THE INDIAN CONTRACT

ACT, 1872

Unit-3 , Session-1
Establishing the Contract
Contract: Inseparable Part of One’s Life

You………….
Buy groceries
Board a train
Hire a cab
Consult a doctor or solicitor
Give your any household gadget for repair

Ever realised!
In each of the above and numerous such situations you
enter into a contractual obligation.
Contract Defined Under The Act

An agreement enforceable by
law is a contract.
Section 2(h)

Agreement: Every promise and every set of promises, forming

the consideration for each other.
A proposal (offer) when accepted becomes a promise.
Thus, a promise implies an accepted offer or proposal
Mutuality is the very base of an agreement.
Legal obligation: To become a contract , an agreement must be
enforceable by law.
Forming a Contract: Essential Steps

1. A contract, essentially , is an agreement.

2. An agreement is a set of two promises, one
flowing from the offeror and the other from
the offeror’s counterpart i.e. acceptor.
3. A promise is an accepted offer or proposal.
4. An offer is a promise of performance, which
is, however, contingent upon a return
promise or an act of forbearance being
received in exchange of it.
Offer→ Acceptance→ Promise→ Agreement
→Contract
Contract Distinguished From Agreement

 An agreement consists of an offer and its subsequent

acceptance, whereas a contract is composed of an
agreement and its legal enforceability.
 Essence of a legal relationship. An agreement may not
create legal relationship.
 Parties entering into a contract essentially have a
common intention of entering into legal obligation.
 All agreements may not be contracts but all contracts
are primarily agreements.
 Enforceability by law. A contract is legally enforceable,
whereas an agreement is not necessarily so.
Essential Elements of Establishing a Valid
Contract
 Agreement
 Intention to create legal relations
 Legitimate consideration
 Capacity of parties
 Free consent
 Lawful object
 Certainty
 Possibility of performance
 Agreements not expressly declared void
Essential Elements of contract
1. An agreement : An agreement is created offer
and acceptance .
 Offer must be definite and acceptance of the
offer must be absolute and unconditional.
 Offer must be lawful and acceptance valid.
 Acceptance must be communicated according to
mode , if any , prescribed.
2. Intention to create legal relationship : An
agreement becomes contract when parties have intention
to create legal relationship.
 Personal nature agreements do not convert into legal
relationship . Example : Case of Balfour Vs. Balfour .
(1919).Husband promised to pay certain amount every
month but after separation stopped . Court gave
judgement that it was Agreement and not contract and
hence not enforceable.
Essential Elements of contract
3. Legitimate consideration (sections 23 & 25)
: Consideration should be real , moral , of some value ,
not against public policy and lawful nature .
4. Capacity of parties : ( Sections 11 & 12 )
 Every person is competent to contract if he is of age of
majority
 Of sound mind
 He is not disqualified from contracting by any law to
which he is a subject .
5. Free Consent :Consent is free if it is not caused by
– Coercion , misrepresentation, fraud , undue influence or
mistake
Essential Elements of contract
6. Lawful object : Object or purpose of contract must
be lawful.
7. Certainty: ( Section 29) : Meaning of agreement
must be certain other wise it becomes void .
8. Possibility of performance : Agreement to
perform impossible work is Void . e.g. To get treasure by
magic .
9. Agreements not expressly declared void
Such agreements are illegal or void , even if all
essential elements are present.
Types of Contracts

Valid contracts, void contracts, and

voidable contracts

Unenforceable contracts and illegal

contacts

Executed contracts and executory

contracts

Express contracts and implied contracts

Unilateral contracts and bilateral contracts

Quasi contracts
Difference Between Void and Voidable
Contracts
S. Point of Void contract Voidable contract
No difference
.
1 Definition A contract, which ceases to be A voidable contract is an agreement which is

enforceable by law, becomes void enforceable by law at the option of one or

when it ceases to be enforceable more of the parties thereto, but not at the

[Section 2 (j)]. option of the other(s) [Section 2 (i)].

2 Nature & A void contract is valid and binding A voidable contract is repudiatble at the
validity upon the parties when entered into, option of the aggrieved party. It remains a

but subsequent to its formation, it valid contract until it is set aside or rescinded

becomes unenforceable due to certain by the party entitled to do so.

reasons.

3. Factors A valid contract may become void due Coercion, undue influence, error, fraud,
responsible to supervening impossibility; change of misrepresentation are the main factors

law; a contingent contract due to responsible for rendering a contract voidable.

emergence of an uncertain event etc.

Difference Between Void and Voidable Contracts
5. Relationship A void contract under no When a voidable contract is rejected by the

circumstances results in a aggrieved party it results in a void contract.

voidable contract.

6. Rights of third A void contract confers no rights or Rights acquired under voidable contract by an
party legal remedies to the third party. innocent third party are not wiped out by such

subsequent avoidance of the contract.

7. Compensation In case of void contract question of In case of voidable contract, the party

compensation or damages does not rescinding the contract can also claim

arise on the non-performance of such damages.

contract.

8. Effect of Lapse of reasonable time does not If a voidable contract is not rescinded by the
lapse of time render a void contract enforceable. It aggrieved party within reasonable time it may

always remains void i.e., become enforceable at the option of the other

unenforceable. party (i.e, who induced the contract).