INDIAN CONTRACT ACT,
1872 (PART 1)
S.Y. B.COM
SEMESTER III
PROF. MS. SHRADDHA VICHARE
(M.COM, SET, NET-JRF)
ESSENTIAL ELEMENTS
OF A CONTRACT
( SECTION 10)
1. PROPOSAL & ACCEPTANCE
• SEC. 2(A)
• “WHEN A PERSON SIGNIFIES TO ANOTHER PERSON HIS ASSENT
WILLINGNESS TO DO OR ABSTAIN FROM DOING ANYTHING, WITH A
VIEW TO OBTAINING THE ASSENT OF THAT PF OTHER TO SUCH ACT
OR ABSTINENCE, HE IS SAID TO MAKE A PROPOSAL. “
• A PROPOSAL WHEN ACCEPTED BECOMES A PROMISE.
• SEC. 2 (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.”
2. LAWFUL CONSIDERATION
• SEC. 2 (D)
• “ WHEN AT THE DESIRE OF A PROMISOR THE PROMISEE OR ANY OTEHR 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 IS CALLED AS ‘CONSIDERATION’ FOR THE PROMISE.
• AN AGREEMENT WITHOUT CONSIDERATION IS VOID.
• AN AGREEMENT IS A CONTRACT, ONLY IF IT IS MADE FOR LAWFUL CONSIDERATION AND
WITH A LAWFUL OBJECT.
• FOR E.G.
A AGREES TO SELL HIS LAPTOP TO B FOR 30000. HERE, A’S PROMISE TO SELL HIS LAPTOP IS
FOR B’S CONSIDERATION TO PAY RS. 30000. AND VICE VERSA.
UNLAWFUL CONSIDERATION
• CONSIDERATION IS UNLAWFUL IF.
1. IT IS FORBIDDEN BY LAW.
2. IS OF SUCH A NATURE THAT IF PERMITTED IT WOULD DEFEAT
THE PROVISIONS OF ANY LAW.
3. IS FRAUDULENT
4. INVOLVES OR IMPLIES INJURY TO THE PERSON OR PROPERTY
OF ANOTHER
5. THE COURT REGARDS IT AS IMMORAL OR OPPOSED TO PUBLIC
POLICY.
3. CAPACITY OF PARTIES TO CONTRACT
• SEC. 11
• PERSON IS COMPETENT TO CONTRACT, WHO IS
1. AGE OF MAJORITY
2. SOUND MIND
3. NOT DISQUALIFIED FROM CONTRACTING BY ANY LAW TO WHICH HE IS
SUBJECT.
4. FREE CONSENT
• SEC. 13
• PARTIES MUST GIVE THEIR FREE CONSENT.
• PARTIES MUST BE AD-IDEM
• BOTH THE PARTIES MUST AGREE UPON THE SAME THING AT THE SAME TIME.
• MERE CONSENT IS NOT ENOUGH.
• IT MUST NOT HAVE BEEN OBTAINED BY
1. COERCION
2. UNDUE INFLUENCE
3. FRAUD
4. MISREPRESENTATION
5. MISTAKE
5. AGREEMENT MUST NOT BE DECLARED TO BE
VOID.
• SEC. 2 (G)
• A VOID AGREEMENT IS NOT ENFORCEABLE BY LAW.
• IT HAS NO LEGAL SANCTITY.
• IT DOES NOT GIVE RISE TO ANY RIGHTS AND OBLIGATIONS.
• THEY ARE OPPOSED TO PUBLIC POLICY.
• FOR E.G. AGREEMENTS IN RESTRAINT OF TRADE ETC.
6. WRITING AND REGISTRATION
• CONTRACT CAN BE EXPRESS OR IMPLIED.
• THE CONTRACT MUST BE IN WRITING AND REGISTERED, IF SO REQUIRED BY ANY
LAW.
• FOR E.G.
1. GIFT, MORTGAGE, LEASE UNDER TRANSFER OF PROPERTY ACT, 1882.
2. MEMORANDUM AND ARTICLES OF ASSOCIATION UNDER COMPANIES ACT
• DOCUMENTS SPECIFIED UNDER SECTION 17 OF INDIAN REGISTRATION ACT, 1908 ARE
REQUIRED TO BE REGISTERED.
ESSENTIALS OF A VALID
OFFER
1. OFFER IS ALWAYS IN THE FORM OF REQUEST
• CANNOT DECTATE TERMS, CONDITIONS
• IT SHOULD BE ALWAYS IN FORM OF REQUEST.
2. LEGAL RELATIONS
• MUST BE CAPABLE OF CREATING OR INTENDING TO CREATE LEGAL RELATIONS
• MUST BE COMMON INTENTION FROM BOTH PARTIES TO ENTER INTO LEGAL RELATIONS.
• PROMISE WITHOUT ANY LEGAL RELATIONS DOES NOT CONSTITUTE A CONTRACT
• FOR E.G.
KALAI HLADAR V. SHEIKH
3. TERMS OF OFFER MUST BE DEFINITE,
UNAMBIGUOUS AND CERTAIN
• IT SHOULD BE DEFINITE.
• IT SHOULD NOT BE VAGUE OR INDEFINITE.
4. THE OFFER MAY BE SPECIFIC OR GENERAL
• GENERAL OFFER IS OPEN TO THE WORLD AT LARGE.
• SPECIFIC OFFER IS MADE TO THE SPECIFIC/ DEFINITE PERSON.
5. AN OFFER CAN BE EXPRESS OR IMPLIED FROM THE
CIRCUMSTANCES
• EXPRESS OFFER – ORAL OR IN WRITING
• IMPLIED OFFER – WHICH IS UNDERSTOOD BECAUSE OF BEHAVIOUR
OF PARTIES.
FOR E.G.
UPTON RURAL DISTRICT COUNCIL V. POWELL
6. AN OFFER MUST BE COMMUNICATED
• COMMUNICATION MUST BE THERE IN BETWEEN THE PROPOSER
AND ACCEPTOR.
• NO COMMUNICATION – NO OFFER
FOR E.G.
LALMAN SHUKLA V. GAURI DUTT
7. AN OFFER MAY BE CONDITIONAL
• IF OFFER IS CONDITIONAL, THEN CONDITIONS MUST ALSO BE
COMMUNICATED.
8. THE OFFER IS JUST READY TO BE ACCEPTED BY THE
OTHER
• WHEN OFFER IS ACCEPTED, IT BECOMES A PROMISE.
• THEREFORE, THE PERSON MAKING THE OFFER IS BOUND BY THAT
OFFER AS SOON AS IT IS ACCEPTED BY THE OTHER.
• HE DOES NOT RESERVE TO DO ANY FURTHER ACT.
