INDIAN ACONTRACT ACT, 1872

Commencement: 1st September, 1872

Important Points:

● It has XI chapters. Chapter VII & XI, Sale of Goods and Partnership respectively are repealed.
● It creates rights in persona, not in rem.
● It consists of two parts:
(i) General principals of the Law of Contract (Sections 1-75)
(ii) Special Kinds of Contracts like Indemnity, Guarantee, Bailment, Pledge and Agency
(Sections 124-238)

The Indian Contract Act, 1872 is a legislation that governs the principles and rules regarding
contracts in India. Below is a summary of sections 2 to 10 of the Indian Contract Act, 1872:

Section 2: Definitions and interpretation:

● This section provides definitions of various important terms used throughout the Act, such
as "contract," "proposal," "acceptance," "agreement," "voidable contract," etc.

● It also clarifies the rules of interpretation for understanding the provisions of the Act.

Section 3: Communication, acceptance, and revocation of proposals:

● This section states that a proposal is communicated when it is made by any act or omission
of the proposer.

● Acceptance of a proposal becomes valid when it is communicated to the proposer.

● A proposal may be revoked at any time before the communication of acceptance is

complete, except in cases where the proposer has promised to keep the proposal open for a
specified period.

Section 4: Communication when complete:

● This section defines when communication is considered complete. It states that

communication is complete when it comes to the knowledge of the person to whom it is
made.

Section 5: Revocation of proposals and acceptances:

● This section specifies that a proposal can be revoked at any time before the communication
of acceptance is complete.

● Acceptance can also be revoked before it is communicated to the proposer.

Section 6: Revocation how made:

● This section describes the methods by which revocation can be made, including through
words or conduct that indicate the intention to revoke.

Section 7: Acceptance must be absolute:

● According to this section, acceptance of a proposal must be unconditional and absolute. Any
conditional or qualified acceptance is considered a counter-offer.
Section 8: Performance of the conditions of a proposal:

● This section explains that the person making the proposal must perform the conditions of
the proposal or offer before the acceptance is complete.

Section 9: Promises, express and implied:

● It states that a promise is an agreement enforceable by law, and it can be either expressed
or implied.

Section 10: What agreements are contracts:

● This section defines the elements required for an agreement to become a valid contract. It
states that an agreement becomes a contract if it is made by the free consent of the parties
who are competent to contract, and the agreement is supported by lawful consideration and
has a lawful object.

These sections provide the foundational concepts and rules related to communication, acceptance,
revocation, and the essential elements of a contract as outlined in the Indian Contract Act, 1872.

Definitions [Section 2]
2(a) Proposal:

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;

2(b) Acceptance:

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to
be accepted.

Explanation: Acceptance is the unconditional and absolute agreement to the terms of a proposal or
offer. It occurs when the party to whom the proposal is made (the "offeree") communicates their
consent to the proposer (the "offeror"). Acceptance must be communicated back to the offeror to
complete the contract.

Promise:

A proposal, when accepted, becomes a promise;

Explanation: A promise is a proposal or offer made by one party (the "promisor") to another party
(the "promisee") to perform or refrain from performing a particular action. It is an essential element
of a contract and forms the basis of the contractual relationship between the parties.

2(c) Promisor and Promisee:

The person making the proposal is called the “promisor”, and the person accepting the proposal is
called the “promisee”;

2(d) Consideration:

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;
2(e) Agreement:

Every promise and every set of promises, forming the consideration for each other, is an agreement;

Explanation: An agreement is defined as a proposal or offer made by one party (the "promisor") to
another party (the "promisee") with the intention of creating legal obligations. It involves the mutual
consent of the parties to the terms and conditions proposed.

2(f) Reciprocal Promises:

Promises which form the consideration or part of the consideration for each other are called
reciprocal promises;

2(g) Void Agreement:

An agreement not enforceable by law is said to be void;

2(h) Contract:

An agreement enforceable by law is a contract;

Explanation: A contract is a legally enforceable agreement between two or more parties. It is formed
when there is a valid offer made by one party, an unconditional acceptance of that offer by another
party, and the presence of consideration (something of value exchanged between the parties). A
contract creates legally binding obligations and provides a framework for the rights and duties of the
parties involved.

