m It came into force on first day of September , 1872.

m It extends to whole of India except the State of Jammu

and Kashmir.
 Section 2(h) of Indian Contract Act, 1872 defines a
contract as
´An agreement enforceable by lawµ.

 Contract = Agreement + Enforceability

m Section 2(b) defines promise in these words: "when the
person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted.

m Proposal when accepted, becomes a promise.

m When, at the desire of the promisor, the promisee or any

other person has clone or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from
doing, something, such Act or abstinence or promise is
called a consideration for the promise
1. Offer and Acceptance

2. Intention to create legal relationship

3. Lawful consideration

4. Capacity of parties-Competency
Ä. Free and genuine consent

6. Lawful object

7. Agreement not declared void

8. Certainty and possibility of performance

9. Legal formalities
All contracts are agreements but all agreements are
not contracs
 (alidity Formation Performance
(alid Contract Express Contract Executed Contract

(oid Contract Implied Contract Executory Contract

(oidable Contract Quasi Contract Unilateral Contract

Illegal Contract Bilateral Contract

Unenforceable
Contract
m (alid Contract: An agreement which has all the
essential elements of a contract is called a valid
contract. A valid contract can be enforced by law.

m (oid Contract [Sec.2(j)] : A contract not enforceable

by law is said to be void.
D E.g., A contract with a minor or an agreement without
consideration.
m (oidable Contract [Section 2(i)]: An agreement which
is enforceable by law at the option of one party but
not at the option of the other or others is a voidable
contract.

m A voidable contract continues to be valid till it is

avoided by the party entitled to do so.
D Example of (oidable Contract: A promises to sell his car to B
for Rs 2000. His consent is obtained by use of force. The
contract is voidable at the option of A .
m 6
  : A contract is illegal if it is forbidden by
law; or is of such nature that, if permitted, would defeat
the provisions of any law or is fraudulent; or involves
or implies injury to a person or property of another,
or court regards it as immoral or opposed to public
policy. These agreements are punishable by law. These
are void-ab-initio.

m ´All illegal agreements are void agreements but all void

agreements are not illegal.
m 

 

 : Where a contract is good in
substance but because of some technical defect cannot
be enforced by law is called unenforceable contract.
These contracts are neither void nor voidable.
m 

 : Where the terms of the contract are
expressly agreed upon in words (written or spoken) at
the time of formation, the contract is said to be
express contract.

m 6

 : An implied contract is one which is

inferred from the acts or conduct of the parties or
from the circumstances of the cases. Where a proposal
or acceptance is made otherwise than in words,
promise is said to be implied.
m '  : A quasi contract is created by law. Thus,
quasi contracts are strictly not contracts as there is no
intention of parties to enter into a contract. It is legal
obligation which is imposed on a party who is required
to perform it. A quasi contract is based on the
principle that a person shall not be allowed to enrich
himself at the expense of another.
m 
 
 : An executed contract is one in which
both the parties have performed their respective
obligation.

m 
    : An executory contract is one where

one or both the parties to the contract have still to
perform their obligations in future. Thus, a contract
which is partially performed or wholly unperformed is
termed as executory contract.
 
  : A unilateral contract is one in which
only one party has to perform his obligation at the
time of the formation of the contract, the other party
having fulfilled his obligation at the time o the contract
or before the contract comes into existence.

 
  : A bilateral contract is one in which the

obligation on both the parties to the contract is
outstanding at the time of the formation of the
contract. Bilateral contracts are also known as
contracts with executory consideration.
Proposal is defined under section 2(a) of the Indian
contract Act, 1872 as "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/offer".

Thus, for a valid offer, the party making it must express

his willingness to do or not to do something.
m An offer may be made by express words, spoken or
written. This is known as Express offer.

m An offer may be inferred from the conduct of the

parties or the circumstances. This is known as Implied
Offer.
D E.g.,When a transport company runs a bus on a particular
route, there is an implied offer by the transport company to
carry passengers for a certain fare.
m åeneral Offer

m Specific Offer

m Cross Offer

m Counter Offer

m Standing, Open or Continuing Offer.

m The offer must show an obvious intention on the part
of the offeror to be bound by it.

m The offeror must make the offer with a view to

obtaining the assent of the offeree to such act or
abstinence.

m The offer must be definite.

m It must be communicated to the offeree.

m It is only a circulation of an offer, an attempt to induce
offers and precedes a definite offer. Acceptance of an
invitation to an offer does not result contract and only
an offer emerges in the process of negotiation. A
statement made by a person who does not intend to
bound by it but, intends to further act, is an invitation
to offer.
m According to Section 2(b), "When the person to
whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted.´

m This means ¶when the offeree signifies his assent to

the offeror, the offer is said to be accepted·.
m Acceptance must be absolute and unqualified.

