The Indian Contract Act, [1] prescribes the law relating to contracts in India and is the key act regulating Indian contract law. The Act is based on the principles of English Common Law. It is applicable to all the states of India. It determines the circumstances in which promises made by the parties to a contract shall be legally binding. Under Section 2 h , the Indian Contract Act defines a contract as an agreement which is enforceable by law. Offer 2 a : When one person signifies to another his willingness to do or to abstain 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.

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A proposal, when accepted, becomes a promise:. Considerations for each other are called reciprocal promises:. Communication, acceptance and revocation of proposals. Communication when complete. The communication of the proposal is complete when B receives the letter. The communication of the acceptance is complete, as against A when the letter is posted as against B, when the letter is received by A. The revocation is complete as against A when the telegram is despatched. It is complete as against B when B receives it.

B revokes his acceptance by telegram. B's revocation is complete as against B when the telegram is despatched, and as against A when it reaches him. Revocation of proposals and acceptances. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Acceptance must be absolute. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

Acceptance by performing conditions, or receiving consideration. Promises express and implied. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

What agreements are contracts. Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. Who are competent to contract. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake. A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code.

A afterwards sues B for breach of contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although section of the Indian Penal Code was not in force at the time when or place where the act was done. Nothing in this sub-section shall affect the provisions of section Ill of the Indian Evidence Act, A employs undue influence.

B employs undue influence. It lies on B to prove that the contract was not induced by undue influence. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms.

This is a transaction in the ordinary course of business, and the contract is not induced by undue influence. A says nothing to B about the horse's unsoundness. This is not fraud in A. Here, the relation between the parties would make it A's duty to tell B if the horse, is unsound. Here, A's silence is equivalent to speech. A has private information of a change in prices which would affect B's willingness to proceed with the contract.

A is not bound to inform B. Voidability of agreements without free consent. A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract hall be performed and that he shall be put in the position in which he would have been if the representations made had been true.

The contract is voidable at the option of B. B examines the accounts of the factory, which show that only four hundred mounds of indigo have been made.

After this B buys the factory. The contract is not voidable on account of A's misrepresentation. B thereupon buys the estate. The estate is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and the mortgage debt redeemed. Through A's ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A. The sale is voidable at the option of A. Agreement void where both parties are under mistake as to matter of fact.

It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreement is void. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. B was dead at the time of the agreement, but both parties were ignorant of the fact. Effect of mistakes as to law. A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation: the contract is not voidable.

Contract caused by mistake of one party as to matter of fact. What considerations and objects are lawful and what not. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Here B's promise to pay the sum of 10, rupees is the consideration for A's promise to sell the house, and A's promise to sell the house is the consideration for B's promise to pay the 10, rupees.

These are lawful considerations. B promises to grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party and they are lawful considerations. Here A's promise is the consideration for B's payment and B's payment is the consideration for A's promise and these are lawful considerations.

Here the promise of each party is the consideration for the promise of the 'other party. They are lawful considerations. The agreement is void, as its object is unlawful. The agreement is void, as the consideration for it is unlawful. The agreement between A and B is void. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect a purchase by the defaulter, and would so defeat the object of the law.

The agreement is void, because it is immoral. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code. Agreement void, if considerations and objects unlawful in part.

A promise to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A salary of 10, rupees a year. The agreement is void, the object of A's promise, and the consideration for B's promise, being in part unlawful. Agreement without consideration, void, uncles it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.

In any of these cases, such an agreement is a contract. Explanation 1. Explanation 2. This is a void agreement. A puts his promise to B into writing and registers it. This is a contract. B promises to give A Rs. B promises to pay A's expenses in so doing. A signs a written promise to pay B Rs. A's consent to the agreement was freely given.

The agreement is a contract notwithstanding the inadequacy of the consideration. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A's consent was freely given. Agreement in restraint of marriage void.

Agreement in restraint of trade void.


The Indian Contract Act, 1872 (Act no. 9 of 1872)

April, ]. Short title. Chapter I. Communication, Acceptance and Revocation of Proposals.


Indian Contract Act, 1872: Bare Act

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