Section 2 (Interpretation-clause) - In this Act the following words and expressions are used
in the following senses, unless a contrary intention appears from the context:—
(a) 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;
(b) 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;
(c) The person making the proposal is called the "promisor", and the person accepting
the proposal is called the "promisee";
(d) 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;
(e) Every promise and every set of promises, forming the consideration for each other, is
an agreement;
(f) Promises which form the consideration or part of the consideration for each other are called
reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) 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;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
Section 3 (Communication, acceptance and revocation of proposals) – The communication of a
proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,
As against the proposer, when it is put in a course of transmission to him, so as to be out of the
power of the acceptor;
As against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,
As against the person who makes it, when it is put into a course of transmission to the person to
whom it is made, so as to be out of the power of the person who makes it;
As against the person to whom it is made, when it comes to his knowledge.
Section 8 (Acceptance by performing conditions, or receiving consideration) - Performance of the
conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may
be offered with a proposal, is an acceptance of the proposal.
Section 10 (What agreements are contracts)– All agreements are contracts if they are made by the
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.
Nothing herein contained shall affect any law in force in 1 India and not hereby expressly repealed by
which any contract is required to be made in writing2 or in the presence of witnesses, or any law
relating to the registration of documents.
Section 12 (What is a sound mind for the purposes of contracting) – A person is said to be of sound
mind for the purpose of making a contract, if, at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract
when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract
when he is of unsound mind.
Section 17 (“Fraud” defined) – “Fraud” means and includes any of the following acts committed by a
party to a contract, or with his connivance, or by his agent1 , with intent to deceive another party
thereto of his agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Section 19 (Voidability of agreements without free consent) – When consent to an agreement is
caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of
the party whose consent was so caused.
A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit,
insist that the contract shall be performed, and that he shall be put in the position in which he would
have been if the representations made had been true.
Exception.—If such consent was caused by misrepresentation or by silence, fraudulent within the
meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary diligence.
Section 23 (What considerations and objects are lawful, and what not) – The consideration or
object of an agreement is lawful, unless—
It is forbidden by law1 ; or Is of such a nature that, if permitted, it would defeat the provisions of any
law; or
Is fraudulent ; or Involves or implies, injury to the person or property of another; or The Court
regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is void.
Section 24 (Agreement void, if considerations and objects unlawful in part )
– If any part of a
single consideration for one or more objects, or any one or any part of any one of
several considerations for a single object, is unlawful, the agreement is void.
Section 124 (Contract of indemnity” defined) – A contract by which one party promises to save the
other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other
person, is called a contract of indemnity.
Section 127 (Consideration for guarantee) – Anything done, or any promise made, for the benefit of
the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.
