0001 Indian Contract Act Part-1

Welcome
to
Marwadi University
Wait……Lecture will start soon

Dr. Kiran Kumar Agrawal
(Associate Professor)
Bachelor of Business Administration
Semester I
Batch - 2021-2024
Business Law-1
Unit-1

(Associate Professor)
BBA Sem-1
(Business Law)
Unit -1
INDIAN CONTRACT ACT, 1872 – NATURE OF CONTRACT:
Contract-Meaning, Essentials of valid Contract, Types of Contract,

Proposal/Offer as per Section 2(a), Acceptance of offer,
Communication of offer and acceptance, Communication of
performance, Revocation of offer and acceptance.
Dr. Kiran Kumar Agrawal , Associate Professor

BBA Sem-1
(Business Law)

BBA Sem-1
(Business Law)
Indian Contract Act 1872
Historical Background
It come into force on 1st September 1872

The Act was very Comprehensive
Law relating to Sales of goods and Partnership were
included
Later on Sec 76 to 123 and 239 to 266 were Repealed

BBA Sem-1
(Business Law)
Present Act
The law relating to contracts is contained in the Indian

Contract Act 1872.
The act deals with :
▪ The general principles of the law of
contract (Secs.1 to 75)
▪ Some special contracts (Secs.124 to 238)

BBA Sem-1
(Business Law)
Indian Contract Act is not exhaustive
The Indian Contract Act is not a complete act for all types
of contracts. It deals with the general principles of law of
contract like essential elements , discharge , remedies
available and with some specific contracts like Quasi
Contract , contingent contract etc.
Some of the contracts like Sale of goods, Partnership ,
Insurance etc. are not dealt by the Indian contract Act
because there are separate Acts for all these type of
contract.

BBA Sem-1
(Business Law)

BBA Sem-1
(Business Law)
DEFINING CONTRACT
According to Section 2(h) of Indian Contract Act

1872, defined contract as,
“an agreement enforceable by law”
According to Pollock,
“Every agreement and promise enforceable at
law is a contract”

BBA Sem-1
(Business Law)
DEFINING CONTRACT
According to Sir William Anson,

A contract is, “ a legally binding agreement between
two or more parties or persons by which rights are
acquired by one or more to acts or forbearances on
the part of the other.”
According to Salmond,
A contract is “an agreement creating and defining
obligations between the parties”

BBA Sem-1
(Business Law)
DEFINING CONTRACT
In simple we can say that ,A contract is a legal

agreement. It is an exchange of promises between
two persons in which there is an obligation to do or
not to do a particular act and such obligation is
enforceable by law.
A contract is an agreement made between two or

more parties which the law will enforce.

From the above mentioned definition we can say that a contract
has following basic features:
Basic Features of a contract:

▪It should be between two parties.
▪It should be a written document.
▪It should be legal.
▪It is time bound
▪Must have terms and conditions
▪Intension.
▪Consideration.

But the basic two ingredients which constitute contract are
1) agreement and 2) is its enforceability
Agreement - The term ‘agreement’ given in Section 2(e) of

the Act is defined as- “every promise and every set of
promises, forming the consideration for each other”.
To have an insight into the definition of agreement, we need

to understand promise.

Section 2 (b) defines promise as
When a person to whom an offer is made signifies his assent

thereto the proposal is said to be accepted and when proposal
is accepted it becomes promise.
The following points emerge from the above definition :
1. when the person to whom the proposal is made

2. signifies his assent on that proposal which is made to him
3. the proposal becomes accepted
4. accepted proposal becomes promise

