Contract Act 1872

Chapter 1
The Indian Contract Act, 1872

Nature of Contract
1
MEANING OF CERTAIN TERMS
(Sec. 2)
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
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer) (Legal obligation)
When the person to whom the proposal is made,
Promise
Signifies his assent thereto,
The proposal is said to be accepted,
A proposal, when accepted, becomes a promise
Every promise
Agreement Sec 2(e)
And
Every set of promises, forming the consideration for each other,
Is an agreement
An agreement enforceable by law is a contract.
Contract Sec 2(h)
Promisor & Promisee When a proposal is accepted
- The person making the proposal is called as promisor; and
- The person accepting the proposal is called as promisee.
When, at the desire of the promisor,
Consideration
The promisee or any other person
Has
- done/abstained from doing something; or
- does/abstains from doing something; or
- promises to do/abstain from doing something,
Such act/abstinence/promise is called a consideration for the promise.
An agreement not enforceable by law is said to be void.
Void agreement
An agreement is a voidable contract if
Voidable contact
It is enforceable by law at the option of one or more of the parties thereto,
It is not enforceable by law at the option of the other or others.
A contract
Void contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
2
MEANING OF CONTRACT
(Sec. 2 & 10)
Definition [Sec. 2 (h)] An agreement enforceable by law is a contract.
Essentials
of
a Following are the two basic elements of a contract.
contract
(a) There must be an agreement
(b) The agreement must be enforceable by law.
In other words, Contract = agreement + enforceability of agreement.
Proposal / Offer
Sec 2(a)
IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

What agreements are
contracts
[Sec. 10]
DISTINCTION BETWEEN AN AGREEMENT AND A CONTRACT
Basic of difference
Meaning
Creation of legal
obligation
One in other
There must be an agreement between the parties

The parties must have an intention to create legal relations.
The parties must freely consent to enter into the agreement.
The parties must be competent to contract.
There must be consideration.
The consideration must be lawful.
The object of the contract must be lawful.
The agreement is not expressly declared to be void.
The legal formalities for entering into such a contract are completed.
It is possible to perform the agreement (Sec. 56)
The terms of the agreement are certain or are capable of being made
certain (Sec. 29)
Agreement
Agreement = offer + acceptance
An agreement does not create a legal
obligation unless it satisfies the
requirements of various provisions of
law.
The term agreement is wider than
contract. An unenforceable agreement
is not a contract.
AGREEMENT TO DO IMPOSSIBLE ACT
Agreement to do an If
impossible act
Contract
Contract = agreement + enforceability
A contract necessarily creates legal
obligations.
Every contract is an agreement.
(Sec. 56)
- An agreement is made to do a particular act;

- At the time of making of agreement, it is certain that such an act is
impossible;
Then - The agreement is void.
- A contract is made to do a particular act;
Agreement to do an If
At the time of making of contract, such an act is not impossible;
act
which
After the contract is made, such an act becomes impossible;
subsequently
Then - The contract has become void.
becomes impossible
Illustrative cases
Situation
Result
A agrees with B to discover treasure by magic
The agreement is void.A and B contract to marry each other. Before the The contract has become void.
time fixed for the marriage, A becomes mad.
A contract to marry B, being already married to C, The agreement is void. A must make
and being forbidden by the law to which he is compensation to B for the loss caused to her
subject to practice polygamy.
by non-performance of his promise.
A contract to take in cargo for B at an American The contract has become void.
port. As Government afterwards declares war
against America.
A contract to act at a theatre for 6 months in a The contract to act on such occasions, on
consideration of a sum paid in advance by B. On which A is unable to act because he is ill,
several occasions A is too ill to act.
becomes void.
2

5.
AGREEMENT VOID FOR UNCERTAINTY (Sec. 29)
ILLUSTRATIVE CASES
An agreement is void, if the meaning of such agreement is
Not certain; or
Not capable of being made certain.
Illustrative cases
Situation
Result
A agrees to sell B a hundred tons of oil
The agreement is void for uncertainty since the
description of oil is not specified.
A agrees to sell B 100 tons of oil of a specified There is no uncertainty and therefore the agreement
description, known as an article of commerce.
is not void.
Mr. A, who is a dealer in coconut oil only, The nature of As trade implies that intends to sell
agrees to sell to B 100 tons of oil
100 tons of coconut oil. So, there is no uncertainty.
A agrees to sell to B all the grain in his granary There is no uncertainty since it is possible to
at Laxmi Nagar.
determine the quantity of grain lying at Bs granary
at Laxmi Nagar.
A agrees to sell to B 1000 Kgs. Of rice at a As the price is capable of being made certain, there
price to be fixed by C.
is no uncertainty to make the agreement void.
A agrees to sell to B his white horse for Rs. 500 There is nothing to show which of the two prices
or Rs. 1000
was to be given. Therefore, the agreement is void.
6
CLASSIFICATION OF CONTRACTS
(Sec. 2&9)
A contract made by words spoken or written.

A contract inferred by
- The conduct of a person; or
- The circumstances of the case.
A contract in which both the parties have fulfilled their
On the basis of Executed contract
obligations under the contract.
execution
A contract in which both the parties have still to fulfill
Executory contract
their obligations.
Partly executed and A contract in which one of the parties has fulfilled his
obligation but the other party is yet to fulfill his
partly executory
obligation.
An agreement which satisfies all the requirements
On the basis of Valid contract
prescribed by law.
enforceability
A contract
Void contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
An agreement not enforceable by law is said to be void.
Void agreement
An agreement is a voidable contract if
Voidable contract
- It is enforceable by law at the option of one or more
of the parties thereto,
- It is not enforceable by law at the option of the other
or others.
An agreement the object of which is unlawful.
Illegal agreement
A contract which fulfils all requirements of a contract
Unenforceable
except some technical requirements. It becomes
contract
enforceable when the defect is subsequently removed.
On the basis of Express contract
creation
Implied contract
Offer / Proposal
7
MEANING OF OFFER
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
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer).
HOW TO MAKE AN OFFER? / MODE OF MAKING OFFER
Express offer
Implied offer
(Sec. 9)
It means an offer made by words spoken or written.

