Indian Contract Act

THE INDIAN CONTRACT ACT, 1872

Contract – Sec.2(h) – an agreement enforceable by law – give rise to legal obligation. Social obligation, no contract.

Agreement – Sec.2(e) - every promise and set of promises, forming consideration for each other. Proposal – assent thereto – proposal accepted - promise – agreement.

Consensus ad idem : meeting of minds in full and final agreement – agree upon the subject matter of the agreement in same sense and at the same time. No consensus ad idem - no contract.

Example : A offers to sell his old Fiat car to B. B thinks that he is purchasing A’s new Scoda car. There is no consensus ad idem and consequently no contract.

Essential characteristics of a valid contract :

1. Offer and acceptance – two parties, one making the offer and other accepting it – offer must be definite – acceptance must be absolute and unconditional – acceptance must be communicated to the offeror.

2. Intention to create legal relationship – intention of parties to the agreement to create legal relationship must – no such intention, no contract – social or domestic agreements do not contemplate legal relationship, as such no contract.

Balfour v Balfour – husband promises to pay household allowance to wife – separated – wife sues for allowance – domestic agreement – no contract.

V.Rao Vs. A. Rao – old widow asked her niece to move in with her - promised to will some property in exchange – niece moved in and stayed till widow’s death – Held, intention to create a legal relationship – niece entitled to share in property.

Rose & Frank Co. v Crompton Bros. – agency agreement between R and C - clause in agreement stated that agreement not entered into as formal or legal – not subject matter of legal jurisdiction – no intention to create legal relationship - no contract.

3. Lawful consideration - both parties give and get something in return – no consideration, no contract - consideration may be past,...