1. INDIAN CONTRACT
ACT 1872
◦ SUBMITTED BY- ABHISHEK DAROCH
◦ AADITYA
◦ PRIYA KUMARI
◦ AMANDEEP RANA
◦ NAVPREET SINGH
This Photo by Unknown author is licensed under CC BY-NC-ND.
This Photo by Unknown author is licensed under CC BY-NC-ND.
This Photo by Unknown author is licensed under CC BY-SA.
2. Objective of the
Act
◦ To ensure that the rights and obligations
arising out of a contract are honored and that
legal remedies are made available to an
aggrieved party against the party failing to
honor his part of agreement.
◦ The Indian Contract Act makes it obligatory
that this is done and compels the defaulters
to honor their commitments.
3. Why are Contracts Important?
A contract will
help you to
navigate the law
A contract helps
you to get paid
A contract helps
to minimize
disputes or
problems
A contract creates
certainty
A contract
provide in-depth
coverage of your
business
A contract helps
you to give good
customer service
A contract helps
to build trust and
give peace of
mind
A contract allows
you to manage
expectations
5. Contracts where writing is
necessary
The Indian contract Act does not insist upon a written contract. But in
certain cases it is required….
◦ An agreement to pay a time barred debt.
◦ Transfer of share certificate.
◦ Hire purchase agreement.
◦ Cheques, bills of exchange and promissory notes
◦ An agreement to sell land ,buildings etc.
6. Extent of the
Act
It extends to the whole of India
• It came into force on the 1st September, 1872.
1-75 General provisions
76-123 Sales of Goods
124-147 Indemnity and Guarantee
148-181 Bailment & Pledge
182-238 Agency
239-266 Partnership
• The sale of Goods was repealed from this Indian Contract Act in 1930.
Contracts relating to partnership were repealed in 1932.
7. Contract
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”.
Contract=Agreement + Enforceability at
law.
8. Contract
Steps involved in the Contract
◦ Proposal and its communication
• Acceptance of proposal and its
communication
• Agreement by mutual promises
• Contract
• Performance of Contract
9. Consensus
Ad Idem
The parties to the agreement must have agreed
about the subject matter of the agreement in
the same sense and at the same time.
Unless there is consensus ad idem, there can be
no contract.
E.g. A contracted with B to purchase rice. Now A
wanted a special type of rice, however, B thought of it
to be normal rice.
In this case, although there is a valid acceptance but
there lacks meeting of minds between the parties;
meeting of minds concerning the type or quality of rice.
10. Enforceable by law
An agreement, to become a contract, must give
rise to a legal obligation or duty.
An agreement may be social agreement or legal
agreement. But only those agreements which
are enforceable in a court of law are
contracts.(Section 10)
“All contracts are agreements, but all agreements are not
necessarily contract”
11. Essential elements
of a Valid Contract
◦ 1.Offer and Acceptance
◦ 2. Legal Relationship
◦ 3. Lawful Consideration
◦ 4. Capacity of Parties
◦ 5. Free Consent
◦ 6. Lawful Objects
◦ 7. Writing and Registration
◦ 8. Certainty of meaning
◦ 9. Possibility of Performance
12. 1.Offer and Acceptance
OFFER: It is a medium through which a person expresses his intention to
enter into a contractual obligation.
◦ It is an offer to do or not to do something.
◦ An offer is made to other person or party
◦ It is made with the intention that the other person accepts it.
13. Characteristics of a valid offer
◦ It must intend to create and be capable of creating
a legal obligation.
◦ The terms must be certain
◦ It must be made to obtain the consent of the
offeree.
◦ It must be communicated.
◦ The offer might be conditional.
14. Types of Offer
Cross offers
Identical offers made by
two parties to each other.
Standing Offer
An offer that is kept open
for acceptance over a
period of time.
Counteroffer
An alternative offer or
proposal made by the
offeree in substitution for
the original one.
Express Vs Implied
offer
Specific Vs
General Offer
15. Revocation or Termination of Offer
◦ Taking back, withdrawing or Cancelling an offer
◦ As a rule an offer can be withdrawn at anytime before the offeree has accepted it.
◦ The notice of revocation must be delivered through the same channel by which the
original offer was made.
