INDIAN CONTRACT ACT 1872

What is a Contract?

A contract is an agreement between parties, creating

mutual obligations that are enforceable by law.
 Essentials of a Valid Contract

All contracts must contain these six

essential elements.

 Offer

 Acceptance

 Awareness

 Consideration

 Capacity

 Legality
 Types of contracts
Contract of Indemnity:-

A contract by which one party promises to save the other from loss caused to him
by the conduct of the promisor himself, or by the conduct of any other person, is
called a contract of indemnity.

Example:-

The most common example of indemnity in the financial sense is an insurance
contract. For instance, in the case of home insurance, homeowners pay insurance
to an insurance company in return for the homeowners being indemnified if the
worst were to happen.
 Contract of bailment

In the contract of bailment, the ownership of the goods

remains with the Bailor and only the possession
transfers to the bailee. Such delivery of goods may be
actual or constructive.

Example:-

The most common example is availing locker services from

banks, i.e., banks are the bailee, and the person keeping his
belongings in such lockers is the bailor. They both agreed
upon some consideration, i.e., bailor uses the locker, and in
turn, bailee charges the consideration for providing such
services.
 Contract of Pledge

“The bailment of goods as security for payment of

a debt or performance of a promise is called
‘pledge’. The bailor is in this case called the
‘pawnor’. The bailee is called ‘pawnee’.”

For example:
Contract of pledge is a subset of a
contract of bailment. ‘A’ pledged his house with a bank for a loan
of INR 2,50,000. The interest on the same was
Pledge is defined in Section 172 of INR 10,000. The bank can retain the pledged
the Indian Contract Act,1872  house until ‘A’ repays the entire amount along
with the interest i.e. INR 2,60,000.
 Contract of guarantee
Contract of Guarantee means
As per 
a contract to perform the
section 126 of Indian Contract
promises made or discharge Act, 1872
the liabilities of the third , a contract of guarantee has
person in case of his failure to three parties: –
discharge such liabilities.

For example, Mr. X advances a loan of 25000 Surety

to Mr. Y and Mr. Z promise that in case Mr. Y
fails to repay the loan, then he will repay the Principal Debtor
same. In this case of a contract of guarantee,
Mr. X is a Creditor, Mr. Y is a principal debtor Creditor
and Mr. Z is a Surety.
 Contract of Agency

Contract of the agency is a legal relationship, where

one person appoints another to perform on the
transactions on his behalf. The person who appoints the
other to take care of his transactions is the principal.
Whereas, the person who looks after the transaction of
the principal is the agent.

Types of an Agency Contract:-

Express Agency

Implied Agency