THE INDIAN CONTRACT ACT (ICA), 1872

What is a contract?
Section 2(h) An agreement enforceable by law is a contract. Thus, Contract = Agreement + Enforceability by Law An agreement The agreement shall be enforceable by law. All agreements are not enforceable by law and therefore, all agreements are not contracts.

1. 2. 3. 4.

Agreement?

Every promise and every set of promises forming the consideration for each other is an agreement

Promise/(s)

Promise/(s)

= Agreement
(in exchange for)

Cases
1. If I promise to offer you a dinner and break that promise, can you claim damages under Contract act? No An agreement between two persons to go together to the restraurant, or to cinema, or for a walk, does not create a legal obligation on their part to abide by it. A promises to deliver his radio to B and in return B promises to pay a sum of Rs. 500 to A. Is it agreement? YES

Promise?
Section 2(b) A proposal when accepted becomes a promise. Promise = Proposal/Offer + Acceptance

Proposal?
Section 2(a) Expression of willingness With a view to seek the assent of the other Thus, mere expression of willingness doesnt constitute offer/proposal.

Offer: Sec.2(a)

Essentials of offer: It must be an expression of the willingness to do or abstain from doing something. Such expression must be to another person. Such expression must be made with the intention to obtain the assent of the other person to such an act or abstinence.

ESSENTIAL REQUIREMENTS OF A VALID OFFER

The offer must be made with a view to obtain acceptance Must give rise to legal consequences & be capable of creating legal relationship. Terms must be certain & not vague. May be specific or general. Must not be an invitation to offer. Can be made subject to any terms & conditions. Must be communicated to offeree. Invitation to offer, cross offers & counter offers. Communication of special terms Prescribed mode of acceptance.

Case
1. X promises to pay an increased price for a horse if it proves lucky to him, is there a valid offer ?

No this offer is vague (not clear) it doesnt tell about the price clearly. An offer must be clear, definite, complete and final. It must not be vague.

Case
1. A advertise in the newspapers that he will pay rupees one thousand to anyone who restores to him his lost son. B without knowing of this reward finds As lost son and restore him to A. Can B claim reward? No In this case since B did not know of the reward, he cannot claim it from A even though he finds As lost son and restores him to A.

Offer and invitation to treat distinguished

A proposal or an offer has to be distinguished from an invitation to treat. Sometimes a person may not offer to sell his goods, but may make some statements or give some information with a view to invite others to make offers on that basis. For example, a bookseller sends a catalogue of books indicating prices of various books to many persons. This catalogue is not an offer to sell those books at prices indicated against those books. This is an Invitation to treat. If any person is interested in purchasing those books mentioned in the catalogue he may make an offer. Similarly, inviting persons to an auction where goods, which are to be auctioned, are displayed is not an offer for the sale of goods. The intending buyers, who make the bid make an offer. Such an offer, when accepted, by the fall of hammer or in some other customary way, will result in a contract.

Case
1. While negotiating, X made a statement of the price at which he is prepared to consider negotiating the sale of piece of land. Can Y bind X for that price ? No It is not an offer but a statement only. ( Harvey v. Facey (1893) A.C. 552).

Acceptance
Section 2(b) Giving of assent to the proposal. Enforceability by Law Agreements which are not enforceable Illegal/unlawful agreements, e.g., to smuggle/to kill Social Agreements (Balfour vs. Balfour)

Acceptance: Sec 2(b)

Acceptance must be given only by the person to whom the offer is made. Must be absolute & qualified. Must be in prescribed mode or reasonable manner. Must be communicated. Within reasonable time. Acceptance must succeed an offer. Rejected offers can be accepted only if renewed.

Case
1. Ram offers his goods to Shyam for Rs. 2000 only. Shyam remains silent. Ram despatches the goods. Is there a contract ?

No Mere silence on the part of the offeree does not amount to acceptance.

Lapse & revocation of an offer:

Lapse of stipulated or reasonable time. Acceptance not in prescribed mode. Rejection. Death or insanity of offeror or offeree before acceptance. Revocation. Non-fulfillment of condition precedent. Subsequent illegality or destruction of subject-matter.

ESSENTIAL ELEMENTS OF CONTRACT

Agreement Intention to create legal relationship Free and genuine consent. Parties competent to contract. Lawful consideration. Lawful object. Must be in writing. (Generally, oral contract is not enforceable) Agreement not declared void or illegal. Certainty of meaning. Possibility of performance. Necessary legal formalities.

Terminology

consensus-ad-idem:-meeting of the minds jus in personam :-right against or in respect of a specific person. jus in rem :-right against or a thing

Case
1. A entered into a bond with the company to serve for a period of five years. In case,A leaves his job earlier and joins elsewhere with companys competitor within five years, he was liable for damages. A was imparted the necessary training but he left the job and joined another company. The former employer instituted a suit against A. Was it a valid contract ? Yes, it was a valid contract and had reasonable conditions

Agreements Declared Void under ICA

Agreement by or with persons incompetent to contract.(Sections 10 & 11) Agreement entered into through a mutual mistake of fact between parties. (Section 20) Agreement, the object or consideration of which is lawful.(Section 23) Agreement , the consideration or object of which is partly unlawful.(Section 24) Agreement made without consideration. (Section 25) Agreement in restraint of marriage. (Section 26) Agreements in restraint of trade. (Section 27) Agreements in restraint of legal proceedings. (Sction 29)

Case

X promised to marry Y only and none else, and to pay Rs 2000 in default . X married Z and Y sued X for recovery of Rs 2000. Is Y recover the money? It was held that Y could not recover anything because the agreement was in restraint of marriage.

Case
In Bhopal city, 29 out of 30 manufacturers of comb agreed with R to supply him combs and not to anyone else. R was fee to reject goods if he found that there was no market for them. Advice R. It is void, because the agreement was in restrain of trade.

Case

X promises to pay Rs 1000 to Y if it rained on a particular day, and Y promises to pay Rs 1000 to X if it did not. What is legal view on this case? Not nobody is going to claim,Such agreement is a wagering agreement

CLASSIFICATION OF CONTRACTS

Classification according to validity or enforceability Classification according to Mode of formation Classification according to Performance