The document discusses key concepts from the Indian Contract Act 1872 such as offer, acceptance, agreement, and contract. It explains that a contract requires an agreement plus legal enforceability. The essential elements of a valid contract are discussed as offer and acceptance, lawful object, lawful consideration, capacity of parties, and free consent. Remedies for breach of contract include damages, specific performance, and injunction. Previous years questions from various competitive exams covering concepts of contract law are also provided.

1. BBA- Semester-I, October2021
Unit-I
Indian Contract Act 1872

2. Unit-1
• Indian Contract Act:
– Offer, Acceptance,
– Agreement and Contract;
– Capacity of parties;
– Essentials of Contract;
– Valid Contracts ;
– Performance of Contracts;
– Termination of Contract,
– Consequence and Remedies for Breach of Contract.

3. Business law is a rule which helps us to regulate and manage our
business transactions and activities system. It has direct relation with
trade, industry and commerce. e.g. insurance act, contract act, tax act,
sale of goods act, agency act etc.
Business Law

4. SOURCES OF MERCANTILE LAW IN INDIA
ENGLISH
MERCANTILE
INDIAN STATUTE
LAW
JUDICIAL
DECISIONS
CUSTOMS AND
USAGES
• Statute: Formal written enactment of a
legislative authority that governs a state, city
or country.

5. The Indian Contract Act consists of the following two parts:
Sections 1 to 75 of the
Indian Contract Act.
came into force on
September 1, 1872.
GENERAL
PRINCIPALS
OF THE LAW
OF
CONTRACT
Sections 124 to 238
of the Indian
Contract Act. These
special contracts are
Indemnity,
Guarantee, Bailment,
pledge and Agency.
SPECIAL
KINDS OF
CONTRACTS
Enacted by Parliament of India
Date enacted 25 April 1872
Date commenced 1 September 1872
Total sections 238
Extent All States of India except
the State of Jammu & Kashmir
INDIAN CONTRACT ACT, 1872

6. Agreement
According to Section 2(e) an agreement is defined as
“every promise and every set of promises forming the
consideration for each other”.
A promise is defined as an accepted proposal as
Section 2(b) says “ a proposal when accepted
becomes a promise “ Therefore it can be said that
an agreement is an accepted proposal.
In an agreement there is a promise from both the
sides.
For example, A promises to deliver his
radio to B and in return B promises to pay a sum
of Rs. 500 to A , there is said to be an agreement
between A and B.

7. PROMISE
ACCEPTANCE
AGREEMENT

8. Promise sec 2(b) - A Proposal when accepted becomes a promise. In
simple words, when an offer is accepted it becomes promise.
Promisor and promise sec 2(c) - When the proposal is accepted, the
person making the proposal is called as promisor and the person
accepting the proposal is called as promisee.

9. Consideration sec 2(d) - When at the desire of the promisor, the
promisee or any other person has done or abstained from doing
something or does or abstains from doing something or promises to do
or abstain from doing something, such act or abstinence or promise is
called a consideration for the promise.
Price paid by the one party for the promise of the other Technical word
meaning QUID-PRO-QUO i.e. something in return.

10. What is a Contract?
According to sec.2(h), a contract is defined as an agreement
enforceable before the law.
1.An agreement
2.The agreement shall be enforceable by law.
3.All agreements are not enforceable by law
4.and therefore, all agreements are not contracts.
“All contracts are agreements, But all agreements are not contracts.”

11. Offer, Acceptance, Agreement and
Contract
• Offer
– proposal is defined in Section 2(a) as “when one
person will signify to another person his willingness to
do or not do something (abstain) with a view to
obtain the assent of such person to such an act or
abstinence, he is said to make a proposal or an offer.”
• Acceptance
– acceptance in Section 2 (b) as “When the person to
whom the proposal is made signifies his assent
thereto, the offer is said to be accepted. Thus the
proposal when accepted becomes a promise.” An
offer can be revoked before it is accepted.

12. • Agreement
– An Agreement is a promise between two entities
creating mutual obligations by law. Section 2(e)
• Contract
– A contract is a lawful agreement. In other words,
an agreement enforceable by law is a contract.
Section 2(h)
– Contract = Agreement + Legal enforceability

13. An agreement is regarded as a contract when it is
enforceable by law.
In other words, an agreement that the law will enforce
is a contract.
The conditions of enforceability are stated in
Section 10 According to this section “ all agreements
are contracts if they are made by the free consent of
parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void.”

