IPCC Notes: Business Laws, Ethics & Communication

THE INDIAN CONTRACT ACT, 1872

 

IMPORTANT TERMS u/s 2

Promise 2(b) When a person 

-to whom proposal is made

 

-signifies his assent thereto

 

-proposal is said to be accepted.

Proposal when accepted becomes a promise.

Agreement 2(e) Every promise and every set of promises

forming consideration for each other.

Contract 2(h) An agreement enforceable by law.
Void Contract 2(j) A contract-which ceases to be enforceable by law-becomes void when ceases to be enforceable.
Voidable Contract 2(i) A voidable agreement-which is enforceable by law-at the option of one or more parties-but not at the option of-the other or others

-is a voidable contract.

Proposal 2(a) A person is said to make a proposal when-he signifies to another his willingness-to do or to abstain from doing-anything with a view to-obtain the assent of that other

-to such act or abstinence.

 

Since we are now familiar with important terms of this act, I will now proceed to rehash the entire act bit by bit.

 

 

Essentials of a valid contract u/s 10

In order to create a valid contract, following are the essentials:

Intention to create legal obligation -There must be an offer-Offer must be accepted-Offer and its acceptance should create legal obligations between parties-Promisee should be able to claim fulfillment.
Free consent of the parties -Consent must be freely given-It should not be given under force, coercion, etc-If consent is not free, contract is voidable at the option of aggrieved party.
Capacity of parties to enter into contract (sec 11) The law prohibits a person from entering into contract who-has not attained majority-is of unsound mind and-is disqualified from entering into contract by law.
Lawful consideration Consideration means-compensation for doing or omitting-an act or deed.-Also defined as ‘quid pro quo’, i.e., something in return for another.
Lawful object The purpose of contract must not be what law declares to be-illegal or void.

 

 

Types of Contract

Void Contract A contract-which ceases to be enforceable by law-becomes void when it ceases to be enforceable.
Voidable Contract A voidable agreement-which is enforceable by law-at the option of one or more parties-but not at the option of-the other or others

-is a voidable contract.

Illegal Contract A contract which is-forbidden by law-opposed to public policy-immoral.
Express Contracts A contract-whose terms are-expressed in words or in writing-is an express contract.As per section 9

-if a proposal or acceptance

-of any promise

-is made in words

-the promise is express.

Implied Contracts A contract-which comes into existence-by implication where-such implication-is by law or by action.

As per section 9

-a proposal or acceptance

-made otherwise than in words

-the promise is implied.

Tacit Contracts A contract-which is inferred-through the conduct of parties.
Executed Contracts A contract in which-consideration could be an act or forbearance-when such consideration is executed-then such a contract is known as-executed contract.
Executory Contract A contract in which-consideration is a reciprocal promise or obligation-which is to be performed in future only.
Unilateral Contract A one sided contract where-only one party has to perform-his duty or obligation.
Bilateral Contract A contract where-both the parties have to perform-their duty or obligation.

 

IMPORTANT NOTE:

Contract according to

  1. Formation: Express, Implied, Tacit.
  2. Performance: Executed, Executory, Unilateral, And Bilateral.

 

Further Classification of Contracts under English Law

Formal Contracts Contract of Record A contract-which derives its binding force-from the authority of court.Authority of court-is through judgment of the court or

-by way of recognizance.

Judgment is binding

-on persons who are litigants.

Recognizance is

-a written acknowledgement

-of a debt due to state

-due to criminal proceedings.

Contract under Seal A contract-which derives its binding force-from its form alone.It is in writing,-duly signed and sealed and delivered to parties.

Also referred as

-deed or specialty contract.

Simple Contract A contract-which does not contain-any formalities-referred in formal contracts.

Stay Tuned for more notes….

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