Chapter 1
The Indian Contract Act, 1872
Nature of Contract
1 MEANING OF CERTAIN TERMS (Sec. 2)
Proposal / Offer When one person signifies to another
Sec 2(a) His willingness
To do or to abstain from doing anything,
With a view to obtaining the assent of that –
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer) (Legal obligation)
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
Agreement Sec 2(e) Every promise
And
Every set of promises, forming the consideration for each other,
Is an agreement
Contract Sec 2(h) An agreement enforceable by law is a contract.
Promisor & Promisee When a proposal is accepted –
- The person making the proposal is called as ‘promisor’; and
- The person accepting the proposal is called as ‘promisee’.
Consideration When, at the desire of the promisor,
The promisee or any other person
Has - done/abstained from doing something; or
- does/abstains from doing something; or
- promises to do/abstain from doing something,
Such act/abstinence/promise is called a consideration for the promise.
Void agreement An agreement not enforceable by law is said to be void.
Voidable contact An agreement is a voidable contract if –
It is enforceable by law at the option of one or more of the parties thereto,
It is not enforceable by law at the option of the other or others.
Void contract A contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
2 MEANING OF CONTRACT (Sec. 2 & 10)
Definition [Sec. 2 (h)] An agreement enforceable by law is a contract.
Essentials of a Following are the two basic elements of a contract.
contract (a) There must be an agreement
(b) The agreement must be enforceable by law.
In other words, Contract = agreement + enforceability of agreement.
1
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
What agreements are There must be an agreement between the parties
contracts The parties must have an intention to create legal relations.
[Sec. 10] The parties must freely consent to enter into the agreement.
The parties must be competent to contract.
There must be consideration.
The consideration must be lawful.
The object of the contract must be lawful.
The agreement is not expressly declared to be void.
The legal formalities for entering into such a contract are completed.
It is possible to perform the agreement (Sec. 56)
The terms of the agreement are certain or are capable of being made
certain (Sec. 29)
3 DISTINCTION BETWEEN AN AGREEMENT AND A CONTRACT
Basic of difference Agreement Contract
Meaning Agreement = offer + acceptance Contract = agreement + enforceability
Creation of legal An agreement does not create a legal A contract necessarily creates legal
obligation obligation unless it satisfies the obligations.
requirements of various provisions of
law.
One in other The term agreement is wider than Every contract is an agreement.
contract. An unenforceable agreement
is not a contract.
4 AGREEMENT TO DO IMPOSSIBLE ACT (Sec. 56)
Agreement to do an If - An agreement is made to do a particular act;
impossible act - At the time of making of agreement, it is certain that such an act is
impossible;
Then - The agreement is void.
Agreement to do an If - A contract is made to do a particular act;
act which - At the time of making of contract, such an act is not impossible;
subsequently - After the contract is made, such an act becomes impossible;
becomes impossible Then - The contract has become void.
Illustrative cases
Situation Result
A agrees with B to discover treasure by magic The agreement is void.-
A and B contract to marry each other. Before the The contract has become void.
time fixed for the marriage, A becomes mad.
A contract to marry B, being already married to C, The agreement is void. A must make
and being forbidden by the law to which he is compensation to B for the loss caused to her
subject to practice polygamy. by non-performance of his promise.
A contract to take in cargo for B at an American The contract has become void.
port. A‘s Government afterwards declares war
against America.
A contract to act at a theatre for 6 months in a The contract to act on such occasions, on
consideration of a sum paid in advance by B. On which A is unable to act because he is ill,
several occasions A is too ill to act. becomes void.
2
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
5. AGREEMENT VOID FOR UNCERTAINTY - (Sec. 29)
ILLUSTRATIVE CASES
An agreement is void, if the meaning of such agreement is –
Not certain; or
Not capable of being made certain.
Illustrative cases
Situation Result
A agrees to sell B ‗a hundred tons of oil‘ The agreement is void for uncertainty since the
description of oil is not specified.
A agrees to sell B 100 tons of oil of a specified There is no uncertainty and therefore the agreement
description, known as an article of commerce. is not void.
Mr. A, who is a dealer in coconut oil only, The nature of A‘s trade implies that intends to sell
agrees to sell to B‘ 100 tons of oil‘ 100 tons of coconut oil. So, there is no uncertainty.
A agrees to sell to B all the grain in his granary There is no uncertainty since it is possible to
at Laxmi Nagar. determine the quantity of grain lying at B‘s granary
at Laxmi Nagar.
A agrees to sell to B 1000 Kgs. Of rice at a As the price is capable of being made certain, there
price to be fixed by C. is no uncertainty to make the agreement void.
A agrees to sell to B his white horse for Rs. 500 There is nothing to show which of the two prices
or Rs. 1000 was to be given. Therefore, the agreement is void.
6 CLASSIFICATION OF CONTRACTS (Sec. 2&9)
On the basis of Express contract A contract made by words spoken or written.
creation Implied contract A contract inferred by –
- The conduct of a person; or
- The circumstances of the case.
On the basis of Executed contract A contract in which both the parties have fulfilled their
execution obligations under the contract.
