Chapter-1: The Contract Act 1872

The Law of Contracts is that branch of Law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. The purpose of the Law of Contract is to ensure the realisation of the reasonable expectation of the parties who enter into a contract. Contract: Sec 2 (h) of Indian Contract Act Defines a contract as an agreement enforceable by law is a contract. According to Salmond: A contract is an agreement creating and defining obligation between the parties. Sir William Anson defines contract as a legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances (abstaining from doing something) on the part of others. Agreement = Offer + Acceptance Contract = Agreement + Enforcement at Law All contracts are agreements but all agreements are not necessarily contracts Classification of Contract: On the Basis of Formation or Creation 1. Express Contracts 2. Implied Contracts 3. Quasi Contracts On the Basis of Execution or Performance 4. Executed Contracts 5. Executory Contracts 6. Unilateral & Bilateral Essential Elements of Valid Contract: 1. Offer & Acceptance 2. Intention to create Legal relationship 3. Lawful Consideration 4. Capacity of Parties: Competency 5. Free & Genuine Consent Offer & Acceptance: Offer/Proposal: Sec 2 (a) defines an Offer / Proposal as When one person signifies to another his willingness to do or to abstain from doing anything with a view to 6. Lawful Object 7. Agreement not declared Void 8. Certainty & possibility of Performance 9. Legal Formalities On the Basis of Forms of Contracts 7. Formal Contracts 8. Simple Contracts On the Basis of validity or enforceability 9. Valid Contracts 10.Void Contracts 11.Voidable Contracts 12.Illegal Contracts 13.Unenforceable Contracts

obtaining the assent of that other to such an act or abstinence, he is said to make a proposal. Example: R offers to sell his bike to B for Rs 20,000/- . This is a proposal and R is a promisor/offeror & B is the offeree. When B accepts the offer and agrees to pay the value for the Bike, B becomes promisee. They both enter into a contract. Types of Proposal/ Offer: 1. Express: Expressed through words, written or spoken 2. Implied: Offer through conduct 3. Specific: When offer is made to specific person 4. General: When offer is made to world at large Essential Elements of a Valid Offer: 1. 2. 3. 4. 5. 6. 7. 8. 9. It should be clear, specific or definite, certain and not vague. An offer must create legal relationship An offer must be communicated to the person to whom it is made Intention of offer must be to obtain the consent or assent Offer may be express or Implied, Specific or General Lawful Offer It must be communicated An Offer is different from an Invitation to an Offer. The Offer should not contain a term non-compliance of which may be assumed to amount to acceptance 10.A statement of Price is not an Offer Acceptance: Sec 2 (b) States, 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. Acceptance may be Express or Implied. Essentials of a Valid Acceptance: 1. 2. 3. 4. 5. 6. 7. 8. 9. It must be Absolute & Unqualified It must be communicated to the offeror It must be as per the mode prescribed and reasonable mode. It must be given in a Reasonable Time It cannot precede an offer. It must show an intention on the part of acceptor to fulfill terms of the promise It must be given to the party or parties to whom the offer is made. It must be given before the offer lapses or withdrawn It cannot be implied from Silence

CONSIDERATION: According to Pollock Consideration is the price for which the promise of other is bought and the promise thus given for value is enforceable

Essentials of a Valid Consideration: It must move at the Desire of the Promisor It may move from the Promisee or any other person It may be an Act Abstinence or Forbearance or a return Promise or a return promise It may be past present or future It need not be adequate It must be real and not illusory It must be some thing that the promisor is not already bound to do It must not be illegal, Immoral or opposed to public money Capacity to Contract: Capacity to Contract means Competency of the parities to enter into a valid contract. Section 11 of ICA deals with the competency of parties and provides that every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualifies from contracting by any law to which he is subject. Incompetent to Contract: Minors Persons of unsound mind Persons disqualified by any law to which they are subject Free Consent: Sec 13 defines that Two or more persons are said to consent when they agree upon the same thing in the same sense. Consent is said to be free when it is not caused by: 1. Coercion 2. Undue Influence 3. Fraud 4. Misrepresentation 5. Mistake Consensus ad idem: If there is no consensus as idem there is no contract. The essence of an agreement is the meeting of the minds of the parties in full & agreement ; there must, in fact, be consensus ad idem. This means that the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time.