 Earlier the Law was part and parcel of Religion

 Religion acted as Yardstick of Good and Bad

 Everything good in religious philosophy was
legal
 During the entire ancient and medieval
periods of human history in India, there was
no general code covering contracts.
 Principles were thus derived from numerous
references- the sources of Hindu law, namely
the Vedas, the Dhramshatras, Smritis, and the
Shrutis give a vivid description of the law
similar to contracts in those times.
 The rules governing contracts form a part of
the law called Vyavaharmayukha (व्यवहारमयखू )
 Manusmriti, Vedas, Arthashastra are some of
the main sources which mentions about
contract directly or indirectly
 Manusmriti provides for the essentials of a
valid contract and what makes an agreement
void and illegal
 Manusmriti also provides for the main and
basic condition to make a contract.
 The smritis also talked about spiritual debt,
Narad smriti talked about the competent
persons to enter into the contract i.e. King,
Vedic teacher and Head of Household.
 We can find the excerpts related to the
recovery of debts, deposits, sale without
ownership, partnerships, non-payment of
wages, nonperformance of agreements,
topics related to the sale and purchase, gifts
and other issues related to the contract
 The concept of liability in contract law finds its birth in
the Vedic period too.
 Spiritual debts were referred as ‘wrin’ and it was
constantly reinforced by the smritis that failure to pay
back the debts meant re-birth as a slave, servant, or
beast in the house of creditor.
 So, the son was liable to pay of his father’s debts even
if he did not inherit any property from him.
 During Chandragupta’s reign, contract existed in the
form of “bilateral transactions” between two
individuals of group of individuals.
 The essential elements of these transactions were free
consent and consensus on all the terms and conditions
involved.
 It was an open contract openly arrived at.
 It was laid down that the following contracts were void:
 Contracts formed during the night.
 Contracts entered into the interior compartment of the
house.
 Contracts made in a forest
 Contracts made in any other secret place
 There were certain exceptions to clandestine contracts
such as:
 Contracts made to ward off violence, attack and affray
 Contracts made in celebration of marriage
 Contracts made under orders of government
 Contracts made by traders, hunters, spies and others who
would roam in the forest frequently.
 Towards the end of the medieval age, the law of
contracts was pretty much being governed by two
factors; the moral factor and the economic factor.
 Activities like transfer of property, performance of
services etc. required rules for agreements and
promises, which covered not just business and
commercial transactions, but also personal
relationships in all walks of life.
 This takes us to the next source, i.e. the Arthashastra
by Kautilya
 यो ग्रामदे शसङ्घानाां कृत्वा सत्येन सांववदम ् ।
ववसांवदे न्नरो लोभात ् तां राष्ट्राद् ववप्रवासयेत ् ॥ २१९ ॥
 yo grāmadeśasaṅghānāṃ kṛtvā satyena saṃvidam |
visaṃvadennaro lobhāt taṃ rāṣṭrād vipravāsayet || 219 ||
 If a man, after having entered into a contract under oath
with a village, a country or a confederation, and breaks
it, through greed, The king shall vanish him from his
kingdom
 During the Muslim rule in India, all matters relating to
contract were governed under the Mohammedan Law of
Contract.
 The word contract in Arabic is Aqd meaning a conjunction.
 It connotes conjunction of proposal (Ijab) and acceptance
which is Qabul.
 A contract requires that there should be two parties to it
one party should make a proposal and the other accept it,
the minds of both must agree that is there declaration
must relate to the same matter and the object of contract
must be to produce a legal result
 The Indian Contract Act, 1872 was enacted on 25th
April, 1872 and subsequently came into force on the
first day of September 1872
 An agreement consists of reciprocal
promises between two parties.
 And an agreement enforceable by law
is termed as contract.
 Contract is an agreement in which
each party can legally enforce the
promise made by other party and
bound by the promise made by him.
A contract can be made by following ways:

 By Agreement
 By Standard Form Contract
 By Promissory Estoppel
Definition of Contract:
Sec. 2(h): An agreement enforceable by law is a
contract.
 All agreements are not enforceable by law, so
all agreements are not contracts.
 Only those agreements which satisfied the
conditions mentioned in Sec. 10 are termed
as contracts.
