THE INDIAN

CONTRACT ACT (ICA),

1872
 What is a contract?
Section 2(h)
“An agreement enforceable by law is a
contract”.
Thus,
Contract = Agreement + Enforceability at
Law
Agreement?
 Section 2(e)

Promise/(s) Promise/(s)
= Agreement
(in exchange for)
Promise?
Section 2(b)
Promise = Proposal/Offer + Acceptance

Proposal?
Section 2(a)
Expression of willingness
With a view to seek the assent of the other
Thus, mere expression of willingness doesn’t
constitute offer/proposal.
Acceptance
Section 2(b)
Giving of assent to the proposal.
Enforceability by Law
Agreements which are not enforceable
Illegal/unlawful agreements, e.g., to
smuggle/to kill
Social Agreements (Balfour vs. Balfour)
Agreements Declared Void
under ICA
e.g.
 Agreement with or by a minor
 Agreement in restraint of trade
 Marriage brokerage contract
 Wagering/Betting Agreements
Kinds of Contracts
From the point of view of
Enforceability
 Void
 Voidable
 Valid
Void Agreement vs. Void Contract
 Void Agreement
i.e., void-ab-initio i.e. unenforceable from the
very beginning
Becomes void (Void Contract)
 Voidable
i.e., void + able
i.e., capable of being declared void
(unenforceable) at the option of one of the
parties to the contract but not at the option of
the other.
Valid Contract
Section 10
To be a valid contract, it must satisfy the
following:
1. Offer and Acceptance
2. Consensus-ad-idem (Meeting of minds)
i.e., persons must agree to the same thing in
the same sense and at the same time.
3. Intention to create legal relationship as
against social relationship or illegal/unlawful
relationship.
4. Free and Genuine Consent, i.e., free from
 coercion
 undue influence
 fraud
 misrepresentation
 mistake

5. Parties competent to contract

6. Lawful consideration and object, i.e.,
something in return and that must be
lawful.
Valid Contract
(‘Object’ and ‘Consideration’ usually overlap.
However, there may be difference at times
e.g., object may be to kill competition and for
that purpose in view, a senior manager of the
competitor may be paid a certain amount to
give unrealistically high quotation.)
Here: Object is to kill competition.
Consideration is :
(i) payment of money
(ii) giving high quotations
Valid Contract
7. Agreement not declared void.
8. Certainty of Meaning: e.g. sale and
purchase of 100 tonnes of oil. But which
oil? Thus, agreement being uncertain –
not valid.
But, if the seller deals only in one kind of
oil and one variety, then it shall be valid
since it is capable of being made certain.
Valid Contract
9. Possibility of performance:
Impossibility whether known to the
parties or not, renders a contract
invalid.
10. Necessary legal formalities: e.g.
sale-deed of immovable property.
Void vs. Illegal Agreements

Void Agreement Illegal Agreement

1. Unenforceable 1. Unenforceable
2. Not Punishable 2. Punishable (fine or
3. Collateral imprisonment or
transactions both)
unaffected. 3. Collateral
transactions are
also void.
Specific and General Offer
 Specific Offer:
 made to a specified person or a group of
persons.
 can be accepted only by the person to
whom made.
Thus, if offer is addressed to ‘A’, ‘B’
cannot accept it.
 Case Law: Boulton vs. Jones
Specific and General Offer
 General Offer:
 which is not a specific offer.
 made to the world at large.
 can be accepted by anyone by
complying with the terms of the offer.
 Case Law: Carlill vs. Carbolic Smoke
Ball Co.
Offer vs. Invitation to offer
 Illustrations of Invitation to Offer:
 Prospectus issued by a college.
 Prospectus issued by a company.
 Invitation of bids in an auction.
 Price-catalogues, price lists, quotations
 Display of goods with a price-tag in a
shop window.
Special Terms in a Contract
Examples: Dry cleaner’s receipt, courier’s
receipt, shipment receipt, insurance policy,
etc.
 Binding if communicated or attention drawn to
the fact that there are certain special terms
and conditions.
 Not binding if attention is not drawn and the
other party not aware of.
Cross Offers & Counter Offers
 Cross Offers
Identical offers cross each other and none of
the parties is aware of the same. Doesn’t
result in a contract unless one of them is
accepted.
 Counter Offer
Instead of accepting an offer, the offeree
makes a counter offer, i.e., accepts the same
subject to certain conditions or qualification.
Contracts through Post
 Communication of Offer
is complete when the offeree has the
knowledge of the same.
 Communication of Acceptance
 It has two aspects, viz.,
 As against the proposer

 As against the acceptor

As against the proposer
 Communication is complete as soon as a duly
addressed letter of acceptance is put into the
course of transmission.
 Whether the same reaches the proposer or
not.
As against the acceptor
 Communication is complete only when the
proposer has received the letter and learnt
the contents thereof.
Communication of Revocation
 Communication of revocation (of offer
or acceptance) is complete:
 As against the person who makes it
when it is put into the course of
transmission.
 As against the person to whom it is
made, when it comes to his knowledge.
 Comparing ‘offer’ to a ‘train of
gunpowder’ and ‘acceptance’ to a
‘lighted match stick’ – How far
correct?
 William Anson’s observation though
valid in the English context doesn’t hold
good in India since in India acceptance
is revocable.
 Claim for Damages

Damages
Damages
U/S Section 74
U/S Section 73

Special Damages
Only damages (No claim for
naturally flowing consequential loss
From breach unless in the Pre-fixed Damages
(Ordinary Contemplation
Damages) of the parties
(Hedley v. Baxendale

Exemplary Nominal Penalty

Damages Damages

Liquidated Damages
(What can be recovered is
actual loss or
amount prefixed,
whichever is less)