The document provides an overview of the Indian Contract Act of 1872. Some key points covered in the summary: 1) The Indian Contract Act lays down legal rules relating to promises, their formation, performance and enforcement. These rules apply not just to business agreements but all agreements. 2) For an agreement to constitute a valid contract under the Act, it requires an offer, acceptance of the offer, consideration and mutual consent between the parties. 3) The Act defines concepts such as proposal, acceptance, promise, consideration and agreement. It distinguishes between agreements in general and contracts, specifying that not all agreements result in enforceable contracts.

1. INDIAN CONTRACT ACT 1872
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2. Introduction
Law of contract – Foundation upon which the superstructure
of modern business is built
Business – promise made between parties – performance
follows later
Breaking of a promise – without incurring liability – endless
complications
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3. Indian Contract Act
Law of contract lays down legal rules relating to promises ,
their formation, performance and enforcement.
These rules are not only applicable to business community
but others
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4. Indian Contract Act
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5. CONTRACT
Sec 2(h)
“An agreement enforceable by law
is a contract”
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6. Proposal
When one person signifies to another his willingness to do or
abstain from doing anything with a view to obtain his assent
on such act or abstinence, he is making proposal.
A goes to a hotel and orders tea. He is making proposal.
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7. Acceptance
When one person signifies his assent thereto on the proposal
made he is said to accept the proposal.
When A orders tea and B supplies tea it is understood that
the proposal made by A is accepted by B
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8. Promise
When a person to whom proposal is made signifies his
assent thereto, the proposal is said to be accepted.
An accepted proposal is known as a promise.
When A asks B to lend him a book and B gives his assent to
lend him a book . This is a promise i.e. Proposal by A to
lend the book
Acceptance by B by lending the book
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9. Consideration
Something in return.
A offers B to sell his car at Rs.1,00,000 /- B accepts the
same. Now for A consideration is Rs.1,00,000/- and for B
consideration is a Car.
Until and unless there is no consideration there cannot be an
agreement.
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10. Agreement
When the proposal is accepted it becomes promise and the
promise, when accompanied with consideration it becomes
agreement.
A offers to sell his car for Rs.1,00,000/- to B. B accepts his
offer. This offer after acceptance becomes promise and this
promise is treated as an agreement between A & B.
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11. Enforceability
An agreement is said to be enforceable by law if it
creates legal obligation.
Obligation is a legal tie which imposes upon
determinate person or persons the necessity of
doing or abstaining from doing a definite act or
acts
If an agreement is incapable of creating a duty
enforceable by law, it is not a contract.
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12. CONTRACT
Proposal + Acceptance = Promise.
Promise + Consideration = Agreement.
Agreement + Enforceability = CONTRACT.
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13. Contract Act
“All contracts are agreement but all agreements are not
contracts”.
Agreements of moral, religious or social nature are
not contracts
 they are not likely to create a duty enforceable by law
parties never intend to create a legal obligation.
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14. Contd -
Ex;
X invites his friend Y to a dinner and Y accepts the invitation. If
Y fails to turn up for the dinner. Can he take his friend to
Court????
X cannot go to the court to claim his loss.
A father promises to pay his daughter Rs 1000 as pocket
allowance. Later he refuses to pay. Can the daughter recover
the Amount???
The daughter cannot recover as its is a domestic
agreement and there is no intention on the part of
the parties to create legal relations
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15. Case
Balfour vs Balfour [(1919) 2 K.B. 571]
A promise by the husband to pay his wife 30 pounds every
month . Later Husband refuses to pay. Wife goes to court.
Held: unenforceable as parties never intended
it to be bound by legal obligations.
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16. contd
 In commercial or business agreements an intention to
create legal relations is presumed. Thus, an agreement
to buy and sell goods intends to create legal
relationship, hence is a contract, provided other
requisites of a valid contract are present. But if the
parties have expressly declared their resolve is not to
create a legal obligation, even a business agreement
does not amount to a contract.