 Definition of Agreement:
 Sec. 2(e): Every promise and every set of
promises, forming the consideration for each
other, is an agreement;
 Definition of Promise:
 Sec. 2(b): When a person to whom the
proposal is made, signifies his assent thereto,
the proposal is said to be accepted. A
proposal, when a accepted, becomes a
promise;
 Definition of Proposal:
 Sec. 2(a): 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;
 All the agreements which satisfies the
conditions of sec. 10 are contracts
 Sec. 10: What agreements are contracts
All agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void. Nothing herein
contained shall affect any law in force in India, and not
hereby expressly repealed, by which any contract is
required to be made in writing or in the presence of
witnesses, or any law relating to the registration of
documents.
1. An Agreement
2. Between competent parties
3. For lawful consideration
4. For lawful object
5. Consent of parties must be free
6. Agreement should not be expressly
declared void
1. Contracts: Which fulfilled the conditions of Sec.
10. (enforceable by law)
2. Void Contracts: Sec. 2(g): An agreement not
enforceable by law is said to be void.
3. Voidable Contracts: Sec. 2(i): An agreement
which is enforceable by law at the option of one
or more of the parties thereto, but not at the
option of the other or others, is a voidable
contract.
4. Illegal Agreements: those agreements which are
forbidden by law and opposed to public policy
are illegal agreements.
 Contracts made by agreements consists of
offer by one party and acceptance from other
party.
Proposal/Offer
 Definition of Proposal: Sec 2(a) 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
 Sometimes a person may not offer to sell his
goods, but makes some statement or gives
some information with a view to inviting
others to make offer on that basis.
 These statements are considered as Invitation
to Treat.
 Eg: 1. Catalogue of books
2. Auction Sale
3. Tenders
 Defendant advertised an auction sale
 Plaintiff travelled to the place of auction.
 Found that defendant has cancelled the
auction.
 Plaintiff brought a suit for the recovery of
expenses made by him to reach the place of
auction.
 Whether he is entitled to recover the money?
 It was held that since there is no contract
between the parties plaintiff is not entitled for
any kind of expenses.
 Defendant was having the business of
medicines.
 They had “ Self Service” system.
 Medicines were displayed with price tags.
 Plaintiff picked up a medicine and bring it to
the cash counter founding that he was
rejected by the cashier to sell that medicine
to him.
 Plaintiff brought a suit for the enforcement of
contract.
 Whether suit of plaintiff will be succeed?
 It was held that mere display of articles does
not amount to offer, it is only invitation to
offer, displayer can reject the customer to sell
the article.
 Defendant was having a piece of land called
“Bumper hall pen”
 Plaintiff send a telegraph, “ Will you sell us
Bumper Hall Pen?, Telegraph lowest cash price”
 Defendant replied, “Lowest price for bumper hall
pen is £ 900”
 Plaintiff send another telegraph, “ We agree to
buy bumper hall pen for £900, please send us
the your title deeds”
 Defendant refused to sell the land and defendant
sued him.
 What will be the fate of this case?
 It was held that second telegraph which
quoted lowest price was invitation to treat
and third was offer and not acceptance, so
defendant was not liable.
 In order that an offer after acceptance results
in a contract, offer must be made with an
intention to create legal relationship.
 Without this intention, agreement shall not be
considered as a valid contract.
 Eg: promise to go for a walk, to go for a
movie
Test to check the intention
 Intention may be presumed from the nature
of agreement and circumstances.
 Defendant was govt. Employee in Ceylon.
 Went to England with his wife for holiday.
 For health reasons wife was unable to
accompany the husband gain to Ceylon.
 Husband promised to pay £ 30 per month as
maintenance for this period she had to live
apart.
 Husband failed to pay this amount and sued
by wife.
 Whether husband is liable to pay the amount?
 Court held that in case of close relationships,
promises made usually not bear the intention
to create legal relationship so husband is not
liable to pay the amount.
 Mrs. Jones was lived in Trinidad.
 Her daughter was in Washington and was serving
in Indian Embassy.
 Mrs. Jones persuaded her to leave the job and to
study Law at Bar in England and promised her to
maintain her.
 Mrs. Jones purchased a house there and allowed
her daughter to live in a portion of the house and
other portion was let out.
 After some time Mrs. Jones filed a suit to evict
her daughter from house.
 Whether her action against daughter is
maintainable?
 Since there is no intention to create legal
relationship from the side of Mrs. Jones, her
suit succeed.
