INDIAN CONTRACT ACT-1872

Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1 st September, 1872. It extends to the whole of India except the state of Jammu and Kashmir.

CONTRACT [SECTION 2(h)]: A contract is an agreement enforceable by law.

CONTRACT = AGREEMENT (+) ENFORCEABILITY BY LAW

All contracts are agreements but all agreements are not contracts

ESSENTIAL ELEMENTS OF A VALID CONTRACT [Section 10]: According to Section 10, All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

Agreement:
To constitute a contract there must be an agreement. There must be two parties to an agreement, i.e. one party making an offer (offeror) and the other party accepting the offer (offeree). The terms of the offer must be definite and acceptance must be absolute and unconditional

To constitute a valid contract, there must be meeting of minds i.e. consensus-adidem. The parties should agree to the same thing in the same sense and at the same time.

Example

Thus, where A who owns 2 cars x and y wishes to sell car x for Rs. 30,000. B, an acquaintance of A does not know that A owns car x also. He thinks that A owns only car y and is offering to sell the same for the stated price. He gives his acceptance to buy the same. There is no contract because the contracting parties have not agreed on the same thing at the same time, A offering to sell his car x and B agreeing to buy car y. There is no consensusad-idem.

Intention to create legal relationship:

When the two parties enter into an agreement, there must be an intention by both parties to legally bind the other as a result of such agreement.

There should be an intention on the part of the parties to agreement to create a legal relationship. An agreement of a purely social or domestic nature not a contract. However, even in the case of agreements of purely social or domestic nature, there m be intention of the parties to create legal obligations. In that case, the social agreement is intended to have legal consequences and, therefore, becomes a contract

Example A husband agreed to pay 30 to his wife every month while he was abroad. As he failed to pay the promised amount, his wife sued him for the recovery of the amount.Held: She could not recover as it was a social agreement and the parties did not intend to create any legal relation

Free and genuine consent The parties should agree upon the same thing in the same sense It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake

Parties competent to contract

The parties to a contract should be competent to enter into a contract. According to Section 11, every person is competent to contract if he is of the age of majority; is of sound mind is not disqualified from contracting by any law to which he is subject.

Lawful Consideration

Each party to the agreement must give or promise something and receive something It can be cash, kind, an act or abstinence. It can be past, present or future. An agreement not supported by a consideration becomes a nudum pactum ie naked agreement

Lawful object: The object of the agreement must not be illegal or unlawful According to Section 23, the consideration or object of an agreement is Lawful, unlessIt is forbidden by law; or Is of such nature that, if permitted it would defeat the provisions of any law or is Fraudulent; or Involves or implies, injury to the person or property of another; or The court regards it as immoral, or opposed to public policy.

Agreements not declared illegal or void

There are certain agreements which have been expressly declared illegal or void by the law. In such cases, even if the agreement possesses all the elements of a valid agreement, the agreement will not be enforceable at law Eg are agreements in restraint of marriage, trade, legal proceedings .IN such cases aggrieved party cant seek relief from court of law

Certainty of meaning
The meaning of the agreement must be certain or capable of being made certain otherwise the agreement will not be enforceable at law.

Example

A agrees to sell 10 metres of cloth. There is nothing whatever to show what type of cloth was intended. The agreement is not enforceable for want of certainty of meaning. If, on the other hand, the special description of the cloth is expressly stated, say Terrycot (80: 20), the agreement would be enforceable as there is no uncertainly as to its meaning.

Possibility of performance
The terms of the agreement should be capable of performance. An agreement to do an act impossible in itself cannot be enforced

Example

A agrees with B to discover treasure by magic. B cant seek redressal of grievance if A fails to perform the promise

Necessary legal formalities

A contract may be oral or in writing. If, however, a particular type of contract is required by law to be in writing it must comply with the necessary formalities as to writing, registration and attestation, if necessary. If these legal formalities are not carried out, then the contract is not enforceable at law