LAB ASSIGNMENT

Indian Contract Law

Karan Kapoor
19PGD1M58
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What is Contract?
According to Section 2 (h) of the Indian Contact Act, 1872, “A contract is “an agreement enforceable
by law”.
A contract therefore, is an agreement the objective of which is to create a legal obligation i.e., a duty
enforceable by law
From the above definition, we find that a contract essentially consists of two elements:
(1) An agreement and
(2) Legal obligation i.e., a duty enforceable by
law As per section 2 (e)
“Every promise and every set of promises, forming the consideration for each other, is an agreement."
Thus, it is clear from this definition that a 'promise' is an agreement.
An agreement is the sum of 'offer' and 'acceptance'.

Essentials of a Valid Contract

According to Section 10, “All agreements are contracts if they are made by free consent of parties,
competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly
declared to be void”.
The essential elements of a valid contract are:
At least two person: There must be two or more persons to make an agreement because one person cannot
enter into an agreement with himself.

Offer and acceptance: The first step towards creating a contract is that one person shall signify or make
proposal or offer to the other, with a view to obtaining the acceptance of that another person to whom the
offer is made. A proposal when accepted becomes a promise.

Intention to create legal relationship: When the two parties enter into an agreement, there must be an
intention by both parties to legally bind the other as a result of such agreement. Thus, agreements of social
or household nature are not contracts.

Lawful object & Consideration: Consideration is one of the most important part of a valid contract.
Subject to a certain exception, an agreement made without consideration is void. When a party to an
agreement promises to do something. He must get “something” in return for it. This “something” in return
for something is known as “consideration”. Consideration may be an act or abstinence or promise. An
agreement is a contract only if it is made for a lawful consideration and with a lawful object. The
consideration or object of an agreement is unlawful if-
1. it is forbidden by law; or
2. is of such a nature that, if permitted it would defeat the provisions of any law; or
3. is fraudulent; or
4. involves or implies injury to the person or property of another; or
5. is immoral; or is opposed to public policy.

Capacity of parties (competence): The parties to the agreement must be capable of entering into a valid
contract. According to Section 11, every person is competent to contract if he or she,
1. is of the age of majority;
2. is of sound mind; and
3. is not disqualified from contracting by any law.

Free consent: To constitute a valid contract the parties must give their free consent. 'Consent' means that
the parties must have agreed upon the same thing in the same sense (sec. 13).
Mere consent is not enough. It should not be obtained by
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1. Misrepresentation,
2. Fraud,
3. Coercion,
4. Undue influence or
5. Mistake.

Writing and registration: A contract may be oral or in writing. If, however, the law requires for a
particular contract, it should comply with all the legal formalities as to writing, registration and attestation.

Certainty: Section 29 of the contract Act provides that "Agreements, the meaning of which is not certain
or capable of being made certain, are void." The terms of contract should be clear.

Possibility of performance: Contracts based on impossibility of performance are not valid. Section 56 lays
down that "An agreement to do an act impossible in itself is void".

Not expressly declared void: The agreement must not have been expressly declared to be void under the
Act.

Types of Contracts

1. Voidable Contract: “An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract”.
A contract is voidable when one of the parties to the contract has not exercised his free consent. One of the
essential elements of a formation of a contract for example, free consent, is absent. All voidable contracts
are those which are induced by coercion fraud or misrepresentation.

2. Void Contract: A contract which ceases to be enforceable by law becomes void, when it ceases to be
enforceable. A void contract is a worthless from its beginning. No rights are formed under a void Contract.
A contract may also be originally valid when entered into but subsequently due to change in the events or
circumstances, it may become void.

3. Unenforceable Contract: A contract which cannot be enforced is a valid contract in law, but is incapable
of proof, and therefore cannot be enforced in the Court of Law

4. Implied Contract: The terms of a contract are inferred from the conduct or dealing between the parties.
When the proposal or acceptance of any promise is made otherwise than in words, the promise is said to be
implied. Such an implied promise leads to an implied contract. For example, A boards a bus. It is implied
from his conduct that A has entered onto an implied promise to purchase a ticket.

5. Quasi-Contract: ‘Quasi contract’ is not a ‘contract’. It is an obligation which law created in absence of
any agreement. Sections 68 to 72 of the Indian Contract Act, 1872 deal with “certain relations resembling
those created by contract”. There are certain relations resembling those created by contract.

Acceptance of an offer
The acceptance of an offer is the second and very important step towards forming contract. A contract is
formed when an offer is accepted. The offeree's willingness to be tied by the terms of the offer is known as
“acceptance”. Acceptance converts offer into a promise. Acceptance is essential to convert offer into an
agreement.
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• Acceptance must be absolute and unconditional

• Acceptance must be communicated: Communication need not be in writing or by word of mouth.
It may also be implied from the conduct of the acceptor. Mere desire to accept a proposal is not
acceptance.
• Acceptance must be in the mode prescribed: If the offeror prescribes the mode or manner of
acceptance, the acceptance must be made in accordance with the mode prescribed.
• Acceptance must be given within a reasonable time: If the offeror has prescribed a time within
which offer must be accepted, it must be accepted within the prescribed time. If no time is prescribed
for acceptance, the offer must be accepted within a reasonable time.
• Acceptance must be given only by the offeree
• Acceptance must be after an offer is made
• Implied acceptance / acceptance by conduct: Acceptance by conduct means entering into an agreement
by performing certain actions rather than by signing an agreement or orally agreeing to be bound

Discharge of a Contract
A contract may be discharged in six ways as discussed hereunder.
(a) Discharge by performance: Discharge by performance will take place when there is (i)
Actual performance or (ii) Attempted performance
Actual performance / discharge takes place when parties to the contract fulfill their obligations within time
and in the manner prescribed. Here each party has done what he has to do under the contract. In attempted
performance the promisor offers to perform his part but the promisee refuses to accept his part.

(b) Discharge by mutual agreement: Discharge also takes place where there is substitution [novation]
rescission, alteration and remission. In this case the terms of the agreement are altered so the old contract
need not be performed.

(c) Discharge by impossibility of performance: A situation of impossibility may have existed at the time
of entering into the contract or it may have transpired subsequently (also known as supervening
impossibility)
Impossibility can arise when
(i) There is an unforeseen change in law.
(ii) Destruction of subject matter.
(iii) Non-existence or non-occurrence of a state of thing to facilitate happening of the agreement.
(iv) Personal incapacity of the promisor.
(v) Declaration of war

(d) Discharge by lapse of time: Performance of contract has to be done within certain prescribed time. In
other words it should be performed before it is barred by law of limitation. In such a case there was no
remedy for the promisee. For example, where then the debt is barred by law of limitation.

(e) Discharge by operation of law: Where the promisor dies or goes insolvent there is a discharge by
operation of law.

(f) Discharge by breach of contract: Where there is a default by one party from performing his part of
contract on due date then there is breach of contract.