INDIAN CONTRACT ACT-1872

Meaning
A Contract is an agreement creating and defining obligations between the parties. Sec 2(h) defines contract as an agreement enforceable by law.

Definitions.
Halsbury - An agreement between two or more persons which is intended to be enforceable at law & is constituted by the acceptance by one party of an offer made to him by the other party to do or to abstain from doing some act.

Definitions .
Pollock - Every agreement and promise enforceable at law is a contract. Sir William Anson - A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances (abstaining from doing something) on the part of the others.

..Definitions
Sec 10 All agreements are contracts if they are made by the parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

Agreement & Promise

Sec 2 (e) defines an agreement as every promise or set of promises forming consideration for each other. Sec 2 (b) When a person to whom a proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

COMPONENTS OF CONTRACT
An Agreement It involves proposal or offer by one party and acceptance of the same by the other party.

AGREEMENT = OFFER + ACCEPTANCE

Enforceable at law An agreement to become a contract must give rise to legal obligations. It must create legal relations and not merely social or domestic relations.
Leading Case: BALFOUR V. BALFOUR

CONTRACT = AGREEMENT+ENFORCEABILITY AT LAW

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Consensus ad idem
Consensus ad idem meeting of minds of the parties in full and final agreement.

Offer/Proposal
Sec 2(a) - 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. Thus, a proposal can be to do a positive act or abstinence from act (i.e. negative act).

Promise
Sec 2(b) - 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. Thus, when a proposal (offer) is accepted, it becomes a promise. As is clear from the definition, only person to whom proposal is made can signify his assent. Other person cannot accept a proposal.
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PROMISOR AND PROMISEE

Sec. 2(c) - The person making the proposal is called the promisor, and the person accepting the proposal is called the promisee. RECIPROCAL PROMISES - Promises which form the consideration or part of the consideration for each other are called reciprocal promises. [section 2(f)].
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Characteristics of a Proposal.
At least 2 parties A proposal may be positive or negative A proposal must be made to obtain assent Proposal must be made with an intention to create legal relations Offer must be definitive

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..Characteristics of a Proposal
It must be signified or communicated. Terms and conditions must be communicated with the offer The offer should not bind the other party to reply A tender may be an offer or a standing offer.

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Acceptance
Sec 2(b) When a person to whom a 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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Who can Accept

Specific Offer General Offer

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Essentials of a valid Acceptance..

Absolute and unconditional In the prescribed manner By performance of conditions By acceptance of Consideration Express or implied Must be given within a specified or reasonable time
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..Essentials of a valid Acceptance

Must be given while the offer is in force Must not precede the offer Must be given by the person to whom offer is made Acceptance must be communicated Must be from a competent person Must be communicated to the offeror himself
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Communication of Offer
When it comes to the knowledge of the person to whom it is made

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Communication of Acceptance
As against the offeror- When it is put in the course of transmission to him so as to be out of power of the acceptor. As against the acceptor- When it comes to the knowledge of the offeror.

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Revocation
As against the person who makes it - When it is put in the course of transmission to him so as to be out of power of the person who makes it. As against the person to whom it is made When it comes to the knowledge of the person to whom it is made.

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Modes of Revocation
by the communication of notice of revocation by the proposer to the other party by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance; by the failure of the acceptor to fulfill a condition precedent to acceptance by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
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Elements of a Valid Contract..

Two or More Persons Offer and acceptance

Intention to create legal relationship

Lawful consideration QUID PRO-QUO

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.Elements of a Valid Contract

Capacity of parties (Sec. 11) Minor;

Persons of unsound mind;

Persons disqualified by law to which they are subject;

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Minor
A person who has not completed eighteen years of age.

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Rules as to Minors
The Law must protect minors The law should not cause unnecessary hardship to other party Enforcement of agreement possible if minor is a beneficiary or promisee

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Effects of Minors Agreements

Void ab initio Minor can be a promisee or beneficiary No ratification Restitution/Compensation possible No estoppel can plead minority No specific performance Contract by parent/guardian
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Persons of Unsound Mind

Idiot Lunatic Delirious person Drunken or intoxicated person Hypnotised persons Mental decay

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Persons Disqualified by Other Laws

Alien enemy Foreign Sovereigns, diplomatic staff etc. Corporations and Companies Insolvents Convicts

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.Elements of a Valid Contract

Free consent (Sec. 13) -Two or more

persons are said to consent when they

agree upon the same thing in the same

manner.

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Free Consent
Consent given by parties under their free will

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Free Consent

Not caused by. Coercion Fraud Mistake Undue Influence Misrepresentation

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Coercion (Sec. 15)

Coercion is the practice of forcing another party to behave in an involuntary manner (whether through action or inaction) by use of threats, rewards or intimidation or some other form of pressure or force.

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Remedies for Coercion

Voidable Contract Restitution

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Undue Influence (Sec. 16)

When a dominant party misuses his influence to dominate the will of the weaker party, to get unfair advantage, in a contract, it is said to be under undue influence.

