The document summarizes key aspects of the Indian Contract Act of 1872. It was enacted by the Parliament of India and came into effect on September 1, 1872. The Act has 266 total sections and applies to all states in India except Jammu and Kashmir. It outlines general principles of contract law in sections 1-75 and special types of contracts in sections 125-238. The document defines a contract and lists essential elements for a valid contract including offer and acceptance, lawful object and consideration, capacity and consent of parties, and possibility of performance.

1. INDIAN CONTRACT ACT, 1872

2. Business Law
• 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.

3. Indian Contract Act, 1872
• Enacted by - Parliament of India
• Date commenced - 1 September 1872
• Total sections - 266
• Extent - All States of India except the State of Jammu & Kashmir
• The Indian Contract Act consists of the following two parts:
Sections 1 to 75 of
Indian Contract
act, 1872
General
Principles of
Law of
Contract
Sections 125 to 238 of
Indian Contract Act,
1872
Special
Kinds of
Contracts

4. What is a Contract ?
• An agreement which is enforceable by law.
• Agreements which are not legally enforceable are not
contracts but remain as void agreements.
• According to Salmond, “ A contract is an agreement
creating and defining obligations between the parties.”
• There are two essential elements of an contract.
•
Agreement
Enforceability
by Law
Contract

5. Agreement
• Section 2 (e) defines agreement as “ every promise and every
set of promises, forming consideration for each other.”
Agreement = Offer + Acceptance
Offer/Proposal sec 2(a) - 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 person either to such
act or abstinence, he is said to make a proposal.
Acceptance sec 2(b) - When the person to whom the proposal
is made, signifies his assent there to , the proposal is said to be
accepted.
Promise sec 2(b) - A Proposal when accepted becomes a
promise. In simple words, when an offer is accepted it becomes
promise.

6. ESSENTIALS OF A VALID CONTRACT
• 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 .”
• “All contracts are agreements, But all agreements are
not contracts.”

7. ESSENTIAL ELEMENTS OF A VALID
CONTRACT
• Offer and acceptance
• Legal relationship
• Free consent.
• Capacity or competency of parties
• Lawful object
• Lawful consideration
• Certainty and possibility of performance
• Agreements not declared to be void
• Legal formalities

8. • 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.
• 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 fail 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 ]
• CASE: BALFOUR (vs) BALFOUR - 1919

9. • Free consent (Permission or Willingness): An
agreement must have been made by free consent of the
parties.
• According to Sec 13, “Two or more person are said to
consent when they agree upon the same thing in same
sense.”
• Consent is said to be free when it is not caused by
coercion, undue influence, fraud, misrepresentation or
mistake.

10. • Capacity of Parties : 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.

11. • 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;
 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.

12. • 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.
• Possibility of performance: It must be capable of
performance. Section 56 lays down that “ An agreement
to do an act impossible in itself is void”.
• Necessary legal formalities : A contract may be oral or
in writing