A Project

On
“ELEMENTS BINDING THE CONTRACT”

[submitted as a partial fulfilment of the requirements for B.A. L.L. B (Hons.) 5-

year integrated course]
Session – 2022-2023
Submitted On: 7 January, 2023

Submitted by Submitted to:

Miss. Naina Sharma Dr. Gunjan Sharma
Roll No.-62 [Faculty]
Semester: III A

University Five Year Law College

University of Rajasthan
Jaipur

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 DECLARATION
I, NAINA SHARMA, hereby declare this project titled “Elements binding the contract” is
based on the original research work carried out by me under the guidance and supervision of
DR. GUNJAN SHARMA
The interpretations put forth are based on my reading and understanding of the original texts.
The books, articles and websites etc. which have been relied upon by me have been duly
acknowledged at the respective places in the text.
For the present document which I am submitting to the university, no degree or diploma has
been conferred on me before, either in this or any other university.

Date: 7 January 2023

MISS.NAINA SHARMA
Roll No: 62
Semester III (A)

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 Acknowledgement
I have written this project under the supervision of Dr. Gunjan Sharma, Faculty, University
Five Year Law College, University of Rajasthan, Jaipur. His valuable suggestions herein
have not only helped me immensely in making this work easier but also in developing an
analytical approach in this work.
I found no words to express my sense of gratitude for Director Dr. Akhil Kumar, Deputy
Director Mr. Ghanshyam Bher and Mr. Sandeep Singh for constant encouragement at every
step.
I am extremely grateful to librarian and library staff of the college for the support and
cooperation extended by them from time to time.

Miss. Naina Sharma

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 CERTIFICATE

Dr. Gunjan Sharma Date: 7 January,2023

Faculty
University Five Year Law College
University Of Rajasthan, Jaipur

This is to certify that Miss. Naina Sharma of III semester, section A of University Five Year
Law College, University of Rajasthan, Jaipur has carried out the project entitled Elements
binding the contract under my supervision and guidance. it is an investigation report of a
minor project. The students have completed research work in my stipulated time and
according to norms prescribed for the purpose.

Supervisor

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 Table of Contents

SR NO. PARTICUAR PAGE NO.

1 Declaration 2

2 Acknowledgement 3

3 Certificate 4

4 Table of Contents 5

5 Abstract 6

6 Introduction 7

7 Chapter 1- History of Indian 8

Contract Act
8 Chapter 2- elements binding 11
Contract
9 Conclusion 14

10 Bibliography 15

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 Abstract

In This project titled “Elements binding the Contract “we have discussed from the meaning of
Contract to its history and essentials. The project overall is divided into 2 parts apart from
introduction and conclusion, the first chapter focuses on history of Contract Act and
significance, second chapter focuses on essentials and elements necessary for binding of
contract. Overall, we try to understand from the very basic. At last, the conclusion will
thoroughly be based upon my understanding and research and my opinion will be mentioned
at the end.

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 Introduction
Many of us gets confused regarding proposal, offer, promise and contract and people
especially from non-legal background are more prone to it.
In our daily life we do not even realize we are entering into a contract, from buying a
subscription of an app to buying ticket for watching movies and even while downloading

various apps we click on accepting terms and conditions .

According to Section 2(A) of the Indian Contracts Act, 1872, 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 proposal1
Proposal and offer are synonymous terms
According to Section 2(B) of the Indian Contract Act, 1872, when the person to whom the
proposal is made (that is the promisee and the one who made the promise is promisor)
signifies his assent that means, the proposal is said to be accepted. A proposal, when
accepted, becomes a promise.2

Offer is an open invitation by the promisor for the acceptance of the terms and conditions of
the undertaking, which when accepted by the promisee becomes binding on both parties and
the proposal becomes a promise. Hence the difference between an offer (proposal) and a
promise lies in acceptance of the offer (proposal)

An offer is a proposal to enter into an agreement and must express the intent of the person
making the offer to form a contract, must contain the essential terms including the price and
subject matter of the contract and must be communicated by the person making the offer. A
legally valid acceptance of the offer will create a binding contract.
The contract is oral or written agreements between two or more parties.
Contracts govern many aspects of our day-to-day lives—they are one of the fundamental
ways that society is ordered. You likely engage in dozens of activities governed by contract
every day, usually without considering the legal relationships you are entering into and
engaging in.
To understand the importance of contract in day-to-day life let’s consider this example
The first thing we did when we woke up is to check our phones and respond to emails. We all
have a contract with our phone company—in consideration for us paying a certain fee every
month, they provided us with a phone, as well as with access to their cell towers. We
accepted this offer when we signed the phone contract and began using their service.

