Contract Act

The Indian Contract Act-1872

The Indian Contract Act, 1872 lays down the law relating to contracts. It does not lay down a number of enforceable rights and duties, but lays down a number of limiting principles subject to which the parties may create rights and duties for themselves.

Definition:

Contract: Sec. 2 (h) ‘An agreement enforceable by law is a contract’. To make a contract, there must be (I) an agreement and (ii) the agreement should be enforceable by law.

Agreement: Agreement is defined as ‘every promise and every set of promises forming consideration for each other ‘. A promise is defined as “an accepted proposal.” Thus, every agreement in its ultimate analysis is made of a proposal from one side and its acceptance by the other.

To become a contract an agreement must be enforceable by law. Sec. 10 of the Act lays down the condition of enforceability. An agreement becomes enforceable only when it is coupled with obligation. An obligation is the legal bond, which binds the parties to a contract. The obligations springing from agreements should be legal obligations and not moral, social or religious obligations.

Essentials of a Valid Contract:

All contracts are agreements but all agreements need not be contracts. The agreements that create legal obligations only are contracts. The validity of an enforceable agreement depends upon whether the agreement satisfies the essential requirements laid down in the Act. Section 10 lays down that ‘all the agreements are contracts if they are made by the free consent of the parties competent to contract for a lawful object and are not hereby expressly declared to be void’.

The following are the essentials:

a) Agreement : An agreement which is preliminary to every contract is the outcome of offer and acceptance. An offer to do or not to do a particular act is made by one party and is accepted by the other to whom the offer is made. Then we say that there is a meeting of the minds of the parties. Such a position is...