Contract Act ,1872

Contract Act
The Indian Contract Act, 1872 defines the term “Contract” under its
section 2 (h) as “An agreement enforceable by law”. In other words, we
can say that a contract is anything that is an agreement and enforceable by
the law of the land.

This definition has two major elements in it viz – “agreement” and

“enforceable by law”. So in order to understand a contract in the light of
The Indian Contract Act, 1872 we need to define and explain these two
pivots in the definition of a contract.

Agreement

In section 2 (e), the Act defines the term agreement as “every promise and
every set of promises, forming the consideration for each other”.

Now that we know how the Act defines the term “agreement”, there may
be some ambiguity in the definition of the term promise.

Promise

The Act in its section 2(b) defines the term “promise” here as: “when the
person to whom the proposal is made signifies his assent thereto, the
proposal becomes an accepted proposal. A proposal when accepted,
becomes a promise”.

In other words, an agreement is an accepted promise, accepted by all the

parties involved in the agreement or affected by it. This definition says
that in order to establish or draft a contract, we need to initiate some steps:
 i. The definition requires a person to whom a certain proposal is made.
ii. The person (parties) in step one has to be in a position to fully
understand all the aspects of a proposal.
iii. “signifies his assent thereto” – means that the person in point one
accepts or agrees with the proposal after having fully understood it.
iv. Once the “person” accepts the proposal, the status of the “proposal”
changes to “accepted proposal”.
v. “accepted proposal” becomes a promise. Note that the proposal is not
a promise. For the proposal to become a promise, it has to be an
accepted proposal.
Agreement = Offer + Acceptance.

Enforceable By Law
Contract = Accepted Proposal (Agreement) + Enforceable by law (defined
within the law)

Property contract
Definition of property
There are different definitions are given in different act as per
there uses and needs. But in the most important act which
exclusively talks about the property and rights related to property
transfer of property act 1882 has no definite definition of the term
property. But it is defined in some other act as per their use and
need. Those definitions are as follows:

Section 2(c) of the Benami Transactions (Prohibition) Act, 1988

defines property as:

“Property” means property of any kind, whether movable or

immovable, tangible or intangible, and includes any right or
interest in such property.

Section 2 (11) of the Sale of Good Act, 1930 defines property as:

“Property” means the general property in goods, and not merely a

special property.

Kinds of property
Broadly Property is divided into three kinds those are as follow:

Movable and Immovable property

Movable property
The definition of movable property is given differently in many
acts. Some of the definitions are as follows:

Section 3 (36) of the General Clauses Act defines movable

property as:

'Movable property shall mean property of every description,

except immovable property."

Section 2 (9) of the Registration Act, 1908 defines property as:

'Moveable property' includes standing timber, growing crops and

grass, fruit upon and juice in trees, and property of every other
description, except immovable property."

Section 22 of IPC defines property as:

The words “moveable property” is intended to include corporeal

property of every description, except land and things attached to
the earth or permanently fastened to anything, which is attached
to the earth.
Things attached to the land may become moveable property by
severance from the earth. for example Cart–loaded of earth, or
stones quarried and carried away from the land become movable
property.

Immovable property
The Term "Immovable Property" occurs in various Central Acts.
However none of those Acts conclusively define this term. The
most important act which deals with immovable property is the
Transfer of Property Act (T.P.Act). Even in the T.P.Act this term is
defined in exclusive terminology.

i. According to Section 3 of that Act, "Immovable Property" does

not include standing timber, growing crops or grass. Thus, the
term is defined in the Act by excluding certain things. "Buildings"
constitute immovable property and machinery, if embedded in the
building for the beneficial use thereof, must be deemed to be a
part of the building and the land on which the building is situated.

ii. As per Section 3(26) of the General Clauses Act 1897,

"immovable property" "shall include land, benefits to arise out of
land and things attached to the earth, or permanently fastened to
anything attached to the earth". This definition of immovable
property is also not exhaustive;

iii. Section 2(6) of The Registration Act,1908 defines "Immovable

Property" as under:

"Immovable Property includes land, building, hereditary

allowances, rights to ways, lights, ferries, fisheries or any other
benefit to arise out of land, and things attached to the earth or
permanently fastened to anything which is attached to the earth
but not standing timber, growing crops nor grass".

The definition of the term "Immovable Property" under the

Registration Act 1908, which extends to the whole of India, except
the State of Jammu and Kashmir, is comprehensive. The above
definition implies that building is included in the definition of
immovable property.
The following have been held as immovable property.

