INDIAN CONTRACT ACT 1872 NATURE OF CONTRACT The term contract is defined under section 2th) of the Indian Contract Act, 1872 as- 'an agreement enforceable by law". The contract consists of two essential elements: (i) an agreement, and (ii) its enforceability by law.
(i) Agreement - The term 'agreement' given in Section 2(e) of the Act is defined as- "every promise and every set of promises, forming the consideration for each other'". To have an insight into the definition of agreement, we need to understand promise. Section 2 (b) defines promise as- when the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted. Proposal when accepted, becomes a promise
The following points emerge from the above definition: 1. when the person to whom the proposal is made 2. signifies his assent on that proposal which is made to him 3. the proposal becomes accepted 4. accepted proposal becomes a promise Thus we say that an agreement is the result of the proposal made by one party to the other party and that another party gives his acceptance thereto of course for mutual consideration Agreement Offer/Proposal + Acceptance
(ii) Enforceability by law- An agreement to become a contract must give rise to a legal obligation which means a duly enforceable by law.
As given by Section 10 of Indian Contract Act, 1872 Essentials of a valid contract Agreement Free consent Competency ofthe parties Lawful consideration Legal object Not expressly declared to be void
Not given by Section 1o but are also considered essential Two parties Intention to create a legal relationshijp Fulfilment of legal formalities Certainty of meaning Possibility of performance
TYPES OF CONTRACT I. On the basis of the validity 1. Valid Contract: An agreement which is binding and enforceable is a valid contract. It contains all the essential elements of a valid contract. a. Void Contract: Section 2 () states as follows: 'A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable'. Thus a void contract is one which cannot be enforced by a court of law
TYPES OF CONTRACT 3. Voidable Contract: Section 2(i) defines that "an agreement which is enforceable by law at the option of one or more parties thereto, but not at the option of the other or others is a voidable contract" 4. Illegal Contract: It is a contract which the law forbids to be made. The court will not enforce such a contract but also the connected contracts. All illegal agreements are void but all void agreements are not necessarily illegal
5. Unenforceable Contract: Where a contract is good in substance but because of some technical defect i.e absence in writing, barred by limitation etc. one or both the parties cannot sue upon it, it is described as ain unenforceable contract
II. On the basis of the formation of contract 1. Express Contracts: A contract would be an express contract if the terms are expressed by words or in writing. Section 9 ofthe Act provides that ifa proposal or acceptance of any promise is made in words the promise is said to be express.
4. E-Contracts: When a contract is entered into by two or more parties using electronics means, such as e-mails is known as e-commerce contracts