THE INDIAN

CONTRACT
ACT, 1872
OFFER - According to Sec.2(a), when a person made
a proposal, when he signifies to another his willingness
to do or to abstain from doing something.

AGREEMENT = OFFER + ACCEPTANCE

CONSENSUS - AD – IDEM-
According to Sec.13, meeting of minds or identity of
minds or receiving the same thing in same sense at
same time.
 Agreement Legal

Obligation

Contract

“All contracts are agreements but all

agreements are not
contracts.”
CONTRACT = AGREEMENT +
ENFORCIBILITY BEFORE LAW
ESSENTIAL ELEMENTS OF A
VALID CONTRACT (Sec.10)
1.Offer & acceptance.
2.Intention to create legal relationship.
3.Consensus - ad - idem.
4.Consideration.
5.Capacity to contract.
6.Free consent.
7.Legality of object.
8.Possibility of performance.
9.Writing & registration.
TYPES OF CONTRACTS
VALID CONTRACTS

ØAbsolute contract
ØContingent contract(Sec. 31-36)
ØExpress contract
ØImplied/Quasi contract(Sec.68- 72)
Valid contract - If all the condition are
fulfilled it is called as a valid contract.
Contingent contract - In a contract to do or
not to do something, if an event is
collateral, does or doesn't happen.
Express contract - When contracts are either
in writing or in oral.
Implied contract - When contracts are
neither in writing nor in oral.
Absolute contract - A contract which is not
dependent on fulfillment of any condition.
INVALID CONTRACTS

• Void contract Is void(Void - ab - initio)

• Becomes void
• Voidable contract
• Illegal contract
• Unenforceable contract
Invalid contract - In a contact if any
one condition is not fulfilled.
Is void (Void-ab-initio) - An agreement
which is not valid from the
beginning.
Becomes void - An agreement which is
valid in the beginning but due to
some supervening
impossibility the contract becomes
void.
Voidable contract - A contract which
is valid unless until avoided by
either the party.
Illegal contract - An agreement
forbidden by law.
Unenforceable contract - It is valid but
due to some technical defect the
contract becomes void. In case
defects are removed the contract is
enforceable.(lack of registration, lack
of signature etc.,)
 OTHER TYPES OF
CONTRACTS
•Executed contract
•Executory contract
•Unilateral contract
•Bilateral contract
Executed contract - In a contract where both the
parties have performed their obligation, there is
remaining nothing to perform.
Executory contract - In a contract where both
the parties are yet to perform their obligation.
Unilateral contract - In a contract one party has
performed his obligation and other person is yet
to perform his obligation.
Bilateral contract - In a contract where both the
parties have performed their obligation. Bilateral
& Executory are same and inter - changeable.
OFFER
 OFFER
According to Sec.2(a), when a person
made a proposal, when he signifies to
another his willingness to do or to
abstain from doing something.
TYPES OF OFFER
§ Express offer
§ Implied offer
§ Specific offer
§ General offer
§ Cross offer
§ Counter offer
§ Standing offer
Express offer - When offer is given to
another person either in writing or in oral.
Implied offer - When offer is given to
another person neither in writing nor in oral.
Specific offer - When offer is given to a
specific person.
General offer - When offer is given to entire
world at a large.(Carlill Vs. Carbolic smoke
ball Co.,)
Cross offer - When both the persons
are making identical offers to
eachother in ignorance of other’s offer.
Counter offer - When both the persons
are making offers to eachother which
are not identical in ignorance of other’s
offer.
Standing offer - An offer which remains
continuously enforceable for a certain
period of time.
LEGAL RULES FOR OFFER
Ø Offer must be given with an intention to
create a legal relationship.(Balfour Vs.
Balfour)
Ø Offer must be definite.(Taylor Vs. Portington)
Ø There is a clear cut difference between offer,
invitation to offer, invitation to sale. (Harris
Vs. Nickerson)
 Offer must be communicated. (Fitch Vs.
Snedkar)
 Mere statement of price of price is not an
offer.(Harvey Vs. Facey)
ACCEPTANCE
ACCEPTANCE
According to sec.2(b), when a
person made a proposal to
another to whom proposal is
made, if proposal is assented
there to, it is called acceptance.
LEGAL RULES FOR ACCEPTANCE
• Acceptancemust be given as per
the mode prescribed by the offerer.
• Acceptance must be given before
the lapse of time or within
reasonable time.
• Acceptance must be unconditional.
• Acceptance may be given by any
person in case of general offer.
• Acceptance may be given by any
specific person in case of specific
offer.
• Acceptance must be communicated.
(Bordgon Vs. Metropolitan Rly. Co.)
• Mental acceptance is no acceptance
or acceptance must not be derived
from silence.
• Acceptance must not be precedent to
offer.
CONSIDERATION
 CONSIDERATION
According to sec 2(d) consideration is defined as
“when at the desire of the promisor , or 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 an act or absinence or promise
is called a consideration for the promise .
When a party to an agreement promises to do something
he must get “something” in return. This “something” is
defined as consideration.
LEGAL RULES AS TO CONSIDERATION