2(i) 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;

2(j) Void Contract:

A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

Formation of a Contract
The formation of a contract in accordance with the Indian Contract Act, 1872 involves several key
stages. Let's go through the process step by step:

Offer: The first step in the formation of a contract is the offer. An offer is a proposal made by one
party (the offeror) to another party (the offeree) expressing a clear intention to create legal
obligations. The offer must be definite, certain, and communicated to the offeree.

Example: A seller offers to sell their car to a potential buyer for a specified price.

Acceptance: Once an offer is made, the offeree must accept the offer to create a valid contract.
Acceptance occurs when the offeree unconditionally agrees to the terms of the offer.

Example: The potential buyer agrees to purchase the car from the seller at the specified price and
communicates their acceptance.

Consideration: Consideration refers to something of value exchanged between the parties. It can be
in the form of money, goods, services, or a promise to do or refrain from doing something.
Consideration is a necessary element for a contract to be valid.
Example: In the car sale contract, the consideration would be the payment made by the buyer to the
seller in exchange for the car.

Intention to Create Legal Relations: For a contract to be valid, the parties must have a genuine
intention to create legal obligations. If the parties do not intend to be legally bound, the agreement
may not be enforceable as a contract.

Example: In a social setting, if friends make a casual agreement without intending it to be legally
binding, it may not be considered a valid contract.

Capacity to Contract: The parties entering into a contract must have the legal capacity to do so. This
means they must be of sound mind, not disqualified by law due to mental incapacity, and not minors
or persons disqualified by law from entering into certain types of contracts.

Example: A person below the age of majority may lack the legal capacity to enter into a contract
without parental or guardian consent.

Free Consent: The consent of the parties must be freely given without any coercion, fraud, undue
influence, or misrepresentation. Consent should be based on a clear understanding of the terms and
consequences of the contract.

Example: If a party is coerced into entering a contract through threats or fraud, their consent may be
considered invalid.

Legality of Object: The object or purpose of the contract must be lawful. It should not involve any
illegal activities or go against public policy.

Example: A contract to engage in illegal gambling activities would have an unlawful object and would
be considered void.

Once these essential elements are present and the contract is formed, the parties involved have
legal rights and obligations as per the terms of the contract. It is important to note that contracts can
be oral or written, as long as the required elements are met. However, certain types of contracts
must be in writing as prescribed by law, such as contracts for the sale of immovable property.

To Summarise,

● Promise = Proposal/Offer + Acceptance

● Agreement = Promise + lawful Consideration
● Contract = Agreement + legal enforceability

Important Case Laws:

1. Balfour Vs. Balfour

Appellant: Mr. Balfour

Respondent: Mrs. Balfour

Facts: Mr. and Mrs. Balfour was a married couple. Mr. Balfour was a civil engineer who worked in
Ceylon (modern-day Sri Lanka). In 1915 Mr. Balfour and his wife went to England for a vacation, his
wife became ill and her doctor advised that she could not return to Ceylon due to her arthritis. They
made an agreement that Mrs. Balfour would stay in England while Mr. Balfour returned to Ceylon.
During the time, Mr. Balfour told Mrs. Balfour that he would pay her ₤30 a month until he returned.
This understanding was made while their relationship was fine; however, the relationship later
soured and they decided to divorce. Mrs. Balfour sued, stating that Mr. Balfour had legal obligation
(under contract) to continue paying her the ₤30 a month. Although Mrs. Balfour Succeeded at first
instance. An additional judge of kings’ bench Division held that the husband was under responsibility
to support his wife and there exists a strong contract between the husband and the wife. The
consent of the wife to this order of monthly transfer was valid though to constitute a required
contract between the couple. Thus, found the contract bounding, which Mr. Balfour appealed.

[https://lawlex.org/lex-bulletin/case-analysis-balfour-v-balfour/20357]

Judgement: The Court of Appeal held in favour of the defendant. The court said that it is essential
that both the parties should intend that an agreement be legally bounding so to become an
enforceable. The parties’ domestic relationship strongly indicated that they did not intend their
personal arrangements to be legally binding. As such, there was no contract. One of the judges,
Atkin held that the law of contract was not made for personal family relationships. As there was no
intend to be legally bound when the agreement was agreed upon, there can be no legally binding
contract.

2. Lalman Shukla Vs. Gauri Datt

Plaintiff: Lalman Shukla

Defendant: Gauri Datt

This case mainly delas with general offer and communication of the proposal.