A right to collect rent, life interest in the income of the immovable

property, right of way, a ferry, fishery, a lease of land.

iv. The term "Immovable Property" is defined in other Acts for the
purpose of those Acts. As per Section 269UA(d) of the Income
Tax Act, 1961, Immovable Property is defined as under :

a. Any land or any building or part of a building, and includes,

where any land or any building or part of a building is to be
transferred together with any machinery, plant, furniture, fittings or
other things, such machinery, plant, furniture, fittings and other
things also.

Any rights in or with respect to any land or any building or part of

building (whether or not including any machinery, plant, furniture,
fittings or other things therein) which has been constructed or
which is to be constructed, accruing or arising from any
transaction (whether by way of becoming a member of, or
acquiring shares in, a co-operative society, or other association of
persons or by way of any agreement or any arrangement of
whatever nature, not being a transaction by way of sale,
exchange or lease of such land, building or part of a building.
1. What is the Rent Control Act?
A central Rent Control Act was passed by the legislature in the
year 1948. It regulates the rules of letting out a property and
ensures that neither the landlords nor the tenants’ rights are
exploited by the other.
It should also be noted that currently, each state has its own Rent
Control Act, though largely similar to each other, they carry some
minor differences. Due to the 1948 Act being extremely stringent
and pro-tenant, the real estate market has had difficulty in
growing in some areas. There are some properties that have
been let out that are still paying the same amount of rent since
1948, disregarding inflation and increased property valuations.
In 1992 the Central Government tried to bring about amendments
to the Act via a proposed model to ensure that the property is not
devalued. Unfortunately, the changes were opposed by the sitting
tenants and therefore failed to take effect.

2. What is a Rental Agreement?

In India, renting or letting out of any property for residential or
commercial purposes is subjected to various rules and
regulations, such as:
– Under the law, it is a must to have a written agreement between
the two parties enumerating all the terms and conditions of
tenancy. An agreement reached without being expressly put in
writing will not be a valid contract in this case.
– Any changes regardless of the type of rectification must also be
put in writing.
– The agreement must be dated and signed by both parties, i.e.
the landlord and the tenant.
-The agreement must be stamped and registered.
Without a valid rental agreement, the rights and duties of the
landlord and the tenant cannot be enforced or protected by law.
Therefore, it is always prudent to enlist the help of a legal
practitioner in the making of such an agreement as many
complexities entail, especially for commercial leasing.

3. What are the Rights of a Tenant?

The Rent Control Act is established not only to protect the
landlord and their property but also to protect the tenant. Under
the Act, the few important rights that are given to the tenant are:

1. Right Against Unfair Eviction: Under the Act, the landlord

cannot evict the tenant without sufficient reason or cause.
The rules of eviction are slightly different from state to state.
In some states for the landlord to evict a tenant, he/she must
approach the court and obtain a court order for the same. In
some states, the tenant cannot be evicted if he/she is willing
to accept any changes to the rent.
2. Fair Rent: The landlord when letting out a house cannot
charge extraordinary amounts in rent. The valuation of a
property for rent is to be dependent on the value of the
property. If the tenant feels that the amount of rent that is
being asked is too much compared to the value of the
property, he/she may approach the court to seek redressal.
Usually, the rent is to be between 8% and 10% of the value
of the property, including all costs incurred via construction
and fixtures on the property.
3. Essential Services: It is the basic right of the tenant to
enjoy essential services such as water supply, electricity etc.
A landlord doesn’t have the right to withdraw these services
even if the tenant has failed to pay rent with regards to the
same property or a different one.

4. What are the Rights of a Landlord?

The point of interest in a rental agreement is always the property,
and the property has to be protected from unfair exploitation. The
Rent Control Act entitles the landlord with the following rights:
 1. Right to Evict: The right to evict a tenant is also different
from state to state. Meaning in some states, the landlord
may evict a tenant for personal and bona fide reasons such
as wanting to live there themselves. Such a reason is not an
acceptable cause for eviction in Karnataka. The landlord, in
most cases, must approach the court to evict the tenant. It is
also needed by law for the landlord to send sufficient notice
to the tenant before approaching the court.
2. Charge Rent: Being the owner of the property, the landlord
has the right to charge rent upon the tenant. Since there is
no actual legislation providing for an upper limit on the rent,
the landlord may keep increasing the rent charges according
to his wishes. Therefore, the prudent thing to do in such
cases is to stipulate the amount of increase and the
condition of increase in the rental agreement itself. Usually,
the rent is increased periodically every year by 5% to 8%.
3. Temporary Repossession of Property: The landlord may
temporarily repossess the property to improve the condition
of the property, alter the property in any way or make
changes to the property. But such changes to the property
must not bring any loss to the tenant or materially affect his
tenancy.