It means an offer inferred by
The conduct of a person; or
The circumstances of the case.
TO WHOM AN OFFER IS MADE?
Specific Offer
General Offer
10
[Sec.2 (a)]
It means an offer made to

(a) A particular person; or
(b) A particular group of persons.
It means an offer which is made to the public in general.
LEGAL RULES AS TO VALID OFFER
Offer must be
communicated
Boulton v Jones
J offered to purchase 50 feet of leather from Z.
Z in the meantime sold his business to B.
Therefore, instead of Z, B supplied the leather to J.
J refused to accept the leather.
It was held that the offer was not communicated to B, and so B had
no legal right to accept the offer made by J.
Therefore, no contract had concluded between J and B.
Carlill v Carbolic Smoke Ball Co.
A pharmaceutical company advertised that it would give 100 Pounds to
anyone who contracted influenza after using their smoke balls for a
certain period.
Mrs. Carlill purchased smoke balls and used them as directed.
Shortly afterwards, she contracted influenza. She claimed the 100 Pounds.
The Court held that the advertisement issued by the pharmaceutical
company was a general offer made to the public at large.
[Mrs. Carlill, being a member of the public, had received the offer
and had acted upon it by using the smoke balls as directed.]
Therefore, a contract was formed between the pharmaceutical company
and Mrs. Carlill, and so Mrs. Carlill could claim 100 Pounds.
Lalman Shukla v Gauri Dutt.
Gs nephew was missing.
L, who was munim of G, went in search of the missing boy.
4
Communication
complete offer
of
An offer must not

thrust the burden of
acceptance on the
transferee
Cross offers do not

conclude a contract
Counter offer
Offer
must
be
distinguished
from
invitation to offer
Meanwhile G issued handbills offering reward of Rs. 501 to anyone who

would trace the boy.
L found the boy and brought him home.
Since L had no knowledge of the offer made by G, he could not accept
such offer.
Since there was no acceptance, there could be no contract, and therefore,
it was held that L was not eligible to receive the reward.
Handerson v Stevenson
X purchased a steamer ticket for traveling from Dablin to White Haven.
On the back of the ticket, certain conditions were printed. One of the
conditions excluded the liability of the company for any loss, injury or
delay to the passengers or their luggage.
X never looked at the back of the ticket and there was nothing to draw his
attention to the conditions printed on the back side.
Xs luggage was lost due to the negligence of the servants of the shipping
company.
Since the steamer company had not taken any steps to ensure that the
conditions printed on the back of the ticket were brought to the knowledge
of the passengers, such conditions do not form part of the contract.
Therefore, X was entitled to recover the damages for loss of his luggage.
Parker v S.E. Rail Co.
P deposited his bags in the cloakroom at a railway station.
On the face of the receipt, the words see back were printed. One of the
conditions printed on the back was the liability of the railway company
shall be limited to $ 10 for any package.
Ps bag was lost. He claimed the actual value of bag amounting to $ 24.
It was held that the disclaimer clause was binding on P since the railway
company had taken all reasonable steps to ensure that the conditions
printed on the back were brought to the knowledge of P.
An offer must not contain any term the non-compliance of which amounts to
acceptance.
Felthouse v Bindley
A wrote to B I will sell you my horse for Rs. 500. If I do not receive a
reply by Sunday next, I shall assume that you have accepted the offer.
B did not reply.
It was held that an offer can not impose the burden on the offeree to reply.
Acceptance is valid only if it is communicated to the offeror.
Since B had not communicated his acceptance to A, there was no contract
between A and B, and therefore A could not sue B.
Two offers which are similar in all respects made by two parties to each
other, in ignorance of each others offer are known as cross offers. Cross
offers do not conclude a contract.
A counter offer amounts to rejection of the original offer.
An invitation to offer does not imply a valid offer.

Offer must be disting- A declaration or a statement merely indicates that an offer will be made or
uished
from
a invited in future.
declaration of intention.
An offer must be The terms of the offer must be
certain.
(a) Definite;
(b) Unambiguous; and
(c) Certain.
11
LAPSE OF AN OFFER
Notice by offeror, i.e.,

Revocation
Lapse of time
Non-fulfillment
of
condition precedent.
Counter offer
Acceptance is not
made in prescribed
mode
Death or insanity of
the offeror or offeree
Rejection by the
offeree
Subsequent illegality
etc.
Revocation of offer means withdrawal or cancellation of the offer.

An offer can be revoked by the offeror anytime. However, revocation is
effective only if it is made before the offer is accepted.
An offer lapses if it is not accepted
Within the time specified in the offer;
Within reasonable time, if no time is specified in the offer.
If an offer requires fulfillment of some condition before the offer can be
accepted, the offer shall lapse if such condition is not fulfilled.
A counter offer results in rejection of the original offer.
If the offeree accepts the offer in a manner which is different from the manner
specified by the offeror, the offeror may refuse to treat such acceptance as
valid, and consequently the offer shall lapse.
An offer shall lapse in the following cases:
(a) Where the offeror dies or becomes insolvent and such fact comes to the
knowledge of the offeree before acceptance of the offer.
(b) Where the offeree dies or becomes insolvent before acceptance of the
offer.
An offer comes to an end if the offeree rejects the offer and communicates
his refusal to the offeror.
If, after making of an offer, the subject matter of the offer is destroyed or the
performance becomes impossible or unlawful, the offer shall lapse.
Acceptance
12
INTRODUCTION TO ACCEPTANCE
(Sec. 2 (b))
of When the person to whom the proposal is made

Signifies is assent
Thereto
The proposal is said to be accepted.
Promise
In case of a specific offer
In case of a general offer
Only that particular person/group Any person if
of persons to whom the specific - He has the knowledge of the
offer has been made and none else.
offer; and
- He fulfils the terms and conditions
of the offer.
(a)
Express acceptance
Mode of acceptance
(b)
Implied acceptance
Definition
acceptance

13
LEGL RULES FOR A VALID ACCEPTANCE
Absolute & unqualified
Acceptance must be
communicated
Acceptance to whom?
Acceptance by whom?
Manner of acceptance.
Time
limit
acceptance
for
Acceptance must be
given before the offer
lapses or revoked
Mode of acceptance
(Sec. 7)
The offeree should assent to all the terms of the offer.

