Indian Contract Act, 1872

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Indian Contract Act, 1872 : Indian Contract Act, 1872 By Anurag Jain 08800200997, allcsclub@gmail.com www.facebook.com/companysecretariesinindia www.cscoachingclassesindelhi.com

Purpose of Indian Contract Act : Purpose of Indian Contract Act The Act was passed by British India and is based on the principles of English Common Law. It determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. It is applicable to the All States of India except the State of Jammu & Kashmir.

History of Indian Contract Act : History of Indian Contract Act The Indian Contract Act came into force on 1 st September 1872 . Before the enactment of the Indian Contract Act, 1872, there was no codified law (Specific law) for contracts in India . The Act originally had 266 Sections. The entire Act was divided into following parts: General Principles of Law of Contract (Sec 1 to 75) Contract relating to Sale of Goods (Sec 76 to 129) Special kinds of Contracts (indemnity, guarantee, bailment & pledge) (Sec 125 to 238) Contracts relating to Partnership (Sec 239 to 266)

Different Acts for Sale of Goods and Partnership : Different Acts for Sale of Goods and Partnership Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and partnership . The developments of modern and complex business world found the provisions contained in the Indian Contract Act inadequate to deal with all the aspects of Sale of goods and partnership. Therefore, subsequently the provisions relating to the sale of goods and partnership contained in the Indian Contract Act were repealed respectively in the year 1930 and 1932 and new enactments namely Sale of Goods Act, 1930 and Indian Partnership Act, 1932 were re-enacted.

Scope of Indian Contract Act : Scope of Indian Contract Act At present the Indian Contract Act may be divided into two parts: Part 1 deals with the General Principles of Law of Contract (Sec 1 to 75) Part 2 deals with Special kinds of Contracts such as Contract of Indemnity and Guarantee, Contract of Bailment and Pledge, Contract of Agency (Sec 125 to 238).

MEANING OF CONTRACT : MEANING OF CONTRACT CONTRACT Agreement Legal Enforceability According to Section 2(h) - A contract is an agreement enforceable by law.

MEANING OF AGREEMENT : MEANING OF AGREEMENT According to Section 2(e) - every promise and every set of promises, forming the consideration for each other, is an agreement. AGREEMENT Promise or set of Promises Valid Consideration

Characteristics of an Agreement : Characteristics of an A greement Agreement Plurality of persons Consensus ad idem At least 2 person Matching of mind at the same time on the same subject matter in the same sense.

MEANING OF PROMISE : MEANING OF PROMISE According to Section 2(b) w hen the person to whom the proposal is made signifies his assent thereto , the proposal is said to be accepted. A proposal, when accepted, becomes a promise. PROMISE Offer/Proposal Acceptance

MEANING OF CONTRACT : MEANING OF CONTRACT CONTRACT Agreement Legal Enforceability Where Rights and Obligations in a contract are enforceable in the eyes of Court. Means where parties to the contract have rights to file case in the court. Promise or set of Promise Lawful Consideration Offer Acceptance

Rights and Obligations : Rights and Obligations Right means interest of a party in a promise. Obligation means the duty to do or not to do something by a party in a promise. Rights and Obligations in a promise may or may not be legally enforceable (enforceable by law). Means in case of non-performance of any duty by one party, other party to an agreement may or may not go to court. Legal enforceability depends upon the intention of parties and the provisions of laws.

Examples of Rights and Obligations : Examples of Rights and Obligations Ram agrees with Shyam (a shopkeeper) to buy an AC for Rs. 50000 from him. Now, this is a commercial contracts. So, it is presumed that here parties wants to create legal enforceability. Now rights and obligations of the parties under this contract are: Rights of Ram: to take AC from Shyam . Obligation of Ram: to pay agreed amount to Shyam . Rights of Shyam : to take agreed amount from Ram. Obligation of Shyam : to deliver AC to Ram.

Agreements which are not Contracts : Agreements which are not Contracts Agreements relating to social matters (like general agreements between friends) Domestic arrangements (like agreements between husband and wife, parents and children etc.) Agreements where intention of the parties is not to create any legal obligations.

ESSENTIAL ELEMENTS OF A VALID CONTRACT (Section 10) : ESSENTIAL ELEMENTS OF A VALID CONTRACT (Section 10) According to Section 10, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration, with a lawful object, and if they are not expressly declared to be void.

ESSENTIAL ELEMENTS OF A VALID CONTRACT : ESSENTIAL ELEMENTS OF A VALID CONTRACT The essential elements of a valid contract are: Offer and Acceptance : There shall be an offer or proposal by one party and acceptance of that offer by another party resulting in an agreement (consensus ad idem). Intention to create legal relations : There shall be an intention between the parties to create legal relations. Lawful consideration : The agreement is supported by a lawful consideration. Consideration means something in return. Capacity of parties : The parties to the contract shall be legally competent to contract. Free consent : The consent of the parties shall be genuine and free. Legal object : The object of the contract shall be legal and shall not be opposed to public policy. Certain terms : The terms of the contract shall be certain and shall not be vague. Possible performance : The agreement is capable of being performed i.e., it is not impossible of being performed.

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