indian contract act

1. UNIT 1

2. INDIAN CONTRACTACT1872
Meaningand Definitions
Agreement enforceable bylaw.
Acontract is an exchange of promise.
Accordingto Salmond,“A contract is an agreement creating and
defining obligation betweens theparties.”
According to Sir Fredrick Pollock, “ Every agreement
and promise enforceable by law iscontract.”

3. Contract
Agreement+Enforceabilityby law
Agreement
Offer +Acceptance
All ContractsareAgreements,but all Agreementsare not
Contract
ForExample:-
Shyam invites his friend for dinner, and Ram accepts the
invitation. If Ram fails to turn up for dinner, Shyam cannot
goto the court to claimshis loss.

4. Difference between Agreementsand Contracts
Basic Agreement Contract
Constituent An offer whenaccepted Acontract is entered into
becomes an agreement by an agreement and
hence valid contractsare
enforce
Creationof Legal When agreement areillegal Acontract necessarily
Obligation the parties are not liableto creates alegal obligation.
perform. An agreementmay
or may not belegal
obligation.
Onein other Everyagreement need not All contractare
necessarily contract necessarily agreements.
Binding Agreement is not concluded Contract is concluded
or abinding contract and binding on the
concerned parties

5. Basic Agreement Contract
Enforceability Theenforceability depends on
the nature ofagreements
It is enforceable under
the provision of thelaw
of the country
Scope Thescopeof an agreement is
more comprehensive than
contract, asagreement canbe
social agreement, legal
agreement, unlawful
agreements, and domestic
agreement
Thescopeis limited as
only legal agreements
becomescontracts that
are enforceable.
Nature Agreement may be lawful or
unlawful
Only lawful agreements
become contracts
enforceable in acourtof
law.

6. EssentialElementsof Valid Contract
1) Agreement:- (Lawful Offer and LawfulAcceptance)
2) Intention to Create Legal Relationship:- ( attached by legal consequences
and create legal obligation)
3) LawfulConsideration:- (Something return)
4) Capacityof Parties:- ( Soundmind, Ageof Majority)
5) FreeConsent :-
Coercion:-
Undue Influence:-
Fraud:-
Misrepresentation:-
Mistake:-

7. EssentialElementsof Valid Contract
6) LawfulObject:- (must not be fraudulent or illegal or immoral or opposed
public policy or must not imply injury to the person or property of another)
7) Writing andRegistration:-
8)Certainty:- (agreement must not beuncertain)
9) Possibilityof Performance:- ( an agreement to do an act impossible in itself is
void)
10) Agreementnot Declared Void:-

9. Onthe BasisofEnforceability
1)Valid Contract:- (Fulfils of all the essentialrequirements)
2)VoidContract:- ( mistake of fact, consideration or object of an agreement
is unlawful , agreement made without consideration)
3) VoidAgreement:- (an agreement not enforceable by law isVoid)
4) Voidable Contract :- (Coercion, Undue Influence,
Misrepresentation)
Fraud,
5) IllegalContract:- (commit crime, immoral or opposed publicpolicy)
6) UnenforceableContract:- (technical defect , absencein writing, barred
by limitations)

10. Onthe BasisofFormation
1) ExpressContract:- (use of words, spoken orwritten)
2) Implied Contract:- (by conduct only for examplebus)
3) Quasi Contract:- (are strictly not contracts as there is no intention of
parties to enter into a contract. For example finder of lost goods and
actual owner)
1) ExecutedContract:-(parties have done their respective work)
2) ExecutoryContract:-(one or both the parties to the contract have still to
perform their obligation infuture)

11. Onthe BasisofObligation
1) Unilateral Contract:-(one sided contract , only one party hasto perform
his promise)
2) Bilateral Contract:-(Outstanding on the part of bothparties)

12. Offer andAcceptance
OFFER
“When one person signifies to another his willingness to do or to abstain from
doing anything, with a view to obtain the assent of that other to such act
abstinence, he is said to make aproposal”
ForExample:-
Rtells S,“I am willing to sell mybike for Rs.20,000; Are you ready to buy?Thisisa
clearoffer from Rto S
Offeror/PromisorAndOfferee/Promisee

13. HowanOffer isMade
1) ExpressOffer:-
a) ByWords:-(Oral orWritten)
b) ByConduct:- (Positive act orSign)
2) Implied Offer :- (An offer implied from the conduct of the parties or from the
circumstances of the caseis known asimplied offer.)
ForExample (Bus)

14. EssentialElementsof Valid Offer
1)Offer mustbeCapableof creatingLegalRelationship:- (Movie)
2) Offer mustbeCertain,Definite andNot Vague :-
3) Offer mustbeExpressedOr Implied:-
4) Offer mustbeDistinguishfrom anInvitation to Offer :-
5) Offer maybeSpecificor General :-
6) Offer mustbeCommunicated :-
7) Offer mustbeMade with a View to Obtainingthe Consentof the Offeree:-
8) Offer mustbeConditional:- (Offer may attach any terms and conditions to
the offer hemakes.)