There must be no variation/reservation, i.e., acceptance must be
unconditional.
Acceptance cannot be made in ignorance of the offer.
Mere mental acceptance is no acceptance.
The acceptance must be communicated to the offeror.
Felthouse v Bindley
F made an offer to his nephew to buy the nephews horse for Rs. 500.
The offer stated that if the nephew failed to reply to the offer of F within
10 days, F shall consider that the horse had been sold to him.
The nephew directed his manager not to sell that horse to anybody since
he wanted to sell that horse to F. But, the nephew did not send any reply
to F.
By mistake, the manager sold that horse to some other person.
It was held that nephew was not bound to send notice of refusal to F.
Therefore, failure to send the letter of refusal within 10 days did not
amount to acceptance.
Also, nephews communication of decision to sell the horse of F did not
result in a valid acceptance since such decision was not communicated
to F, the offeror.
Since there was no contract between F and the nephew, F had no right
against the nephew.
Acceptance must be given by the person who has the authority to accept the
offer.
Situation (A) : The offer does Situation (B): The offer prescribes the
not prescribe the manner of
manner of acceptance.
acceptance
The offer must be accepted in The offer must be accepted in the
some usual and reasonable
prescribed manner.
manner.
If the offer is not accepted in the
prescribed manner, the offeror may
approve or reject such acceptance.
Situation (A): The offer does
Situation (B): The offer prescribes the
not prescribe the time limit
time limit.
The offer must be accepted The offer must be accepted within the
within reasonable time.
prescribed time limit.
Acceptance can be given only to an existing offer.
An offer open for a limited period can be accepted only before the
expiry of such specified period.
An offer can be revoked before acceptance.
Acceptance may be given by
Performance of conditions, or
Acceptance of consideration.
7
14

COMMUNICATION WHEN COMPLETE
(Sec. 4)
Communication of
Offer
Acceptance
Communication when complete?

When the offer comes to the knowledge of the offers.
Communication is complete When acceptance is put in a course of
transmission so as to be out of the power of
against the offer
the offeree.
Communication is complete When acceptance to the knowledge of the
offeror.
against the offeree
Communication is complete When revocation is put in a course of
against the person who transmission
So as to be out of the power of the person
makes it who makes it.
Communication is complete When revocation comes to the knowledge of
against the person to whom it the person to whom it is made.
is made -
Revocation
15
TIME LIMIT FOR REVOCATION
Revocation of
Offer
Acceptance
(Sec. 5)
Time limit for revocation

Before communication of acceptance is complete against the offeror.
Before communication of acceptance is complete against the offeree.
Consideration
16
MEANING OF CONSIDERATION
(Sec. 2 (d))
When, at the desire of the promisor,
The promisee or any other person
Has done/abstained from doing, or does/abstains from doing, or promises to do/to abstain from
doing, something,
Such act/abstinence/promise is called a consideration for the promise.
17
ESSENTIALS OF A VALID CONSIDERATION
Consideration must
move at the desire of
the promisor.
Consideration may
move from promisee
or any other person.
An act or abstinence shall constitute a good consideration only if it is done at

the desire of the promisor.
No
adequacy
consideration
required.
of
So long as there is consideration for promise, it is immaterial as to who has

furnished it.
If a party receives consideration, the contract is valid, even though the
person furnishing the consideration is not a party to the contract.
Where a third party furnishes the consideration, it is valid consideration.
As long as there is consideration in a contract, it is immaterial as to who has
given this consideration. This rule is generally stated as Privity of
consideration is not required.
The law requires that there must be consideration in every contract.
However, adequacy of consideration is not required. Even if it is proved
that such consideration is inadequate, the contract is not void.
The fact of inadequacy of consideration shall be given due weightage while
determining whether the consent of the promisor was freely given or not.
8

It must be different
from
promisors
existing obligation
Consideration must
be lawful
It must be real, and
not illusory
18
Consideration received by a party must be something more than the other

partys contractual and legal obligation.
An agreement is void if the consideration furnished by any of the parties is
unlawful.
Consideration received by a party must be of some value.

Consideration must not be illusionary (i.e., existing in name)
EXCEPTIONS TO THE RULE: NO CONSIDERATION
Agreements made on
account of natural
love and affection
Conditions
(Sec. 25) NO CONTRACT
The agreement is made in writing.

The agreement must be registered.
The agreement must be made between the parties standing in immediate
relation to each other.
There must be natural love and affection between the parties. However,
mere nearness of relationship does not imply natural love and affection.
Compensation
for A party renders some services to the other party or performs the legal
past
voluntary
obligation of the other party.
services - conditions
The services are rendered without any desire of the other party, i.e., the
services are rendered voluntarily.
The other party afterwards promises to compensate the former party for the
services rendered to him.
Promise to pay a Meaning of time A creditor can sue the debtor for recovery of his money
by going to the Court of law. However, if the creditor
time-barred debt
barred debt
fails to institute the suit within 3 years of debt
becoming due for payment, the debt is said to be time
barred debt, i.e., the creditor cannot institute the suit
after the expiry of said period of 3 years.
The general rule is that an agreement to pay a time
General rule
barred debt is void.
An agreement to pay a time barred debt is enforceable
Exception
if the following conditions are satisfied:
The debt is a time barred debt.
The debtor promises to pay the time barred debt.
The promise is made in writing.
The promise is signed by the debtor.
Completed gift
Agreement to make a gift is not enforceable.
However, once a gift has actually been made, the donor cannot demand it
back on the ground that there was no consideration.
No consideration is necessary to create an agency.
Agency
No consideration is necessary for an agreement to receive less than what is due.
Remission
In a contract of guarantee, consideration received by the principal debtor shall
Guarantee
be sufficient consideration for the surety.

19
PRIVITY OF CONTRACT
Privity
consideration
(Sec. 25)
of
It is well established that privity of consideration is not required.

Consideration may move from promisee or any other person.
So long as there is consideration for promise, it is immaterial who has
furnished it.
Privity of contract The general rule is that only the parties to a contract can sue.
Meaning
In other words, if a person is not a party to the contract (i.e., a stranger to
contract), he cannot sue.
Privity of contract Dunlop Pneumatic Tyre Co. V Selfridge and Co.
Example
D entered into a contract of sale of certain tyres to P.
The contract provided that P shall not sell the tyres below the list price.
Also, the contract provided that P shall, at time of resale, impose a
condition on the retailer that sale by retailer shall not be made below the list
price.
P sold certain tyres to S.S. resold certain tyres below the list price.
In a suit instituted by D against S, the Court held that such suit was not
maintainable since there was no privity of contract between S and D.
Beneficiary is not a party to the agreement creating a
Privity of contract Creation of a trust.
trust.
Exceptions
However, the beneficiary is allowed to sue the trustee
for enforcement of trustees duties.
Marriage / Family Where a marriage or family settlement is made, the
person who is a beneficiary under such settlement is
arrangements
entitled to sue even though he may not be a party to sue
settlement.
The person, who becomes an agent of a third party by
Acknowledgement
acknowledgement, can be sued by such third party.
Assignment of a An assignee is entitled to exercise all the rights which
could have been exercised by the assignor previously,
contract.
even though the assignee was not a party to the contract
as originally made.
CAPACITY OF PARTIES
20
EFFECTS OF MINORS AGREEMENT
Agreement is void ab A minor is incompetent to enter into any contract. Therefore, any agreement
initio, i.e., without made by a minor is void ab initio, i.e., it is without any legal effect.
any legal effect.
Mohori Bibi v Dharmodas Ghose (IMP.)
A minor entered into an agreement for mortgage of his property.
He was paid a certain amount for mortgaging the property.
Afterwards, the mortgagee filed a suit against the minor for recovery of
money paid to the minor.
It was held that the money was paid to the minor under a void agreement,
and therefore the mortgage was not valid.
10

