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THE INDIAN CONTRACT ACT, 1872

Essential Features of a Contract

 
COMPETITION LAW
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The Indian Contract Act, 1872
Drafting of Commercial Agreements and Contracts
FAQ on Commercial Agreements and Contracts
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All contacts are agreement but all agreements are not contracts- This implies that for an agreement to become a contract there are essential considerations and stipulations which have to be complied. Thus, an agreement which is legally enforceable is a contract.

 

All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. The Act defines an agreement as every promise and set of promises forming consideration for each other (Section 2(e)) and a contract as an agreement enforceable by law (Section 2(h)).

 

Balfour v. Balfour (1919)2 K.B. 571- In this case, a husband promised to pay maintenance allowance to his wife every month. When he failed to pay the amount, the wife brought an action to enforce the agreement. However, the Court was of the view that as the agreement was of a domestic nature, it was not enforceable under law.

 

The essential elements of a valid contract  

  • A valid offer and acceptance

  • The intention to form a legal relationship

  • Capacity of the parties to contract

  • A lawful consideration

  • Free consent of parties

  • A lawful object

  • Agreement nit expressly declared to be

void Void and Voidable Contracts- Void contracts are those contracts which cannot be enforced by a Court of law and voidable contracts are those which are enforceable by law at the option of one or more parties but not at the option of others is a voidable contract.

 

Express and Implied Contracts- Express contracts are those where the proposal or acceptance of any promise is made in words and a contract which is not express is an implied contract or contracts which are inferred from the circumstances of a case.

 

Offer and Invitation to Offer- An offer is a proposal and is definite whereas an invitation to offer is to invite someone to make a proposal and is done with an intent to induce a negotiation.

 

In Harvey v. Facey [(1893) A.C. 552], the Court explained the difference between offer and invitation to offer. In this case, the Plaintiffs sent a telegram to the Defendant asking “Will you sell us the Bumper Hall Pen? Telegraph lowest cash price.” The Defendants telegraphed “Lowest price for Bumper Hall Pen as £900.” The Plaintiffs sent another telegram to the Defendant saying- “We agree to buy Bumper Hall pen for £900 asked by you, please send us your title deeds.”

 

In the case the Privy Council observed that the first telegram had asked two questions, one regarding willingness to sell and the other regarding lowest price. In reply only lowest price was quoted and this quoting of the price was not an offer. The third telegram from the Plaintiffs saying “we agree to buy” was only on offer and not the acceptance of an offer. Since this offer had not been accepted there was no binding contract between the parties.

 

Special and General Offers- When an offer is made to a specific or special person, it is known as a specific offer but when the same is not made to any particular person but to the public at large it is known as general offer.

 

Acceptance- As per the Act, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise (Section 2(b)).

 

Essentials of a valid acceptance are as under:

- Acceptance should be communicated by the offeree to the offeror

- Acceptance should be absolute and unqualified

- Acceptance should be made in some usual and reasonable manner

- Acceptance shall be made while the offer is still subsisting

 

Revocation of Offer and Acceptance- As per the Act, a proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer nut not afterwards. Similarly, an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor but not afterwards.

 

Standard Form Contracts- are one of the most sought after contract these days. When large number of contracts have to be entered by a person then from a practical point of view and for convenience a standard form of contract is used. Thus, a contract with standard terms and conditions are drafted by one party and on the same terms contract is made with numerous persons having similar interest in the contract.

 

Such contracts may include Insurance Contracts, Property Development Contracts etc. It is a contract between two parties, where the terms and conditions are set by one of the parties to the contract and the other party has little or no say regarding the terms and conditions of the Contract.

 

For more information on The Indian Contract Act, 1872 in India please write to us at: info@ssrana.com

 

 

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