The Indian Contract Act, 1872

The Indian Contract Act, 1872

• This act defines and amends parts of the law related to contracts.
• It was enacted on April 25th, 1872.
• It is Act No. 9 of 1872.
• It extends to the whole of India and came into force on the first day of September, 1872.
• It does not affect the provisions of any statute, Act, or regulation not expressly repealed, any usage or custom of trade, or any incident of any contract that is inconsistent with the provisions of this Act.

Key Definitions

• Proposal: When one person signifies to another their willingness to do or abstain from doing anything to obtain the other's assent.
• Promise: A proposal, when accepted.
• Promisor: The person making the proposal.
• Promisee: The person accepting the proposal.
• Consideration: An act, abstinence, or promise by the promisee or any other person, done at the promisor's desire.
• Agreement: Every promise and every set of promises forming the consideration for each other.
• Reciprocal promises: Promises that form the consideration or part of the consideration for each other.
• Void agreement: An agreement not enforceable by law.
• Contract: An agreement enforceable by law.
• Voidable Contract: An agreement enforceable by law at the option of one or more parties, but not at the option of the other(s).
• Void Contract: A contract that ceases to be enforceable by law.

Communication, Acceptance, and Revocation of Proposals

• The communication, acceptance, and revocation of proposals and acceptances are made by any act or omission intended to communicate it or which has the effect of communicating it.
• Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
• Communication of an acceptance is complete as against the proposer when it's put in transmission, and as against the acceptor, when it comes to the proposer's knowledge.
• Communication of a revocation is complete against the person making it when it's put in transmission, and against the person to whom it is made, when it comes to their knowledge.

Revocation Rules

• A proposal may be revoked any time before the communication of its acceptance is complete against the proposer.
• An acceptance may be revoked any time before the communication of the acceptance is complete against the acceptor.
• A proposal is revoked by communication of notice by the proposer, lapse of time prescribed, failure of the acceptor to fulfill a condition precedent, or the death/insanity of the proposer if known before acceptance.

Acceptance Guidelines

• Acceptance must be absolute and unqualified.
• Acceptance must be expressed in a usual and reasonable manner, unless the proposal prescribes a specific manner.
• Performance of the conditions of a proposal, or accepting consideration for a reciprocal promise is deemed acceptance.
• Promises are express if made in words, and implied if made otherwise.

Contracts, Voidable Contracts, and Void Agreements

• Agreements are contracts if made by free consent of parties competent to contract, for lawful consideration and object, and not expressly declared void.
• This does not affect any law requiring contracts to be made in writing, in the presence of witnesses, or relating to the registration of documents.
• Every person who is of the age of majority, of sound mind, and not disqualified from contracting by any law is competent to contract.
• A person is considered to be of sound mind if they are capable of understanding the contract and forming a rational judgement as to its effect on their interests at the time of making it.
• Two or more persons are said to consent when they agree upon the same thing in the same sense.
• Free consent is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.

Definitions of Improper Influence

• Coercion: Committing or threatening to commit any act forbidden by the Indian Penal Code, or unlawfully detaining or threatening to detain any property, to the prejudice of any person, with the intention of causing any person to enter into an agreement.
• Undue influence: A contract is induced by undue influence where the relations subsisting between the parties are such that one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.
• Fraud: Includes specific acts committed by a party to a contract with the intent to deceive or induce the other party to enter the contract.
• Misrepresentation: Means the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, even though he believes it to be true.

Consequences of Improper Influence

• When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is voidable at the option of the party whose consent was so caused.
• If consent was caused by misrepresentation or silence, the contract is not voidable if the party had the means of discovering the truth with ordinary diligence.
• When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
• Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
• A contract is not voidable because it was caused by a mistake as to any law in force in India.
• A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
• The legal validity of consideration or the object of an agreement depends on if it is forbidden by law, or if permitted, would defeat the provisions of any law, or is fraudulent, or involves injury to person/property, or is immoral/opposed to public policy.

Agreements Without Free Consent

• If any part of a single consideration for one or more objects is unlawful, the agreement is void.
• An agreement made without consideration is void unless it is expressed in writing and registered, and is made on account of natural love and affection between parties in a near relation to each other, or if a promise to compensate a person who has already voluntarily done something for the promisor.
• Every agreement in restraint of the marriage of any person, other than a minor, is void.
• Agreements that restrain anyone from exercising a lawful profession, trade, or business of any kind, are void to that extent including contracts that limit legal proceedings.

Contingent Contracts

• A contingent contract is a contract to do or not do something, if some event, collateral to such contract, does or does not happen.
• Contingent contracts to do or not do anything if an uncertain future event happens cannot be enforced unless and until that event has happened.
• Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible.

Performance of Contracts

• The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused.
• Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.
• When a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance.
• The offer must be unconditional, made at a proper time and place, and the promisee must have a reasonable opportunity to ensure the person is able to perform.
• An offer to one of several joint promisees has the same legal consequences as an offer to all of them.

Additional Contract Performance Rules

• Place for performance: If no place is specified, the promisor must apply to the promisee to appoint a reasonable place.
• Performance manner: It may be made in any manner, or at any time which the promisee prescribes or sanctions.
• Promisor bound to perform: It is only when a contract contains reciprocal promisee which must be simultaneously performed, and the promisee is ready and willing.

Liability of Joint Contract

• Joint promisee liability: Unless a contrary intention appears by the contract then all such person's during their joint lives and after the death of any of them must fulfill promise.
• Joint promisor liability: Any one of the two or more joint promisee may fulfill whole of the promise/contract.
• Co-Surety Liability: A surety can recover from his principle/ Payments made.

Effect of Release

• One joint promisor: It doesn't discountage the other joint promisor/s.
• Is not released from responsibility: To the joint promisor or joint promisors.

Time is of the Essence

• Has to be completed at set date/time: Has the option of promisee can do is they wish otherwise it's essentially void.

Compensation

• When a party does not full fill its part of the contract because of that party then has to compensate for void agreement.
• Also known as a breach of contract.

Contingency

• Is when the court rules a party doesn't have to pay for their part.
• E.g. too sick to complete performance.

Novation, Rescission & Alteration of Contract

• Parties to a contract agree to substitute a new contract for it, or to rescind or after it then doesn't need to be performed.
• Illustration: A owes money to B under a contract. A, B & C agree that B shall accept C as his debtors B & A old contract is discarded has has made debt with C now.

Voidable Contract-Rescinded

• Consequences of rescission of voidable contact: When a person at whose option a contract is voidable rescinds it then the other party thereto need not perform any thing, will the party must restore benefits that have been received by void act.

Promisee

• Promisee may dispense with or remit performance or promise or promisee my extend the time for the time of fullfillment.

Persons incapable of contracting

• Claim for nescassaries are supplied to person incapable of contracting/person that legally supports is supplied by another person and is re imbursed through such supplies.

Consequences of breach of contract

• When a contact is broken (breached): has means to remedy in any way of inconveniences caused

Agency Section Summary

• Agent and principal defined: Agent is someone who acts on behalf of the principal.
• Authority: An agent is liable todo every lawful thing when working under agency. Also when issues or emergency agents can act under ordinary prudence of their rights to protect interests.
• Delegate: Can't lawfully perform another to perform acts which he/she/they has implied to do.

Sub-agent