27/05/2009

 INDIAN CONTRACT ACT 1872

1. The Indian Contract Act consists of 266 sections.
2. Section 1 – 75 deals with general principles of contract.
3. Section 123 – 238 of the Act deals with special contracts.
4. Section 76 – 123 of the Act is bifurcated and enforced as the Sale of
Goods Act 1930.
5. Section 239 – 266 of the Act is bifurcated and enforced as the Indian
Partnership Act 1932.

The Contract Act came into force in India on 1st September 1872 applicable to
whole of India excluding the states of J&K.

 CONTRACT: According to section 2(h) a contract is an agreement

enforceable by law.
 LAW: Law is a set of rules and regulations to be followed which is
mandatory.
 ENFORCEABILITY: Validity
 AGREEMENT: According to section 2(e) every promise or set of promises
forming consideration for each other is called an agreement.
 PROMISE: According to section 2(b) when a person made a proposal to
another to whom the proposal is given if the person assented thereto said to
be a promise.

AGREEMENT= OFFER + ACCEPTANCE

 CONSENSUS – AD – IDEM: According to section 13 Consensus AD

IDEM means meeting of minds or identity of minds or receiving the
same thing in the same time.
 OBLIGATION:
1. SOCIAL (void)
2. LEGAL (valid)

“ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE

NOT NECESSESSARILY CONTRACTS.”
CONTRACT= AGREEMENT + ENFORCEABLE BY LAW

 SOCIAL: Agreements are not contracts.

 LEGAL: Agreements are contracts.

Agreements between blood relations are domestic agreements which are not
contracts even if it is on stamp paper.

 Ex:- A father signs on a stamp paper agreeing that he will pay his son Rs.
2000 every month which he does for the first two months but eventually
stops. The son files a case in the court. The father argues that he is
providing for every need of his son hence does not feel the need for the
money. In such a case the son cannot win.

 ASSENTIAL ELEMENTS OF A VALID CONTRACT:

1. Offer and Acceptance

2. Consensus AD IDEM
3. Intention to create a legal relationship
4. Consideration
5. Capacity to contract
6. Lawful object
7. Possibility of performance
8. Writing and Registration

 OFFER AND ACCEPTANCE: To do or abstain from doing something

with consent.
 OFFER: To sell is the seller’s discretion since it is ‘invitation to offer’ not
‘offer’.
Ex:- Exhibition cum sale, here it the seller’s discretion whether he wants to
sell or not.
 ACCEPTANCE: It might be oral or written. It must be given in the
stipulated time period. If the mode of acceptance is mentioned then it must
be conveyed using that mode or else the usual mode which is generally
accepted. Silence can never be taken as acceptance.
 Acceptance precedent to offer is not valid. Ex:- X makes an offer to Y which
Y refuses but Z says he will accept the offer. This is a case of acceptance
before offer because the offer was never made to Z, it was made to Y hence
this is not valid.

 CASE STUDY: BALFOUR vs. BALFOUR

MR. had to shift out of his residing city for better job prospects but MRS.
could not accompany him as she was not keeping good health hence MR.
decided to give her a monthly allowance. Later due to a particular reason
they seek divorce but MRS. still wants the allowance. This is not possible as
the agreement was made during marriage, not since they are no longer
married MR. is not obliged to pay any allowance to MRS.