Indian Contract Act, 1872.pptx

Indian Contract Act, 1872.pptx

1. Indian Contract Act, 1872 By: Anuj Aggarwal

2. The act is based on English Common Law made up of judicial precedents. It extends to the whole of India except the state of J&K. It is divided into two main groups: General principles of the law of contract (Secs 1-75). Specific types of contracts: Contracts of Indemnity and Guarantee (Secs 124-147) Contracts of Bailment and Pledge (Secs 148-181) Contracts of Agency (Secs 182-238) Introduction

3. Every promise and every set of promises, forming the consideration for each other, is an agreement. {Section 2(e)} A person makes a proposal ( Offer ). When it is accepted by other, it becomes a promise ( Acceptance ). Thus, Offer + Acceptance = Promise Only a mutual promise forming consideration for each other is ‘agreement’. Thus, Promise + Consideration = Agreement 3 Basic Concepts

4. “An agreement enforceable by law” is Contract . - Section 2(h) There must be legal relationship. Agreements of social or domestic nature are not contracts. Example: Invitation to a Birthday party 4 CONTRACT = AGREEMENT + ENFORCEABILITY

5. 1.  Proper offer and its acceptance 2.  Intention to create legal relationship. 3.  Lawful consideration 4.  Capacity of parties to contract 5.  Free Consent 6. Lawful Object  7. Certainty of meaning. 8. Possibility of performance. 9. Not expressly declared void 10. Legal formalities 5 ESSENTIALS OF A VALID CONTRACT

6. In order to create a valid contract, there must be a 'lawful offer' by one party and 'lawful acceptance' of the same by the other party. ‘Lawful’ means it satisfies the requirements of the Contract Act. 6 OFFER AND ACCEPTANCE

7. Agreements which create legal relations or are capable of creating legal relations are contracts, for example, an invitation to a dinner does not create any legal relation and therefore is not a contract. Husband & Wife Agreements The courts consider domestic arrangements between husband and wife to be social agreements and not legally enforceable. { Balfour v Balfour} Intention to Create Legal Relations

8. When, at the desire of the promisor , the promisee or any other person has done or abstained from doing (PAST) , or does or abstains from doing (PRESENT) , or promises to do or to abstain from doing, something (FUTURE) , such act or abstinence or promise is called a consideration for the promise. -Section 2 (d) A promise without consideration is not ‘agreement’ Gratuitous promise is unenforceable. 8 CONSIDERATION = SOMETHING IN RETURN

9.  CAPACITY OF PARTIES The parties to an agreement must be competent to contract. If either of the parties does not have the capacity to contract, the contract is not valid. Following persons are incompetent to contract. (a) Minors,           (b) Persons of unsound mind, and (c) Persons disqualified by law. 9

10. Two or more persons are said to consent when they agree upon the same thing in the same sense . (Section 13) It is known as “Consensus Ad Idem”  10 FREE CONSENT

11. Consent of both parties must be free . Consent is said to be free when it is not caused by: ( 1 ) coercion , as defined in section 15 ( 2 ) undue influence , as defined in section 16 ( 3 ) fraud , as defined in section 17 ( 4 ) misrepresentation , as defined in section 18 ( 5 ) mistake , subject to the provisions of sections 20, 21 and 22. If the agreement is vitiated by first four factors, then contract would be voidable. 11 FREE CONSENT

12. The object for which the contract has been entered into must not be fraudulent or illegal or immoral or opposed to public policy. For instance, a landlord knowingly lets a house to be used for carrying out illegal activity, he can’t recover rent in a court of law. 12 LAWFUL OBJECT

13. If the act is impossible in itself, physically or legally, if cannot be enforced at law. For example, Mr. A agrees with B to discover treasure by magic. Such Agreements are not enforceable. 13 POSSIBILITY OF PERFORMANCE.  

14. The terms of a contract should be clear. In other words, the contract must not be vague. Contracts which are vague cannot be enforced. It must be possible to ascertain the meaning of the agreement, otherwise, it cannot be enforced. Certainty of Terms

15. There are Certain agreements which have been expressly declared void by the law. Thus an agreement made by parties should not fall in this category. For ex agreements in restraint of marriage, trade or legal proceedings. 15 AGREEMENTS NOT DECLARED EXPRESSLY VOID

16. Oral contract is a valid contact. However the contract must be in writing and registered, if so required by any law, for example, gift, mortgage, sale, lease under the Transfer of Property Act 1882, Memorandum and Articles of Association of a Company under the Indian Companies Act etc. 16  Legal Formalities

17. Valid Contract – when all the essential elements are present. Voidable Contract – According to Section 2(i), “an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.” Void Contract – It implies ‘not binding in law’{Section 2(j)}. Unenforceable Contract – a contract which has all the elements of a contract, but neither party can sue the other. Illegal Contract - It implies ‘contrary to law’. Kinds of Contracts

18. Agreements in restraint of marriage (Sec. 26) Agreements in restraint of trade (Sec. 27) Agreements in restraint of legal proceedings (Sec. 28) Agreements the meaning of which is uncertain (Sec. 29) Agreements by way of Wager (Sec. 30) Agreements contingent on impossible events (Sec. 36) Agreements to do impossible acts (Sec. 56) Void-ab-initio or expressly declared void agreements

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