The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the contracting parties. Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1st September, 1872. It extends to the whole of India except the state of Jammu and Kashmir. CONTRACT [SECTION 2(h)]: A contract is “an agreement enforceable by law”. Thus, CONTRACT = AGREEMENT (+) ENFORCEABILITY BY LAW “All contracts are agreements but all agreements are not contracts” AGREEMENT [SECTION 2(e)]: An agreement means, “Every promise or every set of promises, forming consideration for each other”. AGREEMENT = PROMISE(S) BY ONE PARTY (+) PROMISE(S) BY THE OTHER PARTY PROMISE [SECTION 2(b)]: “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.” PROMISE = PROPOSAL + ACCEPTANCE PROPOSAL/OFFER [SECTION 2(a)]: A person is said to make a proposal when “he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence” PROPOSAL = WILLINGNESS TO DO OR ABSTAIN FROM DOING (+) WILLINGNESS’ TO OBTAIN ASSENT OF THE OTHER PARTY TO SUCH ACT OR ABSTINENCE

CONSIDERATION [SECTION 2(d)]: “When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something, such cat or abstinence is called consideration”. In other words, consideration is something in return.

According to Section 11.MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. If it is not possible to ascertain the meaning of the agreement. Lawful Consideration: An agreement to form a valid contract should be supported by consideration. consideration should be real and lawful. kind. or • Involves or implies. Certainty and possibility of performance: The terms of agreement must be certain and not vague. or • The court regards it as immoral. fraud. undue influence or mistake. unless• It is forbidden by law. is of sound mind. 2. i. There must be two parties to an agreement. and 3. hence does not constitute a valid contract. or • Is of such nature that. agreements of social or household nature are not contracts. present or future. there must be meeting of minds i. for a lawful consideration and with a lawful object and are not hereby expressly declared to be void”. if permitted it would defeat the provisions of any law or is fraudulent. is of the age of majority. it is not enforceable at law.e. the consideration or object of an agreement is lawful. The essential elements of a valid contract are: Agreement: To constitute a contract there must be an agreement. coercion. The terms of the offer must be definite and acceptance must be absolute and unconditional. or opposed to public policy. It can be cash. 1. Thus. Also. “All agreements are contracts if they are made by free consent of parties. However. injury to the person or property of another. 1872 ESSENTIAL ELEMENTS OF A VALID CONTRACT [Section 10]: According to Section 10. every person is competent to contract if he or she. . The parties should agree to the same thing in the same sense and at the same time. Consideration means “something in return” (quid pro quo). Section 23: According to Section 23.e. Free consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. Capacity of parties (competence): The parties to the agreement must be capable of entering into a valid contract. competent to contract. The acceptance must be according to the mode prescribed and must be communicated to the offeror. Intention to create legal relationship: When the two parties enter into an agreement. Lawful object: The object of the agreement must not be illegal or unlawful. there must be an intention by both parties to legally bind the other as a result of such agreement. It should not be obtained by misrepresentation. is not disqualified from contracting by any law to which he is subject. agreements to do impossible acts cannot be enforced. Agreement not declared void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law. an act or abstinence. consensus-ad-idem. one party making an offer (offeror) and the other party accepting the offer (offeree). It can be past. Consensus-ad-idem (meeting of minds): To constitute a valid contract.

however.MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. These contracts are neither void nor voidable. Void contract [Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. Executory contract 3. would defeat the provisions of nay law or is fraudulent. Quasi Contracts On the basis of Performance 1. the law confers right on the aggrieved party either to reject the contract or to accept it. Void contract 3. Illegal agreement: An agreement is illegal if it is forbidden by law. CLASSIFICATION OF CONTRACTS TYPES OF CONTRACTS: On the basis of Validity 1. Void agreement: An agreement not enforceable by law is said to be void. in such a case. is a voidable contract. Such an agreement does not result in a contract at all. or involves or implies injury to a person or property of another. However. 1872 Legal formalities: A contract may be oral or in writing. If. A contract when originally entered into may be valid and binding on the parties. or is of such nature that. Unenforceable contracts: Where a contract is good in substance but because of some technical defect cannot be enforced by law is called unenforceable contract. A valid contract can be enforced by law. Valid contract 2. or court regards it as • • • • . Bilateral contract Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. Void agreement • • On the basis of Formation 1. It may subsequently become void. Executed contract 2. but not at the option of other or others. the contract continues to be good and enforceable unless it is repudiated by the aggrieved party. is void-ab-initio (from the very beginning). Implied contract 3. Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto. Such agreement does not confer any right to any of the parties to it. the law requires for a particular contract. The agreement. if permitted. Unilateral contract 4. If the essential element of free consent is missing in a contract. Voidable contract 4. it should comply with all the legal formalities as to writing. Express contract 2. registration and attestation.

Bilateral contracts are also known as contracts with executory consideration. quasi contracts are strictly not contracts as there is no intention of parties to enter into a contract. the other party having fulfilled his obligation at the time o the contract or before the contract comes into existence. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. These are void-ab-initio.MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. • • . Where a proposal or acceptance is made otherwise than in words. Thus. These agreements are punishable by law. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract. Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. promise is said to be implied. a contract which is partially performed or wholly unperformed is termed as executory contract. Quasi contracts: A quasi contract is created by law. 1872 immoral or opposed to public policy. “All illegal agreements are void agreements but all void agreements are not illegal. It is legal obligation which is imposed on a party who is required to perform it. the contract is said to be express contract. Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. A quasi contract is based on the principle that a person shall not be allowed to enrich himself at the expense of another.” Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time of formation. • • • • • Executed contract: An executed contract is one in which both the parties have performed their respective obligation. Thus.