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17. Case
Rose&Frank Co. vs Corruption Bros [1925 AC
445]
There was an agreement between R company and C company
by means of which the former was appointed as the agent of the
latter. One clause in the agreement was: ”This agreement is not
entered into….as a formal or legal agreement and shall not be
subject to legal jurisdiction in the law courts.”
HELD - There was no binding contract as there was no intention
to create legal relationship
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18. Distinction between an agreement and a contract
Agreement Contract
◦ Offer and its acceptance ◦ Agreement and its
constitute an agreement enforceability constitute a
◦ An agreement may or may not contract
create a legal obligation ◦ A contract necessarily create a
◦ Every agreement need not legal obligation
necessarily be a contract ◦ All contracts are necessarily
◦ Agreement is not concluded agreements.
or binding contract
◦ Contract is concluded and
binding on the concerned
parties
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19. Classification of
Contract
Enforceabilty Method of
Extent of
Creation
execution
Valid
Express
Executed
Voidable
Implied Executory
Void
unenforceable
Illegal
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20. CONTRACTS ON THE BASIS OF CREATION
EXPRESS IMPLIED
CONTRACT CONTRACT
Express contract is one An implied contract is
which is made by the one which is inferred
words spoken or from the conduct of a
written. person or circumstances
of a particular case
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21. CONTRACTS ON THE BASIS OF EXECUTION
EXECUTED EXECUTORY PARTLY
CONTRACT CONTRACT EXECUTED &
EXECUTORY
CONTRACT
It is a contract where It is a contract where It is a contract where
both the parties to both the parties to one of the parties to
the contract have the contract have still the contract has
fulfilled their to perform their fulfilled his
respective respective obligation and the
obligations under the obligations other party has still
contract to perform his
obligation
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22. Contracts on the basis of enforceability
Valid Contract A contract which satisfies all the
conditions prescribed by law is a
valid contract
Void Contract A contract which ceases to be
enforceable by law becomes void
when it ceases to be enforceable
Void Agreements An agreement not enforceable by
law is said to be void
Voidable Contract A voidable contract is one which
can be set aside or repudiated or
avoided at the option of the
aggrieved party
Illegal Agreement An illegal agreement is one the
object of which is unlawful
Unenforceable Contract The contract which is actually
valid but cannot be enforced due
to technical defect
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23. Essential elements of a valid contract
 Proper offer and its proper acceptance
 Intention to create legal relationship
 Free Consent
 Capacity to contract
 Lawful consideration
 Lawful object
 Agreement not expressly declared void
 Certainty of meaning
 Possibility of performance
 Legal formalities
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24. Offer / PROPOSAL
When one person signifies to
another his willingness to do or
abstain from doing anything with a
view to obtain his assent on such
act or abstinence, he is making
proposal.
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25. OFFER
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26. Contd
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27. Types of offer
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28. Legal rules as to offer
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29. Contd-
Intention to create legal relationship
An offer must be such that when it is accepted it will create a
legal relationship
Certain and unambiguous terms
If the terms of the offer are vague or indefinite, its acceptance
cannot create any contractual relationship.
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30. Contd -
Different from a mere declaration of intention
Mere declaration of intention indicates that an offer
will be made or invited in the future
A declaration of intention by a person does not give
right of action to another.
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31. Case
Harrison vs Nickerson
An auctioneer advertised in a newspaper that a sale of office
furniture would be held. A broker came from a distant place to
attend that auction, but all the furniture was withdrawn. The
broker thereupon sued the auctioneer for his loss of time and
expenses.
Held - A declaration of intention to do a thing did not
create a binding contract with those who acted upon
it, so that the broker could not recover.
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32. Contd -
Different from an invitation to offer
In an invitation to offer the person making an invitation invites
others to make an offer to him
It is prelude to an offer inviting negotiations or preliminary
discussions
Case –
 Pharmaceutical Society of Great Britian vs Boots cash chemists
Ltd (1953) 1 QB 401
 Harvey vs facey
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33. Contd-
Offer must be communicated
An offer must be communicated to the person to whom it is
made.
