General Principle of Indian Contract Act 1872

Written by Aditya Kumar

DEFINITIONS (Sec 2)

1. Offer (i.e., Proposal) [section 2(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 person either to such act or abstinence, he is said to make a proposal.

• Acceptance 2(b): – When the person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted.

• Promise 2(b): – A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes a promise.

• Promisor and promise 2(c): – When the proposal is accepted, the person making the proposal is called a promisor and the person accepting the proposal is called a promise.

• Consideration 2(d): – When at the desire of the promisor, the promise or any other person has done or abstained from doing something or does or abstains from doing something or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise.

• The price paid by the one party for the promise of the other technical word meaning QUID-PRO-QUO i.e., something in return.

• Agreement 2(e): – Every promise and set of promises form the consideration for each other. In short, agreement = offer + acceptance.

• Contract 2(h): – An agreement enforceable by Law is a contract.

• Void agreement 2(g): – An agreement not enforceable by law is void.

1. Voidable contract 2(I): – An agreement is a voidable contract if it is enforceable by Law at the option of one or more of the parties thereto (i.e., the aggrieved party), and it is not enforceable by Law at the option of the other or others.

1. Void contract: – A contract which ceases to be enforceable by Law becomes void when it ceases to be enforceable.

ESSENTIALS OF A VALID CONTRACT

“All agreements are contracts if they are made –

1. by free consent of the parties, competent to contract,
2. for a lawful consideration and
3. with a lawful object, and
4. not hereby expressly declared to be void.”                                  – Sec.10.

           Offer + acceptance = Promise + consideration = Agreement + enforceability By Law = Contract

Contract

1. Proper offer and proper acceptance with intention to create legal relationship.

Cases; – A and B agree to go to a movie on coming Sunday. A does not turn in resulting in loss of B’s time B cannot claim any damages from B since the agreement to watch a movie is a domestic agreement which does not result in a contract.

1. In case of social agreement there is no intention to create legal relationship and there the is no contract (Balfour v. Balfour)
2. In case of commercial agreements, the law presume that the parties had the intention to create legal relations.
3. [an agreement of a purely domestic or social nature is not a contract]

• Lawful consideration: – consideration must not be unlawful, immoral or opposed to the public policy.

• Capacity: – The parties to a contract must have capacity (legal ability) to make valid contract.

Section 11: – of the Indian contract Act specify that every person is competent to

contract provided.

• Is of the age of majority according to the Law which he is subject, and
• Who is of sound mind and
• Is not disqualified from contracting by any law to which he is subject.

A person of unsound mind can enter into a contract during his lucid interval.

• An alien enemy, foreign sovereigns and accredited representative of a foreign state. Insolvents and convicts are not competent to contract.

Free consent: – consent of the parties must be genuine consent means agreed upon something in the same sense i.e., there should be consensus – ad – idem. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.

Lawful object

• The object of the agreement should be lawful and legal.

• Two persons cannot enter into an agreement to do a criminal act.

• Consideration or object of an agreement is unlawful if it
  • is forbidden by law; or
  • is of such nature that, if permitted, would defeat the provisions of any law; or

• is fraudulent; or
  • Involves or implies, injury to person or property of another; or
  • Court regards it as immoral, or opposed to public policy.
• Possibility of performance:

• The terms of the agreement should be capable of performance.

• An agreement to do act, impossible in itself cannot be enforced.

Example: A agrees to B to discover treasure by magic. The agreement is void because the act in itself is impossible to be performed from the very beginning.

• The terms of the agreements are certain or are capable of being made certain [29] Example: A agreed to pay Rs.5 lakh to B for ultra-modern decoration of his drawing room. The agreement is void because the meaning of the term “ultra–modern” is not certain.

• Not declared Void

• The agreement should be such that it should be capable or being enforced by law.

• Certain agreements have been expressly declared illegal or void by the law.

• Necessary legal formalities

• A contract may be oral or in writing.

• Where a particular type of contract is required by law to be in writing and registered, it must comply with necessary formalities as to writing, registration and attestation.
  • If legal formalities are not carried out then the contract is not enforceable by law. Example: A promise to pay a time. Barred debt must be in writing.

Conclusion:

Thus, we see that an agreement may be or may not be enforceable by law, and so all agreement is not contract. Only those agreements are contracts, which are enforceable by law, In short.

Contracts = Agreement + Enforceability by Law

Hence, we can conclude “All contracts are agreement, but all agreements are not contracts.”

Keywords: Indian Contract Act