Meaning of Contract & Other definitions under Indian Contract Act, 1872

What is Contract?

As mentioned in section 2(h) of the Indian Contract Act, 1872 “An agreement enforceable by law may be a contract”.

A contract may be a combination of the 2 elements:

There must be an agreement
Agreement must be enforceable by law (obligation)

Contract = Agreement + Enforcement by law

Agreement

According to Section 2(e)of Indian Contract Act,1872 “Every promise and each set of promises, forming the consideration for every other, is an agreement.”
Thus it’s clear from this definition that a ‘promise’ is an agreement.

Agreement = offer + Acceptance

Promise

As mentioned in Section 2(b) “when the person to whom the proposal is formed signifies his assent thereto, the proposal is claimed to
be accepted. A proposal, when accepted, becomes a promise.“

An agreement, therefore, comes into existence when one party makes a proposal or offer to the opposite party which
other party signifies his assent thereto.

Legal obligation

As stated above, an agreement to become a contract must produce to a legal obligation i.e. a requirement enforceable
by law.

Elements of a legitimate Contract

According to Section 10 of the Indian Contract Act, 1872 provides that “all agreements are contracts if they’re made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and aren’t hereby expressly
declared to be void”.

Thus, the essential elements of a legitimate contract are as follows:

  • An offer or proposal by one party and acceptance of that provide by another party leading to an agreement —
  • consensus­ad­idem.
  • An intention to make legal relations or intent to possess legal consequences.
  • The agreement is supported by a lawful consideration.
  • The parties to the contract are legally capable of contracting.
  • Genuine consent between the parties.
  • The object and consideration of the contract is legal and isn’t against public policy.
  • The terms of the contract are certain.
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Therefore, to make a legitimate contract there must be (i) an agreement (ii) supported the real consent of the parties,
(iii) supported by a lawful consideration, (iv) made for a lawful object, and (v) between the competent parties.

Offer and Acceptance

Firstly, there must be a suggestion and its acceptance. Such offer and acceptance should create legal obligations between parties. this could end in an ethical duty on the one that promises or offers to try to to something. Firstly, there must be a suggestion and its acceptance. Similarly, this could also provides a right to the promise to say its fulfilment. Such duties and rights should be legal and not merely moral.
Case law: In Balfour v. Balfour, a husband promised to pay maintenance allowance monthly to his wife, goodbye as they continue to be separate. When he did not perform this promise, she brought an action to enforce it. because it is an agreement of domestic nature, it had been held that it doesn’t contemplate to make any legal obligation.

Consent

Consent means knowledge and assent of the parties concerned. A contract is formed when one person makes a
suggestion while another person accepts the offer. This acceptance of the offer should be made with none force or threat. It means a consent given should be free and genuine.

Example: A has two Bike – one black and therefore the other white. He offers to sell one among his Bike to B. A intends to sell the black one while B accepts the offer believing that it’s for the white Bike. Here, A and B aren’t thinking within the same sense of a specific thing. During this situation, there’s an error , so it can’t be said to be free consent.

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Capacity of the parties

The third essential element of a legitimate contract is that the capacity of the parties to form a legitimate contract.
Capacity or incapacity of an individual might be decided only after calculating various factors.

Consideration

As mentioned in Section 2(d) of the Indian Contract Act, 1872 which defines consideration thus:
“when at the will of the promisor, the promisee or the other person has done or abstained from doing, or does or abstains from doing, or promises to try to to or to abstain from doing something, such act or abstinence or promise is named a consideration for the promise”.

In simple words ‘Consideration’ would generally mean ‘compensation’ for doing or omitting to try to to an act or deed.
it’s also mentioned as ‘quid pro quo’ viz ‘something reciprocally for an additional thing’. Such a consideration should be a lawful consideration.

Example: X agrees to sell his toys to Yfor Rs. 100, Y’s promise to pay Rs. 100 is that the consideration for X’s promise to sell his toys and X’s promise to sell the toys is that the consideration for Y’s promise to pay Rs. 100.

Not expressly declared to be void

The last essential elements of a legitimate contract to clinch a contract are that the agreement entered into for this purpose must not be which the law declares to be either illegal or void. An illegal agreement is an agreement expressly or impliedly forbidden by law. A void agreement is one with none legal effects.

Example: Threat to commit murder or making/publishing defamatory statements or getting into agreements which are against public policy is against the law in nature. Similarly, any agreement in check of trade, marriage and legal proceedings etc. are classic samples of void agreements.

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Summary

The Indian Contract Act mostly deals with the overall principles and rules governing to contracts. The Act is divisible into two parts.

  • the primary part (Section 1­ 75) deals with the overall principles of the law of contract, and thus applies to all or any
    contracts regardless of their nature.
  • The second part (Sections 124­238) deals with certain special sorts of contracts, namely contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.

Author: Ananya Kashyap,
Symbiosis Law School, Nagpur/ 1 year

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