INDIAN CONTRACTS ACT,1872

● The Indian Contract Act came into force on 1st September 1872.
● It was enacted mainly with a view to ensure reasonable fulfilment of expectations
created by the promise of the parties and also enforcement of obligations prescribed by
an agreement between the parties.
● The objective of the Act- To ensure that rights & obligations arising out of the contract
are honoured and that legal remedies are made available to an aggrieved party against
the party failing to honour his part of the agreement (guilty party).

CONTRACT
● According to Sir William Anson, "A contract is a legally binding agreement enforceable
at law made between two or more persons, by which rights are acquired by one or more
to acts or forbearances (abstaining from doing something) on the part of others".
● According to Fedrick Pollock, "Every agreement and promise enforceable at law is a
contract".
● According to Sec 2(h) of the Indian Contract Act,1872 “Contract is an agreement
which is enforceable by law".

AGREEMENT
The Indian Contract Act 1872, section 2(e), defines an Agreement as “Every promise and
every set of promises, forming the consideration for each other is an agreement."

According to Sec 2(b) of the ICA, 1872, “ A proposal when accepted becomes a promise”.

A promise is essentially an offer or a proposal, made by a person or an entity, towards another.

Contract = Agreement + Enforceable by law(legal obligation)

Void Agreement:
Sec 2(g) ”An agreement which is not enforceable by law is said to be void”.
Characteristic of a valid contract
1. There must be an offer
2. There must be acceptance of the offer
3. There must be a consideration
4. Intention to create legal relations between the parties
5. The parties must have contractual capacity
6. The contract must not be unlawful or contrary to public policy
7. The contract must be in the form required by law

TYPES OF CONTRACT
I) ON THE BASIS OF MODE OF FORMATION

a) Implied Contract:
A contract inferred by
• The conduct of a person or/and
• The circumstances of the case.

Implied contract= Implied offer + Implied acceptance

According to Sec 9 in so for as such proposed or acceptance is made otherwise than in words,
the promise is said to be implied.
Example: X stops a taxi by waving his hand and takes his seat. There is an implied contract
that X will pay the prescribed fare.

b) Express Contracts:
A contract is made by words spoken or written.
Example: A says to B ‘will you purchase my bike for Rs.20,000?” B says to A “Yes”.

Express contract= Express offer + Express acceptance

c) Quasi-contracts or Constructive:
In such types of contracts, the rights and obligations arise not by an agreement but by the
operation of law. Here, there is no intention on the part of either party to make a contract but the
law imposes a contract upon the parties.
Example: X delivers a birthday gift to the wrong addressee Y. Y is under an obligation either to
pay for it or return it to X.

d) E-contract:
An e-contract is a contract made through the digital/electronic mode such as e-mail.

(II) ON THE BASIS OF PERFORMANCE

a) Executed contract:
In an executed contract both the parties have performed/fulfilled their promises and respective
obligations under the contract.
Example: X buy a car from B by paying cash, B instantly delivers his car.
b) Executory contract:
In this, both parties are yet to perform their promises and obligations.
Example: A sells his car to B for Rs. 2 lakhs. If A is still to deliver the car and B is yet to pay the
price, it is an executory contract.

c) Partly Executed and partly executory contract:

d) Unilateral Contract:
A unilateral contract is also known as a one-sided contract. It is a type of contract where only
one party has to perform his promise.
Example: Anuj promises to pay Rs. 1000 to anyone who finds his lost mobile. B finds and
returns it to Anuj. From the time B found the mobile, the contract came into existence. Now Anuj
has to perform his promise, i.e. the payment of Rs. 1,000 to B.

e) Bilateral contract:
A Bilateral contract is one where the obligation or promise is outstanding on the part of both
parties. It is also known as a two-sided contract.
Example: A promises to sell his car to B for a certain price and agrees to deliver the car on the
receipt of the payment by the end of the week. The contract is bilateral as both parties have
exchanged a promise to be performed within a stipulated time.

(III) ON THE BASIS OF VALIDITY/ENFORCEABILITY

a) Valid contract:
A contract which satisfies all the essential elements of a valid contract as per Section 10 of the
ICA, it is said to be a valid contract.

b) Void contract:
As per sec 2(j) of ICA, 1872 “A contract which ceases to be enforceable by law becomes void
when it ceases to be enforceable”. A void contract is a contract which is valid when entered into
but which subsequently becomes void due to the impossibility of
performance.
Example: Mr A agrees to write a book with a publisher. After a few days, A dies in an accident.
Here the contract becomes void due to the impossibility of performance of the contract.

c) Voidable contract:
Section 2(i) defines the voidable contract as one which is enforceable by law at the option of
one or more parties but not at the option of the other or others.

A voidable contract is one in which consent of the other party is not free i.e. it is induced by
coercion(unlawful force), fraud, undue influence or misrepresentation and hence the other party
has a right to treat it as a voidable contract.

In such a contract the aggrieved party has two options to exercise: Affirmation or
Cancellation/Avoidance of the contract.
Example- X at the gunpoint threatens to kill Y if he does not sell his flat for 5 lakhs to X. Y sells
the flat to X and obtains payment. Here, Y’s consent has been induced by coercion and the
contract becomes voidable at his option.

d) Illegal contract:
Illegal contracts are those that are forbidden by law. All illegal contracts are always void ab
initio. Because of the illegality of their nature they cannot be enforced by any court of law. In
fact, even associated contracts cannot be enforced. Contracts which are opposed to public
policy or immoral, commit a crime like supari contracts, smuggling, kidnapping, and planting a
bomb are illegal contracts.
Example: X rent his house for gambling purpose to Y. Y does not pay the rent. X cannot recover
this rent amount from him through the court because the agreement between X and Y is illegal
and also the object is unlawful.

e) Unenforceable contract:
A type of contract which satisfies all the requirements of the contract but has technical defects
such as not being in writing, being under-stamped, etc. is called an unenforceable contract.
When such legal formalities are complied with, later on, the act becomes enforceable.