The Indian Contract Act 1872

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.

• At present India is having around 34 thousand of laws,

• The latest and the most famous was Lokpal & Lokayutha Act 2013.

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.

Types of Law

Law

Civil Law Criminal LawMercantile

LawIndustrial

LawInternational

Law

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.

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.

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”.

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.

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.

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.

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.

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.

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.

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.

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.

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.

• 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 abinitio, 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.

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.

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.

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.

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.

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.

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.

• 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.

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.