1)It must move at the desire of the promisor.

[Durga Prasad v. Baldeo ]

2)It may move by the promisee .
[Chinnaya v. Ramayya ]
3)It must be past, present or future .
4)It need not be adequate .
5)It must be real .
6)It must not be illegal , immoral or opposed to public
policy .
 Contract without consideration is
void – Exceptions
• Love & affection . [Venkataswamy v.
Rangaswamy]
• Compensation for voluntary service .
• Promise to pay a time – barred debt .
• Completed gift .
• Agency sec (185) .
• Charity .
• Contract of bailment sec(148 ) .
CAPACITY TO
CONTRCT
Capacity to contract
Following are the condition for a
person to enter into contract-

• He must be major
• He must be sound mind
• He must not be disqualified by any
other law.
Disqualified persons to enter into
a contract
a) Minor
b) unsound person
c)others
i.e alien enemy,
insolvent,
convict,
company/corporationagainst MOA /
AOA .
 Minor
According to Indian majority act
sec(3) minor is defined as any person
under the age of 18 years . In the
following cases a person is said to be
minor if he does not complete the age of
21 years
a) any person under the guardian & wards
act ,1890
b)any person which comes under
superintendence of law/legal representative
 Legal rules
• An agreement with minor is void
ab initio
[Mohiri Bibi v. Dharmadas Ghase]
• Minor can be promisee
[Shrafat Ali v. Noor Mohd]
• Minor cannot ratify his agreement
on attaining the age of majority
[Indra Ramaswamy v. Anthiappa
Chettier]
 Unsound person
• According to sec(12) a person
generally sound , occasionally
unsound can enter into a contract
when he of sound mind
• A person generally unsound
occasionally sound can enter onto
contract when he is sound mind .
Persons of unsound mind
1)Lunatic ,
2)Idiots ,
3)Drunken or intoxicated persons.
 What is Performance of Contract?

• The term ‘Performance of contract‘ means that both, the

promisor, and the promisee have fulfilled their respective
obligations, which the contract placed upon them. For
instance, A visits a stationery shop to buy a calculator. The
shopkeeper delivers the calculator and A pays the price. The
contract is said to have been discharged by mutual
performance.
 Types of Performance
1. Actual Performance :

• When a promisor to a contract has fulfilled his obligation in accordance

with the terms of the contract, the promise is said to have been actually
performed. Actual performance gives a discharge to the contract and the
liability of the promisor ceases to exist. For example, A agrees to deliver10
bags of cement at B’s factory and B promises to pay the price on delivery. A
delivers the cement on the due date and B makes the payment. This is
actual performance.

• Actual performance can further be subdivided into substantial

performance, and partial Performance
 2. ATTEMPTED PERFORMANCE/TENDER
• Sometimes it so happens that the promisor offers to perform his obligation under the
contract at the proper time and place but the promisee does not accept the
performance. This is known as “attempted performance” or “tender”.

• If goods are tendered by the seller but refused by the buyer, the seller is discharged
from further liability, given that the goods are in accordance with the contract as to
quantity and quality, and he may sue the buyer for breach of contract if he so
desires. The rationale being that when a person offers to perform, he is ready,
willing and capable to perform. Therefore, a tender of performance is at par to actual
performance, and it gives the promisor freedom from further performance of
contract and moreover authorizes the promisor to bring action against the promisee
for the breach.
 Who can perform a Contract?

