INDIAN CONTRACT ACT, 1872

INDEX :

• Definations.
• Acceptance and Revocation of proposals.
• Contracts, voidable contracts and void agreements.
Definations. :

• 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 said to make a proposal.
• Promise - 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.
Continued… :

• The person making the proposal is called the "promisor

and the person accepting the proposal is called the It
promise":
• Consideration - When, at the desire of the promisor, the 
promisee or  any other person has clone 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.
Continued… :

• Agreement - Every promise and every set of

promises, forming the consideration for each
other, is an agreement.
• Contract - An agreement enforceable by law is a
contract.
• An agreement not enforceable by law is said to
be void.
Contracts :

• Contracts –
• Contract - An agreement enforceable by law is a
contract.
• 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.
Kinds of Contract. :

• Void contract – A contract which ceases to be

enforceable by law becomes void when it ceases to be
enforceable.
• Executed contract – Where both the parties have
performed their obligations, it is executed contract.
• Executory Contract - Where neither of the parties have
performed their obligations, ie both the parties are yet
to perform their promises, the contract is executory.
Continued… :

• Implied Contract – The terms of a contract are

inferred from the conduct or dealings between the
parties. When proposal or acceptance of any
promise is made otherwise than in words, the
promise is said to be implied. Such implied promise
leads to Implied Contract.
• Quasi Contract – Certain relations resemble those
created by a contract. Certain obligations which are
not contracts in fact but are so in contemplation of
law are Quasi Contracts.
Continued… :

• Contingent Contract - It is a contract to do or not to

do something, if some event, collateral to such
contract, does or does not happen.
• Voidable Contract – A contract is voidable when one
of the parties to the contract have not exercised their
free consent.
• Speciality Contract – It is a contract which is in
writing, signed, sealed & delivered by the parties.
Essential elements of a Valid Contract. :

1. Proposal & Acceptance.

2. Consideration.
3. Capacity of parties to contract.
4. Free Consent.
5. Agreement should not be expressly declared void.
Continued :

6. Writing & Registration, if so required by law.

7. Legal Relationship.
8. Certainity.
9. Possibility of Performance.
10. Enforceable by law.
Proposals :

• 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 said to make a proposal.
Essentials of Proposal:

1. Beyond expression of willingness, there must

be something in the nature of a request.
2. Proposer cannot dictate terms.
3. An offer must be intended to create &
capable of creating legal relations.
Communication of proposals. :

The communication of a proposal is complete

when it comes to the knowledge of the person
to whom it is made.
Eg - A proposes, by letter, to sell a house to B at
a certain price. The communication of the
proposal is complete when B receives the
letter.
Acceptance :

• When one person to whom the proposal is

made signifies his assent thereto, the proposal
is said to be accepted.
• Proposal when accepted becomes promise.
• The person making the proposal is called the
Promisor and person accepting the proposal
becomes Promisee.
Essentials of Acceptance.
• 1. Acceptance must be absolute and unqualified.
• 2. It must be expressed in some usual & reasonable
manner.
• 3. Mental Acceptance is not sufficient in Law.
• 4. Acceptance must be communicated to the
offerer.
• . Acceptance must be by a certain person.
• 6. Acceptance must be given within a
reasonable time.
• 7. Acceptance must be given before the offer
lapses or is revoked or is withdrawn.
[Link] of proposal is acceptance of all
terms.
Communication of an acceptance :

The communication of an acceptance is complete, - as

against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of
the acceptor; as against the acceptor, when it comes
to the, knowledge, of the proposer.
Eg : B accepts A's proposal by a letter sent by post.  The
communication of the acceptance is complete, as
against A when the letter is posted as against B,
when the letter is received by A. 18 Communication
of an acceptance
 Revocation of proposals and acceptances :

• Revocation of proposals and acceptances.          A

proposal may be revoked at any time before the
communication of its acceptance is complete as
against the proposer, but not afterwards.          An
acceptance may be revoked at any time before the
communication of the acceptance is complete as
against the acceptor, but not afterwards 19
Revocation of proposals and acceptances
 Capacity of parties to Contract.
• An agreement becomes a contract if it is
entered between the parties who are
competent to Contract. Every person is
Competent to contract 1. Who is of the age of
majority according to the law. 2. Who is of
sound mind. 3. Who is not disqualified by any
law. 20 Capacity of parties to Contract.
 Free Consent :

"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.     
Consent is said to be so caused when it would not have been
given but for the existence of such coercion, undue influence,
fraud, misrepresentation or mistake.
 Coercion :

• Coercion is the committing, or threatening to commit, any act

forbidden by the Indian Penal Code,  or the unlawful
detaining, or threatening to detain, any property, to the
prejudice  of any person whatever, with the intention of
causing any person to enter into an agreement.

