INDIAN CONTRACT
ACT, 1872
ASHISH BAHETY
ACA, CS, LLB
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Preamble
WHEREAS it is expedient to define and
amend certain parts of the law relating to contracts ; It is hereby enacted as follows
This Act may be called the Indian Contract
Act,1872.
It extends to the whole of India *[except the
State of Jammu and Kashmir];
What is Contract ?
SECTION 2 (h)
“An agreement enforceable by law is a
contract”.
Contract = Agreement + Enforceability at
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What is Agreement ?
Section 2(e)
Every promise and every set of promises,
forming the consideration for each other, is an agreement.
Promise/(s) Promise/(s) = Agreement In exchange for each other
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What is Promise ?
When a person to whom the proposal is
made, signifies his assent there to, the proposal is said to be accepted.
A proposal, when accepted, becomes a
promise.
Promise = Proposal/Offer + Acceptance
What is Proposal ?
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
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What is Acceptance ?
When a 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.
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What agreements are
contracts?
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.
Contract = Consent + Competency +
Consideration + Object.
What is Consent ?
Two or more person are said to consent
when they agree upon the same thing in the same sense.
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What is Free Consent ?
Consent is said to be free when it is not caused by -1. Coercion, 2. Undue Influence 3. Fraud 4. Misrepresentation 5. Mistake
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Who are Competent to
Contract?
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 sound mind and is not disqualified from contracting by any law to which he is subject.
Competency = Age + Sound Mind + No
Disqualification
What is Consideration?
“When at the desire of the promisor,
promisee or any other person has done or abstained from doing , or, does or abstains from doing, or, promises to do or to abstain
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Lawful Object & Consideration
The consideration or object of an agreement
is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or
object of an agreement is said to be unlawful.
Every agreement of which the object or
consideration is unlawful is void.
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Essentials of a Valid Contract
1. Intention to create legal relationship. 2. Lawful object
3. Agreement not expressly declared void 4. Proper offer and it s acceptance 5. Free Consent
6. Capacity of parties to contract 7. Certainty of meaning. 8. Possibility of performance.
Essentials of a Valid Contract
9. Lawful consideration 10. Legal formalities
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Relationship
The parties entering into a contract must
have an intention to create a legal relationship.
If there is no intention to create a legal
relationship, that agreement cannot be treated as a valid contract.
Generally there is no intention to create a
legal relationship in social and domestic agreements.
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2. Lawful Object
The objective of the agreement must be
lawful. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract.
A rents out his house for the business of
making bomb, the acts performing there are unlawful. Hence such agreement cannot be treated as a valid contract.
3. Agreement
not
expressly
declared void
Section 24 to 30 specify certain types of
agreement which have been expressly declared void.
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acceptance
There must be two or more parties.
One person cannot make an offer and accept it. The offer must be clear and properly
communicated.
Similarly proper and unconditional acceptance
must be communicated to the offerer.
Proper offer and proper acceptance should be
there to treat the agreement as a contract which is enforceable by law.
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5. Free Consent
Consent is said to be free when it is not caused
by (i) coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake.
If the contract made by any of the above four
reason, at the option of the aggrieved party it could be treated as a void contract.
An agreement can be treated as a invalid
contract when the consent of the parties are not free or under any undue influence, fear or pressure etc.
6. Capacity of parties to contract
Parties entering into an agreement must be
competent and capable.
Ex, If A agrees to sell Taj Mahal, is he capable &
competent ?
If any of the party is not competent or capable of
entering into the agreement, that agreement cannot be treated as a valid contract
Every person is competent to contract
o the age of majority o who is of sound mind, and
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7. Certainty of meaning
Wording of the agreement must be clear and not
uncertain or vague.
Suppose Dhoni agrees to sell 500 Balls to Kallis.
But, what kind of ball is not clear. So on the ground of uncertainty, this agreement stands void.
If the meaning of the agreement can be made
certain by the circumstances, it could be treated as a valid contract.
For example, if Dhoni and Kallis are sole trader of
tennis ball, the meaning of the agreement can be made certain by the circumstance and in that case, the agreement can be treated as a valid contract.
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8. Possibility of performance
If the act is impossible of performance,
physically or legally, the agreement cannot be enforced by law.
Impossible agreements like one claims to run
at a speed of 100km/hr or take 7 wickets in an over. would not create a valid agreement.
In essence, there must be possibility of
performance must be there to create a valid contract.
9. Lawful consideration
Quid Pro Quo - An agreement must be supported by a consideration of something in return.
Agreement must be supported by some type of service or goods in return of money or goods.
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10. Legal formalities
The contract act does not insist that the agreement
must be in writing, it could be oral.
But, in some cases the law strictly insist that the
agreement must be in writing like agreement to sell immovable property must be in writing and should be registered.
These agreement are valid only when they fulfill the
formalities like writing, registration, signing by the both the parties are completed.
If these legal formalities are not completed, it cannot
be treated as a valid contract.
Thank You
“ You cannot teach a man
anything; you can only help him to find it within himself.”