Q1: Explanation of Terms under the Contract Act 1872

i. Contract:

A contract is a legally binding agreement between two or more parties that is enforceable by law. It must contain an
offer, acceptance, consideration, mutual consent, and the intention to create legal relations.

Example: If A offers to sell his car to B for Rs. 50,000 and B accepts, a contract is formed. The contract becomes
enforceable under the Contract Act, as both parties have agreed on the terms and intend to create legal relations.

ii. Agreement:

An agreement is a mutual understanding between two or more parties regarding their respective rights and
obligations. Not all agreements are contracts, but all contracts are agreements.

Example: If A invites B to a party, this is an agreement but not a contract because there is no legal obligation or

consideration involved. iii. Void Agreement:

A void agreement is one that is not enforceable by law from the very beginning. It lacks essential elements required
to be a contract.

Example: An agreement made with a minor (someone under the legal age of 18) is void because minors cannot enter
into contracts under the Contract Act.

iv. Illegal Contract:

An illegal contract is one that involves the performance of an illegal act or is prohibited by law. Such a contract is void
and unenforceable.

Example: A contract to sell counterfeit goods is illegal. Since the subject matter involves an illegal act, the contract is
void.

v. Quasi Contract:

A quasi-contract is not a real contract, but a legal obligation imposed by the court to prevent unjust enrichment or
unfairness, even when there is no agreement between the parties.

Example: If A supplies goods to B without B requesting them, and B uses the goods without objection, A can claim
payment for the goods under a quasi-contract.
Q2: Legal Provisions of Offer and Acceptance under the Contract Act 1872

Offer:

An offer is a proposal made by one party to another to enter into a contract. It must be clear, definite, and
communicated to the other party. A valid offer has the intention to create legal obligations upon acceptance.

● Legal Provisions:
○ An offer must be made with the intention of creating a binding agreement upon acceptance.
○ The offeror must express the offer clearly, so the offeree knows the terms and can accept or reject
them.

Example: A offers to sell his car to B for Rs. 50,000. This is an offer because A has communicated his intention to sell
the car on certain terms.

Acceptance:

Acceptance is the expression of agreement to the terms of an offer. It must be communicated by the offeree and
must be unconditional.

● Legal Provisions:
○ Acceptance must be given within the time specified or a reasonable time.
○ It must be communicated effectively and must be unconditional.
○ A counteroffer is considered a rejection of the original offer.

Example: B accepts A’s offer to buy the car for Rs. 50,000. The acceptance is valid because it matches the terms of
the offer and is communicated clearly.

Conditions for Valid Acceptance:

● Unconditional: The acceptance must not introduce new terms.

● Communication: Acceptance must be communicated to the offeror.

Q3: Consideration under the Contract Act 1872

Meaning of Consideration:

Consideration refers to something of value (money, goods, services) that is exchanged between the parties in a
contract. It is essential for a contract to be valid. It ensures that both parties are bound by a mutual exchange.

Legal Provisions of Consideration:

1. Must be Present: A contract cannot exist without consideration.

2. Must be Lawful: The consideration must be lawful and not illegal.
3. Must be Real and Not Illusory: The consideration must be something that has value in the eyes of the law.
 4. Past Consideration: Consideration provided before the offer is made cannot be valid unless specifically
stated by the parties.

Example: If A agrees to sell a car to B for Rs. 50,000, the money is the consideration for the sale of the car.

Q4: Performance of Contract under the Contract Act 1872

Meaning of Performance:

Performance of a contract refers to the fulfillment of the contractual obligations by the parties involved. It is the
process where each party does what they have promised in the contract.

Legal Provisions of Performance:

1. Performance by the Promisor: A contract must be performed by the promisor as per the terms.
2. Performance by the Third Party: If a contract specifies that the contract can be performed by a third party,
performance is acceptable.
3. Performance of a Contract According to Terms: A contract must be performed in the manner specified,
within the time frame mentioned.

Who Can Demand Performance?

● The party to whom the promise is made can demand performance.

● If the contract specifies the performance should be done to a third party, the third party can also demand
it.

Example: A promises to deliver goods to B on a certain date. A fulfills the promise by delivering the goods, thus
performing the contract.

Q5: Contract of Agency and Termination under the Contract Act 1872

Creation of Contract of Agency:

A contract of agency arises when one person (the principal) authorizes another person (the agent) to act on their
behalf. It can be created through an agreement, either express or implied.

Legal Provisions:

● Agency by Agreement: An agency can be created by a written or oral agreement between the principal and
agent.
● Authority of Agent: The agent can perform specific acts as agreed with the principal.
 ● Ratification: If an agent performs an act without authority, the principal can later ratify it, making the
contract binding.

Example: A appoints B as his agent to sell his house. B has the authority to act on A’s behalf and sign contracts to sell
the property.

Termination of Agency:

An agency can be terminated in the following ways:

1. Revocation by Principal: The principal can terminate the agency at any time, unless the agency is coupled
with an interest.
2. Renunciation by Agent: The agent can refuse to perform the duties and terminate the agency.
3. Death or Insanity: If either the principal or the agent dies or becomes insane, the agency is automatically
terminated.
4. Performance: Once the agent has fulfilled the purpose of the agency, the contract ends.

Example: If A revokes the authority of B to sell his house, the agency terminates immediately. Similarly, if B sells the
house successfully, the agency ends after the transaction is completed.