An offer is complete only when it is communicated to the
offeree
Acceptance is not possible unless offer is brought to the
knowledge of the offeree ie, One can accept the offer only
when he knows about it.
Acceptance in ignorance of offer confers no right. ie, An
offer accepted without its knowledge does not confer
any legal rights on the acceptor.
Case: Lalman Shukla vs Gauri Dutt
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34. Contd -
No term of non-compliance of which amounts
to acceptance
The offer must not contain a term, the non-compliance of
which amount to acceptance
Ex: A offers by post to sell his horse to B for Rs 2000. He
writes, “ If you do not reply, I shall assume you have accepted
the offer.” There would be no contract even if B does not reply
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35. Contd
While making the offer, the offeror cannot say that if the offer
is not accepted before a certain date, it will be presumed to
have been accepted
Communication of special terms or standard
terms of contract
Special terms of the offer must also be communicated along
with the offer.
If the special terms of the offer are not communicated, the
offeree will not be bound by those terms.
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36. Acceptance
Acceptance means giving consent to the offer.
It is an expression by the offeree of his willingness to be
bound by the terms of the offer.
 Sec 2(b) – “ A proposal is said to be accepted
when the person to whom the proposal is made
signifies his assent thereto. A proposal when
accepted becomes a promise.”
Acceptance is the consent given to offer.
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37. Contd-
Who can accept
In case of a specific offer –
To be accepted by that definite person or that
particular group of persons to whom it has been
made and non else.
In case of general offer –
 An offer made to the world at large or public in
general can be accepted by any person having the
knowledge of the offer by fulfilling the terms of the
offer.(Carlil v. Carbolic Smoke Ball Co.)
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38. Contd -
How to make acceptance –
Express acceptance –
An express acceptance is one in which is made by words
spoken or written
Implied acceptance –
 An implied acceptance is one which is made otherwise than
in words.
It is inferred from the conduct of the parties or the
circumstances of a particular case
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39. Legal rules of valid acceptance
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40. CAPACITY OF PARTIES
Sec.11 says
“Every person is competent to contract who is of
age of majority according to the law to which he
is subject,
And who is of sound mind,
And who is not disqualified from contracting by
any law to which he is subject. ”
Thus, all the three tests must be applied to determine whether a
person is competent to contract or not
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41. Who is a MINOR ?
A minor is a person who has not attained majority.
According to Section 3 of the Indian Majority Act,1875, a person is
deemed to have attained majority as under:
Where a guardian of a On completion of 21 years
minor’s person or property is
appointed under the
Guardian and Wards Act
Where minor’s property has On completion of 21 years
passed under the
superintendence of the court
of wards
In other cases On completion of 18 years
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42. Who is a Person of Unsound Mind?
According to Sec 12 of the Indian Contract Act,
“A person is said to be of sound mind for
the purpose of making contract, if at the
time when he makes it, is capable –
•To understand terms of contract
•To form rational judgment to its effect upon
his interests”
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43. Persons disqualified by law
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44. CONSIDERATION
Sec. 2(d) of the Indian Contract Act defines consideration as under :
“when at the desire of promisor, the
promisee or any other person
has done or abstained from doing,
or does or abstains from doing ,
or promises to do or abstain from doing
something,
such act or abstainence or promise is
called a consideration for the promise"
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45. Essential elements of valid
Consideration
i. It must move at the desire of promisor
ii. It may move from any person
iii. It may be past, or present, or future
iv. It must be of some value
v. It must be real and not illusory
vi. Something other than promisor’s existing Obligation
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46. CONSENT
Sec.13 says “Two or more persons
are said to consent when they
agree on same thing in same
sense”
In English Law, this is called
‘consensus-ad-adem’
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47. FREE CONSENT
According to Sec.14 consent is said to be
free when it is caused by
a)Coercion, or
b)Undue influence, or
c)Fraud, or
d)Misrepresentation, or
e)mistake
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48. COERCION
Coercion means compelling a person to enter into a
contract under a pressure or a threat.
