Introduction to Contract Law
Updated on Feb 07, 2025 | 8 min read | 9.0k views
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Updated on Feb 07, 2025 | 8 min read | 9.0k views
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Indian contract act stipulates rules and regulations that outline the procedure to be followed in the event of any disputes emerging from the contracts. This act contains 266 sections and is valid across India except for Jammu and Kashmir.
It was enacted in 1872 and was enforced on 1st September 1872. In this act, the word ‘contract’ has been obtained from the Latin term ‘contructus’, which means ‘to work on contract’. Moreover, this law is centred on the principle of ‘pacta sunt servanda’, which implies ‘agreements must be kept’.
The law entails different aspects like what is an acceptance, offer, essentials of contract, quasi-contracts, voidable agreements, valid consideration, damages under the Indian contract act 1872, and more. It also includes a Contract of Indemnity, bailment, Guarantee, pledge, and Agency.
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Keep reading to learn all about the Indian contract act.
A contract is a legal enforcement between two parties, companies, or businesses that bonds them in an agreement protected by law. The contract among the parties can be created verbally, in writing, or by conduct. When the offer is accepted by both the involved parties/companies/businesses, it is called an agreement. However, when the agreement is combined with law enforcement, it is termed a contract.
Section 2(H) of the Indian Contract Act 1872 defines the term “contract”. It stipulates that an agreement that is enforceable by the law is called a Contract. The intent should be defined to establish legal relationships between the two parties, while there can’t be a social, religious, or moral relationship between the said parties.
A contract provides certain privileges to parties involved and grants certain obligations they should fulfil. Note that a contract is an agreement, but all agreements are not contracts.
The four major types of contracts are described below.
According to Indian contract law, the two fundamental components of a Valid Contract are Agreement and Enforceable by law. Let’s understand these two terms briefly.
An agreement is a set of promises that constitutes form consideration for the involved parties. The Indian Contract Act 1872, section 2(e), defines this component. When a valid proposal/offer is legally accepted under legal consideration, it is called an agreement.
It suggests that if any breach of contract due to any party occurs, the abused party can approach the court and have it legally enforced. Alternatively, the court orders the party who breached the contract to correct it or recompense the abused party in the form of reimbursements.
Section 10 of ICA1872 (Indian Contract Act 1872) defines certain essential features that are obligatory for a valid contract. They are mentioned below.
Here’s the definition of offer/proposal according to Section 2(a) of the Indian contract act 1872.
A person is said to make a proposal if they denote to another person their readiness to do or to refrain from doing anything, with a vision to obtain the approval of that other person to such act or abstention.
The person who prepares the offer/proposal is the promisor/offeror. The person on whom the proposal is prepared is the promisee/offeree.
The essential conditions that must be fulfilled for a valid offer are
Two types of offers are described below.
Specific offer: It is made to a specific individual/group of individuals and can be approved only by the individual(s) to whom it is made.
General offer: It is made to the general public at large-scale, and it can be approved by an individual who steps forward and fulfils the obligatory conditions.
The definition of “Acceptance” according to section 2(b) of the Indian contract act 1872 is as follows:
When the person to whom the proposal is made indicates their approval thereby, the proposal is known as an acceptance. When a proposal/offer is accepted, it becomes a promise.
The essential requisites of a valid acceptance are as below:
Consideration is a fundamental requisite of the establishment of a contract. According to the Section 2(d) of the Indian contract law, the consideration is defined as,
‘When, at the wish of the promisor, the promisee or any other individual has performed or refrained from doing, or does or refrains from doing, or promises to do or to refrain from doing, an act, promise, or abstinence is known as consideration for that promise.
An agreement prepared without consideration shall not be void under the following conditions:
The ‘Privity of Contract’ principle states that a contract only exists between the two parties, and no third person can litigate upon it. However, the following elements are exempted from the principle of the Privity of Contract:
The Indian contract law permits people to legalize and define their relations in the best possible way they want. It helps the contracts to function lawfully and also offers remedies to the individuals affected by it. Hence, it is one of the most significant acts in India.
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