Law of Contracts Topics:

INDIAN CONTRACT ACT, 1872, ACT IX OF 1872

OFFER AND ACCEPTANCE INDIAN CONTRACT ACT, 1872, ACT IX OF 1872

The notion of contract is part of mens common stock even outside the field of legal science,
and to men of law, so familiar and necessary in its various applications, that we might expect a
settled and just apprehension of it to prevail everywhere. Nevertheless, we are yet far short of
this.

Indian contract Act is the Act which regulates the entire arena of business world which does its
business on the basis of contract. Contract Act contains 238 sections. Contract Act covers a
wide range of area like: Formation of contracts, contingent contracts, performance of
the contract, and consequences of breach of contract, sale of goods, indemnity and guarantee,
bailment, agency and so on. Under Section 1 of contract Act says that the Act is applicable to
the whole of India, except the state of Jammu and Kashmir.

In the following chapter, some of the important parts of the Contract Act were discussed.

A contract means an agreement which is enforceable by law .An agreement consists of

reciprocal between the two parties .In case of contract each party is legally bound by the
promise made by him. A contract or an obligation to perform a promise could arise in the
following way:

1. By Agreement and Contract

2. By Standard Form Contract and
3. By Promissory Estoppel

AGREEMENT AND CONTRACT

The most common way of making contract is through an agreement. The two parties may agree
to something through mutual negotiations. When one party makes an offer and the other accepts
the same, there arises an agreement ,which may be enforceable by law.

STANDARD FORM CONTRACT

In the modern age some persons , institutions or establishments such as the Railway, Insurance
Companies, Bank, Manufacturers of various goods, etc., may have to enter into a very large
number of contracts with thousands of persons. They cannot possibly negotiate individually
with the persons with whom the contracts are to be made. Contract with pre-drafted matters are
generally prepared by one party, which the other has to agree to. As a general rule, such standard
Form Contract are as much valid as those entered into through due negotiation.

PROMISSORY ESTOPPEL

Sometimes there may be no agreement and contract in strict sense of the term, but a person
making a promise may become bound because of the application of the equitable doctrine of
Estoppel.
CONTRACT
According to section 2(h) of the Indian Contract Act, 1872 An agreement enforceable by law
is a contract. All agreements are not enforceable by law and, therefore, all agreements are not
contracts. Some agreements may be enforceable by law and others not. For example, an
agreement to sell a radio set may be a Contract, but an agreement to see a movie may be a mere
agreement not enforceable by law. Thus all agreements are not contracts. Only those which
satisfy the essentials mention in Section 10 becomes contracts. However, all contracts are
agreements.

AGREEMENT
According to Section 2(e);Every promise and every set of promises forming the consideration
for each other is an agreement. In an agreement there is a promise from both sides, For
example ,A promises to deliver his watch to B and in return B promises to pay a sum of Rs.2000
to A, there is said to be an agreement between A and B.

Thus, when there is a proposal from one side and the acceptance of that proposal by the other
side, it result s in a promise .This promise from the two parties to one another is known as
an agreement.

THE ESSENTIALS OF A VALID CONTRACT

1. An agreement between the two parties .An agreement is the result of a proposal or an offer
by one party followed by its acceptance by the other.
2. Agreement should be between the parties who are competent to contract.
3. There should be a lawful consideration and lawful object in respect of that agreement.
4. There should be free consent of the parties, when they enter into the agreement.
5. The agreement must not be one, which has been expressly declared to be void.

From the point of view of the legality, there are different types of agreements.

1. CONTRACT
According to Section 2(h), Contract is an agreement which is enforceable by law. It has been
noted above that in order that an agreement becomes a contract , it has to satisfy all the
essentials of a valid contract as mentioned in Section 10.

CLASSIFICATION OF CONTRACTS
The contracts can be classified on the basis of formation and enforceability.

On the basis of formation the contracts can be classified as:

*Express or Formal Contracts.

* Implied Contracts.

Express Contracts are those Contracts which are made by words spoken or written
implied contracts are those, which are inferred from the conduct of parties or of circumstances.
Classification on the basis of enforceability.

