LLB SEM 1

1. UNIT 1
LLB I
BPOC

2. UNIT 1
GENERAL
PRINCIPLES OF
CONTRACT ACT
(Sec. 1 to 75 )

3. INTRODUCTION :-
 The law relating to contracts in India is contained
in Indian Contract Act, 1872.The Act was passed
by British India and is based on the principles of
English Common Law.
 It is applicable to all the states of India except the
state of Jammu and Kashmir.
 It determines the circumstances in which promises
made by the parties to a contract shall be legally
binding on them. All of us enter into a number of
contracts everyday knowingly or unknowingly.
Each contract creates some rights and duties on
the contracting parties

4. CONTI..(WHY) OR (OBJECT)
 The basic purpose of contract law is to provide a
framework within which individuals can freely
contract.
 The rule of contract is the Remedies that are
available in a court of law against a person who
fails to perform his contact .
 Example : commerce and industry as bulk of
their business transaction are based on
contract.

5. WHAT IS CONTRACT :-
 The term Contract is defined in section 2 (h) of the
Indian Contract Act.
 Contract 2(h) :- An agreement enforceable by Law
is a contract.
 OtherWords :-
Contract = An Agreement + Enforceability
 Definition shows that a contract must have the
following two elements :
1) An Agreement and
2) An Agreement must be enforceable by law.

6. Conti…
 Agreement 2(e) :- Every promise and set of
promises forming the consideration for each
other.
 In short, agreement = offer + acceptance.
 If one party fails to perform as promised the
other party can use the court system to enforce
the contract and recover damages or other
remedy.

7. Essential Elements of a Valid
Contract :-
1). Offer and Acceptance:- In order to create a valid
contract, there must be a 'lawful offer' by one
party and 'lawful acceptance' of the same by the
other party. Parties are

8. Conti…

9. Conti…
2). Intention to Create Legal Relationship:- In case, there
is no such intention on the part of parties, there is no
contract. Agreements of social or domestic nature do not
contemplate legal relations.
Example : A husband promised to pay his wife a house hold
allowance of rs 10000 per months. Later the parties
separated and the husband failed to pay the amount.The
wife sued for the allowance. Held agreements such as
these were outside the realm of contract.
3). Lawful Consideration:- Consideration has been defined
in various ways. Consideration means an advantage or
benefit moving from one party to the other. It is the
essence of a bargain. In simple words
consideration is known as quid pro-quo or something in
return. [section 2(d) 23 and 25 ]

10. Conti…
4). Capacity of parties:-The parties to an agreement
must be competent to contract. If either of the
parties does not have the capacity to contract, the
contract is not valid.
According the following persons are incompetent
to contract. (secs. 11 and 12 )
(a)
Minority,
(b) Persons of unsound mind, lunacy, idiocy,
drunkenness and
(c) persons disqualified by law to which they are
subject.

11. Conti…
5). Free Consent:- 'Consent' means the parties must have
agreed upon the same thing in the same sense.
According to Section 14, Consent is said to be free when
it is not caused by-
(1) Coercion, or
(2) Undue influence, or
(3) Fraud, or
(4) Mis-representation, or
(5) Mistake.
An agreement should be made by the free consent of
the parties.

12. Conti…
6). Lawful Object(sec. 23) :- The object of an agreement
must be valid. Object has nothing to do with consideration.
It means the purpose or design of the contract.Thus, when
one hires a house for use as a gambling house, the object of
the contract is to run a gambling house.
The Object is said to be unlawful if-
(a) it is forbidden by law;
(b) it is of such nature that if permitted it would defeat the
provision of any law;
(c) it is fraudulent;
(d) it involves an injury to the person or property of any
other;
(e) the court regards it as immoral or opposed to public
policy.

13. Conti….
7). Certainity of Meaning:- According to Section
29,"Agreement must be certain and not vague or
indefinite”. If it is vague and it is not possible to
ascertain its meaning it cannot be enforced.
Example :
8). Possibility of Performance :- If the act is
impossible in itself, physically or legally, if cannot be
enforced at law.
For example, Mr. A agrees with B to discover
treasure by magic. Such Agreements is not
enforceable.

14. Conti…
9). Not Declared to be void or Illegal (sec 24 to 30 ):-The
agreement though satisfying all the conditions for a valid
contract must not have been expressly declared void by any
law in force in the country. Agreements mentioned in Section
24 to 30 of the Act have been expressly declared to be void for
example agreements in restraint of trade, marriage, legal
proceedings etc.
10). Legal Formalities (sec . 10):- An oral Contract is a perfectly
valid contract, expect in those cases where writing,
registration etc. is required by some statute. In India writing is
required in cases of sale, mortgage, lease and gift of
immovable property, negotiable instruments; memorandum
and articles of association of a company, etc. Registration is
required in cases of documents coming within the scope of
section 17 of the Registration Act.