m Communicated to offeror.

m Acceptance must be in the mode prescribed.

m Acceptance must be given within a reasonable time before

the offer lapses.

m Acceptance by the way of conduct.

m Mere silence is no acceptance.

m Communication of offer: The communication of offer
is complete when it comes to the knowledge of the
person to whom it is made.
D E.g., A proposes by a letter, to sell a house to B at a certain
price. The letter is posted on 10th July. It reaches B on the
12th July. The communication of offer is complete when B
receives the letter i.e., 12th July.
m A proposal may be revoked at any time before the
communication of its acceptance is complete as against
the proposer, but not afterwards. An acceptance may
be revoked at any time before the communication of
the acceptance is complete as against the acceptor, but
not afterwards.
m By the communication of notice of revocation by the
proposer to the other party;

m 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;

m By the failure of the acceptor to fulfill a condition

precedent to acceptance; or

m By the death or insanity of the proposer, if the fact of the

death or insanity comes to the knowledge of the acceptor
before acceptance.
m ´When at the desire of the promisor, promisee or any
other person has done or abstained from doing or
does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence
or promise is called a consideration for the promise.µ
m (1) An act, i.e., doing of something. In this sense consideration is
in an affirmative form.
D Example: A promises B to guarantee payment of price of the goods
which B sells on credit to C. Here selling of goods by B to C is
consideration for A·s promise.
m (2) An abstinence or forbearance, i.e., abstaining or refraining
from doing something. In this sense consideration is in a negative
form.
D Example: A promises B not to file a suit against him if he pays him
Rs.Ä00.The abstinence of A is the consideration for B·s payment.
m (3) A return promise.
D Example: A agrees to sell his horse to B for Rs 1o,ooo. Here B·s promise
to pay the sum of Rs.10,000 is the consideration for A ;·s promise to sell
the horse, and A·s promise to sell the horse is the consideration for B·s
promise to pay the sum of Rs.10,000.
1.It must move at the desire of the promisor.
2.It may move from the promisee or any other person.
3.It may be an act, abstinence or a return promise.
4.It may be past, present or future.
Ä.It need not be adequate.
6.It must be real and not illusory
7.It must be something which the promisor is not
already bound to do.
8.It must not be illegal, immoral or opposed to public
policy (Sec.23).
m Love and Affection [Sec.2Ä(1)]:
D Marriage
m Compensation for voluntary services [Sec.2Ä(2)]
m Promise to pay a time barred debt [Sec.2Ä(3)]
m åift
D The rule ´ No consideration, no contractµ does not apply to
completed gifts.
m Agency [Sec.18Ä]
D No consideration is necessary to create an agency.
m Charitable Subscription
m According to Sec.11 every person is competent to
enter in to contract who
D Has attained the age of majority i:e 18 years.
D is of sound mind while entering into the contract.
D is not disqualified by law.
 D 6







only parties to a contract may
sue and be sued on that contract.‰ 


 


†octrine of privity of contract. j
m ïrivity of contract means relationship subsisting
between the parties who have entered in to
contractual obligations.
m 6
 



  



 







 

 

  
m According to Indian Majority Act,187Ä, a minor is a
person who has not completed 18 years of age.In
the following two cases , he attains majority after 21
years of age.
(1) Where a guardian of a minorüs person or
property has been appointed under the åuardians
and Wards Act,1890 or
(2) Where the superintendence of a minorüs
property is assumed by a Court of Wards.
m  An agreement with or by a minor is
void and inoperative ab initio.
m Ô.He can be a promisee or a beneficiary:
m ð.His agreement cannot be ratified by him on
attaining the age of majority.
m þ.If he has received any benefit under a void agreement , he
cannot be asked to compensate or pay for it.
m Ä.He can always plead minority:
m K.There can be no specific performance of the agreements
entered in to by him as they are void ab initio.
m .He cannot enter in to a contract of partnership
m a.He cannot be adjudged insolvent
m ã.He is liable for the ënecessariesü supplied or necessary
services rendered to him or anyone whom he is legally bound
to support
m ÷ .He can be an agent
m His parents / guardian are /is liable for the contract
entered in to by him
m ÷Ô.A minor is liable in tort (A civil wrong).
m According to Section 13, " two or more persons are
said to be consented when they agree apon the same
thing in the same sense (!
 
