INDIAN CONTRACT

ACT, 1872
 INTRODUCTION
The term contract is defined under section 2(h) of the Indian Contract Act, 1872 as-
“an agreement enforceable by law”.
The contract consists of two essential elements:
1. An agreement, and
2. its enforceability by law.

3. 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 the person to whom the proposal is made signifies his assent there to,
the proposal is said to be accepted. Proposal when accepted, becomes a promise”.
The following points emerge from the above definition:
 when the person to whom the proposal is made
 signifies his assent on that proposal which is made to him
 the proposal becomes accepted
 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

2. Enforceability by law – An agreement to become a contract must give rise to a legal

obligation which means a duly enforceable by law.
Thus, from above definitions it can be concluded that –
Contract = Accepted proposal/Agreement + Enforceability by law.
 Classification of contracts
On the basis of Validity
1. Valid contract : An agreement which has all the essential elements of a contract is called a valid
contract. A valid contract can be enforced by law.
2. Void contract[Section 2(g)] : A void contract is a contract which ceases to be enforceable by law. A
contract when originally entered into may be valid and binding on the parties. It may subsequently
become void.
3. Voidable contract[Section 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 other or others, is a voidable contract.
4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted,
would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or
property of another, or court regards it as immoral or opposed to public policy. These agreements are
punishable by law. 
5. Unenforceable contract: Where a contract is good in substance but because of some technical defect
cannot be enforced by law is called unenforceable contract. These contracts are neither void nor
voidable
 On the basis of Formation
1. Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time
of formation, the contract is said to be express contract.
2. Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the
circumstances of the cases. Where a proposal or acceptance is made otherwise than in words, promise is said to be
implied.
3. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there is no
intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is required to
perform it. A quasi contract is based on the principle that a person shall not be allowed to enrich himself at the expense
of another.
On the basis of Performance
4. Executed contract:  An executed contract is one in which both the parties have performed their respective obligation.
5. Executory contract:  An executory contract is one where one or both the parties to the contract have still to perform
their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory
contract. 
6. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the
formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the
contract comes into existence.
7. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at
the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration.
Essential
Section Elements
10 of theOf Valid Contract
Indian contracts Act, 1872 provides that “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”.

Thus, the essential elements of a valid contract are as follows:

1.Two Parties:
A Valid Contract must involve at least two parties identified by the contact. One of these parties will
make the proposal and the other is the party that shall eventually accept it.

2.Intent of legal obligations:

The parties that are subject to a contract must have clear intentions of creating a legal relationship
between them. What this means is those agreements that are not enforceable by the law.
3.Case specific contracts:
Some contracts have special conditions that if not observed would render them invalid or void.
For example, the Contract of Insurance is not a valid contract unless it is in the written form.
Similarly, in the case of contracts like contracts for immovable properties, registration of contract
is necessary under the law for these to be valid.

4.Free Consent:
Consent is crucial for an agreement and thus for a valid contract. If two people reach a similar
agreement in the same sense, they are said to consent to the promise. However, for a valid
contract, we must have free consent which means that the two parties must have reached consent
without either of them being influenced, coerced, misrepresented or tricked into it.