Facts: In this case, the defendant Gauri Dutt was the owner of the firm where plaintiff Lalman Shukla
worked as a muni. The defendant sent all the servants in search of his nephew after he absconded
from home. The plaintiff Lalman Shukla was one of the servants who had gone out in search of the
nephew from Kanpur to Haridwar. He was paid some money for travel and other expenses.

After Lalman Shukla had left the house, the defendant announced a reward of Rs. 501 to
whomsoever who brings back his missing nephew. Shukla had no idea of such an announcement. He
found the missing nephew and brought him back to his home for which Gauri Datt paid him two
sovereigns and Rs. 20.

Six months after the said incident occurred, Dutt removed Shukla from job. After being removed
from the job, Shukla claimed the reward money from the defendant and on his denial, filed a case in
Small Causes Court. The case was dismissed by Small Causes Court and the appeal was filed in the
High Court.

[https://www.lawctopus.com/academike/lalman-gauri-ica/]

Judgement:

Appeal was dismissed by the Allahabad High Court stating that for entering into a valid contract
there has to be knowledge of the proposal and acceptance by the Offeree. In this case, Lalman
Shukla neither had the knowledge of the Offer nor did he communicate his Acceptance. He acted in
a capacity of a faithful servant for his master. Therefore, he was not entitled to the reward.

Case Citation:

Lalman Shukla vs. Gauri Dutt [1913] 40 ALJ 489

Related Cases for reference:

Fitch vs. Snedaker [1868] 38 N.Y. 248

Gibbons v Proctor [1891] 64 LT 594

3. Mohori Bibee Vs. Dharmodas Ghose

Plaintiff: Dharmodas Ghose

Defendant: Brahmo Dutt

Facts: A mortgage deed was entered between two parties on the 20th of July, 1895. Dharmodas
Ghose, a minor plaintiff, mortgaged his property to defendant Brahmo Dutt, a money lender, in
order to acquire a loan of Rs. 20,000. The minor immediately received Rs. 8,000 as part of the loan.

Brahmo Dutt was a money lender having his business at Calcutta and the mortgage deed with
Dharmodas Ghose was executed by Kedar Nath, the attorney of Brahmo Dutt, on his behalf. At the
time of the mortgage, the plaintiff was still a minor and he had not attained the age of twenty-one
years. His mother who was appointed as his legal guardian had sent a notice on 15th July to Kedar
Nath stating the fact that Dharmodas Ghose was a minor and hence, any contract entered into with
him should be at the concerned party’s own risk.

Even though the attorney and managers of Brahmo Dutt had full knowledge that he was a minor and
was incompetent to mortgage his property, the amount of loan was given to him. Subsequently, the
minor through his guardian (mother) filed a lawsuit for cancellation of the mortgage, claiming that
he was a minor at the time he executed the mortgage. Hence, he asked that the mortgage should be
declared void and inoperative.

Brahmo Dutt contended that neither he nor his attorney received any notice regarding the minority
of Dharmodas Ghose and that the Courts should not provide any relief to Dharmodas Ghose without
requiring him to refund the money advanced.

The Courts of the first instance took a decision in favour of the minor. Later, an appeal was filed by
Brahmo Dutt and his attorney. The Appellate Court dismissed the appeal, and Brahmo Dutta died
soon after, and his legal executors, i.e., Mohori Bibee (wife of Brahmo Dutta) filed an appeal in the
Privy Council.

[https://finlawportal.com/mohori-bibee-vs-dharmodas-ghose-a-case-summary/]

Judgement:

The Court held that the mortgage by Dharmodas Ghose (the minor) was void-ab-initio and
ineffective. That is, the agreement was void right from the beginning.

Further, even though a contract by a minor is void and no liability can be committed by a minor
under a contract, a minor is not precluded from receiving a benefit therein.

As a result, the minor had the option to terminate the mortgage and was not required to repay the
loan amount advanced, i.e., Rs. 8,000.

As the contract was void-ab-initio, there could be no grounds for a claim of the loss amount by the
appellant i.e., the legal executors of Brahmo Dutt.

Case Citation: Mohori Bibee vs. Dharmodas Ghose (1903) 30 Cal 539
Essential Elements of a Valid Contract
The essential elements of a contract, as defined by the Indian Contract Act, 1872, include the
following:

1. Offer and Acceptance: A contract begins with a proposal or offer made by one party to
another. The offer must be communicated to the other party, who then accepts the offer.
Acceptance must be unconditional and in accordance with the terms of the offer.

