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Indian Contract Act 1872: Wikis


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Indian Contract Act 1872 is the main source of law regulating contracts in Indian law, as subsequently amended.



what is a contract? Section 2(h) of the Act defines the term contract "as an agreement enforceable by law". Section 2(e) defines agreement as "every promise and every set of promises, forming the consideration for each other". Again Section 2(b)defines promise in these words: "when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise".

section 2(j)defines void contract as "a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable".

Essential Elements of a Valid Contract

1.Proper offer and proper acceptance. 2.Lawful Consideration. 3.Capacity. 4.Free Consent. 5.Lawful Object and Agreement 6.Parties to the contract are competent

Offer and Acceptance

Proposal is defined under section 2(a) of the Indian contract Act, 1872 as "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/offer". Thus, for a valid offer, the party making it must express his willingness to do or not to do something. But mere expression of willingness does not constitute an offer. An offer should be made to obtain the assent of the other. The offer should be communicated to the offeree and it should not contain a term the non compliance of which would amount to acceptance. The offer must be distinguished from an invitation to offer.

Invitation to offer

An invitation to offer is only a circulation of an offer, it is an attempt to induce offers and precedes a definite offer. Acceptance of an invitation to an offer does not result contract and only an offer emerges in the process of negotiation. A statement made by a person who does not intend to bound by it but, intends to further act, is an invitation to offer.

Lawful Consideration

an agreement must be supported by lawful consideration on both sides.consideration means something in return. The consideration or object of an agreement is lawful, unless and until it is- 1.forbidden by law, or of such nature that ,if permitted ,it would defeat the provisions of any law ,or fraudulant ,or involves or implies injury to the person or property of another ,or 4.the court regards it as immoral ,or opposed to public policy. 5.consideration may take in any form-money,goods,services,a promise to marry, a promise to forbear etc.

Capacity To Contract

Not an unsound mind

Attaining the age to enter the contract(should not be a minor)

not an insolvent

Free Consent

a consent is said to be free when it not caused by coercion or undue influence or fraud or misrepresentation or mistake.

Elements Vitiating free Consent

1.Undue influence

"Where a person who is in a position to dominate the will of another enters into a contract with him and the transaction appears on the face of it, or on the evidence, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other."

  • Poosathurai v Kannappa Chettiar (1919) LR 47 Ind App 1, 3, per Lord Shaw, indicating there is no difference between this provision and that in English law as it then was.

Lawful Agreement



Under section 201 to 210 an agency may come to an end in a variety of ways:

(i) By the principal revoking the agency – However, principal cannot revoke an agency coupled with interest to the prejudice of such interest. Such Agency is coupled with interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.g., where the goods are consigned by an upcountry constituent to a commission agent for sale, with poor to recoup himself from the sale proceeds, the advances made by him to the principal against the security of the goods; in such a case, the principal cannot revoke the agent’s authority till the goods are actually sold, nor is the agency terminated by death or insanity. (Illustrations to section 201)
(ii) By the agent renouncing the business of agency;
(iii) By the business of agency being completed;
(iv) By the principal being adjudicated insolvent (Section 201 of The Indian Contract Act. 1872)

The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal (Section 204), though he can always do so, before such authority has been so exercised (Sec 203).

Further, as per section 205, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. If he does, he is liable to compensate the agent for the loss caused to him thereby. The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent. Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid (Section 206). As per section 207, the revocation or renunciation of an agency may be made expressly or impliedly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them (Section 208).

When an agent’s authority is terminated, it operates as a termination of subagent also. (Section 210).[1]

See also


  1. ^ Pandia - Principles of Mercantile Law, 8th edition, by Ramkrishna R.Vyas.

External links


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