5.Consideration:
Quid Pro Quo means ‘something in return’ which means that the parties must accrue in the form
of some profit, rights, interest, etc. or seem to have some form of valuable “consideration”.
OFFER & ACCEPTANCE
OFFER: An Offer is a proposal by one party to another to enter in to a legally binding
Agreement with him.
 Essentials of a valid offer :
1. Offer must be communicated : Communication of offer is the most primary thing which is to
be done for a valid offer. The offeror must communicate offer to the offeree. For example : “A”
wants to sell his car and he has published an advertisement in newspaper which is a form to
communicate the offer to general public.  Hence it is a valid offer.
2. Offer may be Expressed or Implied : The offeror can make an offer through words or even
by his conduct. An offer which is made via words, whether such words are written or spoken.
3. Offer must create Legal Relations : The offer must lead to a contract that creates legal
relations and legal consequences in case of non-performance.
4. It may be general or specific in nature : The offer can be given to public at large in general
by advertisement in newspaper etc. or it can be given specific person too.
5. An offer can be positive or negative : It can be a promise to do some act, and can also be a
promise to abstain (not do) some act/service. Both are valid offers.
6. Offer may be Conditional : While acceptance cannot be conditional, an offer might be
conditional.
7. Offer must be made with a view to obtain the assent : The offeror must obtain consent which
should be “free” in nature as define under as it define it should not be taken under coercion, undue
influence, fraud, misrepresentation & Mistake.
Different Types Of Offers
1. GENERAL OFFER: When an offer made at large or in public or in general this offer is
known as General Offer. It can be accepted by any individual or public at large whoever is
interested in the offer offered.
CASE : CARLILL v. CARBOLIC SMOKE BALLS CO. (1893) 
This is the landmark judgment of general offer. In this case it held by the Court of Appeal that
whosoever fulfills the terms and condition of the offer will be eligible for the reward of the offer
2. SPECIFIC OFFER : The offer which is made to an individual or to a specific group of
individual is said to be Specific offer. It can be accepted by that individuals or that group of
individual.
Example : Sandhya offer to buy a car from Sona for Rs. 10 lakh. Thus, a specific offer is made to
a specific person , and only Sona can accept the offer.
3. COUNTER OFFER : When an offeror makes an offer to offeree and offeree with some modification in it
makes converse offer which makes initial offer void and the other comes in existence, which reverse the party
from offeror and offeree to offeree and offeror respectively this type of offer is known as counter offer.
CASE : HYDE v. WRENCH (1840) Defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree)
offered him £950 and subsequently rejected the offer. So, the offeree filed the case as the offeror was bind by the
contract but it was held that as soon as offeree put the condition the first offer becomes void which means that the
offeror is not bounded by the contract as the original offer was rejected by the offeree.
4. CROSS OFFER :-
When the offeror and offeree make the same offer to one another having same terms out of knowledge of each other
is known as cross offer. In this case there will be no contract due to acceptance of the offer offered.
CASE : TINN v. HOFFMAN (1873) [5]
In this case Hoffman wrote a letter to Tinn with a offer to sell 800 tons of iron for the price of 69s per  ton. On the
same day without any knowledge Tinn wrote a letter to buy the iron with the price and with same condition as
written by Hoffman. It was held by the court that it was cross offer and no contract exist & no parties are bound by
the contract.
ACCEPTANCE : The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When
the person to whom the proposal has been made signifies his assent thereto, the offer is said to be
accepted. Thus the proposal when accepted becomes a promise.”
Rules regarding Valid Acceptance
1] Acceptance can only be given to whom the offer was made
2] It has to be absolute and unqualified
3] Acceptance must be communicated
4] It must be in the prescribed mode
5] Implied Acceptance
Legal Rules Regarding
consideration
Introduction to consideration
Consideration is something in return. In simple words , it is nothing but the price
that the promise agrees to pay to promisor.
RULES
Consideration must move at the desire of promisor
Consideration may move from a promisor to any other person
It can be in past, present or future
It must have value in the eyes of the law
It should be over and above the promisor’s existing obligation
It can not be unlawful
Capacity to contract
According to section 11 “ Every person is competent to contract who is age of
majority according to the law to which he is subject ,and who is of sound mind
and not disqualified from contracting by any law to which is subject.
Three main aspect :
Attaining the majority
Being sound minded
Not disqualified from entering into contract by any law
DISCHARGE OF A CONTRACT
A contract creates certain obligations on one or all parties involved. The discharge of a contract
happens when these obligations come to an end. There are many ways in which a contract is
discharged.
Contracts can come to an end in the following ways:
• By Performance
• By agreement or by consent
• By promise failing to offer facilities for performance
• By breach of contract
• By impossibility of performance
• By death
• By refusing tender of performance
• By unauthorized material alteration of the contract
• Discharge by lapse of time
• By operation of law
Types of discharge by agreement or consent
As per Section 62 of the Indian Contract Act, 1872 whose heading is – Effect of novation,
rescission, and alteration of contract, “If the parties to a contract agree to substitute a new contract
for it, or to rescind or alter it, the original contract need not be performed.
The 6 types through which discharge of contract through agreement or consent could take place are:
1. Novation
2. Rescission
3. Alteration
4. Remission
5. Waiver
6. Merger
Breach of Contract
A breach of contract is a violation of any of the agreed-upon terms and conditions
of a binding contract. The breach could be anything from a late payment to a more
serious violation such as the failure to deliver a promised asset.
A breach of contract occurs when one party in a binding agreement fails to deliver
according to the terms of the agreement.
A breach of contract can happen in both a written and an oral contract.
The parties involved in a breach of contract may resolve the issue among
themselves, or in a court of law.
There are different types of contract breaches, including a minor or material breach
and an actual or anticipatory breach.
 REMEDIES TO BREACH OF CONTRACT:
A contract can be said to be breached or broken when either of the parties fails or refuses to perform his obligations,
or his promise under the contract.
The laws relating to damages are governed by the Contract Act, whereas the laws relating to injunctions and specific
performance are governed by the Specific Relief Act, 1963
When one of the party commits a breach of the contract, the other party becomes entitled to any of the following
reliefs:

1. Rescission of the Contract:

When one of the parties commits breach of contract, other party shall further treat the contract as void or rescinded.
When the contract is rescinded, the affected party is automatically discharged from all the commitments under the
contract.
Sec. 64 of the Act provides that the party who rescinds the voidable contract, shall if he has received any benefit
there under from the other party, restore such benefit to the person from whom it was received. Further, the person
who rightfully rescinds the contract is entitled to compensation for any damage he faced from non-fulfillment of
contract.
2. Damages for the loss suffered: The term “Damages” means monetary compensation payable by the defaulting
party to the affected party for the loss suffered by him when contract was breached. Therefore, the aggrieved party
may bring an action for damages against the party who is guilty of the breach of contract.
- Ordinary Damages or General Damages.
- Special Damages.
- Exemplary or Vindictive Damages.
- Nominal Damages.
3. Suit for the Specific performance: When the act agreed to be done is such that compensation in money, for its
non-performance could not afford adequate relief. However, specific performance shall not be granted in the
following cases:
a) Where the damages are an adequate relief,
b) Where the contract is determinable in its nature.
c) Where the contract involves personal nature.
d) Where the Courts cannot supervise the carrying out of the contract.
e) Where the contract is not fair and just.
5. Suit for Injunction: The term “Injunction” may be defined as an order of the Court
instructing a person to refrain from doing some act that has been the subject-matter of contract.
Where a party has promised not to do something and he does it, and thereby commits a breach of
contract, the aggrieved party may, seek the protection of the Court under certain circumstances
and obtain an injunction.
4. Suit upon Quantum Meruit: The expression “Quantum Meruit” means, “as much as earned
“. In legal sense, it means payment in proportion to the work done. This principle provides for
the payment of compensation under certain circumstances, to a person who has offered the goods
or services to the other party under a contract, which under certain circumstance, could not be
fully performed.
Conclusion
Contracts plays a significant part in the everyday existence of each individual. More often than
not individuals go into contracts without acknowledging it.
For the development of an contract, there are numerous basics that must be followed. After the
development of an contract, the following stage is reached specifically, the fulfillment of the
object the parties had in mind.
It is significant for a typical everyday exchanging and ordinary managing to have a substantial
and powerful contract and it should be made affective under the Contract act.