Indian Contract Act, 1872

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HomeBrud.gifIndian LawBrud.gifIndian ActsBrud.gifIndian Contract Act, 1872

The Indian Contract Act, 1872 is the law relating to Contracts in India. It came into force on September 1, 1872 and is extended to the whole of India except to the state of Jammu and Kashmir.

The Act has 238 sections altogether. Sections 1 to 75 came into force on September 1, 1872.

Contents

Interpretation of The Indian Contract Act, 1872

  1. When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;
  2. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;
  3. The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promisee";
  4. When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;
  5. Every promise and every set of promises, forming the consideration for each other, is an agreement;
  6. Promises, which form the consideration or part, of the consideration for each other are called reciprocal promises;
  7. An agreement not enforceable by law is said to be void;
  8. An agreement enforceable by law is a contract;
  9. 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;
  10. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

Contract

The term 'Contract' has been defined in Section 2(h) of the Indian Contract Act, 1872. It defines the Contract as an agreement enforceable by law.
An agreement cannot become a contract unless it can be enforceable by law. To be enforceable by law, a contract must contain all the essential elements of a valid contract as defined in Section 10.

According to Section 10, "All agreements are contracts, if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object and are not expressly declared by the Act to be void.

Essential Elements of a Contract

Main Article: Essential Elements of a Contract

Essential Elements of a Contract as defined in Section 10 of the Indian Contract Act 1872

1. Agreement - Offer and Acceptance
2. Legal purpose
3. Lawful Consideration
4. Capacity to contract
5. Consent to contract
6. Lawful object
7. Certainity
8. Possibility of Performance
9. Not expressly declared void
10. Legal formalities like Writing, Registration etc.

All the above ingredients must be satisfied in every valid contract. It can be noted that all contracts are agreements, but not all agreements are contracts.

Offer

Main Article : Offer - Indian Contract Act, 1872

Section 2(a) of the Indian Contract Act, 1872 defines the term "Proposal" as when one person signifies to another his willingness to do or to abstain from doing something with a view to obtaining the assent of the other to such an act or abstinence, he is said to make a proposal. The person making the 'proposal' or 'offer' is called the 'promisor' or 'offeror', the person to whom the offer is made is called the 'offeree'.

Acceptance

Main Article - Acceptance - Indian Contract Act, 1872

Acceptance means the expression of assent to whom the proposal is made in a Contract. Acceptance may be expressed either by conduct or by implied circumstances. However, silence cannot be prescribed as a mode of acceptance.

Consideration

Main Article : Consideration

Section 10 of the Indian Contract Act states Consideration as one of the essential elements to constitute a contract.

Consideration means 'something in return'. According to section 2(d) of the Indian Contract Act, "When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence is called a consideration for the promisee."

Capacity to Contract

Section 11 of the Indian Contract Act provides the requirements for competancy of the parties to the contract.
It says, "Every person is competent to contract, who is of the age of majority, according to law, which he is subject to also who is of sound mind and who is not disqualified from contracting by any law to which he is the subject"

Disqualifications

  1. An incorporated company cannot be part of contract.
  2. A minor is also incompetent to enter into a contract subject to certain exceptions
  3. Mental in capacity. Section 12 says "A person is said to be of sound mind for the purpose of making a contract, if at the time when he makes it, he is capable of understanding it and of forming a rational judgement to its effect upon his interests"
    1. A person who suffers from insanity at intervals can enter into a contract, when he is of sound mind.
    2. A person who suffers from insanity occasionally cannot enter into a contract, when he is of unsound mind.

Quasi-Contracts

Under special circumstances, obligations resembling those created by a contract are imposed by law although there is no contract between the parties. Such contracts are called Quasi-Contracts.

Sections 68 to 72 deal with Quasi-Contractual Obligations.

  1. Claim for Necessaries supplied to a person incapable of contracting or on his account
  2. Reimbursement of person paying money due by another, in payment of which he is interested
  3. Obligation of person enjoying benefit of non-gratuitous act
  4. Responsibility of finder of goods
  5. Liability of person to whom money is paid, or thing delivered by mistake or under coercion.

Discharge of Contract

A Contract may be discharged in any of the following ways

  1. Discharge by Performance.
  2. Discharge by Mutual Consent or Agreement
    1. Novation - When a new contract is substituted for an existing contract
    2. Alteration
    3. Rescission
    4. Remission - Accepting the lesser sum of amount than what was contracted for
  3. Discharge by subsequent illegality or impossibility
    1. Destruction of Subject-matter
    2. Failure of ultimate purpose
    3. Death or personal incapacity of Promisor
    4. Change of Law
  4. Discharge by lapse of time
  5. Discharge by operation of law
  6. Discharge by breach of contract
    1. Anticipatory breach
    2. Actual breach

See Also

  • Section 133: Discharge of surety by variance in terms of contract

Remedies for Breach of Contract

Main Article: Remedies for Breach of Contract

Chapter VI of Contract Act with Sections 73 to 75 deals with the consequences of breach of a contract.

When a contract is breached, the injured party is entitled to one or more of the following remedies.

  1. Rescission of the contract
  2. Suit for damages
  3. Suit upon quantum merit
  4. Suit for specific performance of the contract
  5. Suit for injunction

Damages

Main Article: Damages under Indian Contract Act, 1872

  1. Ordinary or General damages
  2. Special damages
  3. Exemplary or Punitive damages
  4. Nominal damages

Related Topics

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