An offer stands lapsed in any of the cases:
◦ Communication of notice of revocation
◦ Lapse of time
◦ Failure to fulfil a condition
◦ Death of either party
◦ Refusal or counter –offer
◦ Subsequent illegality or destruction of subject matter.
16. Offer vs Invitation to offer
◦ An advertisement of an airline announced on various billboards. “Fly
Mumbai –Delhi for rs 3,200 call our airline no. at..” Ramesh called up the
airline and asked for a ticket the next week.
◦ The airline refused to give a ticket for that fare. Ramesh insists that the
airline has offered the ticket and he confirmed it by making a phone call at
that number.
◦ Do you agree with Ramesh?
17. Examples for invitation to offer
◦ Auction Sale
◦ Display of goods for sale in a show room
◦ General advertisement of Goods
◦ A company prospectus.
18. Acceptance
◦ When the person to whom the offer is made signifies his ascent
thereto, the proposal is said to be accepted.
◦ A proposal when accepted becomes a promise.
◦ Acceptance of an offer may take place by express words-oral or
written, or by conduct
19. Characteristics of Acceptance
◦ It should be made by the offeree
◦ Should be unconditional
◦ Should be communicated to the offerer
◦ It should be in the mode prescribed by the offeree
◦ It should be given within reasonable time
◦ It should be given while the offer is in force.
Mere Silence is not Acceptance
20. 2.Intention to create legal relationship
◦ There must be an intention among the parties to
create a legal relationship.
◦ In case of social or domestic agreements, the usual
presumption is that the parties do not intend to
create legal relationship but in commercial in
business agreement, the usual presumption is that
parties intend to create legal relationship unless
otherwise agreed upon.
21. 3.Lawful consideration:
◦ Consideration is used in the sense of quid pro Quo, meaning something in return.
◦ Consideration may be in the form of some right, interest, profit or benefit accruing to
one party
◦ Paying or promising to pay money happens to be the most common form of
consideration.
◦ In the absence of a valid consideration passing between the parties, the contract
will be of no legal effect.
◦ The existence of a consideration implies that the parties have devoted time and
seriously desire their promises to have legal consequences.
22. Example…
◦ A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the sum
of 10,000 rupees is the consideration for A’s promise to sell the house and A’s
promise to sell the house is the consideration for B’s promise to pay the 10,000
rupees.
◦ Rules governing consideration:
◦ A contract must be supported by consideration
◦ Consideration must move at the desire of a promisor.
◦ Consideration may move from the promisee.
◦ It must have some value.
◦ Must be defined as past, present or future consideration
◦ It must be sufficient
◦ It must be legal
23. Stranger to Contract
◦One who is not party to
the contract.
Privity of contract
◦The Doctrine of Privity
implies that in general, a
person who is not privy
(having no personal
interest or part in) to a
contract that is a third
party can neither sue nor
be sued.
24. 4.Capacity of parties
The parties to an agreement must be competent to contract.
According to section 11 of ICA 1872, a person is competent to contract
who is of the age of majority according to the law to which he is subject and
who is of a sound mind and
is not disqualified from contract by any law to which he is subject.
25. ◦The following persons can be deemed to be incompetent to
enter into a contract:
◦ Minor
◦Persons of unsound mind
◦Persons disqualified by law.
26. 5.Free consent
◦ There must be a free consent of the parties to the contract. According
to Section 14, consent is said to be free when it is not caused by:
◦ coercion,
◦ fraud,
◦ misrepresentation,
◦ undue influence,
◦ mistake
i) If the consent of the party is not free then
not valid contract comes into existence.
What Constitutes Coersion?
• Committing any Act forbidden by the
Indian Penal Code
• Threatening to commit any Act
forbidden by the IPC
• Unlawful detaining of any property
• Threatening to detain any property
27. Fraud
◦ The active concealment of a fact
◦ A promise made without any intention of performing it
◦ Any other Act fitted to deceive
◦ Any such Act or omission as the law specifically declares to be fradulent.
28. Misrepresentation
◦ It refers to the mis-statement of facts made by one party to the other which
while not being a term of contract induces the other party to enter into the
contract.
◦ Misrepresentation may be innocent,negligent or
◦ willful/Intentional /deliberate
Fraud
30. 6.Lawful Object
◦ When contract include some fraud or some illegal factor then both
parties cannot file a suit against each other.
