2. THE INDIAN CONTRACT ACT
• The Indian Contract Act, 1872 prescribes the law relating to contracts in India
and is the key act regulating Indian contract law. The Act is based on the
principles of English Common Law. It is applicable to all the states of India. It
determines the circumstances in which promises made by the parties to a contract
shall be legally binding
3. CONTRACT
DEFINITION:
• Under Section 2(h), the Indian Contract Act defines a contract as an
agreement which is enforceable by law.
• A contract is a legally binding agreement that recognises and governs
the rights and duties of the parties to the agreement. A contract is
legally enforceable because it meets the requirements and approval of
the law.
4. FEATURES OF CONTRACTS
• 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 to such act or abstinence, he is said to make a proposal;
• When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted. A proposal, when accepted, becomes a promise;
• The person making the proposal is called the “promisor”, and the person accepting the proposal is
called the “promisee”;
• When, at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act
or abstinence or promise is called a consideration for the promise;
5. THE TWO ELEMENTS OF A CONTRACT:
• AN AGREEMENT
• ENFORCEABILITY OF AN AGREEMENT
6. AGREEMENT
The term agreement is defined to section 2(e) of the Indian Cotract Act as “Every
promise , forming the consideration for each other” is an agreement.
Agreement = Offer + Acceptance of Offer
7. ELEMENTS OF A CONTRACT
● Offer and acceptance
● Intention to create legal relationship.
● Lawful consideration
● Capacity of parties
● Free consent
● Lawful object
● Agreement not expressely declared
void.
● Certainity of meaning
● Possibility of performance
● Legal formalities
9. To form an agreement, the following ingredients are required:
•Parties: There need to be two or more parties to form an agreement
•Offer/ Proposal: When a person signifies to another his willingness of doing or omitting to do
something with a view to obtain other’s assent. [Section 2(a)]
•Acceptance: When the person to whom the proposal is made signifies his assent for the same thing in the
same sense as proposed by the offeror. [Section 2(b)]
•Promise: When a proposal is accepted, it becomes a promise. [Section 2(b)]
•Consideration: It is the price for the promise. It is the return one gets for his act or omission. [Section
2(d)]
An agreement is, therefore, a promise or set of promises forming consideration for all the parties.
[Section 2(e)]
Agreement = Promise or set of promises (offer + acceptance) + Consideration (for all the parties)
If a 7-year-old boy is buying an ice-cream from an ice-cream vendor and giving Rs. 10 in return, it
becomes an agreement. This is because the boy offers to buy ice-cream and the vendor accepts the offer
which makes it a promise. The consideration for both was ice-cream and money respectively.
10. HOW IS A CONTRACT FORMED?
A contract is a lawful agreement. In other words, an agreement
enforceable by law is a contract.
Contract = Agreement + Legal enforceability
Or
Contract = Legally enforceable Agreement
Now, the law says that any contract entered with a person below
the age of 18 years is not enforceable. In the above case, the deal
between the boy and ice-cream vendor was an agreement but it cannot
be termed as a contract because it is not legally enforceable.
11. DIFFERENCE BETWEEN CONTRACT AND AGREEMENT
Basis for Comparison Agreement Contract
Meaning
When a proposal is accepted by the
person to whom it is made, with
requisite consideration, it is an
agreement.
When an agreement is enforceable by
law, it becomes a contract.
Elements Offer and Acceptance Agreement and Enforceability
Defined in Section 2 (e) Section 2 (h)
In writing Not necessarily Normally written and registered
Legal obligation Does not creates legal obligation Creates legal obligation
One in other
Every agreement need not be a
contract.
All contracts are agreement
Scope Wide Narrow
