Introduction To Indian Contract Act, 1872

In our lives, contracts have always been an essential component. Hundreds of times a year, we get into contracts, whether we realize it or not. A contract is a necessary component of any commercial activity. The smooth operation of a business depends on contracts. A written contract is the only document that exists between two or more parties outlining each party's rights and obligations. It could take the shape of an agreement between the contract's parties to perform or refrain from performing specific acts. A contract wherein one party extends an offer to the other and the other accepts the offer made by the first party needs the assent of both parties to be enforceable.

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This Story also Contains

1. What is a Contract
2. Essentials of a Contract
3. Offer or Proposal
4. Acceptance
5. Breach of Contract
6. Rights Available to Parties
7. Conclusion

The Indian Contract Act of 1872 governs all transactions in India. The consideration or the goal of a contract is presumed to be valid unless it is prohibited by law, according to Section 23 of the Indian Contract Act, of 1872.

What is a Contract

The Indian Contract Act defines "contract" in Section 2(h). It is described as a legally enforceable contract. Here, one party makes a suggestion and it is considered before the other party. The proposal turns into a promise after it is approved by the other party. An agreement is this pledge supported by compensation (financial or in-kind). A contract is an agreement with rules that it must follow and the legal status that the parties hope to give it.

The evolution of technology and e-commerce has brought about considerable changes in Indian contract law, bringing it into line with the digital era. The Information Technology Act of 2000 added new regulations and gave electronic contracts legal standing. The Indian Contract Act of 1872 was amended in 1997 to include provisions for electronic contracts.

Essentials of a Contract

Agreement

An agreement requires two parties, or consensus ad idem, meaning that both sides must be thinking of the same item in the same sense. An offer and an acceptance are the two components of an agreement. The person making the offer is known as the offeror, and the one receiving it is known as the offeree.

Intention to Establish a Legal Relationship

The parties to the agreement should wish to create a legal connection, as was previously mentioned. A contract is not the same as a social or domestic agreement.

Free Consent

The parties to the agreement must give their free and informed consent. It is improper to get consent from parties through deception, fraud, undue influence, coercion, or error. The contract is void if any of these defects are used to seek consent.

Competency of the Parties

A contract must be capable of being entered into by the parties. As stated by Section 11 states that a person is competent to enter into contracts if they meet three requirements: (i) they must be of sound mind; (ii) they must be of legal age; and (iii) they must not be prohibited from entering into contracts by any laws that apply to them.

As a result, one or more parties to the contract may not have been fully capable. A capacity deficiency could result from a minority, insanity, stupidity, intoxication, or social standing. A contract is voidable unless there are special circumstances if one of the parties has any of these defects.

Lawful Consideration

The agreement needs to be supported by both sides. In return for receiving something or making a promise, each participant in the agreement must provide something or make a promise.

A consideration is the cost at which one looks for the other's promise. This cost does not, however, have to be monetary. The pledge will be nudum pactum, or a bare promise, and will not be legally enforceable if it is not accompanied by consideration. Furthermore, the consideration ought to be valid and legitimate.

Lawful Objects

The agreement's purpose must be legitimate and not against the law. The object on which the contract is based should be a lawful and not an illegal object. Making a contract for an illegal object will result in an unlawful contract and the contract will be invalid from the very beginning.

Agreement not declared illegal or void

Even when an agreement has all the necessary components to be enforceable under the law, some agreements have been expressly declared illegal or void by the government.

Possibility of Performance

The terms of the agreement must be able to be carried out. For example, if A and B agree to use magic to find treasure, that agreement cannot be enforced because it is impossible to carry out the act in and of itself.

Necessary Legal Formalities

A written or verbal contract is possible. Any agreement that is legally required to be in writing must follow the necessary procedures for writing, registration, and, if necessary, attestation. If any conditions are not met, the contract is not enforceable in court.

Offer or Proposal

The entire process of entering into a contract is initiated by a proposal or offer made by one party to another. The proposal must be accepted to agree. According to Section 2(a) of the Indian Contract Act 1872, a proposition is "when one person will signify to another person his willingness to do or not do something (abstain) to obtain the assent of such person to such an act or abstinence."

The person making the offer or proposal is referred to as the "promiser" or "offeror". Furthermore, the individual who agrees to an offer is referred to as the "acceptor" or "promisee."

Essential Elements of a Valid Offer

Presence of Two Parties

A suggestion needs to come from one person and be accepted by another, meaning that at least two people need to be involved. All people are covered, including artificial and legal people.

The proposal Must be Communicated

It is necessary to inform people about the proposal. An offer becomes legitimate if it is conveyed to the offeree. Communication can take two forms: explicit and implicit. It can be communicated using words like messenger, telegraph, word-of-mouth, etc. As per the Indian Contract Act's Section 4, a proposal is deemed fully conveyed once it comes to the recipient's attention.

