Contract Act, 1872

Sk. Nazibul Islam

Faculty Member,
Bangladesh Institute of Bank Management
Contract Act, 1872

 Section 1 – 75 : Preliminaries of Contract

 Section 76 – 123 : (Repealed, Sale of Goods Act,
1930)
 Section 124 – 147 : Indemnity and Guarantee
 Section 148 – 181 : Bailment
 Section 182 – 238 : Agency
 Section 239 – 266 : (Repealed, Partnership Act, 1932)

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 The law of contract is the most important part of
commercial law because every commercial
transaction starts from an agreement between two or
more persons.

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Definition of Contract
 An Agreement enforceable by law (Sec. 2h)
 An Agreement and
 The agreement must be enforceable by law

An agreement comes into an existence whenever one or more

persons promise to one or others, to do or not to do
something. ‘Every promise and every set of promises, forming
the consideration for each other, is an agreement’- Sec. 2(e).
Some agreements cannot be enforced through the courts of
law, e.g., an agreement to play cards or to go to a cinema. An
agreement, which can be enforced through the courts of law,
is called a contract.

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The essential elements of a contract
 Offer and Acceptance
 Intention to create Legal Relationship
 Lawful consideration
 Capacity of parties
 Free consent
 Legality of the object
 Certainty
 Possibility of performance
 Writing, Registration and Legal formalities

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Competent to Contract (Sec. 10)

 Every person is competent to contract who is of the age of majority

according to the law to which he is subject, and who is of sound mind ,
and is not disqualified from contracting by any law to which he is subject.

 Major:
 Sound Mind: If he is capable of understanding the consequence of contract.
 Not Disqualified:

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Classification of Contract

1. The Method of Formation of a Contract

2. The time of Performance
3. the Parties f the contract
4. Legality or Validity of the contract

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1. Method of Formation

a) Express Contract: Which is expressed in words spoken or

written.

b) Implied Contract: Understood from the acts, the conduct of the

parties and /or the course of dealing between them.

c) Quasi Contract: Which are not contracts strictly, though the

parties act as if there is a contract.

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2. Time of Performance

a) Executed Contract: The parties perform their obligations

immediately, i.e., as soon as the contract is formed.

b) Executory Contract: Obligations are to be performed at

a later time.

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3. Parties of the Contract

a) Bilateral Contracts: There must be at least two parties to the

contract. Therefore all contracts are bilateral
or multilateral.

a) Unilateral Contracts: One party has to fulfill his obligations

whereas the other party has already
performed his obligations.

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4. Legality or Validity

a) Valid Contract
b) Void Contract
c) Voidable Contract (Sec. 2i)
d) Illegal Contract
e) Unenforceable Contract

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 Valid agreement: An agreement which fulfills all the
essential elements of a contract. , and which is
enfoceable through the courts .
 Void agreement: a void agreement has no legal
effect. It confers no rights on any person and creates
no obligations. ‘An agreement not enforceable by
law is said to be void’.- sec.2(g)
Example- An agreement made by a minor.

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 Voidable agreement: ‘An agreement which is enforceable by
law at the option of one or more of the parties thereto, but not
at the option of the other or others, is a voidable contract.’-
Sec.2(I). A voidabe agreement can be avoided. Until it is
avoided, it is a good contract.
Example- Contracts brought about by coercion, undue
infuence, misrepresentation etc.
X coerces Y into entering into a contract for the sale of Y’s
house to X. This contract can be avoided by Y.
X cannot enforce the contract. But Y, if he so desires, can
enforce it against X.
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 Unenfoceable agreement: An agreement which
cannot be enforced in a court of law one or both of
the parties, because of some technical defect, eg.,
want of registration or non-payment of the requisite
stamp duty.
 Illegal Agreement: An illegal agreement is one which
is against a law in force. Example- an agreement to
commit murder, robbery or cheating.

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Lawful Offer

a) Express or Implied (Sec. 9)

b) To a Definite Person
c) Legal Relationship is required
d) The Terms must be certain, definite, not vague
e) Must be communicated
f) A mere statement of intention
g) May be Conditional

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Lawful Acceptance (Sec. 7)

a) Absolute and unqualified

b) Conditional acceptance
c) Must be expressed in some usual or reasonable
manner
d) Mental acceptance or uncommunicated assent
e) Time of Acceptance
f) When Acceptance is complete
g) Before offer

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 Communication (Sec. 4)

a) Proposal: When it comes to the knowledge of the person to whom it is

made.
b) Acceptance:
 As against the proposer, when it put in the course of transmission to him, so
as to be out of the power of the acceptor.
 As against the acceptor, when it comes to the knowledge of proposer.
c) Revocation:
 As against the person who makes it, when it is put into a course of
transmission to the person to whom it is made, so as to be out of the power of
the person who makes it
 As against the person to whom it is made, when it comes to his knowledge.

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Lawful Consideration

a) Past Consideration
b) Present Consideration
c) Future Consideration

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Consideration-Exceptions (Sec. 25)

a) Natural Love & Affection

 By a written & registered document
 Natural love and affection
 Near relation to each other
b) Voluntary Compensation
c) Time-barred debt
d) Agency
e) Completed gift

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Void Agreements

An Agreement so made must not have been expressly declared

to be void.
 Restraint to Marriage (Sec. 26)
 Restraint of Trade (Sec. 27)
 Restraint of Proceedings (Sec. 28)
 Having Uncertain Meaning (Sec. 29)
 Wagering Agreement (Sec. 30)
Every Contract is an agreement but all agreements are not
contracts.
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Revocation (Sec. 5,6)

 A proposal may be revoked at any time before

the communication of its acceptance is
completed as against the proposer, but not
afterwards.
 An acceptance may be revoked at any time
before the communication of the acceptance is
completed as against the acceptor, but not
afterwards.
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Termination of Contract

 By performance of the promise of all parties

 By mutual consent canceling the agreement or substituting
a new agreement in place of the old
 Subsequent impossibility of performance
 By operation of law – death, insolvency, or merger
 By lapse of time
 By material alteration without the consent of the other party
 By beach made by one party

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Remedies of Breach of Contract

 Free from obligation

 Suit for damages
 Specific performance
 Injunction

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