The Indian Contract Act, 1872

1. NATURE OF CONTRACT

Arushi Gaur Chauhan,

Faculty,
Department of Legal Studies and Research,
Barkatullah University,
Bhopal
WHAT IS LAW?
 The principles, rules and regulations
established in a community by some
authority/government and applicable to its
people/citizens, whether in the form of
legislation or of custom and policies
recognized and enforced by judicial decision.

 Law consists of rules that regulate the

conduct of individuals, businesses, and other
organizations within society.
WHAT IS LAW OF CONTRACT?

 Law of Contract is that branch of

commercial or business law, which
ensures that the promises made by one
person to another in respect of any
transaction shall be performed by the
parties exactly in accordance with the
arrangement between them. And incase of
any default the party at fault shall
compensate the innocent party.
Business law
 Business law is also termed as commercial Law and mercantile
law.
 Business law is generally used to denote that portion of law
which deals with rights and obligations arising out of
transactions between mercantile persons.
 The term appears to be a convenient way of grouping together
the laws that should be regarded important for men in business.
 It includes following laws:
 Law of contract
 Sales of goods Act
 Partnership Act
 Company law
 Negotiable Instrument Act
 Insurance Act 
The Indian Contract Act, 1872
Agreement between: Consideration
Intention to
form legal
relation
Friends • Social Agreement NO
(Party) NO

Agreement
Husband-
NO NO
wife (Food) • Domestic

Buyer- • Commercial
seller Yes Yes
(Amazon) Agreement

Society • Social Agreement

NO NO
(Park)
Which is wider term?

Agreement

Contract
 All contracts are agreements but all
agreements are not contracts
BASIS FOR
AGREEMENT CONTRACT
COMPARISON

Meaning When a proposal is accepted by the person to whom When an agreement is enforceable by law, it becomes a
it is made, with requisite consideration, it is an contract.
agreement.

Elements Offer and Acceptance Agreement and Enforceability

Defined in Section 2 (e) Section 2 (h)

In writing Not necessarily Normally written and registered

Legal obligation Does not creates legal obligation Creates legal obligation

One in other Every agreement need not be a contract. All contracts are agreement

Scope Wide Narrow

 Salient Features:
 The Indian Contract Act 1872-passed by British India
& based on the principles of English Common Law.
 Came into force on 1st Sept. 1872.

 Originally contained 266 Sections, including:

I. General Principles of Law of Contract (S. 1 – 75)

II. Contract relating to Sale of Goods (S.76 -123)
III. Special kinds of Contracts including indemnity,
guarantee, bailment &pledge(S.124 - 238) and
IV. Contracts relating to Partnership(S.239-266)
Conti…
At present the Indian Contract Act may be divided
into two parts:

 Part 1: General Principles of Law of Contract

( S. 1 to 75)
 Part 2:Special kinds of Contracts such as:
a) S. 124-147: Contract of Indemnity and Guarantee
b) S. 148-181: Contract of Bailment and Pledge
c) S. 182-238: Contract of Agency

 The Sale of Goods Act, 1930 and the Indian

Partnership Act,1932 were enacted as separate laws.
Conti…
 The Act is not exhaustive : Does not deal
with contracts relating to partnership, sale of
goods, negotiable instruments, insurance etc.

 Nature of the Law: Does not lay down the

rights and duties law will enforce, but consists
of limiting principles subject to which the
parties may create rights and duties for
themselves, which the law will uphold.
Conti…
 Creates jus in personam as distinguished from jus
in rem:
Example: A owes a certain sum of money to B. B has
a right to recover it 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- Right against

or in respect of a specific person

Jus in rem- Right available against the world at

large.
Thank you!