 Husband and Wife were the joint owners of
one house subject to mortgage.
 Husband left the matrimonial home to live
with another lady.
 And agreed to his wife that if she paid all the
outstanding amount he will transfer that
house to her.
 Wife cleared all the mortgage amount but
husband refused to transfer the house and
subsequently sued by the wife for the same.
 What will be the fate of this suit?
 It was held that circumstances of the case
showed that there is intention to create legal
relationship between both the husband and
the wife so wife is entitled to the full
ownership of the house.
 Sec 2(a) explains that When one person
signifies to another his willingness.......
 Emphasis on the word “Signifies” mean that
the proposal must be communicated to the
intended person for which it has been made.
 Sec 3: The communication of proposals, the
acceptance of proposals, and the revocation
of proposals and acceptance, respectively, are
deemed to be made by any act or omission of
the party proposing, accepting or revoking,
by which he intends to communicated such
proposal, acceptance or revocation, or which
has the effect of communicating it.
 It means offer may be communicated by the
offeror by any act or omission by which the
offeror:-
1. Intends to communicate such offer.
2. Which has the effect of communicating the
offer.
 Sec. 9: In so far as the proposal or acceptance
of any promise is made in words, the promise
is said to be express. In so far as such
proposal or acceptance is made otherwise
than in words, the promise is said to be
implied.
An offer would be an express when it is made
in words:
1. of mouth
2. By writing
 An offer made otherwise then words is said to
be an implied offer.
 Eg: 1. Bus or train services
2. putting coin in a automatic machine
3. passenger boarding a bus
 Sec. 4: The communication of a proposal is
complete when it comes to the knowledge of
the person to whom it is made.
 Eg: A can not said to make an offer to B
unless he brings the same to the knowledge
of B.
likewise, B cannot accept an offer if the
offer has been not communicated to him,
even if acted according to the terms of the
offer.
 Defendant’s nephew absconds from home and
plaintiff (servant of defendant) sent to search the
missing boy.
 Then defendant issued handbills announcing a
reward of Rs. 501 to anyone who might find out
the boy.
 Plaintiff ignorant of the reward successfully
found the boy and handed over him to the
defendant.
 When he came to know of the reward he brought
a suit to recover Rs. 501.
 Whether he is entitled for the reward?
 It was held by the court that since the offer
has not been communicated to the plaintiff,
there arise no question of its acceptance so
plaintiff is not entitled to the reward.
 When two offers having same terms and
conditions crossed each other in the post,
they are called as cross offers.
 Both are offers, none of them would be
considered as acceptance to other though
terms and conditions are same in both.
 A wrote to B that he is willing to send 800
tons of iron at 69 sh./ ton
 Same day B wrote to A that he is willing to
buy 8oo tons of iron at the price of 69 sh. per
ton.
 Two letters crossed each other in post.
 Then B brought action against A for not
supplying the iron.
 what will be the fate of this suit?
 It was held that there were only two cross
offers and the offer of neither of the parties
having been accepted by the other, so there
was no contract which could be enforced.
 When an offer is made to a specific person it
is known as by Specific Offer.
 When the offer is made for public at large, it
is known as by General Offer.
 Defendants advertise their product “ Carbolic
Smoke Ball” as a preventive remedy against
influenza.
 They also offered to pay a sum of £ 100 to
anybody to whom influenza caused even after
taking the medicine.
 They deposited the amount with one Alliance
Bank.
 One Mrs. Carlill consumed the medicine as per
directions but still caught influenza.
 she sued the co. for amount of reward.
 Whether she is entitled for the amount?
 Court held that she is entitled to the amount
of reward as she accepted all the conditions
of offer and same amounts to a contract.
 An Offer which is allowed to remain open for
acceptance over a period of time is known as
by Standing, open or continuing offer.
 Eg: An offer to supply 1000 pens in one
academic session as and when required
 If demand of 100 pens is raised it will amount
to acceptance
 For remaining pens this offer can be
withdrawn like other offers
 Bengal Coal Co agreed to supply coal to
Wadia at an agreed price for a period of 12
months as may be required
 An order for some coal was placed and it was
honoured
 But before other order Bengal Coal Co
withdraw its offer and make it clear that in
future no order would be honored
 They were sued for breach of contract
 Court held that they can withdraw their offer
as it was standing offer
 Thank You