INDIAN CONTRACT ACT, 1872
The Indian Contract Act, came into force on September 1, 1872 and is extended to the whole of India except to the state of Jammu and Kashmir.
1. Contract word has come from the Latin word “CONTRACTUM” which means “Drawn Together”.
2. An Agreement creating and defining obligation among parties – Salmond.
3. Every Agreement and Promise is Enforceable by law.
Section 2(h) – An Agreement enforceable by law—
1. AGREEMENT : Every promise and set of promises forming consideration for each other.
2. PROMISE: Offer + Acceptance = Accepted Proposal. Any Proposal when accepted becomes Promise.
** All Contracts are Agreements. But, all Agreements are not Contracts.
Section 10—All Agreements are contracts if they are made by the free- consent of the parties and competent to contract for a lawful consideration and with a lawful object are not hereby expressly declared void by any law of the Country.
1.CONSENSUS AD- IDEM – Identity of Minds.
There is no Identity of Minds and there is no Agreement.
2.LEGAL PARTNERSHIP- In all Social Agreements there is a presumption of Law that parties have no intention, when entering into an agreement there should be an intention.
3.LAWFUL CONSIDERATION- Consideration means something in return and consideration must be lawful.
4.CAPACITY OF PARTIES- Unsoundness of a person ,mental deficiency are incompetent to Contract.
5. FREE CONSENT- Consent is defined in Section.13 .
Free consent is defined in Section.14. Consent is said to be free , when it is not caused by Innocent Representation or Mis-Representation and not by International Representation – FRAUD.
MISTAKE – two types:
1. BILATERAL – Mistake in the mind of two parties. Contract is void.
2. UNILATERAL – Mistake in the mind of only one party. Contract cannot be avoided.
6. LAWFUL OBJECT- Object means Purpose for which we are entering into Agreement must be Lawful.
7. CERTAINITY—Certainty means Clarity. Terms of agreement should be clear and not vogue or ambigious. If the terms of agreement are not clear then the contract is not valid.
8. POSSIBILITY OF PERFORMANCE—Acts which are not possible to perform, there is no Contract between the parties.
9. Contract may be oral or in writing. If law says – it should be in writing , then it has to be in writing otherwise not enforceable.
CLASSIFICATION OF CONTRACTS:
1. VALID – All agreements which fulfil the conditions in Section.10 are valid contracts.
2. VOID – Which are not enforceable by law due to happening of some event which are valid in the beginning. Void- ab- inito from the beginning.
3. VOIDABLE – Which can be avoided by the option of the one of the parties whose consent is not free.
CONTRACT IS VOIDABLE ONLY IN FOUR INSTANCES—
3. Undue Influence
4.UNFORCEABLE—Technical defect. Ex. Unstamped Promissory note.
5.ILLEGAL—1.Forbidden by Law ; 2. Defeat other laws; 3. Fraudulent; 4. Injury to Person or Property; 5. Immoral ; And 6. Opposed to Public Policy—Against the Interest of Society.
All Illegal Agreements are void. But all Void Agreements are not necessarily Illegal.