THE INDIAN

CONTRACT
ACT, 1872
CONTRACT
CONTRACT - ACCORDING TO SEC.2(H), A
CONTRACT IS DEFINED AS AN
AGREEMENT ENFORCEABLE BEFORE
THE LAW.

AGREEMENT - ACCORDING TO SEC.2(E),

EVERY PROMISE OR SET OF PROMISES
FORMING CONSIDERATION FOR EACH
OTHER.
 PROMISE - According to sec.2(b), when a
person made a proposal to another to whom
proposal is made, if proposal is assented
there to.
OFFER - ACCORDING TO SEC.2(A), WHEN A
PERSON MADE A PROPOSAL, WHEN HE
SIGNIFIES TO ANOTHER HIS WILLINGNESS
TO DO OR TO ABSTAIN FROM DOING
SOMETHING.

AGREEMENT = OFFER + ACCEPTANCE

CONSENSUS - AD – IDEM-
ACCORDING TO SEC.13, MEETING OF MINDS
OR IDENTITY OF MINDS OR RECEIVING THE
SAME THING IN SAME SENSE AT SAME TIME.
 Legal obligation: an agreement to become a
contract must give rise to a legal obligation. It must
become a duty enforceable by law

 Agreements of moral, social or religious nature are not

contracts
 For example: a promise to lunch together at a
friends house or to take a walk together are
not contracts because they are not likely to
create a duty enforceable by law
KINDS OF CONTRACTS
CONTRACTS BY ENFORCEABILITY

VALID CONTRACTS
A valid contract is an agreement
enforceable by law.

An agreement becomes enforceable by

law when all the essential elements of a
valid contract are present
VOIDABLE CONTRACT

 An agreement which is enforceable by law

at the option of one or more of the parties
thereto, but not at the option of the
others, is a voidable contract
 Usually
a contract becomes voidable
when the consent of one of the parties to
the contract is obtained by coercion,
undue influence, misrepresentation or
fraud
EXAMPLE:

A threatens to shoot B if he does not sell

his new Bajaj scooter to A for Rs 2000. B
agrees. The contract has been brought
about by coercion and is voidable at the
option of B
EXAMPLE:

 A,
intending to deceive B, falsely
represents that five hundred quintals of
indigo are made annually at A’s factory
and thereby induces B to buy the factory.
The contract has been caused by fraud
and is voidable at the option of B
EXAMPLE:

 X,
agrees to sell and deliver 10 bags of
wheat to Y for Rs 2500 within one week.
But X does not supply the wheat within
the specified time. The contract becomes
voidable at the option of Y
VOID CONTRACT

 Void
contract implies a useless contract
which has no legal effect at all

 Thereasons which transform a valid

contract into a void contract are:
SUPERVENING IMPOSSIBILITY
 A contract becomes void by impossibility of
performance after the formation of the contract

 Example: A and B contract to marry each other.

Before the time is fixed for the marriage, A goes
mad. The contract to marry becomes void
SUBSEQUENT ILLEGALITY
 A contract also becomes void by subsequent
illegality

 Example: A agrees to sell B 100 bags of wheat

at Rs 650 per bag. Before delivery, the
government bans private trading in wheat. The
contract becomes void
REPUDIATION OF A VOIDABLE CONTRACT

 A voidable contract becomes void, when the

party, whose consent is not free, repudiates
the contract
 Example: M by threatening to murder B’s
son, makes B agree to sell his car worth Rs
30000 for the sum of Rs 10000 only. the
contract being the result of coercion is
voidable at the option of B.In case B
decides to rescind the contract, it becomes
void
IN CASE OF A CONTRACT CONTINGENT ON THE
HAPPENING OF AN UNCERTAIN FUTURE EVENT,
IF THAT EVENT BECOMES IMPOSSIBLE
 A contingent contract to do or not to do
something on the happening of an uncertain
future event becomes void when the event
becomes impossible
 Example: A contracts to give Rs10000 as loan
to B if B marries C. C Dies without being
married to B. The contract becomes void
UNENFORCEABLE CONTRACT

 Anunenforceable contract is one which is

valid in itself but is not capable of being
enforced in a court of law because of
some technical defect such as absence of
writing, registration, requisite stamp, etc
ILLEGAL OR UNLAWFUL CONTRACT

A contract of unlawful nature

 Anagreement to commit murder or

assault or robbery would be illegal
KINDS OF CONTRACTS FROM THE POINT
OF VIEW OF MODE OF CREATION

 Express contract

 Implied contract

 Constructive or quasi contract

EXPRESS CONTRACT

 Where both he offer and acceptance

constituting an agreement enforceable at law
are made in words spoken or written are
express contracts
 Example: A tells B on telephone that he offers
to sell his car for Rs 20000 and B in reply
informs A that he accepts the offer, is express
contract
IMPLIED CONTRACT