2. Intention to Create Legal Relations: There must be an intention between the parties to
create a legally binding agreement. If the parties do not intend to be legally bound, such as
in social or domestic agreements, it may not be considered a contract.

3. Lawful Consideration: Consideration refers to something of value exchanged between the

parties as part of the contract. It can be in the form of money, goods, services, or even a
promise to do or refrain from doing something. Consideration must be lawful, meaning it
should not be illegal, immoral, or against public policy.

4. Capacity to Contract: The parties entering into a contract must have the legal capacity to do
so. This means they must be of sound mind, not disqualified by law, and not minors. Certain
persons, such as minors or individuals of unsound mind, may lack the capacity to contract or
their contracts may be voidable.

5. Free Consent: The consent of the parties must be freely given without any coercion, undue
influence, fraud, misrepresentation, or mistake. Consent should be obtained without any
vitiating factors that affect the voluntary nature of the agreement. Both the parties should
have consensus-ad-idem that is both the parties should have agreed upon the same thing in
the same sense.

6. Lawful Object: The object or purpose of the contract must be lawful. It should not involve
any illegal activities or be against public policy. Contracts with unlawful objects are void and
unenforceable.

7. Certainty and Possibility of Performance: The terms and conditions of the contract must be
clear, specific, and capable of being performed. The contract should not be vague,
ambiguous, or impossible to fulfil.

8. Not Expressly Declared Void or Illegal: Certain types of contracts, such as those expressly
declared void by law or involving illegal activities, are not enforceable. For example,
contracts for committing a crime or contracts prohibited by specific legislation are
considered void ab initio (from the beginning).

These essential elements collectively ensure that a contract is legally binding and enforceable. If any
of these elements are absent or not fulfilled, the contract may be deemed void or unenforceable. It
is important to understand and fulfil these elements when entering into contractual agreements to
protect the rights and obligations of all parties involved.

In summary, an agreement is the mutual understanding and consent between parties, a promise is a
proposal to perform or refrain from performing an action, acceptance is the communication of
agreement to the terms of a proposal, and a contract is a legally enforceable agreement that arises
from the offer, acceptance, and consideration.

Specimen of a Contract to buy and sell goods

[Your Name]

[Your Address]

[City, State, Zip Code]

[Email Address]

[Phone Number]

[Date]

[Buyer's Name]

[Buyer's Address]

[City, State, Zip Code]

Dear [Buyer's Name],

Subject: Contract for the Purchase and Sale of Goods

This agreement ("Agreement") is entered into between [Your Name] ("Seller") and [Buyer's Name]
("Buyer") collectively referred to as the "Parties" with respect to the purchase and sale of goods
described below.

Description of Goods:

a. Type of Goods:

b. Quantity:

c. Quality:

d. Specifications:

Purchase Price:

The total purchase price for the goods shall be [Amount in words] ([Amount in numbers]) in the
currency of Indian Rupees (INR).

Payment Terms:

a. Payment Method:
b. Payment Schedule:

c. Late Payment Charges:

Delivery Terms:

a. Delivery Date:

b. Delivery Location:

c. Shipment Terms:

d. Risk of Loss:

Inspection and Acceptance:

The Buyer shall have [number of days] days from the date of delivery to inspect and accept the
goods. If the goods are found to be non-conforming or defective, the Buyer shall promptly notify
the Seller in writing.

Title and Ownership:

The title and ownership of the goods shall pass from the Seller to the Buyer upon full payment of
the purchase price.

Representations and Warranties:

a. Seller's Representations:

b. Buyer's Representations:

Governing Law:

This Agreement shall be governed by and construed in accordance with the laws of India.

Dispute Resolution:

Any disputes arising out of or in connection with this Agreement shall be resolved through
amicable negotiations. If the Parties fail to reach a resolution, the disputes shall be referred to
mediation or arbitration as per the mutual agreement of the Parties.

Entire Agreement:
This Agreement constitutes the entire understanding between the Parties and supersedes any
prior agreements or understandings, whether written or oral, relating to the purchase and sale of
the goods.

Amendments and Modifications:

Any amendments or modifications to this Agreement shall be in writing and duly signed by both
Parties.

Severability:

If any provision of this Agreement is found to be invalid or unenforceable, the remaining

provisions shall continue to be valid and enforceable to the fullest extent permitted by law.

Please indicate your acceptance of the terms and conditions of this Agreement by signing below.
This Agreement shall be effective as of the date first written above.