An agreement for the
benefit of minor is
enforceable by minor
The principle laid down in Mohori Bibi v Dharamodas Ghose applies only
if the agreement creates an obligation of a minor.
Where, an agreement is for the benefit of a minor, the agreement is not
void and therefore the minor can enforce such agreement.
If the other party to the agreement fails to perform his part of obligation, the
minor can claim restitution.
Restitution
Khan Gul v Lakha Singh
Following principles were laid down in the above case:
The Court may grant relief to the other party if the other party had entered
into a contract with the minor on the basis of a misrepresentation made by
the minor.
If the minor had received some consideration under the agreement, the
Court may grant restitution to the other party.
However, the minor shall not be personally liable. In other words,
restitution shall be made only to such an extent as the estate of minor has
been benefited.
The power of the Court to grant relief is discretionary in nature.
The Court shall not grant relief if the other party had the knowledge of the
fact that it was entering into an agreement with a minor.
No estoppel against a If the rule of estoppel is applied against a minor, it would amount to an
minor
indirect way of enforcing a void agreement.
Therefore, the rule of estoppel does not apply against a minor.
No specific
The other party cannot demand that minor should perform the obligation
performance
which he had agreed to perform under the agreement.
No ratification by a Ratification means acceptance of a transaction already done.
minor
An agreement entered into by a minor cannot be ratified by him after he has
attained majority.
Where on attaining majority, a minor agrees to pay for the goods supplied by a
third party, such agreement is void for want of consideration.
No liability of guardian The guardian of a minor shall not be liable for acts of a minor.
Contracts
by
a The contract by a guardian on behalf of a minor shall be valid if
guardian Valid
(a) The contract is for the benefit of minor; and
(b) The guardian has the authority to enter into such a contract.
Minors liability for Nature of As per Sec. 68, a minor is liable for necessities supplied to
necessities
liability
(a) him; or
(b) Any other person who is dependent on the minor.
(a) The liability is only for necessities of life. The term
Conditions
necessity means necessities of life as per the social status
and conditions of life of the minor.
(b) The minor is not already in possession of such necessities.
(c) The minor shall not be personally liable.
(a) Minor cannot be a guarantor.
Position of minor
(b) Minor may be admitted as a member where the shares are fully paid up.
11

(c)
(d)
21
Minor can be an apprentice provided he is of at least 14 years of age.

Minor cannot be a partner in a firm. However, he may be admitted to the
benefits of partnership.
PERSONS OF UNSOUND MIND
(Sec. 12)
Meaning of sound A person is said to be of sound mind if he is able to mind
understand the contract; and
Form a rational judgment.

The law presumes that every person is of sound mind.
Presumption
Requirements of law At the time of entering into a contract, a person must be of sound mind. A
person can enter into a contract in accordance with the following principles:
Nature of person
When can he enter into a contract?
A person of sound He can enter into a contract at all the times.
mind
He cannot enter into a contract when he is of
unsound mind.
A person of unsound He can enter into a contract only at such intervals
mind.
of time, if any, when he is of sound mind.
Burden of proving otherwise
Burden of proof
Case
A person who is The burden of proving that he was of unsound mind
usually of sound mind at the time of entering into the contract lies on the
person who challenges the validity of the contract.
A person who is The burden of proving that he was of sound mind at
usually of unsound the time of entering into the contract lies on the
person who affirms the contract.
mind.
22
PERSONS DISQUALIFIED UNDER LAW
Company
Alien enemy
Foreign diplomats
A company is a legal person and therefore it can enter into a contract in its
own name.
However, a company is disqualified to enter into any contract which falls
outside the object clause of memorandum
- is suspended until the war is over;
Existing contract
- is discharged, if such contract is against public
policy.
- cannot be entered into until the war is
Fresh contract
over
- An existing contract can be enforced;
Permission of CG
- A fresh contract can be entered into.
Right to sue others
Available
Can be sued
- Only in the following cases:
- (a) Where he submits himself to the Court
- (b) Where approval of CG is obtained.
12

Convict
Existing contract
Fresh contract
Permission of CG
Is suspended until his conviction is completed.

Cannot be entered into
An existing contract can be enforced.
A fresh contract can be entered into.
Free Consent
23
COERCION - CONDITION
(a) Acts forbidden by

IPC
Unlawful
detention of property
(b) Intention
(Sec. 15)
Actually committing an offence forbidden by IPC; or

Threatening to commit an offence forbidden by IPC
Actually detaining the property; or
Threatening to detain the property
Causing any person to enter into an agreement.
Other points :
Applicability
of IPC is not relevant
It is irrelevant as to whether or not IPC is in force

At the time when coercion is employed; or
At the place where coercion is employed.
How coercion may Coercion may proceed from

proceed?
A party to the contract; or
Stranger to contract.
Against
whom Coercion may be directed against coercion may be A party to the contract; or
directed?
Stranger to contract
24
UNDUE INFLUENCE - CONDITIONS
(Sec. 16)
Relations
between One party is in a position to dominate the will of the other.
the parties
Use of the dominant The dominant party uses his dominant position.
position
Dominant
party The dominant party obtains an unfair advantage by way of entering into a
obtains an unfair
contact.
advantage
Undue influence was employed/not employed burden of proof.
Unconscionable
The burden of proof is on the dominant party.
transactions
The dominant party has to prove that undue influence was not employed.
Any
other The burden of proof is on the weaker party.
transaction
The weaker party has to prove that undue influence was employed.
25
ESSENTIALS OF FRAUD
By a party to the
contract
(Sec. 17)
It must be proved that fraud was committed by(a) A party to the contract; or
(b) Anyone with the connivance of a party to the contract.
13

The party makes a
representation
The party has made a representation of a fact.

An opinion, a statement of expression, or a statement of intention does not
constitute a fraud.
The representation is false
The misrepresentation was made willfully.
The misrepresentation was made with a view to deceive the other party.
The other party is actually deceived.
The other party has suffered a loss.
When is a representation considered as false?