Q8. 1882 (b) Indian Contract Act.5. 1872 CHAPTER-1 NATURE OF CONTRACT OBJECTIVE TYPE QUESTIONS Q1. Q3. He is entitled to quiet possession and enjoyment of his property. Q9. Q7. An Agreement is (a) Offer (b) Offer + Acceptance (c) Offer + Enforceability (d) Contract. In such case.000 per month pocket money to his son M. This is called (a) Rights in Personam (b) Rights in Rem (c) Constitutional Right (d) There is no right at all.5. K owns a residential flat in Chennai.000 to his father. but binding in honor only". the agreement is (a) Invalid (b) Valid (c) Illegal (d) Voidable Q12. Q10."This. Which one of the following is an essential element of a valid contract? (a) Consideration (b) Free Consent (c) Competent Parties (d) all the above. A contract is(a) A promise to do something or abstain from doing something (b) A communication of intention to do something or abstain from doing something (c) A set of promise (d) An agreement enforceable by law. L promises to give Rs.MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. If L does not give the pocket . (a) M can sue his father . One of the clauses in an agreement was . Which one of the following is correct? (a) Indian Contract Act. 1872 (d) Indian Contract Act. Valid Contracts (a) are made by free consent (b) are those where the parties to the contract are competent to enter into an agreement (c) have lawful consideration & lawful object (d) all of the above. Q6. Q5. Q4. (b) M has no remedy against L (c) M can accept a lower pocket money (d) M has to give Rs. An agreement to commit a crime or a tort is(a) Void (b) Voidable (c) Valid (d) Unenforceable. agreement shall not be legally enforceable. 1972 (c) Indian Contract Act. 1888. This statement is (a) Wrong (b) Correct (c) Correct subject to certain exceptions (d) Partially correct. An agreement consists of reciprocal promises between at least (a) Four parties (b) Six parties (c) Three parties (d) Two parties. . Q2. Every contract is an agreement but every agreement is not a contract. A void agreement is one which is(a) Enforceable at the option of one party.

(b) only one of the parties (c) one or more but not by the other or Q13. 1872 (b) Enforceable at the option of both the Q19. (b) whole of India excluding Jammu and Kashmir Q20. (a) none of the parties (d) Not enforceable in a court of law.MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. (b) becomes void (d) States notified by the state (c) void ab initio as well as punishable Government from time to time. A contract: (a) may be void as originally entered into (b) may became void subsequent to its formation (c) cannot became void under any circumstances (d) may became void at the will of a party. Law of contract is: (a) the whole law of agreements (b) the whole law of obligations (c) neither the whole law of agreements nor the whole law of obligations (d) none of the above Q25. The term ‘contract’ is defined in which of the following sections of Indian Contract Act. by: (c) Valid but not enforceable. An illegal agreement is: (c) states notified by central Government (a) void ab initio from time to time. (d) voidable Q14. A contract is (a) offer + acceptance (b) Agreement + Enforceability (c) Offer + Enforceability (d) Offer + legal obligations. A proposal when accepted became a (a) promise (b) offer (c) contract (d) acceptance Q16. An executoy contract is: (a) wholly unperformed (b) may be partially performed wholly unperformed (c) wholly performed (d) none of the above or Q24. (a) Section 2 (a) (b) Section 2 (b) (c) Section 2 (e) (d) Section 2 (h) Q15. The transactions collateral to an illegal agreement are: (a) not affected in any manner (b) also illegal (c) voidable at the option of the plaintiff (d) void Q26. The Indian Contract Act applies to others (a) whole of India (d) all the parties to the contract. . A voidable agreement is enforceable parties. A just in personam means a right against (a) a specific person (b) the public at large (c) a specific thing (d) none of these Q23. The law of contract creates the right (a) just in rem (b) just in personam (c) consensus ad idem (d) none of these Q18. Q17.

Which of these is a source of Indian Contract Act? (a) American mercantile law (b) Vedas and Puranas (c) Law of merchants (d) English mercantile law Q39. past or future Q31. Which of these obligations are (c) a or b imposed by the general law of land and not by the contractual agreements? (d) a and b (a) quasi contracts Q28. Q33. Q38. In a voidable contract: (a) parties are incompetent to contract (b) free consent of the parties is missing (c) consideration is inadequate (d) the object is expressly declared void by the act itself. Q37. In which of these situations a contract becomes void: (a) supervening impossibility of an act (b) contract contingent on happening of an uncertain event Q36. Which of these statements are true? (a) an agreement is a wider tern than contract (b) all agreements are contracts but all contracts are not agreements (c) all legal obligations are contracts (d) the Indian Contract Act applies to whole of India. MERCANTILE LAW . (d) None of these. State which of these statements are true (a) A proposal when accepted always becomes a contract (b) All kinds of obligations created between the parties form part of the contract (c) An agreement to agree in future is not a contract. An agreement with a minor is: (b) judgment of the court (a) void (c) status obligations (b) void ab initio (d) in all the three situations (c) voidable (d) valid Q35.CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT. Consideration may be: (a) present (b) past (c) present or past but not future (d) present. A contract may be: (d) in none of the situations (a) express (b) implied Q34. The object of an agreement must be (a) minor (a) beneficial for the society (b) person of unsound mind (b) may be illegal (c) illiterate person (c) lawful (d) persons disqualified by nay law to (d) may be immoral which they are subject to Q30. 1872 (c) in both the situations Q27. Which of the following persons can enter into a valid contract? Q29. An agreement enforceable by law under Indian Contract Act may be: (a) in writing (b) oral (c) a and b (d) a or b Q32.


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