INDIAN CONTRACT ACT,

1872
LEARNING OBJECTIVE
TO UNDERSTAND CONTRACT; OFFER;
ACCEPTANCE
TO LEARN TYPES OF CONTRACT
TO LEARN ESSENTIALS OF
CONTRACT
 INDIAN CONTRACT ACT, 1872
Act lays down principles of
- formation,
- performance,
- enforceability
of contracts
And, rules relating to
Special type of contracts, viz.,
indemnity, guarantee, bailment,
pledge & agency.
 WHAT IS CONTRACT
Section 2 (h) defines a contract as an
agreement enforceable by law thus to make
a contract there must be
1. An agreement
2. The agreement shall be enforceable by
law.
All agreements are not enforceable by
law and therefore, all agreements are
not contracts.
 Contract
A legally binding agreement
that means there must be some
kind of agreement between two
parties
However, not all agreements are
contracts because not all
agreements are legally
enforceable
 Contract
legally enforceable means that a court
will say that an agreement is a contract.
To decide if an agreement is legally
enforceable as a contract, a court will
apply the rules and principles of the law
of contract
Therefore, knowing a little about these
rules can help business people
(MANAGERS) to create valid contracts
 Types of Contracts
Contracts are classified in terms of their

Validity or enforceability
1. Valid Contract
- Has all essential elements
2. Voidable Contract
3. Void Contract
4. Illegal Contract
5. Unenforceable Contract
- Some elements are missing
 Types of Contracts
Contracts are classified in terms of their
Mode of formation
EXPRESSED CONTRACT
Where the terms of the contract are stated clearly in words written

or spoken

IMPLIED CONTRACT
Where terms of contract are inferred from conduct of parties or

circumstances

QUASI CONTRACT
Sometimes, obligation is created by law, where an obligation is
imposed on a party & action is allowed to be brought by another
 Types of Contracts
Contracts are classified in terms of their
Performance
1. Executed Contract
Where parties have completely performed their obligations &
nothing remains to be done
2. Executory Contract
Where parties have still to perform their share of obligation;
something has been left out still to be performed by both the
parties.
3. Uni-lateral
(pays bus fare-one party has fulfilled his part)
4. Bi-lateral
(A contract is a contract from the time it is made & not from the time
of performance is due.Performance can be at the time contract is
made or it can be postponed either in full or part)
Essential elements of a valid contract:
(Sec. 10)
Agreement - Offer & acceptance
Legal consequences - rights &
obligations
Capacity of the contracting parties
Consideration
Legal object
Essential elements of a valid contract:
(Sec. 10)
Free consent
Certainty
Possibility of performance
Writing & registration
Not expressly declared to be
void.
 Agreement
Has 2 elements viz.,
i) A proposal/offer, and
ii) Acceptance of that proposal/offer
Offeror and Offeree 2 parties
Same thing in same sense consent
A contract which is an agreement
enforceable in law has two elements viz;
i) An agreement
ii) Legal obligation
 OFFER
When one person signifies to
another, his willingness to do or
to abstain from doing anything,
with a view to obtaining the
consent of that other person
towards such act or abstinence,
he is said to be making an offer
or proposal.
 Types of Offer

Express Offer
Implied Offer
Specific Offer
General Offer

The offer is the starting point in the process

of making an agreement

Every agreement begins with one party

offering to do/sell something or to provide
a service etc
 Essentials of an Offer
i) Terms of must be definite, unambiguos, & certain or
capable of being made certain
ii) Every offer should be communicated, ie., offeree must have
the knowledge of the offer
iii) An offer cannot contain a term, the non-compliance of
which would to amount to acceptance
iv) Offer must have a intention of creating a binding, mere
statement does not amount to an offer
v) Must have intention to create a legal relationship
vi) Must be made with a view to obtain assent thereto
vii) If no time is fixed within which the offer is to be accepted,
the offer does not remain open for an indefinite period
viii) A offer must be distinguished from a mere invitation to
offer
ix) Offer may be positive or negative
x) Two identical cross-offers do-not result in a contract
 Acceptance
Definition:
An acceptance is the act of manifestation by
the offeree of his intention to the terms of
offer and willingness to be bound by the
terms of the offer communicated to him.

An agreement emerges from the acceptance

of an offer.
Acceptance is the second stage of a
contract.
 Essentials of Valid Acceptance
i) Must be absolute & unqualified & according
to the terms of offer
ii) To be made by the offeree
iii) Communicated to the offeror
iv) After receiving the offer
v) Before the offer lapses-within the time
period
vi) Mode of Communication, if any, must be as
prescribed in the offer
vii) In case of rejection of offer a renewal of
offer required
 AQ1
In Which year Indian Contract Act was
enacted?

A) 1656
B) 1872
C) 1947
D) None of the above
 AQ2
A legally binding agreement is called
______

A) Offer
B) Acceptance
C) Promise
D) Contract