[Act No. 9 of 1872]

By: Amit Kr. Jha (2K14G010)Parikshit Shome (2K14G063)Rajesh Pandey (2K14G071)Ritesh Kr. Singh (2K14G076)Suresh Dash (2K14G098)Lokender Singh (2K14G137)

Contents1. Introduction

2. What is a Contract?

3. Essentials Elements of a Valid Contract

4. Types/Classification of Contracts

4.1 Validity

4.2 Formation

4.3 Performance

5. Contract & Agreement

6. Proposal/Offer

1. Classification

7. Acceptance

1. Legal rules of Valid Acceptance

8. Consideration

9. Free Consent

1. Elements Vitiating free Consent

10. Remedies for Breach of Contract

11. Quasi-Contracts

12. Interpretation of The Indian Contract Act, 1872

Introduction

Law relating to contracts is contained in Indian Contract Act, 1872.

The Act was passed by British India & is based on the principles of English Common Law.

It is applicable to all the states of India except Jammu and Kashmir.

It determines the circumstances in which promises made by the parties to a contract shall legally bind on them.

contract{Section 2(h) of the Indian Contract Act 1872}

“An Agreement enforceable by law is a contract.”

CONTRACT = AGREEMENT + ENFORCEABILITY OF THE AGREEMENT

An analysis of this definition reveals that a contract consists of the following two most important elements:

1. A contract is an agreement; and

2. The agreement is enforceable by law.

Essential elements of a valid contract{Section 10 of the Indian Contract Act 1872}

1. Agreement - Offer and Acceptance

2. Intention to create legal relationship

3. Lawful Consideration

4. Capacity of parties- Competency

5. Free and genuine consent

6. Lawful object

7. Agreement not declared void

8. Certainty and possibility of performance

9. Legal formalities like Writing, Registration etc.

All the above ingredients must be satisfied in every valid contract.

Note: All contracts are agreements, but not all agreements are contracts.

Types of contractContract classified on the basis of:

VALIDITY FORMATION PERFORMANCE

Unenforceable

Illegal agreement

Void contract

Valid contract

Voidable contractQuasi contract

Implied contract

Express contract

Bilateral contract

Unilateral contract

Executory contract

Executed contract

E-Commerce contract

contract & AgreementCONTRACT - A contract is defined as an agreement enforceable before the

law. {Sec.2(h)}

AGREEMENT - Every promise or set of promises forming consideration for each other. {Sec.2(e)}

PROMISE - When a person made a proposal to another to whom proposal is made, if proposal is assented there to. {Sec.2(b)}

OFFER - When a person made a proposal, when he signifies to another his willingness to do or to abstain from doing something. {Sec.2(a)}

AGREEMENT = OFFER + ACCEPTANCE

CONTRACT = AGREEMENT + ENFORCIBILITY BEFORE LAW

Agreement Legal Obligation

Contract

“All agreements are contracts but all

contracts are not agreements.”

contract & Agreement Contd.

Certain domestic and family agreements

Certain friendly or social agreements

Political agreements/promises

Commercial transactions without legal binding

Agreement not possessing all essentials of contracts

Agreements expressly declared to be void

Agreement to make a contract

contract & Agreement Contd.

“All agreements are not contracts” Why?

Agreement

• Every promise and every set of promises forming consideration for each other is an agreement.

• An agreement is created by acceptance of an offer

• An agreement may not create legal rights and obligations of the parties.

• No contract is required to make an agreement.

Contract

• An agreement enforceable by law is a contract.

• Agreement and its enforceability together create a contract

• An contract create legal rights and obligations between the parties.

• Valid agreement is necessary for making a contract

contract & Agreement Contd.

{Section 2(a) of the Indian Contract Act 1872}

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.

{Section 2(c) of the Indian Contract Act 1872}

The person making the offer is called the ‘promisor’, ‘proposer’ or ‘offeror’;

The person to whom the offer is made is called the ‘offeree’.

When the offeree accepts the offer, he is called the ‘acceptor’ or ‘promisee’

Proposal / offer

1. General Offer: Which is made to public in general

2. Special Offer: Which is made to a definite person.

3. Cross Offer: Exchange of identical offer in ignorance of each other.

4. Counter Offer: Modification and Variation of Original offer.

5. Standing, Open or Continuing Offer: Which is open for a specific period

of time.

Classification of offer

Acceptance is the manifestation or the act of assenting by the offeree of his willingnessto be bound by the terms of the offer.

According to sec. 2 (b) “when the 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.”

Acceptance may be express (communicated by words, spoken or written or by doing any required act.) or implied (circumstances). However, silence cannot be prescribed as a mode of acceptance.

acceptance

E.g.: A) At an auction sale, S is the highest bidder. The auctioneer accepts the offer by striking the hammer on the table. This is implied acceptance.

B) A widow promised to settle some immovable property on her niece if the niece stayed with her in her residence. The niece stayed with her in her residence till her death. Held, the niece was entitled to the property [V. Rao v. A. Rao, (1916) 30 Mad. 509]. This is expressed acceptance.

Acceptance must be absolute and unqualified

It must be communicated to the offeror

It must be in prescribed manner

Acceptance may be given by performer of conditions

It may be given by acceptance of consideration

It may be express or implied (cannot be implied from silence)

It must be given within specified or reasonable time

It must be given while the offer is in force

It must not precede an offer

It must be given by the person to whom offer is made

Legal Rules Of Valid Acceptance

{Section 10 of the Indian Contract Act 1872}

One of the essential elements to constitute a contract.

Consideration means 'something in return'.

Definition: “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 or promise is called a consideration for the promisee.“

E.g.: A (promisor) promises B (promisee) to guarantee payment of price of the goods which B sells on credit to C. Here selling of goods by B to C is consideration for A’s promise.

consideration

• Consent according to Section 13: “Two or more persons are said to be consented when they agree upon the same thing in the same sense (Consensus-ad-idem).”

It means the parties agreeing upon the same thing in the same sense at the same time & that their consent is free & real.

According to Sec. 10: “All agreements are contracts if they are made by the free consent of the parties.....”

E.g.: A is forced to sign a promissory note at the point of pistol. A knows what he is signing but his consent is not free. The contract in this case is voidable at his option.

Free consent

• Free consent according to Section 14: A consent is said to be free when it is not caused by-

1) Coercion (Sec. 15), or

2) Undue influence (Sec. 16), or

3) Fraud (Sec. 17), or

4) Misrepresentation (Sec. 18) or

5) Mistake of fact (Sec. 20, 21 & 22)

Elements vitiating Free consent

{Section 73 to 75 of the Indian Contract Act 1872}

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

1. Rescission of the contract

E.g.: A promises B to supply 10 bags of cement on a certain day. B agrees to pay the price after the receipt of the goods. Adoes not supply the goods. B is discharged from liability to pay the price.

2. Suit for damages

a. Ordinary damages: Damages arising naturally;

b. Special damages: Damages in contemplation of the parties;c. Vindictive or exemplary damagesd. Nominal damagese. Loss of reputationf. Damages for inconvenience & discomfortg. Mitigation of damagesh. Difficulty of assessmenti. Cost of decreej. Damages agreed upon in advance in case of breach

Remedies for Breach of Contract

3. Suit upon quantum meruit

4. Suit for specific performance of the contract

5. Suit for injunction

Remedies for Breach of Contract Cont.

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.

Quasi-Contract

interpretation of the Act

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 enforceable by law is a contract or else it is void;

8. 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;

9. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

Thank You