Indian Contract act, 1872
The law of Contract is applicable not only to business but
also to all day to day personal dealings.
For Example
When you ride a bus, you enter into a contract with
transport company.
When you purchase a movie ticket, you enter into a
contract with the theatre owner.
When you purchase a newspaper, you enter into a contract
with the vendor of newspaper.
When you purchase bread and butter, you enter into a
contract with the vendor of bread and butter.
Indian Contract act, 1872
According to Section 2(h) of the Indian Contract 1872, An
Agreement enforceable by law is a contract.
Contract must have the following two elements.
A. An agreement, and
B. Enforceability of an agreement
Contract = An agreement + Enforceability of an agreement
What is Agreement?
Every promise and every set of promises forming the
consideration for each other is an agreement.
Agreement = Offer/Proposal + Acceptance of
Offer/Proposal
What is Promise?
A proposal when accepted becomes a promise.
Indian Contract act, 1872
X offers to sell his car for Rs 1,00,000 to Y. Y accepts
this offer. This offer after acceptance becomes
promise and this promise is treated as an agreement
between X and Y.
An agreement is said to be enforceable by law if it
creates some legal obligations. The parties to an
agreement must be bound to perform their promise
and in case of default by either of them, must intend
to sue.
In case of social or domestic arrangements, the usual
presumption is that the parties do not intend to create
legal relations.
In commercial or business agreements the usual
presumption is that the parties intend to create legal
relations.
Indian Contract act, 1872
Basis of distinction
An agreement
1. What constitute?
Offer
and
its Agreement
and
its
acceptance constitute enforceability
an agreement
constitute a contract
2. Creation
obligation
of
A Contract
Legal May or may not Necessarily creates a
create
a
legal legal obligation
obligation
3. One in other
Every agreement
not a contract
is Every contract
agreement
is
4. Binding
Not binding on the Legal binding on the
concerned parties
concerned parties
Indian Contract act, 1872
Contracts on the Basis of Creation
A. Express Contract: Express Contract is one which is made
by words, Spoken or written.
Eg: X says to Y Will you buy my car for Rs 1,00,000? Y
says to X, I am ready to buy your car for Rs 1,00,000.
B. Implied Contract: An implied Contract is one which is
made otherwise than by words spoken or written. It is
inferred from the conduct of
a person or the
circumstances of the particular case.
Eg: X, coolie in uniform picks up the baggage of Y to
carry it from railway platform to the taxi without being
asked by Y to do so and Y allows it.
Indian Contract act, 1872
Contracts on the Basis of Execution
A. Executed Contract: It is a contract where both the parties
to the contract have fulfilled their respective obligations
under the contract.
Eg: X offers Y to sell his car for Rs 1,00,000. Y accepts his
offer. X deliver the car to Y and Y pays Rs 1,00,000 to X.
B. Executory Contract: It is a contract where both the
parties to the contract have still to perform their
respective obligations.
Eg: X offers Y to sell his car for Rs 1,00,000. Y accepts his
offer. If the car has not yet been delivered by X and the
price has not been paid by Y.
C. Partly Executed and Partly Executory Contract: It is a
contract where one of the parties to the contract has
fulfilled their obligations and the other party has still to
perform his obligation.
Eg: X agrees to give coaching classes to Y, Y agrees to
Indian Contract act, 1872
Contracts on the Basis of Enforceability
A. Valid Contract: A contract which satisfies all the
conditions prescribed by law.
* Void Agreement: An agreement not enforceable by law is
said to be void. Such agreements are void-ab-initio which
means that they are unenforceable right from the time
they are made.
Eg: X agrees B in consideration of Rs 500 to draw two
parallel lines in such a way as to cross each other. The
agreement is impossible to perform and therefore , void.
B. Void Contract: A contract may be enforceable at the time
when it was made but later on it may become void and
unenforceable due to some reasons.
Eg: A and B contract to marry each other. Before the
time fixed for the marriage, A goes mad.
Indian Contract act, 1872
Contracts on the Basis of Enforceability
C.Voidable Contract: An agreement which is enforceable by
law at the option of one or more of the parties thereon but
not at the option of others, is a voidable contract. It
becomes unenforceable only when the aggrieved party
chooses to rescind it. It continues to be valid till it is
repudiated.
Eg: X threatens to kill Y if he does not sell his house for Rs
1,00,000 X. Y sells his house to X and receives payment. Here,
Ys consent has been obtained by coercion and hence this
contract is voidable at the option of Y, the aggrieved party. If Y
decides to avoid the contract, he will have to return the money
received from X. If Y does not exercise the option to repudiate
the contract within a reasonable time and in meantime Z
purchases that house from X in good faith, Y cannot repudiate
the contract.
C.Illegal Agreement: An illegal agreement is one, the object
of which is unlawful.