Must Create a Legal Relationship

An offer must be made in such a way that a binding legal agreement will result from acceptance. Even if accepted, a social event invitation does not establish a legal relationship, so it is not an offer in and of itself.

Acceptance

Section 2(b) of the Indian Contract Act 1872 states that an offer is deemed accepted when the party to whom it is made indicates his or her approval. Therefore, if approved, the proposal turns into a promise. An offer may be withheld before acceptance.

According to the definition, an offer shall be deemed accepted if the offeree, to whom the request is addressed, accepts it without conditions. The offer becomes a promise if it is accepted.

Modes of Acceptance

Implied Acceptance

Acceptance is implied by the behaviour of the individual to whom the offer is made rather than by words or written communication. An example of an auctioneer's implied approval of a bidder's offer is when the auctioneer strikes the hammer three times to indicate his acceptance of the bid;

Express Acceptance

An express acceptance is given verbally, either in writing or orally. For instance, A sends B a letter offering to sell his watch, and A responds to the offer with a nice email.

Conditions of Acceptance

• Acceptance must be unqualified and absolute

• Acceptence must be offered to the offeror

• Acceptance must be communicated

• Acceptance must be given in a reasonable time.

Breach of Contract

Broadly speaking, a breach occurs when someone does not behave as expected or as promised. A breach of contract occurs when one party to an oral or written agreement fails to uphold its terms without providing a valid reason. This can include not completing an assignment, paying in full or on time, not delivering all the items, using inferior or distinctly different products instead, neglecting to provide a bond when required, showing up late without explanation, or acting in any other way that suggests the other party won't complete the task. Breach of contract is one of the most frequent legal grounds for demanding compensation or "specific performance" of the terms of the agreement.

Types of Breach of Contract

Material Breach of Contract

if "all the circumstances are wholly or partly remediable and are, or are likely to become, serious, in the wide sense of having a serious effect on the benefit which the aggrieved party would otherwise derive from the performance of the contract by its terms," a material breach has taken place. There is a close correlation between "the scale of the breach" and "material." If a business contract is broken, it may be assumed that the extent of the breach is determined by the consequences the breach will have on the business if it is not fixed.

Minor Breach of Contract

Even when the other party eventually receives the deliverable by the terms of the contract, a little breach of contract, also known as a minor breach or an inconsequential breach, happens when one party fails to fulfil part of their promise.

Anticipatory Breach of Contract

An anticipatory breach occurs when one party believes that the other will not uphold their end of the agreement. This is typically shown by adamantly refusing to fulfil a contract, taking a step that prevents the deal from being completed, or when the subject matter of the contract becomes unavailable. Simply put, an anticipatory breach also known as repudiation occurs when one party violates a contract with another. Parties alleging an anticipated breach shall take all reasonable measures to mitigate their damages when pursuing a compensation claim. An outright refusal to carry out the duties under the contract is required for there to be an anticipatory breach. It is important to remember that the counterparty may file a lawsuit immediately by asserting an anticipatory breach, as opposed to waiting for the terms of the contract to be broken.

Actual Breach of Contract

There has been a true breach of the contract, meaning that the party who violated the conditions of the agreement either didn't finish the tasks at hand, didn't fulfil them within the deadline, or didn't perform them accurately. When there is a breach, the other party has a lot of options for how to handle the situation.

Rights Available to Parties

Rights in Rem or Jus in Rem

Under the laws of the land, every person entering into a contract has rights in rem. He or she is free to utilize this privilege against everyone and anything. It shields a person's belongings from prying eyes.

We refer to such a right as a negative right because of this. since it ensures that everyone has the right to privacy. This suggests that no one else is permitted to restrict his rights. This specific right (jus in rem) is granted by the liberties specified in Article 19 of the Indian Constitution, subject to certain limitations. There is no limit to the people who can exercise this right in rem; it is open to all.

Right in Personam or Jus in Personam

This is the antithesis of right in rem. A person's right in personam grants them protection from a single party to a contract or individual. It will typically be under a duty imposed on the specified person or party.

The Indian Contract Act confers rights in personam on the parties to a contract. As a result, the parties to a contract only have these rights against one another jus in personam.

Conclusion

The Indian Contract Act of 1872 deals with all types of contracts in India. This article describes the introduction of the Contract. Contracts play a very important role in shaping the social and economic relationships in the country. The essentials of contracts include legal object, free consent, valid offer and acceptance, lawful consideration etc. It is important to know about the requirements and essentials of a contract to form a valid contract. The types of contracts are divided based on formation, validity, nature of contract and execution.