Indian Contract Act, 1872 - Detailed Notes (For 20 Marks Answer)
1. Introduction to Indian Contract Act, 1872:
The Indian Contract Act, 1872 is a fundamental law that governs contracts in India. It came into force on 1st
September 1872 and applies to all Indian states. It is divided into two parts:
- General Principles relating to the Law of Contracts (Section 1 to 75)
- Special kinds of Contracts (Contracts relating to Partnership, Sale of Goods, etc.)
2. Meaning and Definition of Contract:
According to Section 2(h) of the Act: "A contract is an agreement enforceable by law."
To form a contract, two main components are needed:
- Agreement: Every promise and every set of promises forming consideration.
- Enforceability by Law: It must be recognized by the legal system.
3. Essential Elements of a Valid Contract:
To be legally valid, a contract must include the following elements:
a. Offer and Acceptance: There must be a clear and definite offer by one party and acceptance by the other.
b. Intention to Create Legal Relations: Parties must intend that the agreement should be legally binding.
c. Lawful Consideration: Something of value must be exchanged between the parties.
d. Capacity of Parties: Individuals must be competent (i.e., above 18 years, of sound mind, not disqualified).
e. Free Consent: Consent must not be obtained by coercion, undue influence, fraud, misrepresentation, or
mistake.
f. Lawful Object: The purpose of the contract must be legal.
g. Certainty and Possibility of Performance: Terms of the contract must be clear and feasible.
h. Not Declared Void: The agreement must not be expressly declared void under the law.
4. Types of Contracts:
Based on Validity:
- Valid Contract: Legally enforceable.
- Void Contract: Not enforceable by law.
- Voidable Contract: Can be avoided by one party.
- Illegal Contract: Forbidden by law.
Based on Formation:
- Express Contract: Formed through words.
- Implied Contract: Formed through conduct.
- Quasi-Contract: Not real contracts but imposed by law.
Based on Performance:
- Executed Contract: Fully performed.
- Executory Contract: Yet to be performed.
5. Offer and Acceptance:
Offer: When one person signifies to another his willingness to do or abstain from doing something.
- Legal Rules: Offer must be communicated, clear, and made with the intention of creating legal relations.
Acceptance: The act of agreeing to the offer.
- Legal Rules: Acceptance must be absolute, communicated, and in a prescribed mode.
6. Consideration:
Defined in Section 2(d) - It refers to what each party gives up to the other in the contract.
- Must be lawful, real, and have some value.
- Can be past, present, or future.
- Exceptions: In certain cases, contracts without consideration are valid (e.g., natural love and affection).
7. Capacity to Contract:
As per Section 11, the following are competent:
- Major (18 years and above)
- Sound Mind
- Not disqualified by law
A minor's agreement is void ab initio (from the beginning).
8. Free Consent:
Consent is said to be free when it is not caused by:
a. Coercion - Physical force or threat.
b. Undue Influence - Influence of a dominant party.
c. Fraud - False statement made knowingly.
d. Misrepresentation - False statement made unknowingly.
e. Mistake - Wrong belief about a fact.
9. Discharge of Contract:
A contract is said to be discharged when the parties are freed from their contractual obligations.
Modes of Discharge:
a. By Performance
b. By Agreement or Consent
c. By Impossibility of Performance (Supervening Impossibility)
d. By Operation of Law
e. By Breach of Contract
10. Remedies for Breach of Contract:
When a contract is broken, the following remedies are available:
a. Damages - Compensation for loss.
b. Specific Performance - Court orders party to fulfill the contract.
c. Injunction - Court restrains a party from doing something.
d. Rescission - Contract is cancelled.
e. Quantum Meruit - Compensation for work already done.
These notes cover all key concepts for a 20-mark answer on the Indian Contract Act, 1872, as required in
BBA exams.
