Indian contract act 1872

Indian Contract Act, 1872

Essential Elements

Valid Contract: Essential Elements

Proposal (Offer) & Acceptance Consideration Capacity of parties to Contract Free Consent Should not be a Void agreement In Writing & Registered Creates Legal Relationship Certainty Possibility of Performance Enforceable by Law

Agreement (Sec. 2e)

Agreement: “Every promise and every set of promises, forming the consideration for each other is an agreement”

Proposal when accepted = Promise That is, Proposal or Offer + Acceptance =

Agreement What are the kinds of Agreements?

Valid Agreement: An agreement enforceable by law.

Void Agreement: Not enforceable by law. Enforceable Agreement: A contract enforceable

by law. Voidable Agreement: It is valid so long as it is

not avoided by the party entitled to do so. Unenforceable Agreement: It is valid but not

enforceable due to some technical defect. Illegal Agreement: It is void ab-initio.

Contract (Sec. 2h)

“An Agreement Enforceable by Law is a Contract.”

Hence, Contract is a combination of agreement and enforceability.

What are the kinds of Contract? Voidable Contract: It is when one of the

parties has not exercised his free consent.

Void Contract: That which ceases to be enforceable by law becomes void.

Unenforceable Contract: Valid but incapable of proof, hence not enforceable.

Executed Contract: When parties have performed their obligations.

Executory Contract: When any party has not performed his share of obligation or promise.

Express Contract: When terms of contract are reduced in writing.

Implied Contract: Terms of contract inferred from conduct between parties.

Quasi Contract: Obligations which are not contracts but fall under the purview of law.

Contingent Contract: Where a promise contained in the contract is conditional.

Contracts of Record: Contracts made on the records of a court.

Specialty Contract: In writing, sealed and delivered by parties. “Contract under Seal”

Simple Contract: Not under seal. Made in writing or spoken words.

Statutory Contract: All or some terms & conditions are statutory.

Proposal (Sec. 2a)

“When one person signifies to another his willingness to do so or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence he is said make a ‘proposal’.”

In other words, a person should offer to do something. This offer must be sufficiently communicated to the person for whom he intends to do something with a view to obtaining his assent to it.

Maker of the offer = Proposer = Offerer = Promisor

Valid Proposal: Essentials

Proposer cannot dictate terms. Intended to create a legal relation. Mere statement of intention is not a binding promise. Offer must be made to definite person. Offer terms must be unambiguous. Offer can be expressed or implied. Offer must be communicated even if conditional. Proposer should intend to be bound by it.

Some Questions

What is a Counter-Offer?It is a rejection of the original offer and making a new offer. New offer is a counter offer.

What is Auction Sales? It is an invitation to an offer. Only when a buyer makes a bid

for the item that there is an offer. What is a Standing (or Open) Offer?

The continuous supply of a certain article at a certain rate over a definite period is called a standing offer. Unless there is an order there is no contract.

What is ‘Invitation to an Offer?It is not an offer. It is only an aim to circulate information of readiness to negotiate business with anybody who comes to the person sending it.

Acceptance (Sec. 2b)

“When the person to whom a proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.”

To make the contract binding, there must be absolute and unconditional acceptance of the terms of a proposal.

Performance of conditions of a proposal is an acceptance of the proposal.

Valid Acceptance: Essentials

Must be absolute and unconditional. Must be expressed in usual & reasonable manner. Mental acceptance is not sufficient. Must be communicated to Proposer. Must be by a certain person. Doing it by ignorance of proposal is no acceptance. Must be given within a reasonable time. Must accept the proposal.