1
Legalpathshala.com, Offer or Proposal under Indian Contract Act, 1872 - Legal PaathShala, last visited on 31
December,2022

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2Kanoonsangrah.com, Offer or Proposal ( Law Of Contract) - Kanoon Sangrah, last visited on 31
December,2022

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 Chapter- 1
History of Indian Contract Act

The Indian Contract Act codifies the way we enter into a contract, execute a contract and
implement provisions of a contract and effects of breach of a contract.
There are specific areas which deal with property, movable gods and specific performance
such as the Transfer of Property Act, The Sale of Goods Act and The Specific Relief Act.
Some of these acts, were originally a part of the Indian Contract Act enacted in 1872 but were
later codified as separate laws. Moreover, the Act is not retrospective in nature. Hence a
contract entered into prior to 1st September 1872, even though to be performed after passing
of this Act is not hit by this Act.
We will study the history by dividing it in four parts namely;
1)Vedic and medieval Period
2) Mahomedan Period

3)Hindu Law 4)British

Regime

1) Vedic and Medieval Period: During the whole Vedic and Medieval periods, the history
of humans in India, there was no general code covering commercial transactions of money.
Principles were derived from various references. The origin of contract law and the concept of
contractual relations originated in the Vedic period itself which was led down in the studies of
smritis as discussed in the Manu smriti, the first and the essential requirement for a process of a
valid contract to start is the competence of the parties who are willing to enter into a contract.
This pattern laid down for competence resembles the provisions of Section 11 of the
Indian Contract Act, 1872 namely, dependents, minors, sanyasis, persons without
limbs, those addicted to vices were incompetent to enter into a valid contract. The
Narad Smriti describes competent persons into three; the king, the Vedic teacher, and
the head of the household. 3Also, during the region of Chandragupta, commercial
transactions have existed in the form of “bilateral transactions” between two parties.
The essential ingredients of these businesses were free consent and agreed upon the
same thing in the same sense that is agreed on all the terms and conditions involved in
the contract. Also, the context of void relations was there.4

3
Legalkatta.in, https://www.legalkatta.in/history-of-the-indian-contract-act-1872, last visited on 1 January, 2023
4Vedantu.com, https://www.vedantu.com/commerce/indian-contract-act-1872, last visited on 31 December,
2022

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2) Mahomedan Period: During the Mahomedan period in India, all matters relating to the
contract were governed under the Mohammedan Law of Contract.
The valid contract requires that there should be at least two parties, one party should
make an offer and the other party accept it, the minds of both must agree upon the same
thing and in the same sense that is there in India, during the British administration, the
two widespread religions having separate personal laws were Hindus and Muslims and
each had a separate idea as to what composes a contractual agreement and when shall
breach of contract takes place, and what were the assents.
Mahomedans supported Islamic laws which are considered as the holy origin and are
believed as the revelations of the god/Allah. According to Islamic law, every aspect of
their civil law revolves around the contract, like their marriage contract, or their contract
for the inheritance of property. The source of Islamic contract law is Surah Al-Maidah,
Ayah. The unlawful transactions were considered null and void from the beginning under
Muslim laws. These types of transactions were divided into three categories
A) Riba Al Fadl
B) Riba Al N’asia
C) Riba Al Jahilya.5

3) Hindu Law: The Jurisprudential aspect of Hindu law is fundamentally different from
that of English law's jurisprudence. Hindu law is the result of the compilation of numerous
customs and works of Smriti karas, who interpreted and analysed Vedas to develop the various
aspect of Hindu law. The Hindu law dealt with contract law through titles. Manu smriti in
regarding the contract law dealt with the incompetence to enter into a contract. It laid down the
principle which is also followed in the Indian Contract Act, states that a contract entered by a
minor, or intoxicated person or an old man or the cripple is not a valid contract cripple is not a
valid contract.
Regarding the contract by a minor, under Narada Smriti, an infant is considered to be
someone who is between in the stage of an embryo to up to 8 years. After that, from
8 years to 16 years the child is considered as boyhood and after 16 years the person is
competent to enter into a contract.6
This leads to the fundamental aspect of the contract which is the same for both the
Muslim law and Hindu law and the same principle is there in the contract act is that
when any agreement is entered into which is contrary to the law then it shall have no
legal force.

4) British Regime: Britishers came to India around 1600 and they started governing India
through the medium of charters and different regulations. By the Regulating Act of 1773, the
Supreme Court of Judicature was founded in Calcutta replacing the mayor’s

5
Lawteachernet.com, https://www.lawteacher.net/free-law-essays/contract-law/history-of-the-indian-contract-
act-1872-contract-law-essay.php, last visited on 31 December 2022
6 Legalserviceindia.com, https://legalserviceindia.com/legal/article-7749-historical-background-of-indian-

contract-act 1872.html#:~:text=The%20Indian%20Contract%20Act%20as,%2C%20Agency%2C%20Partnership
%20and%2 0bailment, last visited on 1 January, 2023

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court and it served as the highest court of British India from 1774 to 1862 till the time
the High Court of Calcutta was established under the Indian High Courts Act. British
Regime played an important and most crucial role in development of Contract Act
and with time a series of these Contracts was set up.