Suggestion of a false
fact
Concealment of a
fact
Promise
An act/omission
Any other act
Where the person makes a representation of a fact knowing that such

fact is not true.
Where the person conceals a fact even though he has knowledge of such
a fact.
Where a person makes a promise without any intention of performing it.
Any act omission declared by law as fraud also amounts to fraud.
Any other act fitted to deceive also amounts to fraud.
Silence as fraud
General rule
Exceptions
26
Mere silence, which is likely to affect the willingness of the other party,
is not a fraud.
Where the parties stand in fiduciary relationship.
When silence is equivalent to speech.
Partial disclosure of truth which deceives the other party is a fraud.
ESSENTIALS OF FRAUD
(Sec. 18)
By a party to the contract.
The party makes a representation.
The representation is false.
The misrepresentation was made innocently.
The misrepresentation was not made with a view to deceive the other party.
The other party has actually acted.
27
MISTAKE
Mistake of Indian
law
Bilateral mistake
Unilateral Mistake
(Sec. 20 & 22)

The contract is not voidable
The agreement is void if(a) The mistake relates to a fact;
(b) Such fact is material to the agreement; and
(c) Both the parties are at mistake.
Bilateral mistake may be
(a) Mistake as to the subject matter.
(b) Mistake as to the possibility of performance.
The contract is neither void nor voidable.
14
Legality of object and consideration

27
UNLAWFUL OBJECT OR CONSIDERATION-
(Sec. 23)
MEANING AND EFFECTS.

Circumstances
which
object
consideration
unlawful
Legal effect
29
do An agreement is unlawful if,

by It involves doing of an act which is forbidden
by any law for the time being in force.
Defeating the provisions of An agreement is unlawful if,
any law
It is of such a nature that if permitted
It would defeat the provisions of any law
Even though it is not directly prohibited by
any law.
An agreement is unlawful if
Fraudulent
It is made to make a fraud on any person.
Involves injury to any An agreement is unlawful if
person or his property.
It is made for the purpose of causing injury
to
- Any other person; or
- Property of another person.
Immoral or opposed to An agreement is unlawful
public policy
If, the Court regards that object or
consideration of such agreement is
- immoral; or
- opposed to public policy
Every agreement of which the object or consideration is unlawful is void.
in An agreement to
or something forbidden
is law
WHEN IS OBJECT OR CONSIDERATION SAID TO BE AGAINST PUBLIC POLICY
Agreement for trading with enemy
Agreement interfering with personal liberty.
Agreement interference with parental duties
Agreement interfering with marital duties..
Agreement interfering with course of justice.
Agreement for improper promotion of litigation.
Agreement for stifling prosecution
Maintenance agreement.
Champerty agreement.
Agreement to do an act against the duty of a person.
Marriage brokerage agreement.
Agreement not to bid.
Agreement to create monopolies or to eliminate or reduce competition.
Agreement for sale of public offices and titles.

15
30

MAINTENANCE AND CHAMPERTY AGREEMENT
Meaning of maintenance
agreement
Legal
effect
of
maintenance agreement
Meaning of Champerty
agreement
Legal effect of champerty

agreement
31
A party agrees to provide assistance (Financial or otherwise) to

another party to institute or defend a suit.
The person providing such assistance has no interest in such suit.
The party who receives such assistance agrees to pay something
in return to the person who provides such assistance.
The maintenance agreement is valid, if it is bonafide and the
payment the person providing such assistance is reasonable.
A party agrees to provide assistance (financial or otherwise) to
another party to institute or defend a suit.
The person providing such assistance has no interest in such suit.
The party who receives such assistance agrees to share the
proceeds from the suit received by him in return to the person
who provides such assistance.
The Champerty agreement is valid, if it is bonafide and the
share of proceeds paid to the person providing such assistance is
reasonable.
AGREEMENTS UNLAWFUL IN PART
(Sec. 25)
An agreement containing Whether unlawful part can be separated from unlawful partlegal and illegal parts.
If yes
Lawful part can be enforced; or
- Unlawful part cannot be enforced.
If no
- The whole agreement is void.
A reciprocal agreement The reciprocal promise to do
containing legal and illegal
Legal things can be enforced
parts
Illegal things - cannot be enforced.
An agreement containing The alternate promise to do
legal and illegal parts
Legal things can be enforced
Illegal things - cannot be enforced.
Void Agreements
32
AGREEMENTS IN RESTRAINT OF MARRIAGE

(Sec. 26)
Every agreement in restraint of the marriage of any person is void.
33
AGREEMENTS IN RESTRAINT OF TRADE
(Sec. 27)
Agreements in restraint of Every agreement by which

trade is void
Anyone is restrained from exercising
A lawful profession, trade or business of any kind
Is void
To that extent.
Burden of proof
Party supporting the contract must show that the restraint is
reasonably necessary to protect his interests.
Party challenging the contract must show that the restraint is
injurious to the public.
16

Exceptions to Sec. 27
(a)
Such restriction must relate to a similar business.
Sale of goodwill
(b)
Such restriction must be within specified local limits.
(c)
Such restriction must be for the time so long as the buyer or any
person deriving title to the goodwill from him, carries on a like
business in the specified local limits.
(d)
Such specified local limits should be reasonable having regard to
the nature of the business.
Restriction on existing An agreement by a partner not to carry on any business other than that
of the firm is valid.
partner
An agreement may provide that an outgoing partner will not
Restrictions on outgoing (a)
carry on a similar business after dissolution of the firm.
partner
(b)
Such restriction must be within specified local limits or within a
specified period.
(c)
The restriction should be reasonable having regard to the nature
of the business.
An agreement may provide that some or all of the partners will
Restrictions on partners (a)
not carry on a similar business.
upon or in anticipation of
(b)
the dissolution of the firm
specified period.
(c)
of the business.
At the time of sale of goodwill of the firm, a partner may agree
Restriction in case of sale (a)
that he will not carry on a similar business.
of goodwill of a firm.
(b)
specified period.
(c)
of business.
34
AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS (Sec. 28)
Agreement
restricting An agreement by which
Any party is restricted absolutely
enforcement of rights
From enforcing his legal rights under any contract is void.
Agreements
limiting An agreement which limits the time within which an action may be
brought is void.
period of limitation
(a)
An agreement is not void merely because it provides that any
Exceptions
dispute arising between two or more persons shall be referred to
arbitration.
(b)
An agreement is not void merely because it provides that any
dispute that has arisen between two or more persons shall be
referred to arbitration.
35
WAGERING AGREEMENTS
Meaning
Effects
of
agreements
(Sec. 30)
An agreement between two persons under which money or moneys

worth is payable, by one person to another on the happening or nonhappening of a future uncertain event is called a wagering agreement.
(a) The agreement is void.
wagering
(b) The agreement is illegal in the states of Maharashtra and Gujrat.
(c) No suit can be filed to recover the amount won on any wager.
17