Seller:

[Your Name]

[Signature]

[Date]

Buyer:

[Buyer's Name]

[Signature]

[Date]

Reference: https://www.mod.gov.in/sites/default/files/DraftChVISCD.pdf

Concepts of an offer and an invitation to offer with examples:

Offer: An offer is a specific proposal made by one party (the offeror) to another party (the offeree),
expressing a clear intention to enter into a legally binding agreement. It contains definite terms and
conditions that, if accepted, would result in a valid contract. An offer must be communicated to the
offeree and must be capable of acceptance without any further negotiations or modifications.

Example of an offer: A seller displays a product in a store with a price tag attached. The price tag
indicates the seller's willingness to sell the product at that specific price. If a customer agrees to
purchase the product at the price mentioned, an offer has been made.
Invitation to Offer: An invitation to offer, also known as an invitation to treat, is an invitation or
preliminary statement inviting others to make an offer. It is not a definite proposal but an invitation
to enter into negotiations or make an offer. An invitation to offer does not create a binding
obligation on the person making it; instead, it invites others to make offers that can be accepted or
rejected.

Example of an invitation to offer: A store advertises a sale on its website, showcasing various
products with discounted prices. The advertisement is an invitation to offer, as it invites customers
to make offers to purchase the products at the advertised prices. The store has the option to accept
or reject the offers made by customers.

Another example is when a restaurant displays a menu to its customers. The menu is an invitation to
offer, as it invites customers to make orders and place offers for specific food items. The restaurant
then has the choice to accept or reject the customer's order, forming a contract upon acceptance.

In summary, an offer is a definite proposal with the intention to create a binding contract, while an
invitation to offer is an invitation or preliminary statement inviting others to make an offer. Offers
can be accepted or rejected, whereas invitations to offer invite others to make offers that can be
accepted or rejected by the party making the invitation.

Concepts of valid, void, voidable, express, and implied in the context of contracts, along with
examples:

Valid Contract:

A valid contract is a legally enforceable agreement that meets all the essential elements required by
law. It is binding on all parties involved and can be enforced through legal remedies in case of a
breach.

Example of a valid contract: A person offers to sell their car to another person at a specified price.
The other person accepts the offer, and both parties agree to the terms and conditions, including the
price, payment terms, and transfer of ownership. This agreement constitutes a valid contract.

Void Contract:

A void contract is an agreement that has no legal effect right from its inception. It is considered as if
it never existed, and the parties are not legally bound by its terms. A void contract lacks essential
elements or violates the law.

Example of a void contract: A contract to engage in an illegal activity, such as a contract for drug
trafficking, is void. Since the purpose of the contract is illegal, it is considered void and
unenforceable by law.

Voidable Contract:

An agreement which is enforceable by law at the option of one or more the parties but not at the
option of the other or others is a voidable contract. Contracts made by coercion, undue influence,
fraud and misrepresentation are voidable contract.

Example of a voidable contract:

If a person enters into a contract under duress or undue influence, they may have the option to
avoid or cancel the contract. For instance, if a person is coerced into signing a contract through
threats or manipulation, they can choose to void the contract.

Express Contract:

An express contract is a contract where the terms and conditions of the agreement are explicitly
stated in writing or orally. The intentions and agreement of the parties are clearly expressed and
communicated.

Example of an express contract: A person hires a contractor to renovate their house, and they sign a
written contract specifying the scope of work, cost, timeline, and other relevant terms. The terms
are explicitly expressed in the written contract, forming an express contract.

Example of an express contract: Two individuals sign a written document that clearly outlines the
terms of their business partnership, including profit-sharing, responsibilities, and duration of the
partnership. The terms are expressly stated in the written contract.

Implied Contract:

An implied contract is a contract where the terms and conditions are not explicitly stated in writing
or orally but are inferred from the conduct, actions, or circumstances of the parties involved. The
existence of the contract is implied by the behaviour or actions of the parties.

Example of an implied contract: A person enters a restaurant, orders a meal, and consumes it. Even
though there is no explicit agreement or discussion of terms, the implied contract arises from the
conduct of the parties. The person is expected to pay for the meal consumed, implying an implied
contract for the provision of goods (food) in exchange for payment.

In summary, a valid contract meets all legal requirements and is enforceable. A void contract has no
legal effect. A voidable contract is valid at the option of one party of the contract. An express
contract has its terms explicitly stated, while an implied contract is inferred from the parties'
conduct or circumstances.

