INDIAN CONTRACT ACT

1. Define the term Contract and bring out its essential elements.
As per sec.2 (b) of the Indian contract Act, “an agreement enforceable by law is a contract”.
From the above definition, we understand that,
Contract=agreement+legal enforceability
Now, an agreement is one which comes into existence when one party makes an offer to the
other party and that other party gives his acceptance.
Thus, Agreement=offer +Acceptance
The term legal obligation implies a duty enforceable by law.

Essential elements of valid contract

1. Offer and acceptance: there must be a “lawful offer” and a “lawful acceptance” of the offer,
thus resulting in an agreement.
2. Intention to create legal relationships: both parties to the agreement must contemplate legal
consequences. In other words, the agreement should create legal obligations for both parties.
(Case law Balfour Vs Balfour)
3.Lawful consideration: consideration is the price paid for the promise of the other. A contract is
enforceable only if it is supported by consideration; which must be lawful and not forbidden by
law.
4. Capacity of parties: A party to a contract must be competent. In other words,
He should be a major.
He should be a mentally sound.
He should not be disqualified by any law from contracting.
5. Free Consent: Free consent means both the parties must have entered the contract out of
their own free will and voluntarily. Consent is not said to be free if it is caused by
Coercion
Undue influence
Fraud
Misrepresentation
Mistake
6. Lawful object: “object” means purpose.
It is essential that the purpose for which the contract is made is lawful. Specifically, the
object of a contract should not be (a) Fraudulent (b) Immoral (c) Illegal (d) Opposed to public
policy
7. Writing and Registration: it is not essential that for an agreement to be valid, it must be in
writing. However, in certain special cases it is a must, for an agreement to be valid, that it is in
writing.
Also, certain acts require the written agreements to be also registered.
8. Certainty: The terms of the agreement must be certain and unambiguous.
9. Possibility of performance: An agreement must be capable of performance. If the Act in the
agreement is impossible to perform, then the agreement is void.
10. Not Expressly Declared Void: certain types of agreements have been specifically declared to
void under the Contract Act.
For e.g.(1). An agreement in restraint of trade (Sec. 26)
(2). An agreement in restraint of Marriage (sec. 27)
2. what do you understand by the term “Voidable Contract”?
As per the Section 2(i) “ An agreement which is enforceable by law at the option of one or
more of the parties there to, but not at the option of the other or others, is a voidable contract”.
Thus, a voidable contract is one which is enforceable by law at the option of one of the parties.
 Generally, a contract becomes voidable, when the consent of one of the parties to the contract is
affected by reason of coercion, undue influence etc.
The party whose consent has been affected has the option of setting aside or rescinding the
contract in the court.
If the contract is not rescinded, it remains Valid.
Note: there are other circumstances, which may also render the contract voidable.

Consequences of a voidable contract: sec. 64 lays down that when a person rescinds the contract,
the other party need not fulfill his part of the promise. If the party rescinding a voidable contract
receives any benefit from the other party, he must restore such benefit.

3. Explain the term “Void Contract” and state the circumstances under which it turns void . 
As per Sec. 2(j), “ a contract which ceases to be enforceable by law becomes void, when it
ceases to be enforceable”.
In this case, the contract was essentially valid in the beginning but later, it becomes invalid and
hence due to following reasons.
Supervening Impossibility:
A contract becomes void by impossibility of performance after the formation of the contract
owing to following reasons: (a) Death of a party. (b) A party becoming mentally sound. (c)
change in legislation. (d) Destruction of subject matter. (e) A party becoming enemy alien.
Repudiation of voidable contract:
When a voidable contract is rescinded at the option of the party, whose consent was not free,
the voidable contract becomes void.
In the case of a contract contingent on an impossible event:
A contingent contract to do something on the happening of an uncertain event, becomes void,
when the event becomes impossible.

4. Define the term, “Offer”. Explain the legal rules regarding a valid offer.
  An offer is the same as proposal. A proposal may be defined as “when one person signifies to
another his willingness to do or to abstain from doing anything, with a view to obtaining the
assent of that other to such act or abstinence, he is said to make a proposal”.
Legal rules governing a valid offer:
1. An offer may be EXPRESS or IMPLIED
2. An offer expressed by words spoken or written, is called an express offer.
3. An offer which is inferred from the conduct of a person or the circumstances of the case
is called an implied offer.
4. The terms of the offer must be certain:
  If the terms of the offer are not definite and certain, it does not amount to a lawful offer.
E.g.: Arul promises to give Sunder, a grand dinner if sunder does a particular job.
5. An offer may be specified or general:
When an offer is made to a definite person or persons, such an offer is said to be
specific.
 E.g. X offering to sell a motor bike to Y.
A general offer is one which is made to the world at large or public. It may be accepted by any
person who fulfills the requisite conditions.( case: Carlill Vs Carbolic Smoke Ball Co.)
6.  An invitation to offer is not an offer:
An invitation to offer is not an offer; a person only invites the other party to make an offer.
Such invitations are not offers in the eye of law and do not become agreements by their
acceptance.
E.g. Auction sale, Quotations, price catalogue, self service departmental stores etc.
7. An offer must be communicated to the offeree:
An offer is effective only when it is communicated to the offeree. Doing anything in ignorance
of the offer can never be treated as its acceptance.(case: Lalman Vs Gowridutt)
8. Two cross offers do not make a contract:
When two parties make identical offers to each other, in ignorance of each other’s offer, the
offers are “cross-offers”. Cross offers do not constitute acceptance of one’s offer by the other and
there is no contract.

5. Explain how an offer may become lapsed or revoked?

1. An offer lapses after stipulated or reasonable time.
An offer lapses if acceptance is not communicated within the prescribed time or if no time is
prescribed, within a reasonable time.
2. An offer lapses by rejection: an offer lapses if it has been rejected by the offeree.
3. An offer lapses by the death or insanity of the offeror or the oferee before acceptance.: if the
offeror dies or becomes insane before acceptance, the offer lapses provided that the fact of his
death or insanity comes to the knowledge of the acceptor before acceptance.
Thus if an acceptance is made in ignorance of the death or insanity of the offeror, it may be
constructed as valid acceptance.
An offer lapses, if if acceptance is not made in the mode prescribed or if no mode is prescribed,
in some usual and reasonable manner.
An offer lapses by revocation: if the offeror retracts or withdraws his offer before acceptance, it
is termed ‘revocation’.
An offer lapses by subsequent illegality or destruction of subject matter. E.g. Mahinder offers to
supply 250 Sachets of pan masala to sanjay; following a govt. ban on pan masala, the offer
lapses.