15. LapsofOffer
1) ByRevocation:-(Cancel)
2) Bylapsof time:-
3) ByDeathor Insanityof the Offeror or Offeree:-
4) ByFailureto AcceptConditionPrecedent:-
5) ByCounterOffer:-
6) Bynot Acceptingin the PrescribeMode or UsualMode :-
7) ByRejectionof Offer byOfferee:-
8) BySubsequentIllegality or Destructionof Subjectmatter of the offer:-

16. Acceptance
“Aproposalissaidto beacceptedwhenthe personto whomthe proposalis
madesignifieshisassent thereto.”
WhocanAcceptan Offer?
1) In caseof Specific Offer:-
2) In caseof GeneralOffer :-

17. Essentialof Valid Acceptance
1) AbsoluteandUnqualified or Unconditional :-
2) Within ProperTime:-
3) Must beCommunicated:-
4) Must beGivenin aproperMode :-
5) AcceptancemustbeGivenonlybythe personto whomthe offer ismade:-
6) TwoIdentical crossoffer cannotfrom anAgreementorAcceptance must
Succeedthe offer :-
7) Offer OneRejectedcannotbeAccepted :-

18. Communication,AcceptanceandRevocation of Offer
1) Communication of Offer :- (When itcomesto the knowledge of the person
to whom it is made.)
2) Communication of Acceptance :- (When it comesto the knowledge of
the proposer)
3) Communication of Revocation :-

19. Consideration
“Considerationisthe valuegivenin return for a promise”
Essentialof Valid Consideration
1) Consideration must be at the desire of the promisor.
2) Consideration may move from one person to any otherperson.
3) Consideration may past, present, or future.
4) Consideration need not adequate, but should bereal.
5)It must not be Illegal, Immoral or Opposed to Public Policy.

20. Exceptionto the RuleNoConsiderationNo Contract
1) Promiseout of Natural Loveand Affection:-
2) Compensationfor PastVoluntary Service:-
3) Completed Gift:-
4) Remissionof Promise:- (Promise to give concession)
5) Contractof Agency:- (Where aperson hasagreed to act asagent of another
person without anyremuneration)
6) Promiseof Donation :-

21. CapacityToContract
“All agreements are contracts if they are made by the parties competent to
contract”
Whoare Competentto contract?
“ Every person is competent to contract who is of the age of majority
according to the law to which is subject, and who is of sound and is not
otherwise disqualified from contracting by any law towhich he is subject”
Minor
“A person domiciled in India, who is under 18 years ofageis minor”

22. Personof UnsoundMind
“A person is said to be of sound mind for the purpose of making a contract, if
at the time when he makes it, he is capable of understanding it and of
forming arational judgment asto its effectupon his interests”
1) Idiocy:- ( NoSaneness)
2) Lunacyor Insanity:- (Diseaseof Brain)
3) Drunkenness :-
4) Hypnotism:-
5) Mental Decay:- (Oldage)

23. Position of Minor’sAgreement
1) Agreement Entered into by aMinor is AltogetherVoid:-
2) Minor canbeBeneficiary:-
3) No Estoppels against aMinor:-
4) Ratification on Attaining Majority is notAllowed:-
5) Liability for Necessaries:- ( Food , cloths, education, goods andservice)
6) Minor Partner :- (Benefits ofpartnership)
7) Minor Agent:- (he cannot be held personally liable for negligence or breach
of duty)
8) Minor and Insolvency:- (cannot be adjudicated asaninsolvent)
9) Contract by Minor andAdultJointly:-
10) Position of Minor’s Parents:- (Parents of a minor are not liable for
agreements made by minor)

24. PersonsDisqualifiedby Law
1) AlienEnemies:-
2) ForeignSovereignsandAmbassadors:-(Sanction by CentralGovernment)
3) Convict:-
4) Insolvent:-
5) JointStockCompanyandCorporationIncorporate undera specialAct( LIC,
UTI):- ( Artificial Person)
6) PardanashinWomen :-
7) Married Woman:-(married woman may sueor be sued in her own name in
respect of her separateproperty)