According to Section15, a contract is said to be caused
by coercion when it is obtained by—
i.Committing an act which is forbidden by the Indian
Penal Code; or
ii.Threatening to commit any act which is forbidden by
Indian Penal Code; or
iii.Unlawful detaining of any property; or
iv.Threatening to detain any property.
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49. Undue Influence
The term ‘undue influence’ means dominating the will
of other person to obtain an unfair advantage over the
other
Sec 16(1) says a contract is influence by undue
influence—
a)Where the relations subsisting between the parties
are such that one of the is in position to dominate the
will of another, and
b)The dominant party uses that position to obtain an
unfair advantage over the other
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50. Fraud
The term fraud means a false representation of
fact made willfully with a view to deceive the other
party.
Essential elements of fraud :
I.By a party to a contract
II.False representation
III.Representation as to fact
IV.Actually deceived
V.Suffered loss
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51. Misrepresentation
The term ‘misrepresentation’ means a
false representation of fact made
innocently or non-disclosure of a material
fact without any intention to deceive the
other party.
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52. MISTAKE
A mistake is said to have occurred
where the parties intending to do one
thing by error do something else.
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53. Void Agreements
According to Sec2(g) of Indian Contract Act,
1872, a void agreement is an agreement which
is not enforceable by law.
The agreements which are not enforceable by
law right from the time when they are made, are
void -ab-initio
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54. Types of agreements expressly declared void
1. Agreements by or with persons incompetent to contract
2. Agreements entered into through a mutual mistake of fact
between the parties.
3. Agreement, the object or consideration of which is unlawful
4. Agreement, the consideration or object of which is partly
unlawful
5. Agreement made without consideration.
6. Agreement in restraint of marriage
7. Agreement in restraint of trade
8. Agreements in restraint of legal proceedings
9. Wagering agreements
10.Impossible agreements
11.An agreement to enter into an agreement in the future
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55. Wagering agreements
An agreement between two persons
under which money or money’s worth is
payable, by one person to another on the
happening or non-happening of a future
uncertain event is called a wagering
event.
Such agreements are chance oriented
and therefore, completely uncertain
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56. Contigent contracts
Contigent contracts is a contract to do or
not to do something if some events
collateral to such contract, does or does
not happen
Insurance contract provides best
example of contigent contract
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57. Distinction between a wagering agreement and contingent contracts
Basis of distinction Wagering Contingent
agreement contract
Reciprocal promise It consist of reciprocal It may or may not
pronise consist of reciprocal
promise
Void/ valid It is void It is valid
Main/ collateral Future event is Future event is
future events essential to contract collateral to contract
nature It is always of It may not be of a
contingent nature wagering nature
Interest of parties Its parties have no Its parties may have
other interest in the other interest as well
subject matter of the
agreement except
winning or losing of
wagering amount
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58. Breach of contract
A breach of contract occurs if any party
refuses or fails to perform his part of contract
or by his act makes it impossible to perform his
obligation under the contract.
In case of breach, the aggrieved party(i.e. the
party not at fault) is relived from performing his
obligation and gets a right to proceed against
the party at fault.
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59. Types of breach
Anticipatory breach Actual breach
Anticipatory breach occurs when Actual breach may take place
the party declares his intention of when
non performing the contract •The party to the contract refuses
before the performance is due or fails to perform his part at the
time fixed for performance
•Party has performed a part of
contract and then refuses or fails
to perform the remaining part of
contract.
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60. Remedies for breach of contract
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61. Quasi contract
A quasi contract is not a contract at all because one or
other essential for the formation of a contract is absent
It is a law upon a person for the benefit of another even
in the absence of a contract.
It is based on the principle of equity, which means no
person shall be allowed to unjustly enrich himself at the
expense of another
such obligations are called quasi contracts or implied
contracts because the outcome of such obligation
resemble those created by a contract.
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62. Kinds of quasi contracts
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