15-01-2024

Indian Contract Act 1872

An act meant to ensure that rights

agreed between parties in a
contract are legally enforced.

Subject Matter

Offer &
Acceptance

Contract /
Agreement Communication

Consideration

Legal
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What is Subject Matter?

• That Particular Item for which Contract is being made
• Product or Service or part of both
• One of the 2 parties of the contract have control over it
• The other party wants it and is willing to pay for it
• It has ‘Value’

What is an Offer?
• Precise - capable of being understood, communicated
• It must not contain a clause that does away with acceptance
• Special terms must be brought to the notice of the offeree
• Need not be in writing though in immoveable property
contracts it must be in writing.
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Offer … continued
• Offer and an Invitation to an offer : Different
• Advertisement can become an offer
• An offer can be revoked before it is accepted
• In a digital contract the offer has been communicated
once it has entered the computer of the offeree.

ACCEPTANCE
• Must be in response to an offer.
• It must be in the mode prescribed
• By the person to whom offer has been made.
• It must be unqualified and unconditional.
• Within the time provided or reasonable time.
• Can be revoked before it reaches the offeror
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COMMUNICATION
• Offer, Subject Matter, Consideration, Acceptance : to be
communicated
• Clear & Unambiguous
• Normal / Accepted / Required Channel
• Acceptance : Channel to be in same channel as desired
• Communication : Within stipulated Time

CONSIDERATION
• From both Parties
• Consideration is price of Subject Matter of a contract
• A contract without consideration is void
• Must be decided by the parties themselves
• Can be fulfilled by third parties
• Must have some legal value in the eyes of law
• Strangers to a contract have no claims : Privy to the
Contract
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Legal Subject Matter

• Normal Business / Commercial deal
• Right side of the Laws
• Not Illegal
• Legally Enforceable

MINORS… (< 18 Years)

• Agreement with minor is void – ab – initio.
• Even if a minor declares himself to be a major he
can plead that he is a minor
• An agreement with a minor cannot be ratified on
his becoming a major.
• Guardians of a minor are not liable on contracts
with a minor
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COERCION
• Both Parties ( Offeror / Acceptor ) : Free Will
• No Compulsion / Force
• Such Compulsion / Force : Coercion
• No Pressure / Threat / Blackmail
• Free and Fair Deal is a must

Subject Matter

Offer &
Acceptance

Contract /
Agreement Communication

Consideration

Legal
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What is a contract?
• Subject Matter :
– Legal, Enforceable
– Not a social agreement
• It must have an offer and acceptance
• Communication : Clear, Transmitted and Received
• Consideration :
– Quid-Pro-Quo / Something in Return
– To and Fro ( Bi-directional)
• It must not be prohibited by law.
– Not with a Minor
– Not with Force / Coercion

6 C’s of a Contract
• CAPACITY
• CONSIDERATION
• CONSENT
• COMMUNICATION
• COMPLETION
• COMPENSATION
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CAPACITY
• A minor / an unsound person / an insolvent person :
cannot enter into contracts . It is void ab – initio.
• Reasons :
• Creates legally binding obligations on the parties
• Hence only those who have the capability (capacity)
to enter into a contract : are allowed
• Otherwise they (minor/unsound/insolvent) may
harm themselves / others.

CONSENT
• Consent must be free and genuine.
• Consent is not free and genuine when it is
induced by
– coercion
– undue influence
– fraud
– misrepresentation
– mistake
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COMPLETION
• Contract is to be executed as agreed by both
parties
• Executed at the time and place as agreed
• All conditions of the contract are to be honoured
• Failure to honour commitment : Not acceptable

Contracts…

• Conditions…
Offer Acceptance
• Communication
• Capacity
• Consideration
• Consent
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COMPENSATION
• For Failure to execute Contract as agreed
• Failure could be partial or complete
• Party failing to execute : Liable to pay compensation
• Compensation : As per the contract or Legal Recourse

Contracts…
• Basics :

Offeror • Subject Matter Offeree

• Legal
• Willingness
• Consideration
• Agreement
• Execution
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Major Types of Contracts

• Usual Offer / Acceptance
Normal / • Subject Matter / Consideration
Regular • Directly : Offeror & Offeree (O+O)

• Offer / Acceptance
Agency • Subject Matter / Consideration
• O+O+ Through III Party : Agent

• Offer / Acceptance
Bailment • Subject Matter / Consideration
• O+O+ Custody of Product / Item

Agency
• Operating through somebody else
• Key Concepts :
– Principal : On whose behalf act is being done
– Agent : Who is acting on behalf of the Principal
– Principal Authorises Agent to act on his behalf
– Scope, Rights, Responsibilities : Agency Agreement
– Principal not responsible for acts beyond agreement
– Agent can not have rights more than Principal’s
– Agent can not carry out illegal acts
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Bailment
• A little different kind of agreement
• Goods and/or services involved
• Key Concepts :
– Bailor : Actual Owner of Items / Goods
– Bailee : Custodian / Possession of Items / Goods
– Bailor Authorises Bailee to hold custody of goods
– Scope, Rights, Responsibilities : As per understanding
– Bailee to do only such acts that are so agreed
– Bailee to return to Bailor Goods in agreed condition
– Consideration : Varies depending upon Situation

Agency
• Principal :
• Who holds right, but has passed on responsibility
• Who has Authorised another person to represent
• Continues to be Owner
• Parts with Partial / Full Authority
• Limited to Duration / Act
• Agent :
• To whom Power, Authority has been passed on
• To carry out desired act(s)
• Represents the Principal
• Carries out those acts that he is authorised to
• Limited to authority given by Principal
• Can not perform any act not authorised
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Bailment
• Bailor:
• Who holds ownership, but has passes on possession
• Continues to be Owner
• With / without consideration
• For a particular duration
• Gets possession of goods after Bailment
• Bailee :
• To whom only possession has been passed on
• To carry out desired act(s)
• Responsible for proper possession as per agreement
• Does not get ownership
• Usually returns goods after stipulated period / purpose

Contracts

• Executed Contracts :
• Contract Entered into Now
• Consideration : Now
• Execution : Now
• Executory Contracts :
• Contract Entered into Now
• Consideration : May be in Future
• Execution : Future