Indian Contract Act, 1872 PDF

# Indian Contract Act, 1872 * **[Section 2b]** An agreement which is enforceable by law is called a contract. ## Essential elements of a contract - **Two parties** - Promisor - Promisee - **Acceptance** One party accept offer. - **Offer** One party makes offer. - **Consideration** - **Free...

# Indian Contract Act, 1872 * **[Section 2b]** An agreement which is enforceable by law is called a contract. ## Essential elements of a contract - **Two parties** - Promisor - Promisee - **Acceptance** One party accept offer. - **Offer** One party makes offer. - **Consideration** - **Free Consent** - **Major** 18 years or above - **Minor** Less than 18 years - **Lawful Object** - **Certainty of Terms** ## Difference b/w Agreement & Contract | SNo. | Base Meaning | Agreement | Contract | |---|---|---|---| | 1 | | An agreement which is not enforceable by law is called agreement | A contract which is enforceable by law is called contract | | 2 | Element | Offer + Acceptance = Promise<br>Promise + Consideration = Agreement | Offer + Acceptance = Promise<br>Promise + Consideration = Agreement<br>Agreement + Enforceable by law = Contract| | 3 | Risk | High Risk | Low Risk | | 4 | Written Form | Not needed in agreement | Needed in contract | | 5 | Legal Obligation | Does not create any legal obligation | Creates legal obligation. | ## Types of contracts ### On the basis of legality - **Void Contract:** When a contract is valid at the time of making but due to some condition or circumstance it becomes illegal - is called **void contract**. - **Voidable Contract:** An agreement or contract which is enforceable at the option of one party and not at the option of the other party. Types: - Coercion - Undue Influence - Fraud - Misrepresentation - **Valid/Legal Contract:** A contract which is enforceable by law and is made with all the essential documents is called **legal contract**. - **Illegal Contract:** A contract which is made: - With minors - With unsound mind person (lunatics) - Is called **illegal contract**. ### On the basis of extent of execution - **Executed Contract:** A contract in which all the parties have performed their obligation at the time of making or dealing is called **executed contract**. - **Executory Contract:** A contract in which the parties still have to perform their obligations is called **executory contract**. - **Bilateral Contract:** In which both parties exchange a promise to do something in exchange of the other party's promise to do something is called **bilateral contract**. - **Unilateral Contract:** In this kind of contract, a promisor to do something only when the promise has done his desire. Work or act is called **unilateral contract**. ### On the basis of formation - **Express Contract:** A contract which is made in any of the written forms: letter, email etc; is called **express contract**. - **Implied Contract:** The contract which is made in other than written form is called an **implied contract**. ### Qui Contract It is a contract imposed by the law on the parties and given similar obligation to the other party. In other words, it is a valid contract according to the Contract Act, 1872. ## Proposal/Offer A proposal or offer is an expression of willingness by one person to another to enter into an agreement or contract. ## Essential elements of Proposal/Offer - **Two parties:** Proposer/ Offerer & Proposee/ Offeree - **Proposal may be positive or negative.** - **Proposal must be communicated.** - **Proposal must made with the free consent of both the parties.** - **The proposal must be made with the intention to create legal relations.** ## Types of Offer/ Proposal ### On the basis of the mode of making - **Express offer:** An offer which is made in written form like some papers, email etc; is called **express offer**. - **Implied Offer:** An offer which is made in other than written form is called an **implied offer**. ### On the basis of the offerer - **General Offer:** A general offer is one which is made for the general public or for a large population. - **Special Offer:** An offer made for a specific person or for a specific section of the society, can only be accepted by such a specific person is called a **specific offer**. ### On the basis of the nature of the offer - **Cross Offer:** When two persons make an identical offer to each other without having knowledge of each other’s offer is called **cross offer**. - **Counter offer:** When two persons make an identical offer to each other, the acceptance on the basis of terms and conditions is called **counter offer**. ## What is the difference b/w intention to put a proposal & invitation to put a proposal? | SNo. | Base | Intention to put a proposal | Invitation to put a proposal | |---|---|---|---| | 1 | Meaning | It is an explanation or declaration by a person that he intends to offer something in future | When a person with expressing his willingness and certain terms on which he wishes to negotiate | | 2 | Objective | The objective of this proposal is not to get the consent of other party | The objective of this proposal is to receive a final consent of other party | | 3 | Creation of contract | The acceptance or rejection of contract both creates a contract | Acceptance of proposal creates a legal contract | | 4 | Obligation | Acceptance of an offer or proposal creates obligation of the party. | Acceptance of an invitation to proposal may or may not create a legal obligation. | | 5 | Example | **Father to son**<br> **Grandmother to son, daughter, granddaughter** | **Advertisement**<br> **(Discount offers, etc.)** <br> **Auction** | ## Acceptance According to the Contract Act 1872, when the person to whom the proposal has been made, his/her consent to the offer is said to be accepted and when the proposal when accepted it becomes a promise, it's called **acceptance of an offer**. ## Rules regarding valid Acceptance - It must be in the prescribed manner. - Acceptance can only be given to whom the offer was made. - Acceptance must be communicated. - It must be given within a specified time period. - It must include the free consent of both the parties. ## Communication of an offer/proposal, Communication of acceptance, Communication of revocation. ### Communication of an offer/proposal: According to the Contract Act 1872, the communication of the offer is complete when it comes to the knowledge of the offerer or the person for whom the offer was made. ### Communication of acceptance: When both parties agree to all the terms and conditions described in the contract the communication of acceptance is made, which is the agreement of the proposal by an Act. It includes words, conduct, or any other form of action. It is a continuing agreement. Two points need to consider: - Against the offerer: - Against the offeree: If any one of the parties does not agree with the terms and conditions described in the contract the offer is withdrawn anytime before the acceptance is made. ### Communication of revocation: The communication of acceptance is made when both parties agree to the terms and conditions described in the contract. - After the acceptance of the proposal, the offerer cannot reject the proposal. - It can be done through letters, emails, or any other mode. - If it's a continuing contract acceptance can also be done through silent action or any other form of action. ### Examples: - **Communication of an offer/proposal:** Company A posts a letter to P, offering a deal. On the 10th of July, P is deemed aware of the proposal, making the communication complete. - **Communication of acceptance:** B receives the offer from Company A via mail, the offer is received by B on the 14th of July. The communication of acceptance is considered complete between both the parties. - **Communication of revocation:** In this example, the date is marked as 10-14th of July. In this case, until the date of 14th of July, both the parties can revoke the offer. ## Capacity of Parties According to company law Act 1872, it means the legal capacity of the parties to enter into a contract. According to this law, the two legal capacities of the parties are: - **Major** - **Sound Mind** A person should have completed the age of majority according to the law of the country, for example, in India the legal age is 18 years. A person should be sound mind (mentally fit) at the time of entering into a contract. ==End of OCR==