14. Contract sec 2(h) - A agreement enforceable by Law is a contract.
AGREEMENT ENFORCEABLE BY LAW CONTRACT

15. PROPOSAL
PROMISE
CONSIDERATION
AGREEMENT
LEGALLY ENFORCEABLE
CONTRACT VOIDABLE AGREEMENT
LEGALLY NOT ENFORCEABLE
VOID AGREEMENT

16. As per Section 10 “All agreements are contracts, if they are
made – by free consent of the parties, competent to contract,
for a lawful consideration and with a lawful object, and not
hereby expressly declared to be void .”
OFFER ACCEPTANCE PROMISE CONSIDERATION AGREEMENT
ENFORCEABILITY BY
LAW
CONTRACT
ESSENTIALS OF A VALID CONTRACT

17. Agreement Legal Obligation
Contract
“All contracts are agreement
but all
agreements are not
contracts.”
CONTRACT = AGREEMENT +
ENFORCIBILITY BEFORE LAW

18. ESSENTIAL ELEMENTS OF A VALID CONTRACT
1. Offer and acceptance
2. Legal relationship
3. Consensus - ad-idem
4. Free consent.
5. Capacity or competency of parties
6. Lawful object
7. Lawful consideration
8. Certainty and possibility of performance
9. Agreements not declared to be void
10. Legal formalities

19. 1. Offer and Acceptance: In order to create a valid contract, there
must be an agreement between two parties. An agreement involves
a valid offer by one party and valid acceptance of the same by the
other party.
CASE: BOULTON (vs.) JONES.
2.Legal relationship: The parties must intend their agreement to result
in legal relations. This means that the parties must intend that if one of
them fails to perform his promise, he shall be answerable for that failure
in law. Duties and rights should be legal and not merely moral.
[an agreement of a purely domestic or social nature is not a contract .]

20. 3. Consensus-ad-idem: The minds of both the parties must be ad-idem.
In other words, the two parties must have agreed about the subject
matter of the contract at the same time and in the same sense.
4.Free consent (Permission or Willingness): An agreement must have
been made by free consent of the parties. Consent is said to be free
when it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake.

21. 5.Capacity : The parties to a contract must have capacity (legal ability) to
make valid contract.
Section 11:- of the Indian contract Act specify that every person is
competent to contract provided.
 Is of the age of majority according to the Law which he is subject
 Who is of sound mind and
 Is not disqualified from contracting by any law to which he is subject.
6.Lawful object :The object of agreement should be lawful and legal.
Consideration or object of an agreement is unlawful if it
is forbidden by law; or
is of such nature that, if permitted, would defeat the provisions of any law; or
is fraudulent; or
Involves or implies, injury to person or property of another; or
Court regards it as immoral, or opposed to public policy.

22. 7.Lawful consideration : All contracts must be supported by
consideration. Consideration means “something in return” (quid pro quo).
It can be cash, kind, an act or abstinence. It can be past, present or future.
However, consideration should be real and lawful.
A consideration must not be unlawful, immoral or opposed to the public
policy.
8.Not expressly declared to be void: (Section 24-30)
9.Certanity and Possibility of performance: (Section 29,56)
10. Necessary legal formalities :, According to Indian Contract Act,
A contract may be oral or in writing. But in certain special cases it
lays down that the agreement, to be valid must be in writing/or and
registered.

23. Capacity of Parties
• Sec.11 of the Indian Contract Act, 1872
lists down the qualifications which enable a person
in India to enter into contracts-
– A person should have attained the age of majority
– A person should be of sound mind at the time of
entering into a contract.
– A person should not be disqualified under any law to
which he is subject.
• Persons Disqualified by Law
– Alien enemy
– Insolvent
– Foreign sovereign- Diplomats and ambassadors
– Body corporate- A company is an artificial person. The capacity of a
company to enter into a contract is determined by its memorandum
and articles of association.

24. Essentials of Contract; Valid Contracts
• According to section 10 of the contract act, a
contract is valid if it was entered into by free
consent of the parties.
• Section 14 of the contract act defined free
consent as consent not given under coercion,
undue influence, fraud, misrepresentation and
mistake.
– Coercion (Section 15)
– committing any act forbidden by The Indian Penal
Code 1860 or unlawful detaining of property, or
threatening to commit these acts.

25. • Undue influence
– According to section 16 if consent has been obtained by a
person who is in a dominant position compared to the
other person, then it is undue influence.
• Fraud
– It means an act done to deceive the other person whether
to get any advantage from the other person or because of
ill-will or enmity towards the other party.
– According to section 17, Fraud can be committed either by
one contracting party or by a 3rd person with the
connivance of any contracting party or by the agent of any
contracting party.
• Misrepresentation
– When false statements are innocently made without the
intention to deceive, then it amounts to
misrepresentation. In misrepresentation, the person
making the statement is innocent and has no intention to
deceive the other party.