Tenancy laws
In recent times, the government has introduced a slew of reforms aimed
at promoting easier investments in the real estate sector. On the tenth of
July 2019, The Model Tenancy Act (also known as the draft Tenancy
act), was introduced by the government to protect the interests of both
landlords and tenants. The same was initially discussed by the Finance
Minister during the Budget 2019-20 meeting. This Act promises to
facilitate easier landlord-tenant relationships.

Why is this reform necessary? India has been urbanizing at a very rapid
pace with property appreciating very quickly, so much that individuals
have begun investing in second homes. There are almost one crore
properties that are vacant, without being rented out. With the greater
protection that the Tenancy Act provides, it could encourage landlords to
start renting out their vacant properties and earn a secondary income.

What is the Model Tenancy Act?

The Model Tenancy Act reform will be useful when a dispute arises
between the tenant and the landlord. There is a rental contract which has
to be mutually agreed upon with a clear distinguishment of the money
that is spent on repairs – from the owner’s side as well as the tenant’s
side. This act has been brought in with a hope that India’s rapid
urbanization isn’t impeded by imperfect housing laws.

So, what are the major changes in the Tenancy Act 2019?

1. Rental Agreement

A rental agreement has to be signed by the landlord and the tenant. The
same has to be submitted to the rental authority (previously, rental
agreements were submitted at the sub-registrar’s office). The authority
will update the same in its database, which can be accessed through its
website. Within two months of executing the rental agreement, it will be
mandatory for both landlords and tenants to inform the Rent Authority
about this tenancy agreement. The Rent Authority, within seven days,
will issue a unique identification number to both the parties.

2. Security deposit

Previously, landlords used to take an advance for ten months. But they
can’t seek the same according to the latest reform. The rent of two
months is now the security deposit, which has to be returned to the
tenant when he/she leaves (if it’s a non-residential property, rent of one
month has to be paid as a security deposit). The lowered security
deposit amount can encourage more tenants to rent out
properties, without any financial hurdles.
3. Maintenance charges

The cost for maintenance works, such as structural repairs,

whitewashing, and painting shall be borne by both the tenant and the
landlord. While the major chunk of the expenses is usually borne by the
landlord, the agreement has to state which party will bear the expenses
for specific items. If the landlord doesn’t take the necessary steps
towards repairing damages, then the tenant can deduct the money from
the rent. If the tenant doesn’t do the same, the landlord can deduct
money from the security deposit. If the expense incurred is more than
the security deposit, then the tenant has to pay the balance amount.

4. Increasing of rent

The new reform also states that the landlord cannot modify the rental
amount within the time period specified in the agreement. However, if
the same is mentioned in the agreement, the landlord will have to inform
the tenant about a hike in rent at least three months’ prior before revising
the same. Landlords can increase the rent if they have spent money on
the structural altercation, but the same shouldn’t include repairs.

5. Faster dispute resolution

In case of a dispute between the landlord and the tenant, the duo must
approach the authority first. If they are not satisfied with the solution
that is offered to them, then they can challenge the decision in the rent
court within 30 days from the date of the order. “In the areas to which
this Act extends, only the rent court and no civil court shall have
jurisdiction to hear and decide the applications relating to disputes
between landowner and tenant,” as per the policy. The court shall not
take more than two months to resolve the dispute.

6. Entering rented premises

Landlords will now have to give a 24-hour notice to the tenant before
visiting their property. The timings are also specific – from 7 am to 8
pm. This gives the tenant greater privacy in their homes.

7. Subletting

Tenants will have to mention the number of people occupying the

premises to the landlord. Subletting without the landlord’s knowledge is
prohibited. If the same is allowed, tenants cannot charge them more than
the rent that they pay themselves.

8. Compensation for overstaying

The new Act also aims at penalising squatters who stay longer than what
was agreed in the rental agreement. Landlords will be able to claim
double the rent for the first two months of the tenancy and four times the
rent after the third month.

9. Eviction

Landlords can now move to the court if the tenant refuses to pay the rent
for two months on the bounce. If the tenant pays back the money within
one month of reaching court, the tenant can stay in the premises, if it
was the first offence of the year. However, if the tenant deems the
property to be inhabitable, he/she can leave the property after serving a
15-day notice period.

10. The landlord has to provide all the amenities

Landlords cannot strip the tenants off basic supplies like water and
electricity services. Tenants can also use the common facilities availed
to them and the landlord cannot refuse access to the same.

The new Tenancy Act promises to regularize the housing sector and
encourage easier tenant-landlord relations. If you are planning on
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