The Indian Contract Act, 1872: A Comprehensive
Overview
Introduction
The Indian Contract Act, 1872, is a significant piece of legislation that forms the foundation
of contract law in India. This act delineates the parameters within which contracts are
created, executed, and enforced, thereby ensuring clarity and fairness in commercial and
personal agreements.
Key Features of the Indian Contract Act, 1872
1. Definition of Contract
A contract is defined under Section 2(h) of the Act as "an agreement enforceable by law."
This implies that for any agreement to be considered a contract, it must be legally binding.
2. Essential Elements of a Valid Contract
For a contract to be valid, certain essential elements must be present:
● Offer and Acceptance: One party must make an offer, and the other must accept it.
● Intention to Create Legal Relations: Both parties must intend to enter into a legally
binding agreement.
● Lawful Consideration: There must be something of value exchanged between the
parties.
● Capacity to Contract: Parties must have the legal capacity to enter into a contract,
meaning they should be of sound mind, not minors, and not disqualified by law.
● Free Consent: Consent must be given freely without coercion, undue influence,
fraud, misrepresentation, or mistake.
● Lawful Object: The object of the contract must be legal and not against public policy.
3. Types of Contracts
The Act recognizes various types of contracts, including:
● Express and Implied Contracts: Express contracts are stated clearly in words,
whereas implied contracts are inferred from the conduct of the parties.
● Bilateral and Unilateral Contracts: Bilateral contracts involve mutual promises
between two parties. In contrast, unilateral contracts involve one party making a
promise in exchange for an act by the other party.
● Contingent Contracts: These are contracts dependent on the occurrence or
non-occurrence of a specific event.
4. Performance of Contracts
Performance of a contract refers to the fulfillment of contractual obligations. If a party fails to
perform, it leads to a breach of contract, giving the aggrieved party the right to seek
remedies.
5. Discharge of Contracts
Contracts can be discharged in various ways:
● By Performance: Both parties fulfill their obligations.
● By Agreement: Mutual consent to terminate the contract.
● By Impossibility of Performance: Unforeseen events render performance
impossible.
● By Lapse of Time: Contracts are discharged if not performed within a specified time.
● By Operation of Law: Changes in law affect the enforceability of the contract.
6. Remedies for Breach of Contract
When a contract is breached, the aggrieved party can seek various remedies:
● Damages: Monetary compensation for the loss suffered.
● Specific Performance: Court order directing the defaulting party to fulfill their
obligations.
● Injunction: Court order preventing a party from doing something that would breach
the contract.
● Rescission: Cancellation of the contract and restoration of parties to their
pre-contractual position.
Special Provisions
The Act also includes special provisions for specific types of contracts such as:
● Contracts of Indemnity and Guarantee: Where one party promises to save the
other from loss or to fulfill the obligation of a third party.
● Bailment and Pledge: Temporary transfer of possession of goods from one party to
another.
● Agency: Legal relationship where an agent is authorized to act on behalf of the
principal.