◦7. Certainty of meaning
◦ h) When terms and conditions are not clearly defined.
◦ Both the parties should have clarity of contract.
31. 8.Possibility of performance:
◦ Case which is not really possible a contract cannot take place
contract cannot come into existence unless until activities are not
possible.
◦ 9.Legal formalities:
◦ Hand written documents, stamps or signatures etc. are must for a contract.
◦ If legal formalities are not fulfilled it will not be considered as a valid contract.
34. Difference
between
an
agreement
and
contract
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 by law
Defined in Section 2 (e) Section 2 (h)
In writing Not necessarily Normally written and registered
Legal obligation May not create a legal
obligation
Creates legal obligation
One in other Every agreement need
not be a contract.
All contracts are agreement
Scope Wide Narrow
35. Types of contract
◦ Types of Contracts
◦ In connection with contracts, there are four types of classifications. Types of
contracts in contract law are as follows;
◦ On the basis of Formation,
◦ On the basis of Nature of Consideration,
◦ On the basis of Execution and
◦ On the basis of Validity.
36. 1.On the basis of Formation
◦ Express Contracts: The Contracts where there is expression or
conversation are called Express Contracts. It is a contract is a contract with
clearly stated terms
◦ The terms that are explicitly defined within an express contract include the
quantity of goods delivered (or specific services rendered), as well as the
time period during which the transaction is expected to take place.
◦ For example: Majority of real estate contracts.
◦ Implied Contract: The Contracts where there is no expression are
called implied contracts. Non verbal and assumed intentions. The
agreement of the parties is demonstrated by their actions and roles.
◦ Sitting in a Bus can be taken as example to implied contract between
passenger and owner of the bus.
37. Quasi Contract
◦Quasi Contract: In case of Quasi Contract there will be no offer and
acceptance so, Actually there will be no Contractual relations between the
partners.
◦ Such a Contract which is created by Virtue of law is called Quasi Contract.
◦ Sections 68 to 72 of Contract Act read about the situations where court can
create Quasi Contract.(It is not a contract but an obligation created by law)
◦ The word Quasi means “pseudo” hence it’s a pseudo contract.
38. ◦ Sections 68 to 72 of Contract Act read about five situations where court can
create Quasi Contract.
◦ Sec. 68: When necessaries are supplied.
◦ Sec. 69: When expenses of one person are paid by another person.
◦ Sec. 70: When one party is benefited by the activity of another party.
◦ Sec. 71: In case of finder of lost tools.
◦ Sec. 72: When payment is made by mistake or goods are delivered by
mistake.
39. Example of Quasi contract
◦ Example: Acase on this occasionis Chowal Vs Cooper
◦ In this caseA`s husband dies due to prolongedillness.She is very poorand
thereforenot capableof meeting even cost of cremation. B, one of her
relatives,understand`sher positionand spends his own money for cremation.
◦ It is done so withoutA`s request. Afterwards B claims his amount fromA
whereA refuses to pay.
◦ Here court applies Sec. 68 and creates a Quasi Contractbetween them.
Principle of Quasi
Contract “No man
must grow rich out of
another persons’
loss.”
40. Example 2-Section 69
◦ Peter is a zamindar. He has leased his land to John, a farmer. However, Peter fails to pay the revenue
due to the government. After sending notices and not receiving the payment, the government releases
an advertisement for sale of the land (which is leased to John). According to the Revenue law, once the
land is sold, John’s lease agreement is annulled.
◦ John does not want to let go of the land since he has worked hard on the land and it has started
yielding good produce.
◦ In order to prevent the sale, John pays the government the amount due from Peter. In this scenario,
Peter is obligated to repay the said amount to John.
41. Example 3
◦ Peter and Oliver enter a contract under which Peter agrees to deliver a basket of fruits at Oliver’s
residence and Oliver promises to pay Rs 1,500 after consuming all the fruits. However, Peter
erroneously delivers a basket of fruits at John’s residence instead of Oliver’s.
◦ When John gets home he assumes that the fruit basket is a birthday gift and consumes them.
◦ Does John have to pay for the goods?
Sec. 72: When payment is made
by mistake or goods are
delivered by mistake.
42. 2.On the basis of Nature of Consideration
◦ BilateralContracts:In this type of contractboth the parties have to perform their promises or
obligations at some future time.