Thus we say that an agreement is the result of the proposal
made by one party to the other party and that other party gives
his acceptance thereto of course for mutual consideration.
Agreement = Offer/Proposal + Acceptance
(ii) Enforceability by law – An agreement to become a

contract must give rise to a legal obligation
Means if an agreement is enforceable at court of law than only

it becomes contract.
Contract = Agreement + its enforceability by law

Contract = Agreement + its enforceability by law
On elaborating the above two concepts, it is obvious that contract comprises of
an agreement which is a promise or a set of reciprocal promises, that a promise
is the acceptance of a proposal giving rise to a binding contract.
Further, section 2(h) requires an agreement to be worthy of being enforceable
by law before it is called ‘contract’. Where parties have made a binding contract,
they created rights and obligations between themselves.
Example: A agrees with B to sell car for `2 lacs to B. Here A is under an obligation
to give car to B and B has the right to receive the car on payment of `2 lacs and
also B is under an obligation to pay `2 lacs to A and A has a right to receive `2
lacs.
So Law of Contract deals with only such legal obligations which has resulted from
agreements.

Such obligation must be contractual in nature. However some obligations
are outside the purview of the law of contract.
Example: An obligation to maintain wife and children, an order of the

court of law etc. These are status obligations and so out of the scope of
the Contract Act.
So from above discussion we may say that the statement “All contract
are agreement but all agreements are not contract” is true

Though we have already seen that only those agreement which are
enforceable at law are contract, in order to get more clarity and insight
on the statement “All contract are agreement but all agreements are not
contract” lets taken another example.
Suppose Ram has invited his friend Shyam on Sunday for lunch and to
enjoy watching live IPL match on television together. On the day fixed
Shyam took taxi for Rs 300 and reached at Ram’s house but Ram was not
there and house was locked. In such a case do shyam has a right to
recover 300 Rs from Ram.
Answer is NO. because the agreement between Ram and Shyam is of
social nature, their intension was not to create any legal relationship, nor
it was a business meeting or a business deal for which they decided to
meet.
So in such a case there is offer there is acceptance, there is promise,
there is agreement but the intention was not to create legal relationship
and the nature of agreement was of social nature. Neither Ram was
having intention that if Shyam breacheas promise he will file case against
him nor Shyam was having intention at the time of making promise that
in case if Ram breaches promises he will recover the loss or file the case
for the recovery.
So from above example it is clear that only those agreement which are
enforceable at law are contract. So we conclude that yes “All contract are
agreement but all agreements are not contract”

All agreements are not contract. Only those
agreements which are enforceable at law is a
contract. In other words, the parties must have
intention to create legal relationship.
According to Sec. 10, 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 expressly declared
void. In order to become a contract an agreement
must have the essential elements.

Consensus ad idem
The essence of an agreement is the meeting of the minds of the
parties in full and final agreement; there must, in fact, be
consensus ad idem.
This means that the parties to the agreement must have agreed
about the subject matter of the agreement in the same sense and
at the same time. Unless there is consensus ad idem, there can be
no contract.
Example: A, who owns two horses named Alfa and Beta, is selling
horse Alfa to B. B thinks he is purchasing horse Beta.
There is no consensus ad idem and consequently no contract.
Consensus ad idem
In order to determine whether, in any given agreement, there is
existence of consensus ad idem, it is usual to employ the language
of offer and acceptance. Thus, if A says to B, “Will you purchase my
blue car for `10,000 and B says ‘yes’ to it, there is consensus ad
idem and an agreement comes into existence.”
So finally it is important that

“The parties to a agreement must have agreed about the subject
matter of the agreement in the same sense and at the same time”
if not there is no agreement and thus there is no contract at all.
Law of Contract creates jus in personam as distinguished from jus in
rem
Jus in rem means a right against or in respect of a thing;

jus in personam means a right against or in respect of a specific person.
A jus in rem is available against the world at large;

a jus in personam is available only against particular persons.
Examples: (a)A owes a certain sum of money to B. B has a right to recover

this amount from A. This right can be exercised only by B and by none else
against A. This right of B is a jus in personam.
(b)X is the owner of a plot of land. He has a right to have quiet possession
and enjoyment of that land against every member of the public. Similarly,
every member of the public is under an obligation not to disturb X’s
possession or enjoyment. This right of X is a jus in rem.
ESSENTIAL ELEMENTS OF A VALID CONTRACT