On this basis the contracts are classified as:

1 Valid Contracts. 2 Void Contracts. 3 Voidable Contract.
Valid Contracts are those which satisfy all conditions prescribed by Law. Either the party can
go to the court for remedy.

2. VOID AGREEMENTS
According to Section 2(g), an agreement not enforceable by law is said to be void. For instance,
an agreement by a minor has held to be void. Sections 24 to 30 make a specific mention
about agreements which are void. Those agreements include an agreement include
an agreement without consideration. An agreement in restraint of marriage and agreement in
restraint of trade.

3. VOIDABLE CONTRACTS
According to Section 2(I), an agreement which is enforceable by law at the option of one or
more of the parties there to, but not at the option of the other ,is a voidable contract .Thus,
a voidable contract is one which could be avoided by one of the parties to the contract at his
option. Even if one of the parties does not avoid the contract ,the contract still becomes void
.For instance, when the consent of a party to a contract has been obtained by coercion, under
influence ,fraud or misrepresentation, the contract is voidable at the option of the party whose
consent has been so obtained.

OFFER AND ACCEPTANCE

It has been noted that an agreement between the parties is one of the essentials for creating
a contract ,An agreement arises by an offer or proposal by one of the parties and the
acceptance of such offer by the other.

PROPOSAL OR OFFER

The term proposal has been defined in section 2(a) as follow:

When one person signifies to another his willingness to do or obtain from doing anything , with
a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal.

The term proposal used in the Indian Contract Act is synonymous with the term offer used in
English law. The willingness to do or abstain from doing something, i.e., the proposal or the
offer may be made with a view to obtaining the assent of the other party thereto.

ACCEEPTANCE : A proposal, when accepted, results in an agreement .It are only after
the acceptance of the proposal that a contract between the two parties can arise.

According to section 2(b): when the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. A proposal, when accepted , become a promise.

The Person making the proposal does not become bound thereby until acceptance. As soon as
his proposal is accepted that is known as promise whereby both the parties become bound.

ESSENTIALS OF VALID ACCPTANCE :In order that acceptance of an offer can result in
a contract, the acceptance must satisfy the following requirements.
1. Acceptance should be communicated by the offeree to the offeror.
2. Acceptance should be absolute and unqualified.
3. Acceptance should be made in some usual and reasonable manner, unless the proposal
prescribes the manner of acceptance.
4. Acceptance should be made while the offer is still subsisting.

CONSIDERATION

Presence of consideration is one of the essentials of a valid contract. Subject to certain

exceptions, the general rule in India is that an agreement without consideration is void.

In England, the contracts are divided mainly into two categories:

1. Contracts under seal, or contracts in the form of a deed, such contracts are valid even without
consideration.
2. Simple contracts, or patrol contracts. For the validity of such contracts the presence
of consideration is needed.

Consideration means something in return for the promise. It may be either some benefit
conferred on One party or some detriment suffered by the other.

TERMINATION OR DESCHARGE OF CONTRACT

By Performance.
By mutual consent/agreement.
By lapse of time.
By impossibility.
By operation of Law.
By breach of contract.

REMEDIES FOR BREACH OF CONTRACT : Under sec 73 when a contract has been
broken, the party who suffers by such breach is entitled to receive, from the party who has
broken the contract, compensation for any loss or damage caused to him thereby, which
naturally arose in the usual course of things from such breach, or which the parties know, when
they made the contract, to be likely or result from the breach of it. Such compensation is not to
be given for any remote and indirect loss or damage sustained by reason of the breach.

Damages may be classified into four categories.

1. Ordinary or general damages.

2. Special damages.
3. Exemplary or vindictive damages.
4. Nominal damages.

Under sec 74, when a contract has been broken, if a sum is named in the contract as the amount
to be paid in case of such breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled ,whether or not actual damage or loss is
proved to have been caused thereby ,to receive from the party who has broken the contract
reasonable compensation not exceeding the amount so named, or as the case may be, the penalty
stipulated for.