UNIVERSITY INSTITUTE OF LEGAL

STUDIES
DEPARTMENT- LAW
Course –LL.B 1st Semester
Subject Name- Indian Contract Act, 1872
Subject Code- 20LCT- 112
Ms Deeksha (Assistant Prof.)

Indian Contract Act, 1872:Introduction DISCOVER . LEARN . EMPOWER

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 INDIAN • Space for visual (size 24)
CONTRACT
ACT, 1872

Course Outcome
CO Title Level
Number

CO1 The students will be able to understand theoretical and Understand

practical aspects of contracts

CO2 Students will be able to formulate different kinds of contracts Understand

CO3 Students will be able to apply critical thinking skills in reading understand
and interpreting contracts

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 Introduction(General)

COMMENCEMENT AND APPLICABILITY

The Indian Contract Act, 1872 is a part of mercantile law that is it deals with business or commercial transactions
This Act was passed by British India and is based on the principles of English Common law and came into force from 1 st day
of September, 1872
Prior to this Act, English law of contract was followed in India
It extends to whole of the India
This Act is not a complete code and deals with different stages in the formation of a contract, its performance, essential
elements, breach of contract etc

This Act is not retrospective in nature it is prospective in nature meaning whereby it is applicable to transactions which came
into existence after it came into force

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 Introduction

DIVISION OF THE ACT

• The Indian Contact Act is divided into two parts
• A) General Principles of the law of contract (Section 1-75)
• B) Special kinds of contract (Section 124-238)
• Sections 1 to 75 of Indian Contract deal with all kinds of contracts irrespective of their nature
• Sections 76 to 123 deals with Sales of Goods Act, 1930 (now a separate Act)
• Sections 124-238 deals with contract of indemnity, guarantee, bailment, pledge and agency
• Sections 239-266 deals with Partnership Act, 1932 (now a separate Act)
• Sections 76-123 were repealed from this Act in the year 1930 and a separate Act of Sales of Goods Act, 1930 was formed
• Sections 239-266 were repealed from this Act in the year 1932 and a separate Act of Partnership Act, 1932 was formed

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About Contracts
• We enter into contracts so many times in a day that contracts have become an indispensable part of our life
• People purchasing newspaper in the morning or going to movie in the evening, or a company purchasing a business are all examples of
contracts
• Any business is a series of contracts made on regular basis

• Basically a person is free to contract on any terms he chooses

• The rights and duties of parties and terms of agreement are decided by the contracting parties themselves
• A valid contract binds all the parties to the contract, howsoever unfavourable the terms may be
• The court of law intervenes to enforce the contract only in case there is non-performance of contract and that too when the contract was
a valid contract
• Some everyday terms related to contract are
• Offer
• Promise
• Agreement
• Contract

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 What is a Contract

DEFINITION
Section 2(h) of the Indian Contract Act, 1872 defines the term contract as an agreement which is enforceable by law
• Contract is an agreement between two or more parties to do or abstain from doing something
• A contract can be either oral or written but since oral contracts are more challenging to enforce they should be avoided, if
possible
• If we examine the definition of contract, then we can see two important things which are necessary for the formation of
contract
• First thing is an agreement and second thing is enforceability of that agreement
• Hence, A Contract is equal to Agreement plus Enforceability
• For Example
• There are two parties A and B
• There is an agreement between A and B that B will pay Rs 10 lakhs to A for purchasing his car and A will sell his car to B
• Now this is a contract because it is enforceable by law
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Essentials of a valid contract
Section 10 says all agreements are contracts if they are made by the free consent of the parties competent to contract for a
lawful consideration and with a lawful object and are not expressly declared to be void
So according to section 10 there are six essential elements
• 1) Agreement between two or more parties
• 2) Free Consent of the parties
• 3) Competency of the parties
• 4) lawful object
• 5) Lawful consideration
• 6) Not expressly declared to be void
• Section 10 is not exhaustive and complete and there are other sections which also contain requirements for the agreement to
be enforceable such as
• Intention to create legal relationship

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Essentials Explained
I) Agreement
• It is an outcome of offer and acceptance
• For a valid contract there must be an offer made to a party and that offer must be accepted by the party to whom it Is made
• For Example A offers to sell his car to B for Rs 10,00000 and B accepts that offer then it becomes an agreement
II) Free Consent
Section 14 of the Indian Contract Act defines free consent, it says a consent is said to be free if it is not caused by coercion,
undue influence, fraud, misrepresentation and mistake
III)Competency(capacity of parties to contract)
Section 11 talks about competency, it says every person is competent to contract who is of the age of majority according to 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
In simple words a minor, a person of unsound mind and person disqualified by law are not competent

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Explanation continued
IV) Lawful Consideration
Section 2(d) defines consideration, in simple words consideration means something in return
It can be past, present and in future and need not be in money only
Section 25 also talks about consideration and it says that agreement made without consideration is void
V) Legal object
Section 23 renders certain objects and consideration unlawful(to be discussed later)
For now we can discuss illegality of an object with few examples
• A promises B to drop a prosecution which he has initiated against B for robbery and B promises to restore the value of
things taken by him
Here the agreement is void as the object is unlawful
• A is looking for a job and there is a vacancy in the government department but A is not eligible for this job and A goes to B
a person who works in the department and promises to pay him Rs 1,00000 if he gets him a job
• This is not a valid contract as the object is unlawful

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Continued
VI) Agreements expressly declared to be void
• There are certain agreements that are expressly declared to be void by Indian Contract Act, 872 itself
• For Example
• Agreements void for uncertainty (section 29)
• Contingent Contracts (section 36)
• Agreements to do impossible acts (section 56)
These are just the examples there could be more

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 Assessment pattern
• Discuss the essentials of a Valid Contract.

• Discuss the history, development and objective of Indian Contract Act, 1872.

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 Application

Students will be able to appreciate the transactions and agreements, they make in their day to day living.
Students will be able to avail and guide people to claim remedies in case of non-fulfillment of the conditions by any
party to the contract.

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 REFERENCES

• Indian Contract Act, 1872, BARE ACT

• Law of Contract, by Dr. Avtar Singh
• Law of Contract, by Dr. R.K. Bangia
• Law of Contract by Mulla

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THANK YOU

For queries
Email: deeksha.e9912@cumail.in