).
m A consent is said to be free when it not caused by
coercion or undue influence or fraud or
misrepresentation or mistake.
m Coercion.
m Undue Influence.
m Fraud.
m Misrepresentation.
m Mistake of Fact.
m Coercion is the committing or threatening to commit,
any act forbidden by the Indian Penal Code,1860 or
unlawful detaining, or threatening to detain, any
property, to the prejudice of any person whatever, with
the intention of any person to enter in to an
agreement.(Sec.1Ä).
m ´Where a person who is in a position to dominate the
will of another enters into a contract with him and the
transaction appears on the face of it, or on the
evidence, to be unconscionable, the burden of proving
that such contract was not induced by undue influence
shall lie upon the person in the position to dominate
the will of the other."
m A statement of fact which one party makes in the course of
negotiations with a view to inducing the other party to
enter in to a contract is known as a representation.
m It may be expressed by words spoken or written or implied
from the acts and conduct of the parties.
m A representation when wrongly made, either innocently or
intentionally, is a misrepresentation.
m ´Misrepresentationµ is a misstatement of a material fact
made innocently with an honest belief as to it·s truth or
non-disclosure of a material fact, without any intent to
deceive the other party.
m ´Fraudµ exists when it is shown that,
m A false representation has been made
D knowingly, or
D without belief in it·s truth, or
D recklessly, not caring whether it is true or false, and
D the maker intended the other party to act upon it.
m There is a concealment of material fact.
m The intention of the party making fraudulent
misrepresentation must be to deceive the other party
to the contract or to induce him to enter in to a
contract.
m Mistake is erroneous belief about something.
1. Mistake of law, or
2. Mistake of fact.

(1)Mistake of law: It may be«.

D Mistake of law of the country
D Mistake of law of foreign country
(2) Mistake of fact: Mistake of fact may be,
D Bilateral Mistake, or
D Unilateral Mistake.
m An agreement is a contract if it is made for a lawful
consideration and with a lawful object (Sec. 10)
m Every agreement of which the object or consideration
is unlawful is void.
m A void agreement is one which is not enforceable by
law. [Sec.2(g)]
m The following agreements are declared to be void.
1. An agreement made by incompetent persons (Sec.11).
2. Agreement made under mutual mistake of fact (Sec.20)
3. Agreements the consideration or object is unlawful (Sec.23)
4. Agreements the consideration or object is unlawful in part.
(Sec.24)
Ä. Agreement made without consideration is void ( Sec.2Ä)
6. Agreement in restraint of marriage (Sec.26)
7. Agreement in restraint of trade (Sec.27)
8. Agreement in restraint of legal proceedings (Sec.28)
9. Agreement the meaning of which is uncertain (Sec.29)
10. Agreement by way of wager (Sec.30)
11. Agreement contingent on impossible events
(Sec.36)
12. Agreement to do impossible acts. (Sec.Ä6)
m A wager is an agreement between two parties by
which one promises to pay money or money·s worth
on the happening of some uncertain event in
consideration of the other party·s promise to pay
uncertain event in consideration of the other party·s
promise to pay if the event does not happen.
m Promise to pay money or money·s worth

m Uncertain event

m Each party must stand to win or lose.

m No control over the event

m No other interest in the event

m A crossword competition involving a good measure of skill for
it·s successful solution

m åames of skill, e.g., picture puzzles or athletic competitions

m A subscription or contribution or an agreement to subscribe

or contribute toward any plate (a cup or other prize for a
race or other contest), prize or sum of money of the value of
Rs.Ä00 or above to be awarded to the winner or winners of a
horse race (Exception to Sec.30)

m Share market transactions in which delivery of stocks and

shares is intended to be given and taken.

m A contract of insurance.
m Contingent contract is a contract to do something, if
some event, collateral to such contract, does or does
not happen.

m Characteristics of a contingent contract.

D It·s performance depends upon the happening or non
happening in future of some event.
D The event must be uncertain.
D The uncertain future event must be collateral to the contract.
m The parties to a contract either perform or offer to
perform their respective promises.

m By whom the contract must be performed ?

D promisor himself
D agent
D legal representative
D joint promisors
m Who can demand performance ?
(a) It is only promisee himself.In case of his death,
the legal representative, who can demand
performance.
(b) In case of joint promisees, any of the joint
promisees can demand performance.
When all promisees die ,the legal representatives
of all the diseased persons can demand
performance.
m A contract is said to be discharged when the
obligations created by it come to an end.