It's important to note that legal requirements and interpretations may vary in different jurisdictions,
so it's always advisable to consult relevant laws and seek legal advice when dealing with specific
contracts or legal matters.

Under the Indian Contract Act, 1872, Sections 23 to 30 deal with void agreements. Void agreements
are those that are considered unenforceable and have no legal effect. Let's go through these
sections and understand the concept of void agreements:

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 law; 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.

Illustrations

(a) A agrees to sell his house to B for 10,000 rupees. Here Bs promise to pay the sum of 10,000
rupees is the consideration for As promise to sell the house, and As promise to sell the house is the
consideration for Bs promise to pay the 10,000 rupees. These are lawful considerations.

(b) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to
pay it. B promises to grant time to C accordingly. Here, the promise of each party is the
consideration for the promise of the other party, and they are lawful considerations.

(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is
wrecked on a certain voyage. Here, As promise is the consideration for Bs payment and Bs payment
is the consideration for As promise, and these are lawful considerations.

(d) A promises to maintain Bs child, and B promises to pay A 1,000 rupees yearly for the purpose.
Here, the promise of each party is the consideration for the promise of the other party. They are
lawful considerations.

(e) A, B and C enter into an agreement for the division among them of gains acquired or to be
acquired, by them by fraud. The agreement is void, as its object is unlawful.

(f) A promises to obtain for B an employment in the public service and B promises to pay 1,000
rupees to A. The agreement is void, as the consideration for it is unlawful.

(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal,
to obtain for B a lease of land belonging to his principal. The agreement between A and B is void. as
it implies a fraud by concealment, by A, on his principal.

(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises
to restore the value of the things taken. The agreement is void, as its object is unlawful.

(i) As estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which
the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes
the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has
paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and
would so defeat the object of the law.

(j) A, who is Bs mukhtar, promises to exercise his influence, as such, with B in favour of C, and C
promises to pay 1,000 rupees to A. The agreement is void, because it is immoral.

(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is
immoral, though the letting may not be punishable under the Indian Penal Code (45 of 1860).

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.

Illustration
A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in
other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the
object of As promise, and the consideration for Bs promise, being in part unlawful.

Section 25: Agreement without consideration, void, unless it is in writing and registered, or is a
promise to compensate for something done, or is a promise to pay a debt barred by limitation law.

An agreement made without consideration is void, unless

(1) it is expressed in writing and registered under the law for the time being in force for the
registration of 1[documents], and is made on account of natural love and affection between parties
standing in a near relation to each other; or unless

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do; or
unless;

(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent
generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor
might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract.

Explanation 1. Nothing in this section shall affect the validity, as between the donor and donee, of
any gift actually made.

Explanation 2. An agreement to which the consent of the promisor is freely given is not void merely
because the consideration is inadequate; but the inadequacy of the consideration may be taken into
account by the Court in determining the question whether the consent of the promisor was freely
given.

Illustrations

(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.

(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B
into writing and registers it. This is a contract.

(c) A finds Bs purse and gives it to him. B promises to give A Rs. 50. This is a contract.

(d) A supports Bs infant son. B promises to pay As expenses in so doing. This is a contract.

(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay
B Rs. 500 on account of the debt. This is a contract.

(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. As consent to the agreement was freely given.
The agreement is a contract notwithstanding the inadequacy of the consideration.

(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement
was freely given.

The inadequacy of the consideration is a fact which the Court should take into account in considering
whether or not As consent was freely given.

Section 26: Agreement in restraint of marriage, void.

Every agreement in restraint of the marriage of any person, other than a minor, is void.

Section 27: Agreement in restraint of trade, void.

Every agreement by which any one is restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void.

Exception 1. Saving of agreement not to carry on business of which good-will is sold. One who sells
the good-will of a business may agree with the buyer to refrain from carrying on a similar business,
within specified local limits, so long as the buyer, or any person deriving title to the good-will from
him, carries on a like business therein, provided that such limits appear to the Court reasonable,
regard being had to the nature of the business.

Section 28:

Section 28. Agreements in restraint of legal proceeding void.

Every agreement, —

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of
any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any
liability, under or in respect of any contract on the expiry of a specified period so as to restrict any
party from enforcing his rights, is void to the extent.