• Promisor himself
• Agent
• Representatives
• Third Persons
 Who can demand performance of a
Contract?
• Promisee – only a promisee can demand performance and not
a stranger demand performance of the contract.

• Legal Representative – legal representative can demand

Exception performance. Contrary intention appears from the
contract. Contract is of a personal nature.

• Third party – Exception to “stranger to a contract”.

 Discharge of contract
• A contract is said to be discharged when the obligations created by
it come to an end. In other words discharge of contract means '
termination of the contractual relationship between the parties'.
There are various modes of Discharge of Contract, a contract may
be discharged either in a positive way (Positive - by performance)
or in negative. (Negative - by breach or failure to perform
contractual obligation by either of the parties).

• The various ways to discharge a contract includes, the performance of

contracts, novation, recession, alteration, remission, waiver, by
operation of law, breach of contract.
 Discharge of contract (Modes)
• There are various modes of discharge of a contract which are as follows :

1. By performance

2. By agreement or consent

3. By impossibility (personal incapability, destruction of subject matter,

death, outbreak of war, change in law etc.)

4. By lapse of time

5. By operation of law (death, merger, insolvency, unauthorized

alteration etc.)
•
6. By breach of contract
A contract may be terminated by subsequent agreement. The new agreement
may be by way of :
a)Novation- Section 62 of the Indian Contract Act deals with the doctrine of novation.
when a new contract is substituted for an existing one, either between the same parties
or between the new parties. If the parties to a contract agreed to substitute a new
contract for it or to rescind or alter it, the original contract need not be performed.

b) Alteration-. i.e., when one or more of the terms of the contract is/are altered by the
mutual consent of the parties to the contract.

c) Rescission- i.e., when all or some of the terms of the contract are canceled.

d) Remission- Section 63 of the Indian Contract Act 1872 speaks about the discharge
of a contract by remission. i.e., acceptance of a lesser fulfillment of the promise made.

e) Waiver - which means intentional relinquishment or giving up of a right by a party

entitled thereto under a contract.

f) Merger- i.e., when an inferior right accruing to a party under a contract merges into a
superior right accruing to the same party under a new contract.
 Breach of Contract
• Breach of contract means the promisor fails to perform the
promise or breaking of the obligations which a contract
imposes. It occurs when a party to the contract without lawful
excuse does not fulfill his contractual obligation or by his own
act makes it impossible that he should perform his obligation
under it.
• It confers a right of action or damages to the injured party.
Branch of contacts may be of two types: Actual breath of
contact and Anticipatory breach of contact.
1. Actual breach of contract: Actual breach means the promisor’s
failure to perform the promise on the due date of performance.
When a promisor fails or refuses to perform the promise upon the
due date for performance then it is called an actual breach of
contract. In such a case the promisee is exempted and may rescind
the contract. A promise can sue the party at fault for damages for
breach of contract.

2. Anticipatory Breach of contract: It occurs when a party to an

executory contract declares his intention of not performing the
contract before the performance is due. It may take place in two
ways i.e. either expressly by words or by implied conduct.
 Remedies for breach of contract
• Recession of Contract

• Sue for Damages

• Sue for Specific Performance

• Injunction

• Quantum Meruit
 Doctrine of Privity of contract
• It is a general rule of law that only those person who are
parties to a contract may sue and be sued on that contract.
Any person other than the parties to a contract is called as
"stranger to the Contract".

• A contract neither confers any rights nor imposes any

obligation/ duties on such person. Hence, a stranger to a
Contract cannot sue and be sued. This rule is known as the
Doctrine of Privity of Contract.
 Example
• Dunlop Pneumatic Tyre Co. Ltd Vs. Selfridge and Company Ltd.
(1915) A.C 847

S bought Tyres from the Dunlop Rubber company and sold them to
D. sub-dealer who agreed with S not to sell below the Dunlop's list
price and to pay the Dunlop company.$ 5 as damages on every tyre D
undersold. D sold two Tyres at less than the list price and thereupon
the Dunlop company sued him for breach.

In this case, court held that the Dunlop company could not
maintain the suit as it was a stranger to the contract.
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