Executory contract A contract in which both the parties have still to fulfill
their obligations.
Partly executed and A contract in which one of the parties has fulfilled his
partly executory obligation but the other party is yet to fulfill his
obligation.
On the basis of Valid contract An agreement which satisfies all the requirements
enforceability prescribed by law.
Void contract A contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
Void agreement An agreement not enforceable by law is said to be void.
Voidable contract An agreement is a voidable contract if –
- It is enforceable by law at the option of one or more
of the parties thereto,
- It is not enforceable by law at the option of the other
or others.
Illegal agreement An agreement the object of which is unlawful.
Unenforceable A contract which fulfils all requirements of a contract
contract except some technical requirements. It becomes
enforceable when the defect is subsequently removed.
3
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
Offer / Proposal
7 MEANING OF OFFER [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 –
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer).
8 HOW TO MAKE AN OFFER? / MODE OF MAKING OFFER (Sec. 9)
Express offer It means an offer made by words spoken or written.
Implied offer It means an offer inferred by –
The conduct of a person; or
The circumstances of the case.
9 TO WHOM AN OFFER IS MADE?
Specific Offer It means an offer made to –
(a) A particular person; or
(b) A particular group of persons.
General Offer It means an offer which is made to the public in general.
10 LEGAL RULES AS TO VALID OFFER
Offer must be Boulton v Jones
communicated J offered to purchase 50 feet of leather from Z.
Z in the meantime sold his business to B.
Therefore, instead of Z, B supplied the leather to J.
J refused to accept the leather.
It was held that the offer was not communicated to B, and so B had
no legal right to accept the offer made by J.
Therefore, no contract had concluded between J and B.
Carlill v Carbolic Smoke Ball Co.
A pharmaceutical company advertised that it would give 100 Pounds to
anyone who contracted influenza after using their smoke balls for a
certain period.
Mrs. Carlill purchased smoke balls and used them as directed.
Shortly afterwards, she contracted influenza. She claimed the 100 Pounds.
The Court held that the advertisement issued by the pharmaceutical
company was a general offer made to the public at large.
[Mrs. Carlill, being a member of the public, had received the offer
and had acted upon it by using the smoke balls as directed.]
Therefore, a contract was formed between the pharmaceutical company
and Mrs. Carlill, and so Mrs. Carlill could claim 100 Pounds.
Lalman Shukla v Gauri Dutt.
G‘s nephew was missing.
L, who was munim of G, went in search of the missing boy.
4
The Indian Contract Act, 1872
Nature of Contract
1 MEANING OF CERTAIN TERMS (Sec. 2)
Proposal / Offer When one person signifies to another
Sec 2(a) His willingness
To do or to abstain from doing anything,
With a view to obtaining the assent of that –
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer) (Legal obligation)
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
Agreement Sec 2(e) Every promise
And
Every set of promises, forming the consideration for each other,
Is an agreement
Contract Sec 2(h) An agreement enforceable by law is a contract.
Promisor & Promisee When a proposal is accepted –
- The person making the proposal is called as ‘promisor’; and
- The person accepting the proposal is called as ‘promisee’.
Consideration When, at the desire of the promisor,
The promisee or any other person
Has - done/abstained from doing something; or
- does/abstains from doing something; or
- promises to do/abstain from doing something,
Such act/abstinence/promise is called a consideration for the promise.
Void agreement An agreement not enforceable by law is said to be void.
Voidable contact An agreement is a voidable contract if –
It is enforceable by law at the option of one or more of the parties thereto,
It is not enforceable by law at the option of the other or others.
Void contract A contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
2 MEANING OF CONTRACT (Sec. 2 & 10)
Definition [Sec. 2 (h)] An agreement enforceable by law is a contract.
Essentials of a Following are the two basic elements of a contract.
contract (a) There must be an agreement
(b) The agreement must be enforceable by law.
In other words, Contract = agreement + enforceability of agreement.
1
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
What agreements are There must be an agreement between the parties
contracts The parties must have an intention to create legal relations.
[Sec. 10] The parties must freely consent to enter into the agreement.
The parties must be competent to contract.
There must be consideration.
The consideration must be lawful.
The object of the contract must be lawful.
The agreement is not expressly declared to be void.
The legal formalities for entering into such a contract are completed.
It is possible to perform the agreement (Sec. 56)
The terms of the agreement are certain or are capable of being made
certain (Sec. 29)
3 DISTINCTION BETWEEN AN AGREEMENT AND A CONTRACT
Basic of difference Agreement Contract
Meaning Agreement = offer + acceptance Contract = agreement + enforceability
Creation of legal An agreement does not create a legal A contract necessarily creates legal
obligation obligation unless it satisfies the obligations.
requirements of various provisions of
law.
One in other The term agreement is wider than Every contract is an agreement.
contract. An unenforceable agreement
is not a contract.
4 AGREEMENT TO DO IMPOSSIBLE ACT (Sec. 56)
Agreement to do an If - An agreement is made to do a particular act;
impossible act - At the time of making of agreement, it is certain that such an act is
impossible;
Then - The agreement is void.