(a) Agreement to pay prize money not exceeding Rs. 1,000
Agreements not held as
(b) An agreement to pay a prize exceeding Rs. 500 to the winner of
wagers
a horse race is not a wager.
Contingent Contracts
36
INTRODUCTION TO CONTINGENT CONTRACTS
(Sec. 31)
Meaning
of A contingent contract is a contract to do or not to do something,
contingent contract
If some event, collateral to such contract, does or does not happen.
(a) It is a contract to do or not to do something.
Essentials features of
a contingent contract
(b) This contract is dependent on happening or non-happening of an
event.
(c) Such an event is a collateral event, i.e., it is collateral to the contract,
i.e., the event must not depend upon the mere will of a party.
(d) The event is uncertain.
37
INTRODUCTION TO CONTINGENT CONTRACTS
Contract contingent
upon
Happening of an
event
Non- happening of a
future event
Happening of an
event within a
specified time
Non-happening of an
event within a fixed
time.
Future conduct of a
living person.
Impossible events
When can it be enforced?

When such event has happened.
(Sec. 31)
When does it become void?
When the happening of such event

becomes impossible.
When the happening of such event When such event has happened.
becomes impossible.
When such event has happened within When the happening of such event
becomes impossible before the
the specified time.
expiry of specified time.
When such event has not happened
within the specified time.
When the happening of such event When such event has happened
becomes impossible before the expiry within the specified time.
of specified time.
When such event has not happened
within the specified time.
When such person acts in the manner When such person does anything
which makes the desired future
as desired in the contract.
conduct of such person
(a)
Impossible; or
(b)
Dependent upon certain
contingency.
Such an agreement cannot be enforced since it is void. Whether the
impossibility of the event was known to the parties or not is immaterial.
18
Quasi Contracts
38
INTRODUCTION TO QUASI CONTRACTS
It means a contract which lacks one or more of the essentials of a

contract.
Quasi contracts are declared by law as valid contracts on the basis of
Basis of quasi contract
principles of equity, i.e., no person shall be allowed to enrich himself at
the expense of another.
Legal effect of a quasi The legal obligations of parties remain same in case of a quasi contacts
also, i.e., the parties will have same obligations and rights as if such
contract.
quasi contract fulfils all the essentials of a contact.
Meaning of a quasi contract
39
SUPPLY OF NECESSARIES TO PERSONS INCOMPETENT
(Sec. 68)
TO CONTRACT
A person who is incompetent to contact is made liable u/s. 68.
The liability of an incompetent person arises if necessities are supplied
to
Such person (.e., incompetent person); or
Any other person who is dependent on such incompetent person.
Liability of incompetent The person who supplies necessities to the incompetent person is
person
entitled to be reimbursed from the property of such incompetent
person.
However, the incompetent person is not personally liable.
Meaning of necessities
Necessities means necessaries suitable to the conditions in life of
the person to whom such necessities are supplied.
Who is made liable u/s. 68?
Conditions of Sec. 68
40
PAYMENT BY A PERSON WHO IS INTERESTED IN A
TRANSACTION
Legal effect of Sec. 69
41
(Sec. 69)
One person is legally bound to make a payment.

Some other person makes such payment.
The person making such payment is not legally bound to make such
payment.
The person making such payment is interested in paying such
amount.
If all the conditions of Sec. 69 are satisfied, the person who is
interested in paying such amount shall be entitled to recover the
payment made by him.
OBLIGATION OF PERSON ENJOYING BENEFIT OF
(Sec. 70)
NON-GRATUITOUS ACT
A person has lawfullyo
Done something for another person; or
o
Delivered something to another person.
Such person must have actedo
Voluntarily; and
o
Non-gratuitously
19
The other person has enjoyed the benefit of

o
The act done for him; or
o
The thing delivered to him.
If the conditions of Sec. 70 are satisfied, there will be a quasi
contract between the parties.
Consequently, the party who has done something or delivered a
thing shall be entitled to recover its value from the person who
obtained the benefit of the same.
42
FINDER OF GOODS
A finder of goods has same rights and duties as that of a bailee.
(Sec. 71)
43
MONEY PAID UNDER A MISTAKE OR COERCION
(Sec. 72)
A person has o
Paid money to another person; or
o
Delivered something to another person.
Such person must have actedo
Under a mistake; or
o
Under coercion
If the above conditions are satisfied, there will be a quasi contract
between the parties.
Consequently the party who has paid money or delivered a thing
shall be entitled to recover its value from the person who obtained
the benefit of the same.
Performance of a Contract
44
OBLIGATIONS OF PARTIES TO CONTRACTS
Actual performance
( Sec. 37 & 38)
Promisor makes an offer of performance to the promisee.

The offer has been accepted by the promisee.
Offer to perform/ Tender / Promisor makes an offer of performance to the promisee.

Attempted performance
The offer has not been accepted by the promisee.
45
TYPES OF TENDERS AND THEIR EFFECTS
Tender
services
of
goods
Tender of money
and Goods or services need not be offered again if

The promisor is
(a)
Discharged;
(b)
Not required to offer again;
(c)
Not responsible for non-performance;
(d)
Is entitled to sue the other party;
The debtor remains liable to pay the debt.
The debtor is discharged from liability for payment of interest from the
date of tender.
20

46
CONDITIONS OR ESSENTIALS FOR A VALID TENDER (Sec. 38)

(a) The tender must be unconditional
(b) The tender must be for the whole obligation.
(c) The tender must be given at a proper time.
(d) The tender must be given at a proper place.
(e) The tender must give a reasonable opportunity of inspection.
(f) The party giving the tender must be wiling to perform his obligation.
(g) The tender must be made to the proper person.
(h) The tender must be made for the exact amount of money.
47
PERSONS LIABLE FOR, & ENTITLED TO,
(Sec. 40 & 42)
PERFORMANCE
(a)
(b)
(c)
(d)
48
Persons liable for performance

Promisor
Agent of promisor
An of the several joint promisors
Legal representative of a promisor
PERFORMANCE OF JOINT PROMISE
(a)
(b)
(c)
(d)
49
(a)
(b)
(c)
(d)
Persons entitled to performance

Promisee
Agent of promise
Joint promises
Legal representative of a promisee.
(Sec. 42)
All the joint promisors are jointly and severally liable. However, the contract between the
joint promisors may provide otherwise.
A joint promisor may claim contribution from other joint promisors, if he is compelled to
perform the whole promise.
A joint promisor may claim contribution from other joint promisors, if any other joint
promisor makes a default in performance of his promise.
Where one of the joint promisors is released, other joint promisors shall continue to be
liable.
APPROPRIATION OF PAYMENTS
Application
of
payment where debt
to be discharged is
indicated
Application
of
payment where debt
to be discharged is
not indicated.
(Sec. 59 to 61)
A debtor owes several distinct debts to the creditor.