• Eg - A, on board an English ship on the high seas, causes B to

enter into  an agreement by an act amounting to criminal
intimidation  under the Indian Penal Code.
 Undue influence :

• A contract is said  to be induced  by "undue influence” where the

relations  subsisting  between the  parties  are  such that one of
the parties is in  a  position  to dominate  the will of the other and
uses that position to  obtain  an unfair advantage over the other.

• Eg - A had given advance money to his son B during his  minority,

upon B's coming of age obtains, by misuse of parental  influence, a
bond  from B for a greater amount than the sum due in respect  of 
the advance.  Here A employs undue influence. 23 Undue
influence
 Fraud :

• "Fraud" means and includes any of the

following acts committed by a party to a
contract, or with his connivance, or by his
agent, with intent  to deceive another party
thereto of his  agent,  or  to induce him to
enter into the contract –
• 1)   the suggestion, as a fact, of that which is
not  true, by one who does not believe it to be
true
 Fraud :

• 2) The active  concealment  of  a  fact  by  one  

having knowledge or belief of the fact.
• 3)  A promise made without any intention of
performing.
• 4)  Any other act fitted to deceive; 5)  Any such
act or omission as the law specially  declares to
be fraudulent. 25 Continued
 Misrepresentation :

• "Misrepresentation"   means and includes –

• 1)   the positive assertion, in a manner not warranted by the

information of the person making it, of that which is not true,
though he believes it to be true.

• 2)   any  breach, of duty which, without  an intent to deceive, gains

an advantage to the person committing it,  or any  one  claiming
under him, by misleading  another to his prejudice or to the
prejudice of any one claiming under him.
• Continued… :
• 3)   causing, however innocently, a party to an
agreement to make a mistake as to the
substance of the thing which is the subject of
the agreement.
 Contingent contract :

• "Contingent contract" defined – A "contingent

contract" is a contract to do or not to do something, if
some event, collateral to such contract, does or does
not happen.

• Essential characteristics of a contingent Contract – 1.

There should be existence of a contingency, happening
or non happening of some event in future.
 Contingent contract :

• 2. Contingency must be uncertain.

• 3. The event must be collateral, for example,
incidental to the contract.
• Eg – A contracts to pay B Rs 10,000 if B’s house
is burnt. This is a contingent contract as A will
pay B only if his house burns and not otherwise.
 Waggering Contracts. :

• It is agreement by mutual promises, each of

them conditional on the happening or not
happening of an unknown event. All wagers
are contingent but all contingent contracts are
not wagers.
 Quasi Contracts :

• Quasi Contract is an obligation resembling

that created by a contract. It is implied
Contract. The essentials of formation of
contracts are absent. There is no agreement at
all.
 Types of Quasi Contracts.

• Where a person supplies necessaries to a person

incapable of contracting, he is entitled to be
reimbursed from that property of such incapable
person. A person who is interested in the payment
of money which another is bound by law to pay is
entitled to be reimbursed by other. A person to
whom money is paid by mistake or under coercion,
must repay or return it.
• Cotinued… :
• When a person lawfully does anything not intending
to do so gratuitously & other person enjoys benefit
thereof, the later is bound to make compensation to
the former. A person who finds the goods belonging to
another is subject to the same liabilities as a bailee of
goods. He is entitled to retain the goods until he
receives the lawful charges or compensation.
 Discharge of Contract
• Discharge means “ termination “ of a contract.
The contract may be discharged in any of
following ways –
• 1. By performance.
• 2. By death.
• 3. By refusing tender of performance.
• 4. By breach of Contract.
• 5. By impossibility of performance.
 Discharge of Contract
6. By agreement or by consent.
7. By promisee failing to offer facilities for
performance.
8. By operation of law.
9. By unauthorized material alteration of a contract.
10. Discharge by lapse of time…
 Breach of Contract :

• Breach of contract is non performance of contract.

Remedies for breach of contract to Aggrieved party.
• 1. Suit for specific performance – The court directs
party committing breach to perform the promise
according to the terms of the contract.
• 2. Suit for injunction – An injunction is an order of
Court directing person to do or refrain from doing
some act which is subject matter of contract.
 Breach of Contract :

• 3. Suit for damages, for the loss sustained – In

case of breach of contract, injured party can
claim for damages caused due to breach.
• 4. Quantum meruit – Quantum meruit means
as much as earned or deserved or as much as
is merited. A person can claim payment for
the work done or goods supplied.