Indian Contract Act 1872

• Introduction
• The Law of contracts constitutes the most important branch of
mercantile or commercial law. It affects every body, more so,
trade, commerce and industry. It may said that contract is the
foundation of civilized world.
• The law relating to contract in India is contained in Indian
Contract Act, 1872. It came in to force from September 1872.
It is applicable to all states of India, except the State of
Jammu and Kashmir. It determines the circumstances in which
promise is made by the parties to a contract shall be legally
binding on them. All of us enter into a number of contracts,
• Knowingly or unknowingly. Each contract creates some rights
and duties on the contracting parties. Indian contracts deals
with the enforcement of these rights and duties upon the
parties in India.
• Provisions
• General Principles of Law of Contract Section 1 – 75
• Contract relating to Sale of goods Section 76 – 129
• Special Kinds of Contract (including indemnity, guarantee,
bailment and pledge) Section 125 – 238
• Contracts relating to Partnership Section 239 – 266
• Indian Contract Act embodied the simple and elementary rules
relating to sale of goods and Partnership. The development
of modern business world found the provisions contained
in the Indian Contract Act inadequate to deal with the new
regulations or give effect to the new principles.
Subsequently the provisions relating to sale of goods and
Partnership in the Indian Contract Act were repealed
respectively in the year 1930 and 1932 respectively and
new enactments namely Sale of Goods and Movables Act
1930, and Indian Partnership Act 1932 were enacted
• At Present Indian Contract Act includes:
• General Principles of Law of Contract Section 1-75
• Special Kinds of Contracts (includes indemnity, guarantee,
bailment and pledge) Section 125 – 238
Important Facts about Indian Contract Act, 1872

• Rights in rem (jus in rem) (Roman term)

• A right rem is available against the whole world at large. This
right protects interest against the world and there is a duty
upon every person of the world not to interfere with others
rights. It is available against an open or indefinite class of
persons. The freedoms given in Article 19 of the Indian
constitution with its restrictions are the rights in rem.
• Example: ‘X’ has house. The people of world have a duty not
to interfere with his ownership. Nobody has right to disturb his
possession.
• Rights in Personam (jus in Personam)
• A right in Personam is available only against a particular
person or party. This right protects an interest solely against
determinate individual and duty imposed upon determinate
individuals. Indian Contract Act, 1872 provides right in
Personam to the parties who enters in to the contracts thus, the
parties to the contract can exercise their contractual rights
against each other only.
• Example: ‘X’ let his house to ‘Z’. X has right to receive rent
from his tenant. This right to receive rent from his tenant is
right in personal. The rest of the world is not concerned with
it.
• Assumptions
• (a) There shall be freedom to parties to the contract to
determine their rights and obligations under contract and law
shall enforce only what the parties have agreed to be bound
subject to certain limited principles.
• (b) Rights and obligations created by the parties shall be
performed and their non performance shall give rise to legal
consequences.
 CONTRACT : ITS ESSENTIALS
• The Indian Contract Act came into force on 1st September, 18
72.
• It was enacted mainly with a view to ensure reasonable
fulfilment of expectations created by the promises of the
parties and also enforcement of obligations prescribed by an
agreement between the parties,
• The object of the Act is also to introduce definiteness in comm
ercial transactions.
• It applies to the whole of the country except the state of
Jammu and Kashmir.
• The Act is neither retrospective nor exhaustive. It deals mostly
with the general principles.
 Application of the English Law
• In case, a particular matter is not covered by any section of the Contract
Act or by any other law in force in India, the courts may follow the
principles of English Common Law, provided they are not inconsistent with
Indian conditions and circumstances. Indian Contract Act applies only to
those agreements which are valid and enforceable by law.
• Further, the Law of Contract is not the whole law of agreements nor is it
the whole law of obligations. An agreement which does not give rise to any
legal obligations will not be enforceable by law.
• There are various social, religious and moral obligations, Example:
Marriage, conveyance of gifts, etc., which are not enforceable by law as
contracts.
• Obligation to maintain one’s wife and children does not arise out of
contract.
• Agreement which result in the transfer or destruction of rights are not
covered by the contract.