Exception 1.—Saving of contract to refer to arbitration dispute that may arise.—This section shall
not render illegal a contract, by which two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subjects shall be referred to arbitration, and that
only the amount awarded in such arbitration shall be recoverable in respect of the dispute so
referred.

Exception 2.—Saving of contract to refer questions that have already arisen. —Nor shall this section
render illegal any contract in writing, by which two or more persons agree to refer to arbitration any
question between them which has already arisen, or affect any provision of any law in force for the
time being as to references to arbitration3.

Exception 3.—Saving of a guarantee agreement of a bank or a financial institution.—This section

shall not render illegal a contract in writing by which any bank or financial institution stipulate a term
in a guarantee or any agreement making a provision for guarantee for extinguishment of the rights
or discharge of any party thereto from any liability under or in respect of such guarantee or
agreement on the expiry of a specified period which is not less than one year from the date of
occurring or non-occurring of a specified event for extinguishment or discharge of such party from
the said liability.

Section 29:

Agreements void for uncertainty.

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Illustrations
(a) A agrees to sell to B "a hundred tons of oil". There is nothing whatever to show what kind of oil
was intended. The agreement is void for uncertainty.

(b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of
commerce. There is no uncertainty here to make the agreement void.

(c) A, who is a dealer in cocoanut-oil only, agrees to sell to B "one hundred tons of oil. The nature of
A"s trade affords an indication of the meaning of the words, and A has entered into a contract for
the sale of one hundred tons of cocoanut-oil.

(d) A agrees to sell to B "all the grain in my granary at Ramnagar". There is no uncertainty here to
make the agreement void.

(e) A agrees to sell B "one thousand maunds of rice at a price to be fixed by C". As the price is
capable of being made certain, there is no uncertainty here to make the agreement void.

(f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand". There is
nothing to show which of the two prices was to be given. The agreement is void.

Section 30:

Agreements by way of wager, void.

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged
to be won on any wager, or entrusted to any person to abide the result of any game or other
uncertain event on which any wager is made.

Exception in favour of certain prizes for horse-racing.—This section shall not be deemed to render
unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered
into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees
or upwards, to be awarded to the winner or winners of any horse-race.

Section 294A of the Indian Penal Code not affected.—Nothing in this section shall be deemed to
legalize any transaction connected with horse-racing, to which the provisions of section 294A of the
Indian Penal Code (45 of 1860) apply.

Differences between:

(a) Coercion & Undue Influence:

Coercion refers to the use of force or threat to compel someone to enter into a contract against
their free will. It involves the use of physical force, intimidation, or unlawful pressure.

Undue influence, on the other hand, occurs when one party takes advantage of their dominant
position or relationship of trust to influence the decision-making of the other party. It involves the
misuse of persuasion, manipulation, or unfair persuasion.

The key difference is that coercion involves force or threat, while undue influence involves the abuse
of power or trust.

(b) Fraud & Misrepresentation:

Fraud is a deliberate and intentional act of deception by one party to induce another party to enter
into a contract. It involves making false statements or concealing material facts with the intention to
deceive and gain an unfair advantage.

Misrepresentation, on the other hand, refers to a false statement made innocently or without the
intention to deceive. It may be a result of negligence, innocent mistake, or incomplete information.

The key difference is that fraud involves intentional deception, while misrepresentation may be
unintentional or negligent.

(c) Void & Voidable Contract:

A void contract is a contract that is considered to have no legal effect from the beginning. It is invalid
and unenforceable by law. A void contract is treated as if it never existed, and the parties have no
legal obligations towards each other.

A voidable contract is a contract that is initially valid and enforceable, but due to certain defects or
circumstances, one or both parties have the option to either enforce or reject the contract. The
party with the power to reject can exercise that right and render the contract voidable.

The key difference is that a void contract is inherently invalid and has no legal effect, while a
voidable contract can be accepted or rejected by a party in the contract who is at disadvantage.

(d) Valid Contract & Void Agreement:

A valid contract is an agreement that meets all the essential elements required by law and is
enforceable by the courts. It has all the necessary elements such as offer, acceptance, consideration,
capacity, free consent, lawful object, etc.

A void agreement, on the other hand, is an agreement that has no legal effect right from the
beginning. It is not enforceable by law, and the parties involved are not legally bound by its terms. A
void agreement is essentially treated as if it never existed.

The key difference is that a valid contract is legally enforceable, while a void agreement has no legal
validity or enforceability.