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 Chapter- 2
Contract and Elements Binding Contract

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as
“An agreement enforceable by law”. A contract, therefore, is an agreement the object of
which is to create a legal obligation i.e., a duty enforceable by law.7

Contract = Agreement + Enforceability

Elements of a Binding Contract

The essential elements binding contract are:

(a) Proposal and acceptance

(b) Consideration

(c) Capacity of parties to contract competent parties

(d) The agreement should not be expressly declared void

(e) Consent

1) Proposal and acceptance: As per section 2(a) of the Indian Contract Act the
meaning of the term offer or proposal. According to the Section an offer or proposal is said to be
made by a person who signifies to the other person his willingness to do or abstain from doing
an act with a view to obtain the assent of the other person.
Section 2(b) of the Indian Contract Act talks about “acceptance”. According to the
Section, when the person to whom an offer is made gives, his assent that means is said
to have accepted the offer.

In the case of Lalman Shukla v Gauri Dutt, the defendant’s boy went missing,
accordingly, his servant-Plaintiff was sent to search for the boy, in the meantime a
missing poster was released by the defendant, promising to pay a certain sum, to the
person who finds the boy. The servant, unaware of such an offer succeeded to find the

7
Indiankanoon.com, https://indiankanoon.org/doc/171398/, last visited on 1 January, 2023

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 boy. Once he discovered that such an offer existed, he asked for the consideration, but
the same was denied. The court ruled in favour of the Defendant, by holding that
Plaintiff was ignorant of offer and thus the performance of the promise does not
amount to acceptance.8

2) Consideration: Consideration essentially means ‘quid pro quo’ which means

something done in the return of the other. It is the compensation for the act or omission
committed by a person for the fulfilment of the terms of the contract.9

The consideration and object of agreement should be lawful for it to be valid.

Illustration: Assume Mr. X sells a property to Mr. Y for Rs 100000. Here X’s promise
to sell his property and Y’s consideration is to pay him the stipulated sum of Rs
100000. Conversely, it is Y’s promise to pay the sum and X’s consideration to sell the
property to Y. The promise for a promise in return is consideration.

3) Capacity of parties to contract competent parties: Section 11 of Indian

contract act lays down the criteria for competency to contract. To enter into a valid contract, the
parties entering into a contract should have the capacity to enter into a contract.10

Illustration: A and B enter into a contract both are adult, the consideration is lawful
and consent is free, the agreement is valid.

4) Consent: section 13 of the Indian Contract Act defines the term consent as the
agreement of the parties to the contract upon the same thing in the same sense. For the
formation of a valid contract, it is essential that they should have “consensus ad idem” i.e., they
should agree to the same thing in the same sense11.

Illustration: A agrees to sell his house to B. ‘A’ owns three houses and wants to sell
his house in Haridwar. ‘B’ thinks he is buying his Delhi house. Here ‘A’ and ‘B’ have
not agreed upon the same thing in the same sense.

A contracted with B to purchase rice. Now A wanted a special type of rice, however,
B thought of it to be normal rice. In this case, although there is a valid acceptance
but

8
Blogipleader.com, https://blog.ipleaders.in/essentials-of-a-valid-contract/, last visited on 1 January, 2023
9 Blogipleader.com, https://blog.ipleaders.in/essentials-of-a-valid-contract/, last visited on 1 January, 2023
10 Blogipleader.com, https://blog.ipleaders.in/essentials-of-a-valid-contract/, last visited on 1 January, 2023
11 Blogipleader.com, https://blog.ipleaders.in/essentials-of-a-valid-contract/, last visited on 1 January, 2023

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 there lacks meeting of minds between the parties; meeting of minds concerning the
type or quality of rice.

The consent must also be free and not because of

 Undue influence

 Fraud

 Misrepresentation

 Mistake

 Coercion

5) The agreement should not be expressly declared void: The agreement

should not be expressly declared void: The agreement which is entered into by the parties
should not be expressly declared as void or illegal by any law in force12.

Illustration: A promises to pay B Rs 1000 for supply of drugs, the agreement is void.
 Agreement in restraint of Marriage

 Agreement in restraint of trade

 Agreement in restraint of proceedings

12
Toppr.com, https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/essentials-of-a-
contract/, last visited on 2 January, 2023.

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 CONCLUSION
Contract is something that we pass through in our day-to-day life, the elements mentioned
here are most basic and elementary principles of a contract, which are to be fulfilled, however
there may be other conditions, which may be laid down by a special law, or for specific type
of contracts. We have studied from history of contract beginning from Vedic and medieval
period (and also the Chandra gupt Maurya regime that include most important contract
system of that time of exchanging goods and all) to Islamic to Hindu and to British Regime.
Then the elements binding the contract, that include offer, acceptance, consideration, consent,
capacity and the agreement must not be expressly declared void. For a contract to be valid
then all these elements along with few other should be there.

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 BIBILOGRAPHY

Web sources
1) https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-
i/essentials-of-a-contract
2) https://blog.ipleaders.in/essentials-of-a-valid-contract
3) https://indiankanoon.org/doc/171398
4) https://www.lawteacher.net/free-law-essays/contract-law/history-of-the-indian-
contract-act-1872-contract-law-essay.php
5) https://www.legalkatta.in/history-of-the-indian-contract-act-1872
6) https://www.vedantu.com/commerce/indian-contract-act-1872
7) Offer or Proposal under Indian Contract Act, 1872 - Legal PaathShala
8) Offer or Proposal ( Law Of Contract) - Kanoon Sangrah

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