Contract Law 1872

Let’s break down the Indian Contract Act of 1872 and its key components:

What is a Contract?

Section 2(h) of the Indian Contract Act defines a contract as “an agreement enforceable by law.” This means a contract is a legally binding agreement between two or more parties.

Essential Elements of a Valid Contract:

1. Offer (Proposal): Section 2(a) defines a proposal as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”

2. Acceptance: Section 2(b) states, “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.” Acceptance must be absolute and unqualified, communicated to the offeror.

3. Agreement: An agreement arises when a proposal is accepted. (Offer + Acceptance = Agreement).

4. Consideration: Section 2(d) defines consideration as “when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.” It is the “price” for the promise. It must be lawful.

5. Capacity to Contract: Section 11 specifies that every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. Minors, persons of unsound mind, and persons disqualified by law cannot enter into valid contracts.

6. Free Consent: Section 14 defines free consent as consent said to be free when it is not caused by:

   • Coercion (Section 15): Compelling a person to enter into a contract by use of force or threats.
   • Undue Influence (Section 16): Where one party is in a dominant position and uses that position to obtain an unfair advantage.
   • Fraud (Section 17): Intentional misrepresentation of facts.
   • Misrepresentation (Section 18): Innocent misstatement of facts.
   • Mistake (Sections 20, 21, 22): Erroneous belief about a fact essential to the agreement.

7. Lawful Object and Consideration: Section 23 states that the consideration or object of an agreement is lawful, unless:

   • It is forbidden by law.
   • It is of such a nature that, if permitted, it would defeat the provisions of any law.
   • It is fraudulent.
   • It involves or implies injury to the person or property of another.
   • The court regards it as immoral, or opposed to public policy.

8. Certainty of Meaning: Section 29 states agreements, the meaning of which is not certain, or capable of being made certain, are void.

9. Possibility of Performance: Section 56 states that agreements to do impossible acts are void.

10. Not Expressly Declared Void: The agreement must not be one that is expressly declared void by the Contract Act itself (e.g., agreements in restraint of marriage, trade, or legal proceedings under certain circumstances).

Types of Contracts:

• Valid Contract: Meets all essential elements.
• Void Agreement: Not enforceable by law from the beginning (e.g., an agreement with a minor).
• Voidable Contract: Enforceable at the option of one party but not at the option of the other (e.g., a contract induced by coercion).
• Illegal Agreement: Unlawful and void (e.g., an agreement to commit a crime).
• Unenforceable Contract: Valid but cannot be enforced in court due to a technical defect (e.g., lack of proper documentation).
• Express Contract: Terms are explicitly stated (oral or written).
• Implied Contract: Terms are inferred from the conduct of the parties.
• Executed Contract: Both parties have performed their obligations.
• Executory Contract: Obligations are yet to be performed.

Privity of Contract:

Only parties to a contract can sue or be sued on it. A third party (stranger to the contract) cannot enforce the contract, even if it benefits them. However, there are exceptions to this rule.

Performance of Contract:

Sections 37-67 deal with the performance of contracts, including who must perform, time and place of performance, and performance of reciprocal promises.

Remedies for Breach of Contract:

• Rescission: Cancellation of the contract.
• Damages: Monetary compensation for losses suffered.
• Specific Performance: Court order requiring the breaching party to perform their obligations.
• Injunction: Court order restraining a party from doing something.
• Quantum Meruit: Payment for work done when a contract is discharged by breach.

Quasi-Contracts (Certain Relations Resembling Those Created by Contract):

Sections 68-72 deal with quasi-contracts. These are not actual contracts but obligations imposed by law to prevent unjust enrichment. Examples:

• Claim for necessaries supplied to a person incapable of contracting.
• Obligation of a person enjoying benefit of non-gratuitous act.
• Responsibility of finder of goods.
• Liability of person to whom money is paid or thing delivered by mistake or under coercion.

This provides a comprehensive overview of the Indian Contract Act, 1872. Remember that this is a complex area of law, and it’s always advisable to consult with a legal professional for specific legal advice.