INTRODUCTION TO

LAW OF
CONTRACT
Author:Prof Vishwanath
CONTENT
 Business Law
Business law is a rule which helps us to regulate and manage our
business transactions and activities system. It has direct relation with trade,
industry and commerce. e.g. insurance act, contract act, tax act, sale of goods
act, agency actetc.
 INDIAN CONTRACT ACT, 1872
Enacted by Parliament of India
Date enacted 25 April 1872
Date commenced 1 September 1872
Total sections 238
Extent All States of India except
the State of Jammu & Kashmir

The Indian Contract Act consists

of the following twoparts:
What is a Contract?
An agreement which is legally enforceable alone is a contract.
Agreements which are not legally enforceable are not contracts but
remain as void agreements which are not enforceable at all or as
voidable agreements which are enforceable by only one of the parties
to the agreement.

“All contracts are agreements, But all agreements are not contracts.”
OFFER/PROPOSAL ACCEPTANCE PROMISE
Offer/Proposal sec 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 aproposal.

Acceptance sec 2(b) - When the person to whom the proposal is made,
signifies his assent there to , the proposal is said to be accepted.

Promise sec 2(b) - A Proposal when accepted becomes a promise. In

simple words, when an offer is accepted it becomes promise.

Promisor and promise sec 2(c) - When the proposal is accepted, the
person making the proposal is called as promisor and the person
accepting the proposal is called aspromisee.
 PROMISE

AGREEMENT

CONSIDERATION
Consideration sec 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-QUOi.e. something in return.

Agreement sec 2(e) - Every promise and set of promises forming the
consideration for eachother.
AGREEMENT ENFORCEABLEBYLAW CONTRACT

Contract sec2(h) - An agreement enforceable by Law is acontract.

 ESSENTIALS OF A VALID CONTRACT

As per Section 10 “All agreements are contracts, if they are

made – by free consent of the parties, competent to contract,
for a lawful consideration and with a lawful object, and not
hereby expressly declared to be void .”
ESSENTIAL ELEMENTS OF A VALID CONTRACT
• Offer and acceptance
• Legal relationship
• Consensus - ad-idem
• Free consent.
• Capacity or competency of parties
• Lawful object
• Lawful consideration
• Certainty and possibility of performance
• Agreements not declared to bevoid
• Legal formalities
Offer and Acceptance: In order to create a valid contract, there must
be an agreement between two parties. An agreement involves a
valid offer by one party and valid acceptance of the same by the
other party.
CASE:BOULTON (vs) JONES.
CASE:HARVEY(vs)FACEY.

Legal relationship: The parties must intend their agreement to result in

legal relations. This means that the parties must intend that if one of
them falls to perform his promise, he shall be answerable for that failure
in law. Duties and rights should be legal and not merely moral. [an
agreement of a purely domestic or social nature is nota contract ]
CASE:WEEKS(vs) TYBALD- 1905
CASE:BALFOUR(vs) BALFOUR-1919
Consensus-ad-idem: The minds of both the parties must be ad-idem. In
other words, the tow parties must have agreed about the subject
matter of the contract at the same time and in the same sense.

Free consent (Permission or Willingness): An agreement must have

been made by free consent of the parties. consent is said tobe free
when it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake.
CASE:RANGANAYAKAMA(vs) ALWARSETHI
Capacity : The parties to a contract must have capacity (legal ability) to
make valid contract.
Section 11:- of the Indian contract Act specify thatevery person is
competent to contractprovided.
 Is of the age of majority according tothe Law which he is subject
 Who is of sound mind and
 Is not disqualified from contracting by any law to which he is subject.

Lawful object :The object of agreement should be lawful and legal.

Consideration or object of an agreement is unlawful if it
 is forbidden by law; or
 is of such nature that, if permitted, would defeat the provisions of any law; or
 is fraudulent;or
Involves or implies, injury to person or property of another; or
Court regards it as immoral, or opposed to public policy.
Lawful consideration : All contracts must be supported by consideration.
Consideration means “something in return” (quid pro quo). It can be cash,
kind, an act or abstinence. It can be past, present or future. However,
consideration should be real and lawful.
A consideration must not be unlawful, immoral or opposed to the public
policy.

Not expressly declared to be void

Possibility of performance

Necessary legal formalities

• A contract may be oral or in writing
 Review

ELEMENTS OF A VALID CONTRACT

AGREEMENT
Two parties REALITYOF LEGALITY
CONSENT

not valid
OFFER ACCEPTANCE • FRAUD SUBJECT
OBJECTIVE
Legal relationship • MISREPRESENTATION MATTER
• DURESS
• UNDUE INFLUENCE
• MUTUALMISTAKE
CONSIDERATION
CAPACITY

not valid
LEGAL BARGAINED •INFANTS WRITING
DETRIMENT/ FOR •MENTAL
LAWFUL •DRUNKARDS
•CORPORATIONS
TYPES OF CONTRACT
 ON THE BASIS OF CREATION

Express Contracts: Where the terms of the contract are expressly agreed
upon in words (written or spoken) at the time of formation, the contract
is said to be expresscontract.

Implied Contracts: Implied contracts in contrast come into existence by

implication.

Most often the implication is by law and or by action.

Tacit Contracts: Tacit contracts are those that are inferred through the
conduct of parties.

Quasi Contracts: A quasi contract is created by law. Thus, quasi

contracts are strictly not contracts as there is no intention of parties to
enter into a contract. It is legal obligation which is imposed on a party
who is required to perform it
 ON THE BASIS OF VALIDITY

Valid contract : An agreement which has all the essential elements of a

contract is called a valid contract. Avalid contract can be enforced by law.

Void contract (2(j) : "A contract which ceases to be enforceable by law

becomes void when it ceases to be enforceable". Thus a void contract is
one which cannot be enforced by a court of law.
Under a mistake of facts [20]
Consideration or object of an agreement is unlawful[23]
Agreement made without consideration [25]
Agreement in restrain of marriage[26]
Restraint of trade [27]
Restrain legal proceeding [28].
Agreement by wage of wager [30]
Voidable contract Section 2[i] : Defines that an agreement which is
enforceable by law at the option of one or more parties but not at the
option of the other or others is a voidable contract.

Result of coercion, undue influence, fraud andmisrepresentation.

Unenforceable contract : Where a contract is good in substance but

because of some technical defect cannot be enforced by law is called
unenforceable contract. These contracts are neither void nor voidable.

Example: Writing registration or stamping.

Illegal contract : Contracts those which are forbidden by law. All illegal
contracts are hence void also, because of the illegality of their nature
they cannot be enforced by any court of law. In fact even associated
contracts cannot be enforced. Contracts which are opposed to public
policy or immoral are alsoillegal.

“All illegal agreements are void agreements but all void agreements are not
illegal.”
 ON THE BASIS OF EXECUTION

Executed contract : An executed contract is one in which both the

parties
.
have performed their respectiveobligation.

Executory contract : An executory contract is one where one or both

the parties to the contract have still to perform their obligations in
future. Thus, a contract which is partially performed or wholly
unperformed is termed as executory contract.
 ON THE BASIS OF LIABILITY

Unilateral contract : A unilateral contract is one in which only one

party has to perform his obligation at the time of the formation of the
contract, the other party having fulfilled his obligation at the time of
the contract or before the contract comes into existence.

Bilateral contract : A bilateral contract is one in which the obligation

on both the parties to the contract is outstanding at the time of the
formation of the contract. Bilateral contracts are also known as
contracts with executory consideration.
THAN K YOU
HAVE A FABULOUS DAY 