Agreement to do an If - A contract is made to do a particular act;
act which - At the time of making of contract, such an act is not impossible;
subsequently - After the contract is made, such an act becomes impossible;
becomes impossible Then - The contract has become void.
Illustrative cases
Situation Result
A agrees with B to discover treasure by magic The agreement is void.-
A and B contract to marry each other. Before the The contract has become void.
time fixed for the marriage, A becomes mad.
A contract to marry B, being already married to C, The agreement is void. A must make
and being forbidden by the law to which he is compensation to B for the loss caused to her
subject to practice polygamy. by non-performance of his promise.
A contract to take in cargo for B at an American The contract has become void.
port. A‘s Government afterwards declares war
against America.
A contract to act at a theatre for 6 months in a The contract to act on such occasions, on
consideration of a sum paid in advance by B. On which A is unable to act because he is ill,
several occasions A is too ill to act. becomes void.
2
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
5. AGREEMENT VOID FOR UNCERTAINTY - (Sec. 29)
ILLUSTRATIVE CASES
An agreement is void, if the meaning of such agreement is –
Not certain; or
Not capable of being made certain.
Illustrative cases
Situation Result
A agrees to sell B ‗a hundred tons of oil‘ The agreement is void for uncertainty since the
description of oil is not specified.
A agrees to sell B 100 tons of oil of a specified There is no uncertainty and therefore the agreement
description, known as an article of commerce. is not void.
Mr. A, who is a dealer in coconut oil only, The nature of A‘s trade implies that intends to sell
agrees to sell to B‘ 100 tons of oil‘ 100 tons of coconut oil. So, there is no uncertainty.
A agrees to sell to B all the grain in his granary There is no uncertainty since it is possible to
at Laxmi Nagar. determine the quantity of grain lying at B‘s granary
at Laxmi Nagar.
A agrees to sell to B 1000 Kgs. Of rice at a As the price is capable of being made certain, there
price to be fixed by C. is no uncertainty to make the agreement void.
A agrees to sell to B his white horse for Rs. 500 There is nothing to show which of the two prices
or Rs. 1000 was to be given. Therefore, the agreement is void.
6 CLASSIFICATION OF CONTRACTS (Sec. 2&9)
On the basis of Express contract A contract made by words spoken or written.
creation Implied contract A contract inferred by –
- The conduct of a person; or
- The circumstances of the case.
On the basis of Executed contract A contract in which both the parties have fulfilled their
execution obligations under the contract.
Executory contract A contract in which both the parties have still to fulfill
their obligations.
Partly executed and A contract in which one of the parties has fulfilled his
partly executory obligation but the other party is yet to fulfill his
obligation.
On the basis of Valid contract An agreement which satisfies all the requirements
enforceability prescribed by law.
Void contract A contract
Which ceases to be enforceable by law
Becomes void when it ceases to be enforceable.
Void agreement An agreement not enforceable by law is said to be void.
Voidable contract An agreement is a voidable contract if –
- It is enforceable by law at the option of one or more
of the parties thereto,
- It is not enforceable by law at the option of the other
or others.
Illegal agreement An agreement the object of which is unlawful.
Unenforceable A contract which fulfils all requirements of a contract
contract except some technical requirements. It becomes
enforceable when the defect is subsequently removed.
3
, IDEAL / CPT / MERCANTILE LAW / THE INDIAN CONTRACT ACT, 1872
Offer / Proposal
7 MEANING OF OFFER [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 –
To such act; or
Abstinence,
He is said to make a proposal (i.e., offer).
8 HOW TO MAKE AN OFFER? / MODE OF MAKING OFFER (Sec. 9)
Express offer It means an offer made by words spoken or written.
Implied offer It means an offer inferred by –
The conduct of a person; or
The circumstances of the case.
9 TO WHOM AN OFFER IS MADE?
Specific Offer It means an offer made to –
(a) A particular person; or
(b) A particular group of persons.
General Offer It means an offer which is made to the public in general.
10 LEGAL RULES AS TO VALID OFFER
Offer must be Boulton v Jones
communicated J offered to purchase 50 feet of leather from Z.
Z in the meantime sold his business to B.
Therefore, instead of Z, B supplied the leather to J.
J refused to accept the leather.
It was held that the offer was not communicated to B, and so B had
no legal right to accept the offer made by J.
Therefore, no contract had concluded between J and B.
Carlill v Carbolic Smoke Ball Co.
A pharmaceutical company advertised that it would give 100 Pounds to
anyone who contracted influenza after using their smoke balls for a
certain period.
Mrs. Carlill purchased smoke balls and used them as directed.
Shortly afterwards, she contracted influenza. She claimed the 100 Pounds.
The Court held that the advertisement issued by the pharmaceutical
company was a general offer made to the public at large.
[Mrs. Carlill, being a member of the public, had received the offer
and had acted upon it by using the smoke balls as directed.]
Therefore, a contract was formed between the pharmaceutical company
and Mrs. Carlill, and so Mrs. Carlill could claim 100 Pounds.
Lalman Shukla v Gauri Dutt.
G‘s nephew was missing.
L, who was munim of G, went in search of the missing boy.
4