26. Performance of Contracts
• Section 37 of the Contract Act talks about performance. According to the Section, there are two types of
performance which are:
• Actual performance:
Actual performance of the contract means the actual discharge of the liability or obligation which a person has
undertaken to perform and there remains no other task which he is obliged to discharge under the promise.
He is said to have made the actual performance of the promise.
• Attempted performance:
At times when the performance becomes due. The promisor is not able to discharge his obligation or perform
his duty because he is prevented by the promisee in doing so. This situation where the promisor actually
intended to perform his obligation or discharge his duty but is prevented from doing so by an intervening
disability is known as the attempted performance of a promise.
• Attempted performance is also known as Tender. A tender can be of two types:
– Tender of goods and services: The discharge of the contract to deliver goods and services is completed
when the goods are tendered for acceptance in accordance with the terms of contact. If the goods and
services so tendered are not accepted they are to be taken back by the offeror and he is discharged from
his liability.
– Tender of money: where the debtor tenders the money which is to be paid to the creditor but the
creditor refuses to accept the money. The debtor is not discharged from the liability to pay back the
money. Therefore, a tender of money can never result in the discharge of debt.

27. Termination of Contract/ Termination of
Agreement
• A Termination Agreement is a legal agreement
that exists between the parties to a contract
which consists of the conditions known for the
termination of the contracts if it should occur.
Termination of Contract relieves the parties
from the contractual liabilities involved in the
contract.
• Before the parties are able to complete all the
contractual obligations stipulated by the
contract, their ability to accomplish the
obligations is cut short.

28. • Despite the fact that the contractual
obligations to fulfill according to agreement
terms have ended, the parties can still file
claims for restitution under the common law
and if any termination allowances stated in
the agreement.
• Reasons for Terminating a Contract
– Mutual consent
– When one of the parties becomes bankrupt
– Failure of a set precedent or condition
– When a Legal order is passed

29. Consequence and Remedies for Breach
of Contract.
• A contract can be said to be breached or broken when either of the parties fails or
refuses to perform his obligations, or his promise under the contract
• Therefore, as soon as one party commits a breach of the contract, the law grants to the
other party three remedies. Other party may seek to obtain:
– Damages for the loss sustained, or
• Section 73 of the Indian Contract Act 1872 lays down four important rules
governing the measure of damages.
– A decree for specific performance, or
• According to Section 10 of the Specific Relief Act, 1963, there are seven cases
when specific performance of a contract may be allowed by the Court
– An injunction
• Under Section 36 of Specific Relief Act 1963, an injunction is defined as an
order of a competent court, which:
– Forbids the commission of a threatened wrong,
– Forbids the continuation of a wrong already begun, or
– Commands the restoration of status quo (the former course of things).

30. Previous Years Questions
• 2011
1) Distinguish between an offer and an invitation to
offer.
2) Explain the various ways in which a contract may be
discharged
3) Define and distinguish between coercion and undue
influence. What is their effect on the validity of a
contract?
• 2012
1) Distinguish between a contract and an agreement.
2) "A contract without consideration is void.,,
Comment on the statement and give its exceptions.
3) What do you understand by 'capacity to contract'?
What is the effect of agreements made by persons
not qualified to contract?

31. • 2013
1) Describe the various methods of a discharge of
a contract.
2) "All contracts are agreements, but all
agreements are not contracts." Explain and
bringing out clearly the essentials of a valid
contract.
• 2014
1) What are the essentials of a Valid Contract
2) Explain the various ways in which a contract
may be discharged

32. • 2015
1) Define Contract
2) What do you mean by offer and acceptance?
3) What do you mean by contractual capacity ?
4) Define contract of Guarantee. What are the essentials
of a valid contract of Guarantee?
5) ' Define the term 'undue influence'. what is the effect
of undue influence on the validity of a contract ?
• 2016
1) "Contract is an agreement enforceable by Law’
2) Define Consent , when is consent said not to be free?
3) "All agreements are void in the absence of
Consideration. Explain this law and describe the
exceptions to this law. In which circumstances a
consideration is regarded as illegal?

33. • 2017
1) Define void and voidable contracts‘
2) "All contracts are agreement but all agreements
are not contract. " Explain.
3) Define Consent, When is consent said not to be
free ? Discuss its effect on the validity of a
contract.
• 2018
1) “Agreement with Minor is Void adroit”. Explain
• 2019
1) Discuss the effect of mistake on contract.
2) Define Consideration. State the exceptions of the .
rule that "An agreement without consideration is
void".