NATURE OF CONTRACT

The Indian Contract Act, 1872

Adithya Venugopal0801101

IInd BCom (A&F), Shift I

Contents

Objects of Law of ContractThe Indian Contract Act,1872Definition of ContractEssential Elements of a Valid ContractClassification of ContractsClassification of Contracts in English Law

Object of Law of Contract

Definiteness in business transactions.

To ensure realisation of reasonable expectation of the parties who enter into a contract.

Of particular importance to people engaged in trade, commerce and industry as bulk of their business transactions are based on contracts.

The Indian Contract Act,1872

Branch of law which determines circumstances in which promises made by parties to a contract shall be legally binding on them.

It deals with General Principles of the Law of Contract (Sec 1-75) Some special contracts only (Sec124-238)

The Act is not exhaustive : Does not deal with contracts relating to partnership, sale of goods, negotiable instruments, insurance etc.

Nature of the Law: Does not lay down the rights and duties law will enforce, but consists of limiting principles subject to which the parties may create rights and duties for themselves, which the law will uphold.

Is not the whole law of agreements nor whole law of obligations: Excludes from its purview all obligations not contractual in nature and agreements which are social in nature

Creates jus in personam as distinguished from jus in rem:

Example:A owes a certain sum of money to B. B has a right to recover it from A. This right can be exercised only by B and by none else against A. This right of B is a jus in personam.

Right against or in respect of a thingAvailable against the world at large

Right against or in respect of a specific personAvailable only against particular persons

Proposal

Promise

Agreement

Legal Obligation

Contract

Consensus Ad Idem

Offer + Acceptance

Agreement Enforceability at Law

Sec 2(h) based on Pollock“ Every agreement and promise enforceable at law is a contract.”

Definition of Contract

Essential Elements of a Valid Contract

SNo

Element Description

1 Offer and Acceptance

There must be offeror and acceptor.Offer: DefiniteAcceptance: Absolute, unconditional, communicated in the mode prescribed

2 Intention to create legal relationship

Social agreements do not create legal relations, therefore not contracts,Example: Balfour Vs. Balfour

3 Lawful Consideration

Consideration: Something in return, must be real and lawful

4 Capacity of Parties

Parties must be:Of age of majorityOf sound mindNot disqualified from contracting by any law subject to

SNo

Element Description

5 Free and Genuine Consent

Parties must agree on subject matter in the same sense and at the same time.Consent should not be induced by coercion, undue influence, misrepresentation, fraud or mistake.

6 Lawful Object Object must not be:IllegalImmoralOpposed to public policy

7 Agreement not declared void

Must not have been expressly declared void by any law in force in the country

8 Certainty and Possibility of performance

Agreement must not be vague or impossible to perform

9 Legal formalities

Contract preferably written, must be registered or stamped as per requirements.

Classification of Contracts

Validity PerformanceFormation

Bilateral

Illegal

Void Express

Voidable

Unenforceable

E-CommerceQuasiImplied

Unilateral

Executory

Executed

Contracts

Classification - Quick StudyType of Contract

Description

Voidable A contract enforceable by law at the option of one or more of the parties to the contract, but not at option of other or others .

Void A contract which ceases to be enforceable by law.

Illegal One which transgresses public policy, is illegal or criminal.

Unenforceable

One that cannot be enforced because of a technical defect or lapse of time.

Express A contract in which the terms are stated in words.

Implied One inferred from the circumstances or from conduct of parties.

Quasi Obligation created by law, regardless of any agreement.

E-Commerce One which is entered into via the internet.

Executed Contract wholly performed by both parties.

Executory Contract where promises by both parties are yet to be performed.

Unilateral A contract in which only one party is yet to perform obligation.

Bilateral A contract in which both parties are yet to perform obligations.

Classification of Contracts-English Law

Formal

Contracts of Record

Simple

Contracts under Seal

A judgement of a Courtor a Recognisance( due to the Crown) based on authority, not agreement.Based on its form, does not require consideration, signed, sealed and delivered by the parties.

All contracts which are not made under seal, requiring consideration.

Contracts

End of Chapter 1Nature of ContractThe Indian Contract Act,1872