposal

Acceptance

Consideration

Agreement

Legally Enforceable

Contracts

Legally not Enforceable

Void

Voidable

Types of Contract
Enforceabilty
Valid
Voidable

Method of
Formation
Formal
Simple

Extent of
performance

Obligation to
perform

Executed
Executory

Unilateral
Bilateral

Void
unenforceable

Illegal

Express

Implied

Quasi

Standard
Form

Contingent

ESSENTIAL ELEMENTS OF A VALID CONTRACT

(Sec.10)
1.Offer & acceptance.
2.Intention to create legal relationship.
3.Consensus - ad - idem.
4.Consideration.
5.Capacity to contract.
6.Free consent.
7.Certainity of Meaning
8.Not Expressly declared Void
9. Possibility of performance.
10.Compliance of necessary Legal Formalities

Offer & Acceptance

An offer involves the following essential elements:
Offer must be given with an intention to create a legal
relationship.
Offer must be definite.
There is a clear cut difference between offer, invitation to
offer, invitation to sale. It is prelude to an offer inviting
negotiations or preliminary discussions.
Example:- Government Tender
A Company invites application from public to subscribe for its shares.
Recruitment advertisement inviting application.

Offer must be communicated.

Mere statement of price of price is not an offer

Legal Rules For Acceptance

Absolute and unqualified

Manner
Communication
By whom
To whom
Before the lapse of the offer

Intention to create legal relationship

Intention to create legal relationship as against social
relationship or illegal/unlawful relationship.

Consensus-ad-idem (Meeting of minds)

i.e., persons must agree to the same thing in the same
sense and at the same time.
For example, a business needing to resupply its
inventory of toys and speaks with a local supplier. The
businessman indicates that he is looking to buy the
supplier's stock, which he takes to be the supply of toys
that the supplier has. The supplier, however, thinks that
the businessman is looking to buy out his business,
hence his "stock" of shares. Because both parties are
not agreeing to the same material exchange there is no
meeting of the minds, and thus no agreement.

Consideration
The Life Blood of Every contract.
The idea of consideration is vital to contract law
because, in order for a contract to be enforceable, there
must be mutuality of obligation. In other words, in order
for a contract to be valid, both parties to the contract
must be required to perform under the contract.

Capacity to Contract
Following
contract
He must
He must
He must

are the condition for a person to enter into

be major
be sound mind
not be disqualified by any other law.

Disqualified persons to enter into a contract

a) Minor
b) unsound person
c)others
i.e alien enemy,
insolvent,
convict,
company/corporationagainst MOA / AOA
.

Free Consent
The Consent given by the parties should be free
from

coercion
undue influence
fraud
misrepresentation
mistake

Not Expressly Declared Void

The terms and condition of the agreement must
be certain and not vague or indefinite.

Certainty of Meaning
Agreement must not be the one, which the law declares to
be either illegal or void.
Examples:
Agreements in restrain of trade
Agreement in restrain of Marriage

Possibility of performance
An agreement to do an act impossible in itself cannot be
enforced.

Compliance of necessary legal formalities

Wherever a particular type of contract is required by the
law to be in writing and registered, it must comply with
the necessary formalities as to writing, attestation, and
registration otherwise it becomes unenforceable.
Example : MOA & AOA of the Company.

Thank You
The only source of knowledge is experience.

Albert Einstein