First chapter of Indian Contract Act 1872.

1. The Indian Contract Act 1872

2. Introduction
• As a social being, man comes into contact with
people in different ways. He comes into
contact, For eg. With landlord as a tenant,
with government as a Taxpayer, with
customers as a seller, with supplier as a buyer.
• Due to this contract he associates with others.
• In all this associates, he is expected to observe
a code of conduct or a set of rule.

3. • At present India is having around 34 thousand
of laws,
• The latest and the most famous was Lokpal &
Lokayutha Act 2013.

4. What is Law?
• For different people the meaning of law is
different. For general public it is set of rules,
For a lawyer it is vocation. For government
this law is for guiding the people on true path.
• However a single sense is that “ Law includes
all the rules and principle which regulate our
relation worth other individuals and with the
state.

5. Types of Law
Law
Civil Law Criminal Law
Mercantile
Law
Industrial
Law
International
Law

6. Law is not Static.
• As and man development the society and
surrounding also develops.
• So with changing society, as and when law
also keeps on changing and amendment are
made into to the Law.

7. Mercantile Law
• Body of law that deals with customs and
practices of Local & International Commerce.
• Generally it had been taken from the English,
Mercantile Law before the independence.

8. The Indian Contract Act 1872
• Def: “ A contract is an agreement made
between two or more parties which the law
will enforce.” Sec 2(h) defines contract as an
agreement enforceable by law.
• If we look at the definition we get to item.
1) agreement 2) its enforce by law.
• An agreement is defined as “Every promise
and every set of promise, forming
consideration for each other”.

9. Consensus ad idem
( meeting of minds)
• Before there can be an agreement between two
parties, there must be consensus ad idem. This
means that the parties to the agreement must
have agreed about the subject-matter of the
agreement in the same sense and at the same
time.
• There must be an offer and acceptance.
• Eg. If A says to B, will you purchase my blue car
for Rs.10,000?, And B say yes to it. There is
consensus ad idem and an agreement comes into
existence.

10. Obligation
• An agreement, to become a contract, must
give rise to a legal obligation or duty.
• Def: “Obligation is defined as a legal tie which
imposes upon a definite person or persons the
necessity of doing a definite act.
• Eg. A agrees to sell his car to B for Rs. 50,000.
The agreement gives rise to an obligation on
the part of A to deliver the car to B. And from
B’s part to give him the money.

11. Agreement is a very wide term
• An agreement may be a social agreement or a
legal agreement. If A invites B to a dinner and
B accept the invitation, it is social agreement.
• A social agreement does not give rise to
contractual obligation nor does enforceable in
a court of Law.
Contract = Agreement + Enforceable by Law
Agreement = Offer + Acceptance.

12. Essential Elements of a Valid Contract
In Order to become contract, an agreement
must have the following essential elements:
1. Offer and acceptance: There must be two
parties to an agreement, i.e one party
making the offer and other party accepting it.
2. Intention to create legal relationship: When
the two parties enter into an agreement,
their intention must be to create legal
relationship between them.

13. 3. Lawful Consideration: An agreement to be
enforceable by law must be supported by
consideration. ‘Consideration’ means an
advantage or benefit moving from one party
to the other.
4. Capacity of parties-competency: The parties
to the agreement must be capable of entering
into a valid contract. If he is
a) is of age of majority
b) is of sound of mind
c) is not disqualified by law.

14. 5. Free and genuine consent: It is essential to
the creation of every contract that there must
be free and genuine consent with same mind
and understanding.
6. Lawful object: The object must not be Illegal,
immoral, or opposed to public policy. (Sec 23)
7. Agreement not declared void: The agreement
must not have been expressly declared void
by law in force of country.

15. 8. Certainty and possibility of performance: The
agreement must be certain and not vague of
indefinite. If uncertainty is there it cannot be
enforce by law.
9. Legal formalities: A contract may be made by
word of spoken or written. For legal obligation
the agreement must be stamped. And in other
cases it has to be registered.

16. Classification of Contracts
A. Classification according to validity:
A contract is based on an agreement. An
Agreement becomes a contract when all the
essential elements referred before are
present. Such contract are only said valid
contract. If one or more of these elements is
missing then contract is either avoidable, void,
illegal, or unenforceable.

17. Voidable contract: An agreement which is
enforceable by law at the option of one or
more of the parties thereto, but not at the
option of the other or others, is voidable
contract [Sec. 2(i)].
This happens when the essential element of free
consent in a contract is missing.
Eg. A promise to sell his car to B for Rs. 20,000.
His consent is obtained by use of force.

18. • Void agreement and Void Contract:
Void Agreement
Def:” An agreement not enforceable by law is said
to be void [Sec. 2(g)]”. A void agreement does not
create any legal right or obligation. It is void ab
initio, i.e from the very beginning.
Eg. Agreement with minnor.
Void Contract
Def: A contract which ceases to be enforceable by
law becomes void when it ceases to be
enforceable [Sec 2(g)].
Eg. Buying of Shop. And Shop gets burn.

19. Illegal Agreement: An illegal agreement is one
which transgresses some rule of basic public
policy or which is criminal in nature or which
is immoral.
Eg. A borrows Rs. 5000 from B and enters into a
contract to import some prohibited goods. B
know the purpose of A. So it illegal
agreement.
Unenforceable contact: An unenforceable
contract is one which cannot be enforced in a
Court of law because of some technical defect
such as absence of writings.

20. B. Classification according to information:
1. Express contract: If the terms of a contract
are expressly agreed upon (spoken or
written) at the time of formation of the
contract, the contract is said to be an express
contract. Where an offer and acceptance of
any promise is made in words. The promise is
said to be express [Sec.9] . This express
promise result in an express contract.

21. B. Classification according to information:
2. Implied contract: An implied contract is
one which is inferred from the acts or
conduct of the parties or course of dealings
between them. It is not result of any express
promise or promises by the party but of their
particular acts.
Eg. Fire broke out in farm. Implied promise.
Taking a cup of tea in restaurant.

22. B. Classification according to information:
3. Quasi-contract: A Quasi Contract is not a
contract at all. A Quasi contract is on the
other hand is created by law. It resembles a
contract in that a legal obligation is imposed
on a party who is required to perform it.
Eg. T, a tradesman, leaves goods at C’s house by
mistake. C treats the good as his own. C is
bound to pay for the goods.

23. B. Classification according to information:
4. E-commerce contract: An E-commerce
contract is one which is entered into
between two parties via internet.
Eg. Online shopping.

24. Classification according to
performance
• Executed Contract: Executed means that
which is done. An executed contract is one in
which both the party have performed their
respective obligation.
Eg. A paint the picture for B.
• Executory Contract: Executory means that
which remains to be carried into effect.

25. • Unilateral or one-sided contract:
A unilateral or one-sided contract is one in
which only one party has to fulfill his
obligation at the time of the contract or
before the contract comes into existence.
Eg. A permits a railway coolie to carry his
luggage and place it in a carriage. A contract
come into existence as soon as the luggage is
placed in the carriage.

26. Summary
• Intro
• What is Law?
• Type of Law
• Law is not static
• Mercantile Law
• The Indian contract Act 1872
– Definition, Obligation, Elements of Valid contract,
Classification of Contract.