25. FreeConsent
Consent is said to be so caused when it would not have been given but for the
existence of such coercion, undue influence, misrepresentation m, fraud or
mistake.
Coercion :- “Coercion is the committing or threatening to commit any act
forbidden by the Indian Penal Code, or the unlawful detaining or threatening
to detain any property, to the prejudice of any person whatever, with the
intention of causing any force in the place where the coercion is employed.”
UndueInfluence:- “A contract is said to be induced by undue influencewhere
1) Therelations subsisting between the parties are suchthat one of the parties
is in aposition to dominate the will of the other
2) Heusesthe position obtains an unfair advantagesover theother.

26. Fraud:-
“fraud meansthe act committed by aparty to acontract, or with his
involvement or by his agent with intent to deceive another party thereto
or his agent or to induce him to enter into the contract.”
Misrepresentation :-
“ Theterm Misrepresentation meansafalse representation of fact made
innocently or non-disclosure of a material fact without any intention to
deceive the other party.
Mistake :-
1) Unilateral Mistake:- only one of the contracting parties is mistaken asto a
matter of fact.
2) Bilateral Mistake :- where the parties toan agreement misunderstood
eachother and are at crosspurpose.

28. Mistake of Law:-
1) Mistake of IndianLaw:-
2) Mistake of ForeignLaw:-
Mistake of Fact:-
1) Unilateral mistake:- Where only one of the contracting parties is mistaken
asto matter of fact, the mistake is aunilateralmistake.
2) Bilateral Mistake:- where the parties to an agreement misunderstood each
other and are at crosspurpose, there is abilateralmistake.
Typesof Bilateral Mistake:-
a) Mistake asto existence of subjectmatter
b) Mistake asto identity of subjectmatter
c) Mistake asto title of subjectmatter
d) Mistake asto price of subjectmatter
e) Mistake asto quantity of subjectmatter
f) Mistake asto quality of subjectmatter

29. Agreementopposedto Public Policy
1) Agreementof Tradingwith Enemy:-
2) Agreement of Stifling Prosecution:- ( Feel Uncomfortable) (You cannot
convert crime into source ofprofit)
3) Agreementin the Nature of Maintenance:-
( one party having no interest in suit, Public Litigation)
4) Agreement for the sale/Transfer of Public Office and Titles :- (transfer of
public offices or to obtain public titles are illegal on the ground of public
policy)

30. 5) Agreement Creating Interest against Professional Duty:- ( any agreement
by him , which goes against his duty and brings some personal gain to
him, isVoid)
6) Agreement in Restraint of Parental Right:- (agreement which prevent
apparent to exercisehis right ofguardianship is Void)
7) Agreement is Restraint of Personal Liberty :- ( personal freedom to the
citizen)
8) AgreementTendsin to create Monopoly:-
9) AgreementInterfering with courseof Justice:-
10) Marriage BrokerageContract :-

31. Legalityof Object
“Object meanspurpose or Design of thecontract.”
When Consideration or Objectis Unlawful
1) Forbiddenby Law:-
2) Defeat the Provisionof Law:-
3) Defeat of anyRulefor the Timebeingin Forcein India:-
4) Fraudulent:-
5) Injury to the personor property of another:-
6) Immoral:-
7) AgreementOpposedto Public Policy:-

32. Performanceof Contract
“Fulfillment of respective legal obligation created under the contract by both the
parties”
WhomayPerforma Contract?
1) PromisorHimself :-
2) Agent:-
3) Representatives:-
4) ThirdPerson:-
5) JointPromisor:-
WhomayDemand Performance?
1) Promisee:-
2) Agent:-
3) LegalRepresentative:-
4) ThirdPerson:-

33. Dischargeof Contract
Termination of the contractualrelationship.
Rights and obligations created by it comestoan end.
Mode of Dischargeof Contract
1) ByPerformance:-
i) ActualPerformance:-(eachof the parties hasdone what he had agreed to
do under the agreement)
ii) Attempted Performance:-(promisee refuse to accept)

34. 2) ByMutualAgreement:-
i) ExpressConsent:-
ii) Implied Consent:-
a) Effectof Novation:- (replace the old contract)
b) Effectof Rescission:-(discharge before the date of performance)
c) EffectofAlteration of contract:- (changein one or more of the material
terms of contract)
d) Remission:-(acceptance by the promise of alesser(Less)fulfillment of the
promise made)
e) Waiver :- (do not have to obey aparticular rule orlaw)