Eg.A Contracthas got formed betweenX and Y on 1st Jan, According to which X has to
deliver goodsto Y on 3rd Jan and Y has to pay amount on 3rd Jan.
◦ UnilateralContract:
◦ A contractin which onlyone partymakes an express promise, or undertakes a performancewit
hout first securinga reciprocal agreement from the other party.
◦ You place an advertisementin the newspaperor onlineofferinga $100 reward to the person
who returnsyour missing Dog. By offering thereward, you'reofferinga unilateralcontract.
◦ You promiseto pay should anyonefulfillthe obligation of returningyour dog. You'rethe only
personwho has taken any actionin thiscontract,as no one is specificallyresponsibleor
obligatedto finding your dog passedon thisinteraction.
Exampl
e
Exampl
e
43. 3.Types of Contracts on the basis of Execution
◦ If performance is completed (both the parties have done their promised work), it is called executed contract.
◦ In case where contractual obligations are to be performed in future, it is called executory contract.
Executed
contract
Executory
contract
44. 4.On the basis of Validity
On this base Contracts can be classified into 5 groups. namely
◦ Valid,
◦ Void,
◦ Voidable,
◦ Illegal and
◦ Unenforceable Contracts.
45. Valid contract:
If the contract entered by the parties satisfies all the elements of a valid contract.
Void Contract 2(g):
A contract which ceases to be enforceable by law is known as a void
contract.
Section 2(g) states that contracts or agreements that are not enforceable by
law are known as void contracts.
Simply put, a contract that cannot be enforced by either of the parties to the
contract is one which has been rendered void.
It is as if any agreement between the parties never existed, and thus no
obligations by either of the parties have to be fulfilled.
46. When an object or a consideration is
unlawful…(void)
For a valid contract legality of object and consideration is
an important requirement….
◦ If it is already forbidden by law.
◦ An Act which would defeat the provisions of any law.
◦ If it creates injury to any person.
◦ Object or consideration of an agreement is fraudulent.
◦ Where court considers it as immoral or against public policy.
47. Consider the following situations
◦ Situation 1: Two parties contract to steal a car and share the
proceeds.
◦ Situation 2: A contracts with B to sell a mobile phone but supplies a
stolen one.
◦ Situation 3: To provide a taxi service, the driver jumps a traffic light.
In the first case the object of the contract is illegal. In the second
and third cases, the contract is legal, but the law has been violated
in the performance of a contract.
Every agreement of which the object or consideration is
unlawful is void.
48. Usually a valid contract ceases to be enforceable on the change in
circumstances, policies, laws etc..
Eg. A a rice merchant based in Delhi, agreed to sell to B, residing in
Agra, 100 bags of basmati rice at the rate of Rs. 1500 per bag. But before
the delivery could take place, the government imposed a ban on interstate
–trading in rice .Here the contract becomes void.
A void contract carries no contractual rights and obligations.
If the goods have been transferred under a void contract, ownership of
goods will not pass and they can be recovered from the person in
possession at any time before being consumed. If not remuneration is
provided under quantum meruit.
49. Voidable contract 2(i):
A voidable contract is a formal agreement between two
parties that may be rendered unenforceable for a number
of legal reasons.
Reasons that can make a contract voidable include:
◦ failure by one or both parties to disclose a material
fact;
◦ a mistake,
◦ misrepresentation or fraud;
◦ undue influence or duress;
◦ one party's legal incapacity to enter a contract;
◦ or a breach of contract
50.
51. ◦ Illegal Agreement: An illegal agreement, under the common law of
contract, is one that the courts will not enforce because the purpose of
the agreement is to achieve an illegal end. The illegal end must result
from performance of the contract itself.
◦ The classic example of such an agreement is a contract for murder.
◦ Unenforceable contract: An unenforceable contract is a contract
which cannot be enforced in a court of law due to some reason.
◦ This could happen because the terms of the contract are ambiguous, if
one party has a voidable contract or if the Statute of Limitations has
expired.
52. Example of unenforceable contracts
◦ Example
◦ Bill bought a property from Harry through a written contract for
sale. Seven years after the purchase Harry wanted to claim that
the contract was unenforceable. The statute of limitations for
written contracts in the country is six years and Harry would not
be able to challenge the contract.
