The Indian Contract Act, 1872

The Indian contract act is one of our oldest laws. Contracts were
entered from times immemorial. But they were governed by the
customs. However, during the British regime in the year 1872, an
attempt was made to codify and establish uniform principles of
mercantile laws resulting in the enactment of the Indian contract act,
1872.

The term agreement for a lay man means to agree. Here one
person offeres or proposes to another and the latter agrees to the
offer or the proposal made. This results in an agreement.

IMPORTANCE OF INDIAN
CONTRACT ACT, 1872

Offer: When one person signifies to another his willingness to do or

abstrain from doing anything, with a view to obtaining the assent of
that other to search at or abstinence, he said to make a proposal.

Example: The taxi parked at the taxi stand. It is an implied offer to

ply passangers. The terms of the offer must be certain and
unambiguous. Offer can be made to one individual or to a group or
to the public at large.

Acceptance : A person makes the offer to another with a view of

obtaining assent of that other. The assent is the acceptance of the
offer. When the person to whom the proposal is made signifies his
assent thereto, the proposal is said to be accepted. A proposal, when
accepted, becomes a promise. The person accepting the offer maybe
called an offeree or promisee or accepter. Like an offer, acceptance
too can be expressed or implied.

Example: A offers to cell his plasma T.V. set at Rs. 30,000/- to B. B

agrees to buy the same telephonically. Here acceptance is expressed.

In the above example B does not reply, but takes out his cheque
book and draws a cheque for that amount and hands it over to A.
Here the acceptance is implied.

Legal relation: The parties to the agreement are serious of what

they are offering or agreeing. This means that if any party breaks his
promise, the innocent party can go to the court of law for
inforcement of the promise or for damages as the case maybe. This
is what distinguishes a contract from a mere agreement that may
result only in a social obligation which when not performed, no legal
action can be taken up.

Example: A agrees to sell his house to B for Rs. 50,00,000/- which

was accepted by B. If A subsequently sells it to C, B can inforce the
contract through the court of law as it was a legal obligation.

Capacity: Every person who is a major, of sound mind and not

disqualified by law can enter into a valid agreement. Every person is
compitant to contract whos of the age of majority according to the
which he is subject, and whos of sound mind and is not disqualified
from contracting by any law to which he is subject.

For entering into a contract, law only has stated the minimum
age required. Sound mind here implies, the parties entering into a
contract must be aware of the terms and consiquences of what he or
she is entering into. Parties who are insolvent, foreign sovereigns,
alien enemy, a convict ect. cannot enter into a contract.

Free consent: The parties entering into a contract, must

understand the terms in the same perspective. Also the parties must
consede voluntarily. Concent is not free when it would not have
been given but for the existence of such coercion, undue influence,
fraud, misrepresentation or mistake.

Effects of the Indian Contract Act, 1872

Effect of mistakes as to law .– A contract is not voidable because it
was caused by a mistake as to any law in force in India; but a mistake
as to a law not in force in [India] has the same effect as a mistake of
fact.

Illustration

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.

Effect of release of one joint promisor .– Where two or more persons

have made a joint promise, a release of one of such joint promisors
by the promisee does not discharge the other joint promisor or joint
promisors ; neither does it free the joint promisors so released from

responsibility to the other joint promisor or joint promisors .

. Effect of failure to perform at fixed time, in contract in which time
is essential .– When a party to a contract promises to do a certain
thing at or before a specified time or certain things at or before
specified times, and fails to do any such thing at or before the
specified time, the contract, or so much of it as has not been
performed, becomes voidable at the option of the promisee, if the
intention of the parties was that time should be of the essence of the
contract.

Effect of such failure when time is not essential - If it was not the
intention of the parties that time should be of the essence of the
contract, the contract does not become voidable by the failure to do
such thing at or before the specified time ; but the promisee is
entitled to compensation from the promisor for any loss occasioned
to him by such failure.

Effect of acceptance of performance at time other than that agreed

upon. If, in case of a contract voidable on account of the promisor's
failure to perform his promise at the time greed the promisee
accepts performance of such promise at any time other than that
agreed, the promisee cannot claim compensation for any loss
occasioned by the non-performance of the promise at the time
agreed, unless, at the time of such acceptance he gives notice to the
promisor of his intention to do so.
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