35. 4) DischargebyLapseof Time:-
5) DischargebyOperation of Law:-
a) ByDeath:-
b) ByInsolvency:-
c) ByUnauthorizedMaterialAlteration:-
d) Bythe Identity of PromisorandPromisee:-(When promisor becomes
promisee)
6) Dischargeof Breachof Contract :-

36. 3) DischargebyImpossibilityof Performance:-
i) Initial Impossibility:-
a) If Knownto the Parties:-(one party unknown)
b) If Unknownto the parties:- (both parties)
c)If Unknownto the promisoronly:-
ii) SuperveningImpossibility:-
a) Destructionof SubjectMatter:- (crop and Fire)
b) Deathor IncapacityPersonalService:- (illness)
c)Declarationof war:-
d) Changeof Law:-

37. Breachof Contract
“When one of the parties to contract, denies to perform the acts or to fulfill
the obligations”
Typesof Breachof Contract
1) AnticipatoryBreach:-
i) Express:-
ii) Implied:- (by any act)
2) ActualBreach:-
i) OndueDate of Performance:-(Failed on fixed time)
ii) Duringthe Courseof performance:-

38. Remediesfor Breachof Contract
1) Rescissionof Contract:- when acontract is broken by one party, theother
party may treat the contract asit is (cementbags)
2) SuituponQuantum Meruit:- (claim for the work done under the
contract)
3) Suitfor SpecificPerformance:-(carry out his promise)
4) Suitfor Injunction :-
5) Suitfor Damages:-

39. QuasiContract
In case of Quasi Contract, there will be no offer and no acceptance either on
express baseor on implied base.
But under certain circumstances Court creates contract between the parties
artificially and thus binds over the parties. Such contracts which are created
by virtue of law are called QuasiContracts.
Section 68 to 72 of Contract Act read about the situations where court can
create QuasiContract.
Section 68 - when necessaries are supplied: When one party supplies
necessaries to the other (without request), a quasi contract comes into
force.

40. • Section 69 - When expenses of one person are paid by the other: When
expenses which are to be paid one party are paid by another party, the
parties are said to be under quasi contract. Acaseon this point is Hazarilal
VsNavaranglal. In this case Bpurchases A`s agricultural land. On that land
cess is in arrears for a longer period which are actually to be cleared by A,
But B pays that amount. Here Court creates a quasi contract between
them under Section 69 and thus capacitates B to recover that amount
from A.
• Section 70 - When one party is benefited by the activity of another
party: When one party Conducts an activity and its benefit is attained by
another party, then also Court cancreate aquasiContract.
A Case on this point is Damodar Modaliar Vs Secretary of State for India. In
this case Ais resident of a Village. The local government conducts repairs
to the tank situated at A`s village. As a result Agets benefited because the
surrounding lands belong to A. Here Court creates a Quasi Contract and
decides that Ahasto bear cost ofrepairs.

41. • Section 71 - In case of finder of lost goods: Court can create a quasi
contract in case of finder of lost goods. Related case is Hallius Vs Fowler.
In this case B finds a diamond at A`s shop and hands it over to A,
requesting A to send the diamond to true owner. True owner is not
found. When true owner is not found. Finder gets the title. No one can
claim share init.
• Section 72 - When payment is made by mistake: When ever payment is
made by mistake or goods are delivered by mistake , Court can create a
quasi Contract.
Acaseon this point is Khaniyalal VsSalesT
axOfficer of the Banaras.In this
case Mr. A pays Sales tax by mistake though he is need not to pay. Here
Court creates aquasi Contract and capacitatesAto recover that amount.

42. CASESTUDY
“H agreeswith Gto discover treasure by magic and Gagreesto pay Rs.5000”
“A owns a motor boat for taking people from Mumbai to Goa. The boat is in
the waters at the gateway of India. This is an offer by conduct to take
passengersfrom Mumbai to Goa.Heneed not speakor callpassengers.”
“M makesan offer to N to sell his bike for Rs.10,000.”
“A offer to sell his car to Bfor Rs.50,000. Bagreesto buy the car For Rs.
50,000.
“ X says to Y, I shall kill your son unless you agree to sell your house to me
for 50,000. Ysays, All right, I shall sell my house to you for Rs. 50,000 do
not kill myson”