The debtor makes a payment to the creditor.
The debtor intimates the creditor that the payment made is to be applied to
the discharge of some particular debt.
The creditor has no option but to apply such payment for the discharge of
such particular debt.
The debtor does not indicate the debt for which the payment is to be
applied.
The creditor has the discretion to apply such payment for any lawful debt
which is due to him from the debtor.
21

Application
of
payment where none
of the parties makes
the appropriation

The debtor does not indicate the debt for which the payment is to be
applied.
The creditor accepts such payment but does not apply such payment for
any lawful debt which is due to him from the debtor.
The payment shall be applied in discharge of the debts in order of time.
Discharge of a contract
50
MEANING OF DISCHARGE OF A CONTRAT

Discharge of contract means termination of contractual relations between the parties to a
contract.
51
MODES OF DISCHARGE OF A CONTRACT

1.
Discharge by performance
2.
Discharge by impossibility of performance.
3.
Discharge by mutual agreement.
4.
Discharge by lapse of time.
5.
Discharge by operation of law
6.
Discharge by breach of contract.
52
DISCHARGE BY PERFORMANCE
Actual performance
Attempted perform-ance
or tender
53
(Sec. 37 to 38)
When both the parties perform their respective obligations in

accordance with the terms of the contract, the contract is discharge.
Where a valid tender is not accepted by the other party, the promisor
is discharged.
DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE
Meaning of supervening
impossibility
(Sec. 56)
No impossibility existed at the time of making of the contract.

The impossibility arises subsequently to the formation of the contract.
The impossibility arises because of(i) Change in circumstances beyond the contemplation of parties; or
(j) Change in law.
The impossibility is of such a nature that it makes the performance of
a contract impossible or illegal.
If particular state of things, which forms the basis of a contract, ceases
to exist or occur, the contract is discharged.
Krell v Henry
X hired a room from Y for viewing the coronation process of Kind
Edward.
The procession was cancelled because of Kinds illness.
Since the ultimate and only purpose of the contract was defeated, the
contract was discharged.
22
Partial failure of objects or partial impossibility does not discharge a

contract.
H.B. Steamboat Co. v Hulton
X agreed to hire a boat from Y for the purpose of viewing the naval
review on the eve of coronation of kind and for sailing around the
fleet.
Due to kings illness, the naval review was cancelled, but the fleet was
assembled.
X used the boat for sailing around the fleet.
Although the primary purpose of the contract was defeated, the
secondary purpose was fulfilled and therefore, the contract was not
discharged by supervening impossibility.
Effects of supervening
impossibility
55
The contact becomes void. All the parties are discharged from their
respective obligations.
Restitution is allowed.
DISCHARGE BY MUTUAL AGREEMENT
Novation
Alteration
Remission
Rescission
(Sec. 62 to 63)
Novation means substitution of a new contract in place of the original

contract.
The new contract may beo
Between the same parties; or
o
Between different parties.
A new contract is entered into in consideration of discharge of the old
contract. In other words, the consideration for the new contract is the
discharge of the original contract.
Alteration means a change in one or more of the terms of a contract
with mutual consent of parties.
An alteration discharges the original contract and creates a new
contract between the parties.
However, the parties to the new contract remain the same.
Remission means acceptance of a lesser consideration than agreed to
in the contact.
A promise may
o
Dispense with (wholly or in part) the performance of a promise
made to him; or
o
Extend the time for performance due by the promisor; or
o
Accept a lesser sum instead of the sum due under the contract;
or
o
Accept any other consideration than agreed to in the contract.
No consideration is necessary for remission.
It means cancellation of a contract by one or all the parties to the
contract.
(a) A party whose consent was not free may avoid the contract.
(b) A party to the contract may rescind a contract if breach of
contract is made by the other party to the contract.
(c) All the parties may mutually agree to bring the contract to an
end.
23
Waiver
Merger
55
56
Waiver means intentional relinquishment of a right under a contract.

Conversion of an inferior right into a superior right is called as
merger.
The effect of conversion is that the contract under which inferior right
is created is discharged.
DISCHARGE BY LAPSE OF TIME
Where the time of performance by a party is due but the party fails to perform within the time
specified, the contract is discharged by non-performance.
DISCHARGE BY OPERATION OF LAW
Death
Insolvency
Unauthorized material
alteration
Merger of rights.
57
DISCHARGE BY BREACH OF CONTRACT
Meaning of breach
Consequences of breach
58
Contracts involving personal skill, knowledge or ability of the

deceased party are discharged automatically.
The insolvent is discharged from liability on all contracts entered into
upto the date of insolvency.
An alteration which changes the substance (i.e., legal effect or basic
character) of a contract is called as material alteration.
If the rights and liabilities arising under a contract vest in the same
person, the contract is discharged.
Failure of a party to perform his part of contract is called as breach.

