Indian Contracts Act, 1872: Elementary knowledge of essentials of a valid contract,
Performance of Contract, Mode of Discharge of Contract, Remedies for breach of
contract, Indemnity and Guarantee, Bailment and Pledge; Contract of Agency:
Definition of agent and agency, Creation of agency, Duties and rights of agent and
principal, Principal's duties towards agents and third parties; Termination of agency, E-
contract.
The Indian Contracts Act, 1872, is a foundational legal framework governing contractual
obligations in India. Here’s a breakdown of the key concepts:
Essentials of a Valid Contract:
For a contract to be valid under the Act, the following essentials must be met:
1. Offer and Acceptance: One party must make an offer, and the other must accept it.
2. Intention to Create Legal Relations: Both parties must intend that the agreement
should result in legal consequences.
3. Lawful Consideration: There must be something of value exchanged between the
parties.
4. Capacity of Parties: The parties must be competent to contract, i.e., they must be
of sound mind, of the age of majority, and not disqualified by law.
5. Free Consent: Consent of the parties must be free from coercion, undue influence,
fraud, misrepresentation, and mistake.
6. Lawful Object: The object of the contract must not be illegal or immoral.
7. Certainty and Possibility of Performance: The terms of the contract must be clear,
and the contract must be capable of being performed.
8. Not Expressly Declared Void: The contract must not be one that the law has
expressly declared as void.
Performance of Contract:
Performance of a contract refers to the fulfillment of the terms agreed upon by the parties. It
may involve:
• Actual Performance: When the parties to the contract do what they had agreed to
do.
• Attempted Performance (Tender): When a party offers to perform their part but is
prevented by the other party.
Mode of Discharge of Contract:
A contract can be discharged in the following ways:
1. By Performance: When the contract is performed, it is discharged.
2. By Agreement or Consent: Parties may mutually agree to terminate the contract.
3. By Impossibility of Performance: If performance becomes impossible due to
unforeseen events, the contract is discharged.
4. By Lapse of Time: If a contract is not enforced within the time prescribed by law, it
is discharged.
5. By Operation of Law: E.g., bankruptcy or death of a party may discharge the
contract.
6. By Breach: When one party fails to perform their obligations, the contract is
discharged.
Remedies for Breach of Contract:
1. Damages: Compensation for loss or damage caused by the breach.
2. Specific Performance: A court order directing the defaulting party to fulfill their
obligations under the contract.
3. Injunction: A court order restraining a party from doing something that violates the
contract.
4. Rescission: The contract is canceled, and parties are restored to their original
positions.
5. Quantum Meruit: Compensation for the value of work done if the contract is
terminated.
Indemnity and Guarantee:
1. Indemnity: A contract by which one party promises to save the other from loss
caused to them by the conduct of the promisor or any other person (Section 124).
2. Guarantee: A contract to perform the promise, or discharge the liability, of a third
person in case of their default (Section 126). There are three parties in a guarantee: the
creditor, the principal debtor, and the surety.
Bailment and Pledge:
1. Bailment: The delivery of goods by one person to another for a specific purpose,
upon a contract that the goods shall be returned or otherwise disposed of after the purpose
is accomplished (Section 148).
2. Pledge: A type of bailment where goods are delivered as security for the payment
of a debt or performance of a promise (Section 172).
Contract of Agency:
1. Definition of Agent and Agency: An agent is a person employed to do any act for
another or represent another in dealings with third parties. The person represented is called
the principal.
2. Creation of Agency: An agency can be created by express or implied agreement,
ratification, necessity, or estoppel.
3. Duties and Rights of Agent and Principal:
• The agent must act within the authority given by the principal and with due
diligence.
• The principal must indemnify the agent against lawful acts and pay the agent’s
remuneration.
4. Principal’s Duties towards Agents and Third Parties: The principal is bound by the
acts of the agent if they act within their authority. If the agent exceeds authority, the
principal is not liable unless they ratify the act.
5. Termination of Agency: Agency can be terminated by the act of the parties (e.g.,
mutual agreement, revocation by the principal, or renunciation by the agent) or by operation
of law (e.g., death, insanity, insolvency).
E-Contracts:
E-contracts are contracts formed electronically, often involving clickwrap, browsewrap, or
shrinkwrap agreements. They are governed by the same principles of contract law but also
include specific rules under the Information Technology Act, 2000. E-contracts must meet
the same essentials of a valid contract as traditional contracts, including offer, acceptance,
and consideration.
These are the foundational principles of contract law under the Indian Contracts Act, 1872