Two or More Parties
Offer and Acceptance
Intention to create Legal Relationship
Lawful Consideration
Free Consent
Capacity of Parties
Lawful Object
Writing and Registration
Not expressly declared Void
Certainty and Possibility of Performance

Types of Contract

CLASSIFICATION OF CONTRACT
On the Basis of On the Basis of On the Basis of On the Basis of
Enforceability Formation performance Obligations to perform
Valid
Executed
Unilateral
Void
Voidable Executory Bilateral
Unenforceable
Illegal
Express Implied Quasi E- Contract or

E-commerce
Two or More Parties

OFFER AND ACCEPTANCE

What is OFFER?
An offer is a proposal by one party to another to enter into a

legally binding agreement with him. The person making the
offer is known as the offeror, proposer or promisor and the
person to whom it is made is called the offeree or proposee.
When the offeree accepts the offer is called the acceptor or
promisee.[Sec.2(c)]

ACCEPTANCE
A contract emerges from the acceptance of an offer. Acceptance is
the act of assenting by the offeree to an offer. In simple words it is
the willingness to be bound by the terns of the offer.
Types of Acceptance:
▪General
▪Specific
Acceptance can be :
▪Express
▪Implied

INTENSION TO CREATE LEGAL RELATIONSHIP
When two parties enter into an agreement, their intention must

be to create legal relationship between them. If there is no such
intension on the part of the parties, there is no contract between
them. Agreement of a social or domestic nature do not
contemplate legal relationship. As such they are not contracts.
For example: in case of Balfour vs. Balfour, (1919) 2 K.B. 571, a

husband promise to pay his wife a household allowance of $30
every month. Later the parties separated and husband failed to
pay amount, the wife sued for the allowance. Held, agreement
such as these were outside the realm of contract altogether.

LAWFUL CONSIDERATION
An agreement to be enforced by law must be supported by

consideration. ‘Consideration’ means an advantage or benefit
moving from one party to the other. It is the essence of a
bargain. In simple words, it means, ‘something in return’. The
agreement is legally enforceable only when both parties give
something and get something in return. A promise to do
something and getting nothing in return is usually not
enforceable by law. Consideration need not necessarily be in
cash or kind. It may be an act or promise to do or not to do
something. It may be past present or future. But it must be real
and lawful.[Sec.2(d),23 and 25]

LAWFUL CONSIDERATION
According to sec. 2 (d) Defines Consideration
When at desire of the promisor , the

promisee 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 , some thing , such act or abstinence or promise is
called a Consideration for the promise.”

FREE CONSENT
It is essential to the creation of every contract that there must be free

and genuine consent of the parties to the agreement. The consent of
the parties is said to be free when they are of the same mind on all
the material terms of the contract. The parties are said to be of the
same mind when they agree about the subject-matter of the contract
in the same sense and at the same time(Sec.13). There is absence
of free consent of the agreement is induced by:
▪Coercion
▪Undue influence
▪Fraud
▪Misrepresentation
▪Mistake
“When there is no consent, there is no contract.”

CAPACITY OF PARTIES
The parties to the agreement must be capable of entering into a

valid contract. Every person is competent to contract if he
–
a. Is of the age of majority
b. Is of sound mind
c. Is not disqualified from contracting by any law to which he
is subject (Sec 11 & 12).
Flaw in capacity to contract may arise from:

I. Minority
II. Person with unsound mind
- idiot, lunatics, drunken
III. Person disqualified by law.
-alien enemy, foreign sovereigns, corporation, insolvents,
convicts

LAWFUL OBJECT
The object of the agreement must be lawful. In other words, it

means that the object must not be --
▪ illegal
▪Immoral
▪Opposed to public policy. (Sec.23)
If an agreement suffers from any legal flaw, it would not be

enforceable by law.

