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Indian contract act. 1872
Indian contract act. 1872
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The Indian Contract Act, 1872

  1. 1. Indian Contract Act, 1872 1
  2. 2. Presentation Agenda • Introduction • What is a Contract? • Essentials of a Valid Contract • Classification of Contract • What is an Offer? • Essentials of a Valid Offer • Types of Offer • What is Acceptance? • Legal Rules for Acceptance • Communication for Offer and Acceptance • Lapse of an Offer • What is Consideration? • Essentials of Consideration • No Consideration, No Contract – Exceptions • Stranger to Contract 2
  3. 3. Introduction • The law of contract is that branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. • In simple words, it may be said that the purpose of the law of contract is to ensure the realisation of reasonable expectation of the parties who enter into a contract. • The law relating to contracts is contained in the Indian Contracts Act, 1872. 3
  4. 4. Contract? • A contract is an agreement between two or more parties which the law will enforce. • Case: Balfour v Balfour  Mrs. and Mr. Balfour were living in Sri Lanka. They went to England during Mr. Balfour’s leave and there his wife got arthritis. She stayed back but Mr. Balfour had to go Sri Lanka and promised his wife to pay monthly £30. They drifted apart and after sometime Mr. Balfour stopped paying the amount. • It was concluded that there was no enforceable agreement as it was domestic in nature. 4
  5. 5. Essentials of a Valid Contract Offer and Acceptance Intension to create legal relationship Lawful consideration Capacity of parties Free consent Lawful object Agreement not declared void Certainty and possibility of performance Legal formalities 5
  6. 6. Classification of Contract On the basis of Validity On the basis of Nature On the basis of Execution 6
  7. 7. On the basis of Validity 1. Valid Contract – Includes all the elements of valid contract. 2. Void Contract – It can be of two types:  Agreement – It is void from the beginning  Contract – It becomes void after some time. 3. Voidable Contract – It is enforceable by law/voidable at the option of one party. Here, the consent of one of the parties is due to force. 7
  8. 8. On the basis of Nature 1. Express Contract – The terms of the contract are expressly agreed upon, i.e., by words spoken or written. 2. Implied Contract – It is one which is inferred from the acts or conduct of the parties or course of dealings between them. 8
  9. 9. On the basis of Execution 1. Executed Contract – Both the parties have completed their respective obligations. 2. Executory Contract – Both the parties or one of the parties have to complete their obligation. 9
  10. 10. Offer? • An offer is a proposal by one party to another to enter into a legally binding agreement with him. Proposal can be to do an act or abstain from doing that act. • The person making an offer is known as the offeror and the person to whom it is made is called the offeree. 10
  11. 11. Essentials of a Valid Offer Intention to create legal relationship Should not be mere declaration or intention No terms which means non- compliance is an acceptance Certain and clear Offer is different from invitation Communication of special terms of the contract 11
  12. 12. Types of Offer 1. General offer – It is made to public at large and anyone can accept it. 2. Specific offer – It is made to a specific person/one party and can be accepted by him only. • Case: Carlill v Carbolic Smoke Ball Company  It is concerned with a flu remedy called ‘the carbolic smoke ball’ manufactured by Carbolic Smoke Ball Company. It advertised that buyers who found it did not work would be awarded £100 . Mrs. Carlill saw the advertisement, consumed the carbolic smoke balls but contracted flu. Therefore the company had to pay the amount. 12
  13. 13. 3. Cross offer – Both the parties offer the same object. Therefore, both of them become offeror and the offer is thus negligible. 4. Counter offer – One party gives the offer, the other party changes the terms and conditions and gives another offer. 13
  14. 14. Acceptance? • It is the act of assenting by the offeree to an offer. In other words, it is the manifestation by the offeree of his willingness to be bound by the terms of the offer. • It can be express or implied. It is express when it is communicated by words, spoken or written, whereas, it is implied when it is to be gathered from the surrounding circumstances or the conduct of the parties. 14
  15. 15. Legal Rules for Acceptance It should be unqualified or unconditional. It should be in a proper & prescribed manner. Communication of the acceptance must be done before the offer lapses. 15
  16. 16. Communication of Offer & Acceptance • The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. • The communication of an acceptance is complete – as against the proposer when it is put into a course of transmission to him and as against the acceptor, when it comes to the knowledge of the proposer. 16
  17. 17. Lapse of an Offer By revocation By lapse of time By death or insanity By failure to accept conditions By counter offer By subsequent destruction of matter By not accepting in the prescribed mode 17
  18. 18. Consideration? • Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. • When a party to an agreement promises to do something, he must get ‘something’ in return. This ‘something’ is defined as consideration. 18
  19. 19. Essentials of Consideration Must be by the promisee At the desire of the promisor May be past, present or future Must be real Must be lawful Need not be adequate 19
  20. 20. No consideration, No contract - Exceptions Love and affection Compensation for voluntary services Promise to pay time- barred debt Completed gift Agency Charitable subscription 20
  21. 21. Stranger to Contract • It is a general rule of law that only parties to a contract may sue and be sued on that contract. • This rule is known as the doctrine of privity of contract. It means there is a relationship subsisting between the parties who have entered into contractual obligations. • Therefore, a person who is not a party to a contract cannot sue and the contract cannot impose obligations arising under it on any person other than the parties to it. 21
  22. 22. Thank You 22

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