15. Types of Contracts :-

16. Classification according to
validity or enforceability :-
a) Valid contract: A contract which satisfies
all the conditions prescribed by law is a valid
contract.
E.g. X offers to marry y. y accepts X offer.This
is a valid contract.
Section 10 of indian

17. Conti..
b) Void Contract: The term void contract is described as
under section 2(j) of I.CA, 1872, A contract which cases to
be enforceable by law becomes void when it ceases to be
enforceable. In other words, a void contract is a contract
which is valid when entered into but which subsequently
became void due to impossibility of performance, change
of law or some other reason.
E.g. X offers to marryY,Y accepts X offer. Later onY dies this
contract was valid at the time of its formation but became
void at the death ofY.


18. Conti….
c) Void Agreement: According to Section 2(g), an
agreement not enforceable by law is said to be
void. Such agreements are void- ab- initio which
means that they are unenforceable right from the
time they are made.
E.g. in agreement with a minor or a person of
unsound mind is void –ab-initio because a mino
or a person of unsound mind is incompetent to
contract.

19. Conti…
d) Voidable contract to section 2(i) : According of the Indian contract
act, 1872, A voidable contract is one which can be set aside or
avoided at the option of the aggrieved party. Until the contract is set
aside by the aggrieved party, it remains a valid contract. For e.g. a
contract is treated as voidable at the option of the party whose
consent has been obtained under influence or fraud or
misinterpretation.
E.g. X threatens to killY, if the does not sell his house for Rs. 1 lakh
to X.Y sells his house to X and receives payment. Here,Y consent has
been obtained by coercion and hence this contract is void able at the
option ofY the aggrieved party.

20. Conti…
e) Illegal Agreement: An illegal agreement is
one the object of which is unlawful. Such an
agreement cannot be enforced bylaw.Thus,
illegal agreements are always void – ab- initio
(i.e. void from the very beginning)
e.g. X agrees to y Rs. 1 lakhY kills Z.Y kill and
claims Rs. 1 lakh.Y cannot recover from X
because the agreement between X andY is
illegal and also its object is unlawful.

21. Conti…
f) Unenforceable contract: It is contract which is
actually valid but cannot be enforced because of
some technical defect (such as not in writing,
under stamped). Such contracts can be enforced
if the technical defect involved is removed.

22. Classification according to
Formation :-
a) Express contract: Express contract is one which
is made by words spoken or written.
Example No. 1: X says toY, will you buy a car for
Rs. 100000?Y says to X, I am ready to buy you car
for Rs. 100000. It is an express contract made
rally.
Example No. 2: X writes a letter toY, I offer to
sell my car for Rs. 100000 to you.Y send a letter
to x, I am ready to buy you car for Rs. 100000. It is
an express contract made in writing.

23. Conti…
 An implied / tactic contract :- is a contract which
is made otherwise than by the words spoken or
written. It came into existence on account of an
act or conduct of the parties.
 Example :- A stops a taxi by waving his hand and
boards it.There is an implied contract that A will
pay the prescribed fare on reaching his
destination.
 Withdrawal of cash from the ATM of a bank.

24. Conti…
c) Quasi or constructive contract: It is a contract
in which there is no intention either side to make
a contract, but the law imposes contract. In such a
contract eights and obligations arise not by any
agreement between the practice but by operation
of law.

25. Conti…
 E- Contract :- An e-contract is a contract
made through the electronic mode.

26. Classification according to
Performance / Obligation :-
 Executed Contract :- In an executed contract both
the parties have performed their promises under a
contract. It is a contract where, under the terms of
contract, nothing remains to be done by the
parties.
 Example
A sells his car to B for 1 lakh. A delivered the car
and B paid the price.This is an executed contract.

27. Conti….
 Executory Contract :- In an executory
contract both the parties are yet to perform
their promises. In other words, it is a contract
where parties have to still perform their
obligation in the future.
 Example
A sells his car to B for 1 lakh. If A is still to
deliver the car and B is yet to pay the price, it
is an executory contract

28. Conti….
 Bilateral Contract :- In a bilateral contract both
the parties have to perform their respective
promises. It is also known as a two-sided
contract. Here, the obligation is outstanding on
the part of both the parties.
example :- X promises y to pay rs 1000 for his
cycle. Neither of them has performed his
obligation.

29. Conti….
 Unilateral Contract :- A unilateral contract is also
known as a one-sided contract. It is a contract where
only one party has to perform his promise. In such a
contract, the promise on one side is exchanged for an
act on the other side.Aft er the formation of a
unilateral contract, only one party remains liable to
perform his obligation because the other party has
already performed his obligation.
 Example
Alap promises to pay 1000 to anyone who finds his lost
cellphone. Bansi finds and returns it to Alap. From the
time Bansi found the cell phone, the contract came into
existence. Now Alap has to perform his promise, i.e.,
the payment of 1000.

30. References
 Mercantile Law N.D.Kapoor, Sultan Chand
and Sons Part 1 Contract law chapter 1 page
no 3.
 http://www.slideshare.net/abdu_569/indian-
contract-act-9647662

31. Thank U