WRITING AND REGISTRATION
A contract may be made by words spoken or written. As regards

the legal effects, there is no difference between a contract in
writing and a contract made by word of mouth. It is, however, in
the interest of the parties that the contract should be in writing.
There are some formalities also which have to be compiled with
in order to make an agreement legally enforceable. In some
cases, the document in which the contract is incorporated is to
be stamped. In some other cases, a contract besides being
written one, has to be registered. Thus where there is a
statutory requirement that a contract should be made in writing
or in the presence of witnesses or registered, the requirement
statutory formalities must be complied with(Sec.10, para 2).

NOT EXPRESSLY DECLARED VOID
It is also necessary that the agreement must not have been

declared to be expressly void. There are large number of
agreements which the law has expressly declared to be void as
these agreements are not in public interest. [Sec. 24 to 30]
For example wagering agreement , agreements in restraint of

marriage etc.
B agrees to pay D 1 lakh if D does not marry him and D agrees.

The agreement is in restraint of marriage and hence void.

CERTANITY AND POSSIBILITY OF PERFORMANCE
The contract must be certain and not vague or

indefinite(Sec.29). If it is vague and it is not possible to
ascertain its meaning, it cannot be enforced.
For example: S agrees to sell to Z” a hundred tons of oil”. There

is nothing whatever to show what kind oil was intended. The
agreement is void for uncertainty.
The terms of the agreement must be such as are capable of

performance. Agreement to do an act impossible in itself cannot
be enforced.[Sec.56(1)].
For example, where A agrees with B to put life into B’s dead
wife, the agreement is void as it is impossible of performance.

THANK YOU!

0001 Indian Contract Act Part-1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

0001 Indian Contract Act Part-1

Uploaded by

Copyright:

Available Formats

Welcome

Wait……Lecture will start soon

Dr. Kiran Kumar Agrawal

Contract-Meaning, Essentials of valid Contract, Types of Contract,

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

It come into force on 1st September 1872

Dr. Kiran Kumar Agrawal , Associate Professor

The law relating to contracts is contained in the Indian

Dr. Kiran Kumar Agrawal , Associate Professor

Indian Contract Act is not exhaustive

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

According to Section 2(h) of Indian Contract Act

Dr. Kiran Kumar Agrawal , Associate Professor

According to Sir William Anson,

Dr. Kiran Kumar Agrawal , Associate Professor

In simple we can say that ,A contract is a legal

A contract is an agreement made between two or

Dr. Kiran Kumar Agrawal , Associate Professor

Basic Features of a contract:

Dr. Kiran Kumar Agrawal , Associate Professor

1) agreement and 2) is its enforceability

Agreement - The term ‘agreement’ given in Section 2(e) of

To have an insight into the definition of agreement, we need

Dr. Kiran Kumar Agrawal , Associate Professor

When a person to whom an offer is made signifies his assent

The following points emerge from the above definition :

1. when the person to whom the proposal is made

Dr. Kiran Kumar Agrawal , Associate Professor

Agreement = Offer/Proposal + Acceptance

(ii) Enforceability by law – An agreement to become a

Means if an agreement is enforceable at court of law than only

Contract = Agreement + its enforceability by law

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

Example: An obligation to maintain wife and children, an order of the

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

So finally it is important that

Jus in rem means a right against or in respect of a thing;

A jus in rem is available against the world at large;

Examples: ​(a)​A owes a certain sum of money to B. B has a right to recover

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

Express Implied Quasi E- Contract or

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal , Associate Professor

An offer is a proposal by one party to another to enter into a

Dr. Kiran Kumar Agrawal , Associate Professor

Dr. Kiran Kumar Agrawal

When two parties enter into an agreement, their intention must

For example: in case of Balfour vs. Balfour, (1919) 2 K.B. 571, a

Dr. Kiran Kumar Agrawal

An agreement to be enforced by law must be supported by

Dr. Kiran Kumar Agrawal

According to sec. 2 (d) Defines Consideration

When at desire of the promisor , the

Dr. Kiran Kumar Agrawal

It is essential to the creation of every contract that there must be free

“When there is no consent, there is no contract.”

Examples: (a)A owes a certain sum of money to B. B has a right to recover