 Where both the offer and acceptance

constituting an agreement enforceable at law
are made otherwise than in words

 It can be by acts and conduct of the parties

A is a coolie in uniform takes up the
luggage of B to be carried out of the
railway station without being asked by B,
and B allows him to do so, then the law
implies that B agrees to pay for the
services of A and there is an implied
contract
M is a professional shoe shiner starts
polishing the shoes of N without being
requested to do so and N allows M to
polish his shoes knowing that M expects
to be paid for the service, there comes
into existence an implied contract and N
is under obligation to pay to M
CONSTRUCTIVE OR QUASI CONTRACT
 The law infers or recognizes a contract under
special circumstances

 Example: obligation of finder of lost goods to

return them to the true owner
 OR
 Liability of person to whom money is paid
under mistake to repay it back
 Theycannot be said to arise out of a
contract even in the remotest sense, as
there is neither an offer nor consent

 But
these are very much covered under
quasi contacts
OTHER TYPES
OF CONTRACTS
•Executed contract
•Executory contract
EXECUTED CONTRACT -

In a contract where both the parties have

performed their obligation, there is
remaining nothing to perform.
Example: when a bookseller sells a book on
cash payment it is an executed contract
EXECUTORY CONTRACT –

In a contract where both the parties are

yet to perform their obligation.
Example: T agrees to coach R from the
first day of the next month and R in
consideration promises to pay T Rs
500 per month, the contract is
executory
ESSENTIAL ELEMENTS OF
A VALID CONTRACT
(Sec.10)
OFFER AND ACCEPTANCE

 Offer and Acceptance

 There
must be lawful offer and lawful
acceptance, resulting into agreement
INTENTION TO CREATE LEGAL RELATIONS
 There must be an intention among the parties
that the agreement should be attached by legal
consequences and create legal obligations

 Agreements of social and domestic nature do

not contemplate legal relations and as such do
not give rise to a contract
EXAMPLE: BALFOUR VS BALFOUR

 The defendant was a civil servant

stationed in Ceylon. He and his wife were
enjoying leave in England. When the
defendant was due to return to Ceylon, his
wife could not accompany him because of
her health
 Thedefendant agreed to send her 30
pounds a month as maintenance
expenses during the time they were thus
forced to live apart

 She sued for breach of this agreement

 Heraction was dismissed on the ground
that no legal relations had been
contemplated and therefore there was no
contract
EXAMPLE: ROSE & FRANK CO VS CROMPTON &
BROTHERS LTD

 Inthe above case R company entered into

an agreement with C company, by means
of which the former was appointed as the
agent of the latter
 One clause of the agreement was as
follows:" this arrangement is not entered
into as a formal or legal agreement and
shall not be subject to legal jurisdiction in
the court of law”
 Itwas held that there was no intention to
create legal relations on the part of
parties to the agreement and hence there
was no contract
LAWFUL CONSIDERATION

 Consideration has been defined as the price

paid by one party for the promise of the other. It
should be lawful

 An agreement is legally enforceable only when

each of the parties to it gives something and
gets something
CAPACITY OF PARTIES

 Theparties to an agreement must be

competent to contract otherwise it cannot
be enforced by a court of law
 In
order to be competent to contract the
parties must be of the :

 Age of majority
 Sound mind
 Must not be disqualified from contracting
by any law to which they are subject
FREE CONSENT

 Consentmeans that the parties must

have agreed upon the same thing in the
same sense

 Thereis absence of free consent if the

agreement is induced by coercion, undue
influence, fraud, mis-representation or
mistake
LAWFUL OBJECT

 For the formation of a valid contract it is also

necessary that the parties to an agreement
must agree for a lawful object

 An agreement must not be fraudulent or illegal

or immoral or opposed to public policy or must
not imply injury to the person or property of
another
WRITING AND REGISTRATION

 A contract may be oral or in writing. But in

certain special cases it lays down that the
agreement to be valid must be writing and
registered
CERTAINTY
 Agreements the meaning of which is not
certain or capable of being made certain are
void

 A agrees to sell B “a hundred tons of oil.” there

is nothing whatever to show what kind of oil
was intended. The agreement is void for
certainty”
POSSIBILITY OF PERFORMANCE

Acontract must be capable of

performance

Aagrees with B, to discover treasure by

magic. The agreement is not enforceable
NOT EXPRESSLY DECLARED VOID

 The agreement must not have been expressly

declared to be void under the Act

 For example: an agreement in restraint of

marriage, an agreement in restraint of trade