The other party is relieved from performing its part of obligation.
It gets a right to proceed against the party at fault.
KINDS OF BREACH
(Sec. 39)
Actual breach
Time when breach

takes place
Manner in which
actual breach may
take place
Anticipatory breach
Meaning of
anticipatory breach
Modes of
anticipatory breach
On the due date of performance

During performance.
Where a party fails to perform.
Where a party refuses to perform.
Where a party acts in such a manner that it
becomes impossible for him to perform.
Where a party declares his intention of not
performing the contact before the performance of
contract is due.
(a) Express Repudiation. Where a party refuses
to perform his obligation before the
performance has become due.
(b) Party disables himself. Where a party acts in
such a manner that it is impossible for him to
perform, i.e., the party has disabled himself
from performance that he had promised.
Remedies for Breach of a Contract

59
REMEDIES FOR BREACH OF A CONTRACT.

Following remedies are available in case of breach of a contract:
1. Rescission
2.
Suit for damages
3.
4. Suit for injunction.
5.
Suit for quantum meriut
24
Suit for specific performance
60

RESCISSION
(Sec. 39)
Meaning of rescission
Effects of rescission
61
Rescission means a right available to an aggrieved party to terminate a

contract.
The aggrieved party is not required to perform his part of obligation.
The aggrieved party can claim compensation for any loss caused to him.
SUIT FOR DAMAGES
Meaning
Object of
damages
awarding
(Sec. 73)
Monetary compensation allowed for loss suffered by the aggrieved party

due to breach of a contract.
Not to punish the party at fault.
To make good the financial loss suffered by the aggrieved party due to
breach of contract.
Kinds of damages
Ordinary damages
Special damages
Exemplary or punitive
or vindictive damages
Nominal damages
Damages
for
inconvenience etc.
Liquidated
damages
and penalty
Forfeiture of security
deposit
These damages are awarded for such loss suffered by a party which is a
proximate consequence of breach.
Damages are not awarded if they have resulted because of an indirect
consequence.
Special damages are awarded to cover such loss which through does not
arise naturally, but was in the contemplation of both the parties at the
time when the contract was made.
These damages can be recovered only if the special circumstances
which would result in a special loss in case of breach of a contract are
communicated to the other party.
These damages are awarded only in the following 2 cases:
Breach of a contract The damages shall be calculated on the basis of
mental injury sustained by the aggrieved party.
to marry
Unjustified dishonor The damages shall be calculated on the basis lower
the amount of cheque, greater will be the damages.
of a cheque
Where no loss is suffered by the aggrieved party, the Court generally
awards nominal damages.
Where a party has suffered physical inconvenience, discomfort or mental
agony as result of breach, the Court may award damages for the same.
Where the parties to a contract specify a certain sum in the contract
which will become payable as a result of breach, such specified sum is
called as liquidated damages or penalty
If the specified sum represents a fair and genuine pre-estimate of the
damages likely to result due to breach, such specified sum is called as
liquidated damages.
If the specified sum is disproportionate to the damages which are likely
to result as a result of breach, such specified sum is called as penalty.
In India, damages shall be restricted to a reasonable compensation not
exceeding the specified sum.
If any loss is suffered by a party as a result of breach, the damages
awarded to him shall be limited to the loss suffered by him.
Any clause in the contract entitling the aggrieved party to forfeit the
security deposit is not valid.
25

Payment of interest
Payment of interest is permissible.

If no rate of interest is mentioned in the contract, the party shall be
liable to ay interest
(a) As per any law for the time being in force;
(b) As per the custom or usage of trade.
However, if the interest is in the nature of penalty, the Court may grant
relief.
62
SUIT FOR SPECIFIC PERFORMANCE
Meaning
Specific performance means demanding an order from the Court that the
promise specified in the contract shall be carried out.
When
is
specific Actual damages arising from breach are not measurable.
performance allowed? Monetary compensation is not an adequate remedy.
When
is
specific Where damages are an adequate remedy.
performance
not Where the performance of contract involves numerous or minute details,
allowed?
and therefore it is not possible for the Court to supervise the
performance of the contract.
Where personal quality of a person is the subject matter of contract.
Where the contract is dependent upon personal volition of the parties.
Where the contract is inequitable to any of the parties.
Where the contract is made by a company beyond its powers as laid
down in the object clause of memorandum of association.
Specific performance cannot be enforced against a minor.
63
SUIT FOR INJUNCTION
Meaning
Injunction means an order of the court restraining the other party from
carrying out a particular act.
When is this remedy The Court has the discretion whether or not to grant injunction.
available?
Where a party to the contract promises to do an act but refuses to
perform such act resulting in breach of contract, the aggrieved party
may claim an injunction order from the Court restraining the defaulting
party from performing such act in future.
64
SUIT FOR QUANTUM MERIUT (as much as he has earn)
One party preventing If a party prevents the other party from completing his obligation
the other from compunder the contract, the aggrieved party may claim payment on
letion of contract
quantum meriut for the part of contact already performed by him.
Divisible
contract A party at fault may sue on quantum meriut if
partly performed
(a) The contract is divisible;
(b) The contract is partly performed; and
(c) The party not at fault has enjoyed the benefits of the part
performance.
Indivisible contract A party at fault may sue on quantum meriut if
performed
(a) The contract is indivisible;
completely but badly.
(b) The contract is for a lump sum consideration;
(c) The contract is completely performed;
(d) The contract is performed badly.
26

Contract Act 1872

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What are the essential elements of a valid contract?

What are the essential elements of a valid contract?

What is the difference between an agreement and a contract?

What is the difference between an agreement and a contract?

Chapter 1

The Indian Contract Act, 1872

MEANING OF CERTAIN TERMS

When one person signifies to another

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

DISTINCTION BETWEEN AN AGREEMENT AND A CONTRACT

There must be an agreement between the parties

AGREEMENT TO DO IMPOSSIBLE ACT

Every contract is an agreement.

- An agreement is made to do a particular act;

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

A contract made by words spoken or written.

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

HOW TO MAKE AN OFFER? / MODE OF MAKING OFFER

It means an offer made by words spoken or written.

TO WHOM AN OFFER IS MADE?

It means an offer made to

LEGAL RULES AS TO VALID OFFER

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

An offer must not

Cross offers do not

Meanwhile G issued handbills offering reward of Rs. 501 to anyone who

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

Notice by offeror, i.e.,

Revocation of offer means withdrawal or cancellation of the offer.

of When the person to whom the proposal is made

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

LEGL RULES FOR A VALID ACCEPTANCE

Absolute & unqualified

The offeree should assent to all the terms of the offer.

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

Communication when complete?

TIME LIMIT FOR REVOCATION

Time limit for revocation

ESSENTIALS OF A VALID CONSIDERATION

An act or abstinence shall constitute a good consideration only if it is done at

So long as there is consideration for promise, it is immaterial as to who has

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

Consideration received by a party must be something more than the other

Consideration received by a party must be of some value.

EXCEPTIONS TO THE RULE: NO CONSIDERATION

(Sec. 25) NO CONTRACT

The agreement is made in writing.

Agreement to make a gift is not enforceable.

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

It is well established that privity of consideration is not required.

EFFECTS OF MINORS AGREEMENT

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872

Minor can be an apprentice provided he is of at least 14 years of age.

PERSONS OF UNSOUND MIND

Meaning of sound A person is said to be of sound mind if he is able to mind

understand the contract; and

Form a rational judgment.

PERSONS DISQUALIFIED UNDER LAW