THE INDIAN CONTRACT ACT (ICA), 1872

What is a contract?

Contract-Section 2(h)

“An agreement enforceable by law is a contract”.

Agreement-Section 2(e)

“Every Promise and every set of promises forming consideration for each other”

Promise – Section 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”

Contract consists of two elements: A) An agreement B) Legal Obligation

All Contracts are agreements, but all agreements are not contracts

Valid Contract

Section 10

To be a valid contract, it must satisfy the following:

1. Agreement - Offer and Acceptance

2. Consensus-ad-idem (Meeting of minds) i.e., persons must agree to the same thing in the same sense and at the same time.

3. Intention to create legal relationship as against social relationship or illegal/unlawful relationship.(Balfour Vs.Balfour)

Parker Vs.Clark

4. Free and Genuine Consent, i.e., free from coercion undue influence fraud misrepresentation mistake

5. Parties competent to contract Sec.11- is of the age of majority, is of sound mind, is not disqualified from Contracting.

6. Lawful consideration and object, i.e., something in return and that must be lawful.

7. No Consideration – No Contract (Nudum Pactum)

Valid Contract

7. Agreement not declared void.

8. Certainty of Meaning: e.g. sale and purchase of 100 tonnes of oil. But which oil? Thus, agreement being uncertain – not valid.

But, if the seller deals only in one kind of oil and one variety, then it shall be valid since it is capable of being made certain.

Valid Contract

9. Possibility of performance: Impossibility whether known to the parties or not, renders a contract invalid.

10.Necessary legal formalities: e.g. sale-deed of immovable property.

Classification of Contracts

From the Point of view of Enforcement

a) Valid Contracts

b) Void Contracts

c) Voidable Contracts

d) Illegal Agreements

e) Unenforceable Agreements

Classification of Contracts

According to Mode of Formation:a) Express Contractsb) Implied Contractsc) Quasi ContractsAccording to Performance:a) Executed Contractb) Executory Contractc) Unilateral Contractd) Bilateral Contract

Offer

a) Offer by an Act-By Words (Express Offer)

b) Offer by Omission

c) Offer by Conduct (Implied Offer)

d) Specific Offer

e) General Offer (Carlill Vs.Carbolic Smoke Ball Co.,)

f) Counter Offer

Essentials of a Valid Acceptance

1.Acceptance must be absolute and unqualified

2.Acceptance must be communicated to the Offeror

3.Acceptance must be according to the mode prescribed.

4.Acceptance must be given within the time specified.

5.Acceptance must be in response to the offer

6.Acceptance must be made before the offer lapses.

7.Acceptance must be given by the person to whom the offer is made

Communication of Special Terms:Parker Vs.South Eastern Rly.Co.,

Mental Acceptance is no AcceptanceBrogden Vs.Metropolitan Rly.Co.,

Communication of Acceptance It has two aspects, viz.,

As against the proposer As against the acceptor

Agreements Declared Void

1.With or by a person incompetent of Contracting (S.11) – Void ab initio

2.Affected by mutual mistake of fact between the parties (S.20)

3.The object of consideration is unlawful.4.Agreement without Consideration (S.25)5.Agreements in restraint of Trade (S.27)6.Agreements in restraint of Marriage (S.26)7.Agreements in restraint of Legal Proceedings

(S.28)

8. Uncertain Agreements (S.29)

9. Wagering Agreements (S.30)

10.Impossible Agreements (S.56)

11.Agreement to enter into an Agreement in Future.

Consent (S.130)

Two or more persons said to consent when they agree upon the same thing in the same sense.

Free Consent.(S.14) When it is not caused by

a. Coercion

b. Undue Influence

c. Fraud

d. Misrepresentation

e. Mistake.

Free Consent

Coercion (S.15):Committing or threatening to commit any act forbidden by law.

Ranganayakkamma Vs.Alwar Setti

Effects of Coercion:Contract voidable at the option of the aggrieved party. (S.19)

Undue Influence (S.16) One party is in a position to dominate

the will of the other. Effect – Voidable.

Fraud (S.17)

No truth, active conealment of fact. An act to deceive

Effects of Fraud: a) Rescind the Contract; b) Sue for Damages C) Can insist on Performance

However, relief available only if party actually defrauded.

A fraud that does not defraud is no fraud.

Misrepresentation (S.18)

Innocence, no desire to deceive, may be false or inaccurate.

Effects: a) Rescind the Contract b) Insist on Performance

Mistake (S.22): Mistake of Law and Mistake of Fact.

Consequence of Mistake : Void

Consideration (S.2d)

Quid Pro Quo: Something in Return The price which the Promisor demands for his

Promise.

Legal Rules as to Valid Consideration:

1.Consideration must move at the desire of the Promisor (Durga Prasad Vs.Baldeo)

2. Consideration may move from the promisee or any other person (Chinnayya Vs.Ramayya)

3. Consideration may be past, present or future

4. Consideration must be of some value

5. Consideration must be legal.

Quasi Contracts:

1. Claim for necessities supplied to a person incapable of contracting on his account.

2. Reimbursement of a person paying money due by another in payment of which he is interested.

3. Obligation of a person enjoying benefits of a non-gratuitous act.

4. Responsibility of Finder of lost goods 5. Liability of a person to whom money is paid or

thing delivered by mistake.

Insurance = Contingent Contract.

Discharge of Contracts:

1. By Performance

2. By tender of Performance

3. By mutual consent: Novation/Rescission

4. By subsequent impossibility

5. By Breach: Actual or Anticipatory

Remedies for Breach of Contract

Remedies Right of Rescission of the Contract Suit for damages: Ordinary/Special Suit for specific Performance Suit for Injunction Suit for “Quantum Meruit” (as much as

earned)