m The various modes of discharge of contract are as

follows:
1. Discharge by performance
2. Discharge by agreement or consent
3. Discharge by impossibility
4. Discharge by lapse of time
Ä. Discharge by operation of law
6. Discharge by breach of contract.
m In case of breach of contract, the injured party has one
or more of the following remedies:
m Suit for RESCISSION:
D Rescission is the revocation of contract.When there is breach
of a contract by a party , the injured party may sue to treat
the contract as rescinded. He is also absolved of all the
obligations under the contract.
m Suit for DAMAåES:
D Damages are monetary compensation awarded to the injured
party by Court for the loss or injury suffered by him.
m Ordinary Damages:
D These are damages which actually arise in the usual course of things
from the breach of a contract.
m Special Damages:
D Damages which arise from unusual circumstance known to both
the parties to the contract are called special damages.
m (indictive or Exemplary or Punitive Damages:
D These damages are allowed in case of the breach of a contract to
marry or dishonor of a cheque by a banker wrongfully.
m Nominal Damages:
D Where the injured party has not suffered any loss by reason of the
breach of a contract, the Court may award a very nominal sum as
damages.
A right to sue on a quantum meruit (as much as earned) arises
where a contract, partly performed by one party, has become
discharged by the breach of the contract by the other party.
This right is founded on the implied promise by the other party
arising from the acceptance of a benefit by that party.
m A contract by which one party promises to save the
other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other
person, is called a " contract of indemnity".
m Illustration: A contract to indemnify B against the
consequences of any proceedings which C may take
against B in respect of a certain sum of 200 rupees.
This is a contract of indemnity.
m A "contract of guarantee" is a contract to perform the
promise, or discharge the liability, of a third person in
case of his default. The person who gives the guarantee
is called the "surety"; the person in respect of whose
default the guarantee is given is called the "principal
debtor ", and the person to whom the guarantee is
given is called the "creditor". A guarantee may be either
oral or written.
m A "bailment" is the delivery of goods by one person to
another for some purpose, upon a contract that they
shall, when the purpose is accomplished, be returned
or otherwise disposed of according to the directions
of the person delivering them.
m The person delivering the goods is called the "bailor".
The person to whom they are delivered is called, the
"bailee"
m CONTRACT:
It is a basic essential for bailment.
m (II) MO(EABLE PROPERTY:
Property must be moveable in contract of bailment.
m (III) DELI(ERY OF åOODS:
The delivery of goods should be made for some purpose
under a contract.
m (I() CHANåE OF POSSESSION:
In bailment possession is changed from one person to
another person.
m (() SPECIFIC PURPUSE:
The goods are delivered for some specific purpose to
another person.
m ((I) OWNERSHIP IS NOT CAHNåED:
The ownership is not change. It remain to bailor.
m ((II) PARTIES OF CONTRACT:
There are two parties to the contract of bailment
bailor and bailer.
m ((III)RETURNABLE:
The goods must be returned to the owner of property
or disposed according to the direction of bailor.
m Care of åoods
m Act according to the Contract
m Not deny the Title
m Return the åoods
m Return at Proper Time
m Return of profit
m Proper Use of goods.
m Recovery of Loss
m Recovery of Compensation
m Recovery of expenses
m Right to retain
m Right of Indemnity
m Right against third person
m Right of Remuneration
m The bailor is responsible to the bailee for any loss
which the bailee may sustain by reason that the bailor
was not entitled to make the bailment, or to receive
back the goods or to give directions, respecting
them. 16Ä- Bailment by several joint owners. If
several joint owners of goods bail them, the bailee may
deliver them back to, or according to the directions of,
one joint owner without the consent of all, in the
absence of any agreement to the contrary.
m Pledge" "pawnor" and "pawnee" :
The bailment of goods as security for payment of a debt
or performance of a promise is called "pledge". The
bailor is in this case called the "pawnor". The bailee is
called the "pawnee".
m The contract which creates relationship of principal
and agent is called agency. An agent is involving party to
the contract of agency. He is merely the connecting
link. His authority can be revoked by the principal.
O

m He is a person employed to do any act for another in
dealing with third parties.
m O
  O

m According to sec. 183 of Contract Act "Any person who is
of the age of majority according to the law to which is
subject, and who is of sound mind, may employ an agent.
m þ WH O
B
O

m According to Sec. 184. of Contract Act "As between the
principal and third person, any person may become an
agent, but no person who is not of the age of majority and
of sound mind can become an agent, so as to reasonable to
his principal according to provisions in that behalf herein
contained.
m If principal revoke authority before agent has exercised
his power,
m —
In case of death of principal,
m —
In case of death of agent.. I
m — 
If agent give up business of agency,
m —
In case of insanity of principal,
m —
In case of insanity of agent,
m —
If principal become insolvent,
m —
If subject matter of the agency is destroyed
m — 
On expiry of time.
m When he does not disclose the name of the principal,
m —
When agent receive money by mistake or fraud,
m —
When agent performs any act without the authority of
principal.
m — 
If agent made a contract with a foreigner foi the sale
or purchase of goods,
m —
If he make contract in his own name and not by the
name of principal,
m —
If an agent has agreed to accept the liability of the third
party,
m —
If an agent on the bill of exchange without disclosing
that he is singing on behalf principal.
Ö Ankit åupta ² 22
Ö Shailesh Kalantry ² 3Ä
Ö Urja Padwal ² 42
Ö Piyush Rathi ² Ä0
Ö Raghav Rathi ² Ä1
Ö Chahat Agarwal - 4