Indian Contract Act 1872, Contract Law, Contract Act

1. Indian Contract Act 1872
An act meant to ensure that rights
agreed between parties in a contract
are legally enforced.

2. What is a contract?
“An agreement enforceable by law”
Offer Acceptance
(3Cs)
Capacity
Consideration
Consent
Legal

3. FORMATION-What is a contract
(Conditions of Contracts)
• It must have an offer and acceptance
• It must have the 3 C’s (Capacity,
Consideration, Consent).
• It must not be prohibited by law.
(note : a social agreement is not a contract
because it does not have any legal intention
between the parties).

4. What is an Offer
1.It must be precise, understandable and
communicable.
2.It must not contain a clause that does away
with acceptance.
3.Special terms must be brought to the notice of
the offeree.
4.It need not be in written form but incase of
immovable property (Land, Buildings, etc)
contracts it must be in written form.

5. Offer … continued
5.Distinguish between an offer and an invitation to an
offer.
6.Under certain circumstances an advertisement can
become an offer.
7. An offer can be revoked before it is accepted though
in some countries it is not so.
8. In a digital contract the offer has been
communicated once it has entered the computer of
the offeree.

6. ACCEPTANCE
1. An acceptance must be in response to an
offer.
2. It must be in the mode prescribed
3. It must be made by the person to whom the
offer has been made.
4. It must be unqualified and unconditional.
(Though in some countries minor
modifications are permissible.)

7. Acceptance ..contd.
5. Acceptance must be made within the time
provided or reasonable time.
6. Acceptance can be revoked before it reaches
the offeror.
7. In the case of cyber contracts acceptance has
reached when it enters the system of the
offeree.

8. CASE: OFFER AND ACCEPTANCE
Som enters a shop to buy a DVD player. Different communications
which could take place between him and the shopkeeper, Arvind.
Situation 1: Som says, “I want a Philips DVD player. The price
quoted in the company’s advertisements is Rs. 4,000. Will you sell me
one for this price?” Arvind replies, “Yes sir, I will.”
Situation 2: Som says, “I want to buy a Philips DVD player.” Arvind
replies, “It will be Rs. 4,000, sir.” Som says, “Fine. Give me one.”
Situation 3: Arvind says, “Philips is a good make. I recommend it to
you. It is priced at Rs. 4,200.” Som offers, “I can pay Rs. 3,500.” Arvind
responds, “We do not bargain.” Som says, “But still, give me some
discount.” Arvind says, “I will give it to you for Rs. 4,000.” Som replies,
“All right. I will buy one.”
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9. The agreement in all the three cases (in the previous slide) is the same,
that is, Som will buy a Philips DVD player from Arvind for Rs. 4,000.
However, they reached the agreement through different
communicative processes. For an agreement to get formed, parties
must initiate communication. The last part of the communication is
important in deciding whether an agreement has been formed or not.
One party puts up an offer or proposal to another and the other person
accepts it, leading to an agreement between the parties. An offer is the
penultimate act leading to the agreement. Once accepted, both the
parties get bound by the agreement. Thus, in situation 1, Som has
offered and Arvind has accepted, while in situations 2 and 3, Arvind has
offered and Som has accepted.
PRINCIPLE: An agreement is about a meeting of two minds. It can be
formed when one party puts up an offer and the other person accepts
it.
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10. CASE: REJECTION OF OFFER
Rohan says to Shyam, “I have got a job transfer. I can sell my motorcycle to you
for Rs. 35,000”.
Shyam replies, “Thank you. I am not interested as I bought a new motorcycle
just yesterday”.
In this case, Rohan made an offer to Shyam. However, Shyam rejected the offer.
Contract formation is a voluntary activity among the parties. A person is not
obliged to make an offer to another; and the person to whom the offer is made,
is under no obligation to accept it. He is free to reject or accept it. However, if
he accepts the offer, an agreement gets formed and the parties get tied by
certain rights and obligations towards each other.
PRINCIPLE: An offer or proposal can be accepted or rejected. If the offer is
rejected, that is the end of it. However, if an offer is accepted, an agreement is
formed.
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11. OFFER: EXPRESS AND IMPLIED
 When an offer is accepted, an agreement is formed. Once an
offer is made, the other person has to say ‘yes’ to bind himself.
 As the making of an offer has a significant implication, it is also
required that the person making the communication must
intend to get into a contractual relationship and the offer must
be clear, definite and unambiguous.
For example:
o Statement like, “I may consider selling my car to you for Rs. 4 lakhs” is
not an offer.
o Statement from a travel agent, on a query about a fare, to the effect,
“Usually, Delhi-Mumbai tickets are available for Rs. 3500,” is not
definite enough to be an offer.
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12. AGREEMENTS
BUNDLE OF OFFERS
• A customer utters to a shopkeeper, “Give me a
Coke.”
• The shopkeeper opens a bottle of Coke puts a straw
and gives it to him.
What are the details in this transaction impliedly
shared between the shopkeeper and the customer?

13. 1. The buyer will pay cash immediately after finishing
his drink.
2. The buyer will not take away the bottle.
3. The price will not exceed the maximum retail sale
price.
4. The drink will be cold.
Cont…

14. CASE: EXPRESS AND IMPLIED OFFER AND
ACCEPTANCE
Situation 1: Gyan says to a shopkeeper, “Will you sell me this
soap for Rs. 10?” The shopkeeper nods.
Situation 2: In a hostel mess, different food items are kept on a
table in bowls. Students can pick up and eat what
they like. An attendant notes down the food items
picked up by a student, against his name in a
register. The amount for the item picked up from
the table is deducted from the ‘advance mess
charge’ paid by the student at the beginning of the
term.
Situation 3: Ajay waved for a taxi to stop, got into the taxi, and
left.
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15. In situation 1, Gyan makes an express offer. The acceptance by
the shopkeeper is implied in the nod of his head.
In situation 2, the offer is made by the hostel mess. It is implied in
the food kept on the table. The acceptance is also implied, when a
student picks up an item.
In situation 3, both, the offer and the acceptance, are implied.
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16. 3 C’s of a Contract
CAPACITY
CONSIDERATION
CONSENT

17. CAPACITY
• A minor, an unsound person and an insolvent
person cannot enter into contracts . It is void
ab – initio.
• Reason : The contract creates legally binding
obligations on the parties and hence only
those who have the capability (capacity) to do
so should be allowed otherwise
they(minor/unsound/insolvent) may harm
themselves.

18. MORE ON MINORS
1.Agreement with minor is void – ab – initio.
2. Even if a minor declares himself to be a major
he can plead that he is a minor
3. An agreement with a minor cannot be ratified
on his becoming a major.
4. Guardians of a minor are not liable on
contracts with a minor

19. Minor….
5. A minor if provided with necessaries of life
then it can be reimburse from the minor’s
estate.
6. A minor can be a beneficiary.
7. A minor can become a partner though he
would not be liable.

20. C - Consideration
1.Consideration is the price of a contract.
2. A contract without consideration is void.
3. Consideration must be decided by the parties
themselves. Consideration can be fulfilled by
third parties.
4. Consideration must have some legal value in
the eyes of law.
5. Strangers to a contract have no claims.

21. C- Consent
1. Consent (approval) must be free and genuine.
2. A consent is not free and genuine when it is
induced by =
- coercion (Rape threaten)
- undue influence
- fraud
- misrepresentation
- mistake

22. FISHER VS. BELL