SALIENT FEATURES OF THE INDIAN CONTRACT

ACT, 1872

VIJAY PAL DALMIYAVAISH ASSOCIATES

ADVOCATES

INDIAN CONTRACT ACT, 1872

In India, all contracts are covered/governed by the Indian Contract Act, 1872, unless stipulated otherwise by parties

What is a contract??

As per Contract Act, an agreement enforceable by law is a contract. [section 2(h)]

An agreement is a promise or set of promises: Between two or more persons To do or refrain from doing a particular thing For consideration

Contract may be oral or writtenNOTE: Special Contracts need to be in writing

ESSENTIALS OF A VALID CONTRACT

Offer/Proposal Acceptance Intention to create Legal relationship Consideration Consensus ad idem Free & genuine Consent

ESSENTIALS OF A VALID CONTRACT

Legal Capacity to contract Lawful Consideration/Object Agreement should not be void or voidable Discharge of the Contract

OFFER/PROPOSAL

Can be oral, written or through conduct Offer and Invitation to offer/treat Must be communicated to the offeree Counter Offer Offer to the whole world

OFFER/PROPOSAL

Offer gets terminated by:RejectionLapse of timeSpecified EventDeathRetraction/Withdrawal of Offer

ACCEPTANCE

Can be oral, written or through conduct Must be communicated to the offeror Must be absolute and unqualified Must be expressed in some usual and

reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

Acceptance by performing conditions of an offer Carlill vs. Carbolic Smoke Ball Co.

LEGAL RELATIONSHIP

Intention to enter into a legal relationship Social engagement are not binding, for

example;An agreement to have lunch at a friend’s

place.

CONSIDERATION

An act, abstinence or promise Must be at the desire of the promisor May be from the promisee or any other person Can be past, present or future Must be something of value (in the eyes of law) It may be adequate or not

CONSIDERATION

Examples:MoneyPropertyActionable ClaimAnything of Value

Performance of a legal duty is no consideration

FREE CONSENT

Consent is said to be free when it is not caused by:CoercionUndue InfluenceFraudMisrepresentationMistake

CONSENSUS AD IDEM

Both the parties to a contract must agree to same thing at the same time.

The contract may become void if it turns out that the parties were of a different understanding.

COMPETENCY TO CONTRACT

Every person is competent to contract who is of: Age of majority Sound mind Someone not disqualified under Indian laws

Examples: Alien enemy Foreign sovereigns and ambassadors

Both individual and companies having legal competency have the capacity to contract.

LAWFUL CONSIDERATION/OBJECT

The consideration or object of an agreement is lawful, unless - It is forbidden by law; or is of such nature that, if permitted it would defeat the provision of

any law or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful.

Every agreement of which the object or consideration is unlawful is void.

VOID AGREEMENT

Agreement to do an impossible act Agreement without consideration; except for gifts, debt

etc. If, consideration and object is unlawful When both the parties to an agreement are under a

mistake as to a matter of fact essential to the agreement Agreement in restraint of marriage Agreement in restraint of trade Agreement in restraint of legal proceedings

VOID AGREEMENT

Uncertain Agreement Wagering Agreement, except for Horse-racing Agreement contingent on impossible event When a party to a contract with reciprocal promises is

prevented from performing his obligation, the party prevented can void the contract

In a contract where time is of the essence and a party fails to adhere to the timing schedule, the other party can void the contract.

VOIDABLE AGREEMENT

An agreement is voidable at the option of the party giving consent;When consent is caused by CoercionWhen consent is caused by Undue InfluenceWhen consent is caused by FraudWhen consent is caused by Misrepresentation

Quasi Contracts

Claim for necessaries supplied to a person incompetent to contract

Reimbursement of money paid due by another Obligation of person enjoying benefit of non-

gratuitous act Enjoyment of benefit by the defendant is

necessary: Finder of Lost goods

DISCHARGE OF THE CONTRACT

Performance of contract Breach of Contract

PERFORMANCE OF CONTRACT

The final step in contract formation is its performance. Certainty and possibility of performance Every such offer must fulfill the following conditions:-

it must be unconditional it must be made at a proper time and place under such circumstances that the person to whom it is made

may have a reasonable opportunity for inspection An offer to one of several joint promisees has the same legal

consequences as an offer to all of them

BREACH OF THE CONTRACT

Anticipatory breach Actual Breach Liability of loss only due to CAUSATION Remoteness of damages Mitigation of loss

BREACH OF THE CONTRACT

Remedies Injunction

Temporary (interim) Permanent

Damages Nominal Compensatory Punitive/Exemplary

Account of Profits Specific performance (where subject matter is unique and money will

not adequately compensate.) Declaration Rectification Recission/Substitution/Novation

Thank you.

Vijay Pal Dalmia, AdvocateHead Intellectual Property & Information Technology Laws Division

Vaish Associates, AdvocatesFlat No 903, Indra Prakash Building,

21, Barakhamba  Road,New Delhi 110001 (India)

Phone: +91 11 42492532 (Direct)Phone: +91 11 42492525 Ext 532

Mobile :- 9810081079Fax: +91 11 23320484

email:- vpdalmia@vaishlaw.com