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Essential Elements of Undue Influence

The relation between the parties The use of dominant position The dominant party obtains unfair advantage.

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Effect/Remedies of Undue Influence

Voidable Contract Absolute rescission by the court Conditional rescission

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Fraud (Sec. 17)

"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him to enter into the contract.

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Fraud
To prove fraud, it is to be shown that a false representation has been made: Knowingly Without belief in its truth Recklessly without caring whether it is true or false.

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Essentials of Fraud.
the suggestion as a fact, of that which is not true, by one who does not believe it to be true; the active concealment of a fact by one having knowledge or belief of the fact;

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.Essentials of Fraud
a promise made without any intention of performing it; any other act fitted to deceive; any such act or omission as the law specially declares to be fraudulent

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Remedies for Fraud

Contract voidable Insisting for performance Restitution Claim for damages

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Misrepresentation (Sec. 18)

Misrepresentation means and includes 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

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Misrepresentation
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; 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
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Effects of Misrepresentation
Contract Voidable Insisting on performance Restitution

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Mistake (Sec. 20,21&22)

Misconception/Misimpression/Misunderstand ing/Erroneous belief in contracting.

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Mistake of Law
Mistake of law of land (Ignorantia juris non excusat) Mistake of foreign law

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Mistake of Fact
Bilateral mistake Unilateral mistake

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Mistake as to Subject Matter

Mistake as to identity of subject matter Mistake as to existence of subject matter Mistake as to quality of subject matter Mistake as to quantity of subject matter Mistake as to price of subject matter Mistake as to title of subject matter Mistake as to existence of state of affairs
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Mistake as to Possibility of Performance

Physical Impossibility Legal Impossibility

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Unilateral Mistake

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..Elements of a Valid Contract

Lawful object: if forbidden by law; of such nature that if permitted it would defeat the provisions of any law; fraudulent; involves injury to person or property; Court regards it immoral or opposed to public policy.
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Agreement Opposed to Public Policy..

Agreements of trading with enemy Agreement for stifling prosecution Agreement for improper promotion of litigation (Maintenance & Champerty) Agreement for sale of public offices and titles Agreement influencing/interfering with the course of justice

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..Agreement Opposed to Public Policy

Agreement creating interest opposed to duty Agreement interfering with parental rights and duties Agreement in restraint of personal liberty Marriage Brokerage Agreement Agreement interfering with marital duties Agreement to defraud creditors..etc.
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..Elements of a Valid Contract

Certainty of meaning Possibility of performance Not declared to be void or illegal Legal formalities

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Classification of Contracts
According to Validity Voidable Contract Void Agreement Void Contract Illegal Agreement Unenforceable Contract
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Classification of Contracts
According to Formation

Express Contract
Implied Contracts Quasi Contracts

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Classification of Contracts
According to Performance

Executed Contract
Executory Contracts Unilateral/One sided Contracts

Bilateral Contracts

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Classification of Contracts - According to Validity .

Contract based on agreement all essentials are present. If any one is missing then it is voidable/ void/ illegal/ Unenforceable.
Voidable Contract Enforceable at the option of one or more of parties Eg: A promises to sell his house to B for Rs.2 lakhs. His consent was obtained by force. The contract is voidable at the option of A.
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..According to Validity
Void Contract A contract which is not enforceable by law A contract entered with minor. Illegal Agreement: Criminal in nature, which is immoral. Unenforceable Contract Cannot be enforced in court of law because of technical defect Eg. Time barred, Lapse of time.
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According to Formation

Express Contract Terms expressly agreed by words spoken/ written At the time of formation of contract.
Implied Contract Conduct of Parties A lunch taken in a hotel, it is implied that bill will be paid.
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According to Performance
Executed Contract Both Parties have performed their obligations Executory Contract Both parties are yet to perform their obligations Unilateral contract One has fulfilled his obligation, other is yet to do his act. Bilateral Similar to Executory Contract.
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Discharge of a Contract
A contract is discharged when parties to a contract no longer have any obligation under the contract.

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Modes of Discharge of a Contract

By Performance Actual performance Attempted performance or tender

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Modes of Discharge of a Contract

By mutual agreement / consent Novation Alteration

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Modes of Discharge of a Contract

By lapse of time

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Modes of Discharge of a Contract

By operation of law Death Insolvency Material Alteration Merger of Rights Rights and liabilities becoming vested in the same person Loss of evidence of contract
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Modes of Discharge of a Contract

By impossibility of performance Initial impossibility Subsequent impossibility

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Modes of Discharge of a Contract

By breach of contract

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Breach of Contract
Refusal or failure of any one party to perform his contractual obligations.

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Actual Breach of Contract

On due date During the course of performance

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Anticipatory Breach of Contract

When a party to the contract disables himself from performing or refuses to perform the contract before the due date it is anticipatory breach of contract.

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Remedies for Breach of Contract

Suit for rescission of the contract Suit for damages Suit for quantum meruit Suit for specific performance Suit for injunction

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