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Indian Contract Act 1872
Indian Contract Act 1872
Indian Contract Act 1872
It affects everybody, more so, trade, commerce and industry. It may be said that the
contract is the foundation of the civilized world.
What is Contract?
According to section 2(h) of the Indian Contract Act, 1872 “An agreement
enforceable by law is a contract.“
Agreement
Section 2(e) “Every promise and every set of promises, forming the consideration
for each other, is an agreement.” Thus it is clear from this definition that a
‘promise’ is an agreement.
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.“
An agreement, therefore, comes into existence when one party makes a proposal or
offer to the other party and that other party signifies his assent thereto.
Legal obligation
Such offer and acceptance should create legal obligations between parties. This
should result in a moral duty on the person who promises or offers to do
something.
Similarly, this should also give a right to the promise to claim its fulfilment. Such
duties and rights should be legal and not merely moral.
Consent
Consent means ‘knowledge and approval’ of the parties concerned.
A contract is made when one person makes an offer while another person accepts
the offer. This acceptance of the offer should be made without any force or threat.
It means that a consent given should be free and genuine.
Example: A has two Bike – one black and the other white. He offers to sell one of
his Bike to B. A intends to sell the black one while B accepts the offer believing
that it is for the white Bike. Here, A and B are not thinking in the same sense of a
particular thing. In this situation, there is a mistake, so it cannot be said to be free
consent.
Therefore, law prohibits
Minors
Persons of unsound mind
Person who is otherwise disqualified like an alien enemy, insolvents,
convicts etc from entering into any contract.
Consideration
Section 2(d) of the Indian Contract Act, 1872 defines consideration thus:
“when at the desire of the promisor, the 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”.
Example: A agrees to sell his toys to B for Rs. 100, B’s promise to pay Rs. 100 is
the consideration for A’s promise to sell his toys and A’s promise to sell the toys is
the consideration for B’s promise to pay Rs. 100.
Similarly, any agreement in restraint of trade, marriage and legal proceedings etc.
are classic examples of void agreements.
Key Term
Contract: A written or spoken agreement, especially one concerning employment,
sales, or tenancy that is intended to be enforceable by law.
Summary
The Indian Contract Act mostly deals with the general principles and rules
governing contracts. The Act is divisible into two parts.
• The first part (Section 1- 75) deals with the general principles of the law of
contract, and therefore applies to all contracts irrespective of their nature.
• The second part (Sections 124-238) deals with certain special kinds of contracts,
namely contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.