THE INDIAN CONTRACT ACT, 1872(1)

(1)

THE INDIAN CONTRACT ACT, 1872

(2)

DEFINATION

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Sec.2(h) “An agreement enforceable

by law.”

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Agreement + enforceability by law =

contract

contract..

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 Agreement must create a legal obligationAgreement must create a legal obligation

or duty. or duty.

(3)

Agreement

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 Sec. 2(e), “Every promise and everySec. 2(e), “Every promise and every

set of promises, forming set of promises, forming

consideration for each other” consideration for each other”

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promise

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 Sec.2(b), “When a person to whomSec.2(b), “When a person to whom

the proposal is made signifies his the proposal is made signifies his assent thereto, the proposal is said assent thereto, the proposal is said to be accepted. A proposal when

to be accepted. A proposal when accepted, becomes a promise.” accepted, becomes a promise.”

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(5)

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 Social agreementsSocial agreements 

 Legal agreementsLegal agreements

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Legal agreements are

contracts.

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Essential elements of a valid contract

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 Offer and acceptanceOffer and acceptance 

 Intention to create legal relationshipIntention to create legal relationship 

 Lawful consideration.Lawful consideration. 

 Capacity of parties – CompetencyCapacity of parties – Competency 

 Free and genuine consentFree and genuine consent 

 Lawful objectLawful object 

 Agreement not expressly declared voidAgreement not expressly declared void 

 Certainty and possibility of performanceCertainty and possibility of performance 

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Classification of Contract

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 According to validityAccording to validity

Valid contract, Valid contract, voidable contract, voidable contract, void contract, void contract, Illegal contract, Illegal contract, unenforceable contract. unenforceable contract.

(8)

Classification of Contract

o

o According to formationAccording to formation

Express contract, Express contract, Implied contract, Implied contract, Quasi contract. Quasi contract.

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Classification of Contract

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 According to performanceAccording to performance

Executed contract, Executed contract, Executory contract, Executory contract,

Unilateral and bilateral

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Offer and Acceptance

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 For an agreementFor an agreement

There has to be a

clear and

definite

definite offer

offer

by one person and,by one person and, Its

Its

unconditional acceptance

by the person to whom the offer is by the person to whom the offer is made.

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Offer

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An offer is a proposal by one

party to another to enter in

to a legally binding

agreement with him.

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Offer may be express(spoken or

written words) or

implied.(inferred from conduct)

(12)

Constituents of an offer

(essential(essential elements)

elements)

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 The offer must show the obvious intentionThe offer must show the obvious intention

on part of the offerer to be bound by it. on part of the offerer to be bound by it.

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 The offerer must make the offer with theThe offerer must make the offer with the

view to obtain the assent of the offeree. view to obtain the assent of the offeree.

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 It must be definite.It must be definite. 

 It must be communicated to the offeree.It must be communicated to the offeree. 

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Rules of legal offer

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 Offer must be such that as in law itOffer must be such that as in law it

is capable of being accepted and is capable of being accepted and giving rise to a legal

giving rise to a legal relationship.relationship.

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 Terms of offer must be definite,Terms of offer must be definite,

clear and certain. clear and certain.

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 The offer must not thrust a burdenThe offer must not thrust a burden

of acceptance on the offeree. of acceptance on the offeree.

(14)

Invitation to offer, a

Invitation to offer, a few possibilities

few possibilities

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 Display of goods for saleDisplay of goods for sale 

 Price lists, cataloguesPrice lists, catalogues 

 AdvertisementsAdvertisements 

 Declaration of intentionDeclaration of intention 

 AuctionsAuctions 

 TendersTenders 

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Termination of offer

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 Sec.6 of the Act deals with terminationSec.6 of the Act deals with termination

of offer. of offer. 2.

2. Revocation-offer may be revoked at anyRevocation-offer may be revoked at any time before its acceptance is complete. time before its acceptance is complete. 3.

3. Lapse of time.(specified time orLapse of time.(specified time or reasonable time.)

reasonable time.) 4.

4. Failure of the acceptor to fulfill theFailure of the acceptor to fulfill the condition precedent to acceptance. condition precedent to acceptance. 5.

(16)

Other instances of termination of offer

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 As per sec.6 of the Act.As per sec.6 of the Act. 

 RejectionRejection 

 Counter offerCounter offer 

 Failure to accept according to theFailure to accept according to the

mode prescribed. mode prescribed.

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 Subsequent illegality or destructionSubsequent illegality or destruction

of subject matter. of subject matter.

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Acceptance

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 Acceptance is the act of assenting by theAcceptance is the act of assenting by the

offeree to an offer. offeree to an offer.

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 It indicates that the person making it isIt indicates that the person making it is

willing to be bound by the terms of the willing to be bound by the terms of the offer.

offer.

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 _{Acceptance may be express or implied.}_{Acceptance may be express or implied.} 

 Sec.2(b)’when the person to whomSec.2(b)’when the person to whom

proposal(offer) is made signifies his proposal(offer) is made signifies his

assent thereto, the proposal is said to be assent thereto, the proposal is said to be accepted. A proposal when accepted

accepted. A proposal when accepted becomes a promise.(i.e.a contract) becomes a promise.(i.e.a contract)

(18)

Legal rules as to acceptance

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 _{It must be absolute and unqualified.}_{It must be absolute and unqualified.} 

 _{It must be made by the party to whom}_{It must be made by the party to whom}

the offer is made. the offer is made.

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 The acceptance must be expressed inThe acceptance must be expressed in

usual or reasonable manner. usual or reasonable manner.

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 It must be given in reasonable time.It must be given in reasonable time. 

 It cannot be made in ignorance of offer.It cannot be made in ignorance of offer. 

 It must be given before the offer lapses.It must be given before the offer lapses. 

 _{It must be communicated to the offerer.}_{It must be communicated to the offerer.} 

 Mere mental acceptance is no acceptance.Mere mental acceptance is no acceptance. 

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Communication of offer, when

complete

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 (the spirit of the law is that the(the spirit of the law is that the

message reaches the concerned party.) message reaches the concerned party.)

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 Sec.4 provides that the communicationSec.4 provides that the communication

of proposal is complete when it comes of proposal is complete when it comes to the knowledge of the person for

to the knowledge of the person for whom it is made.

(20)

Communication of acceptance, when

complete

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 Sec.4 ‘The communication of Sec.4 ‘The communication of

acceptance is complete acceptance is complete

as against proposer:

as against proposer: when it is put in awhen it is put in a course of transmission to him, so as to course of transmission to him, so as to be out of power of the acceptor.

be out of power of the acceptor.

as against the acceptor:

as against the acceptor: when it comerswhen it comers to the knowledge of the proposer.’