This presentation covers important concepts with sections and case laws which can guide BBA , IMBA , LLB and MBA students. introduction to Law , Indian Contracts Act, 1872 – Essentials of valid contract, Kinds of Contacts, Offer, Acceptance, consideration, Capacity of parties to a contract, Free Consent, Stranger to the contract.

3. Contents Covered
• Unit-I: Law of Contract – Essentials of valid
contract, Kinds of Contacts, Offer, Acceptance,
consideration, Capacity of parties to a
contract, Free Consent, Stranger to the
contract.

4. Blockstone: law in its most general and
comprehensive sense signifies a rule of action
and is applied indiscriminately to all kind of
actions irrespective of gender, caste, language,
race, birth, colour, and etc
WHAT IS LAW?

5. deal with the
conduct of
nation states
and internation
al organisations
among
themselves
used to resolve legal
disputes
between private individu
als who
cross international
boundaries

6. TYPES OF
CIVIL LAWS

10. FAMILY LAWS
MARRIAGE – CHRISTAIN 1872 MUSLIM 1939 ,HINDU 1955…MARRIAGE ACTS
DIVORCE
MAINTENANCE
ADOPTION
INHERITANCE

11. HIERARCHY
OF COURTS

13. INDIAN CONTRACT ACT,1872
This act was passed by British India.
• This act came into force on september,1,1872.
• This act applicable in all state of India except
Jammu & Kashmir.
• Not applicable in J&K because central
government have on authority to take legal
decision of J&K.(Only authority of external affairs,
defence,

14. Composition of the Act
• It consists of 11 chapters, 266 sections and 1
schedule.
• 238 sections after repealing and replacing sales
of goods as sales of goods Act, 1930 and
partnership as partnership Act, 1932.
• Sec 1-75 - general principles
• Sec76-123 - sales of goods
• Sec124-147 – Contract of Indemnity and
Contract of Guarantee (special/specific
contracts)

15. • Sec 148-181 – Contract of Bailment, Contract
of Pledge /Pawn (special/specific contracts)
• Sec182-238 - Contract of Agency
(special/specific contracts)
• Sec 239-266 – laws relating to partnership.
(repealed and replaced by sec73 and schedule
II of Indian Partnership Act,1932)

16. Agreement : Every promise or set of promise forming
consideration for each other.
OFFER ACCEPTANCE AGREEMENT
sec 2(a) sec 2(b) sec 2(e)

17. Contract :An Agreement enforceable by law
sec 2(e) (sec 10) sec(2h)
AGREEMENT ENFORCEABILITY CONTRACT

18. Types of contracts
EXPRESSED
IMPLIED
QUASI
E-CONTRACTS
ON THE BASIS OF
FORMATION
ON THE BASIS OF
PERFORMANCE
ON THE BASIS OF
ENFORCEABILITY
UNILATERAL
BILATERAL
EXECUTED
EXECUTORY
PARTIALLY EXECUTED
PARTIALLY EXECUTORY
VALID
VOID
VOIDABLE
ILLEGAL
UNENFORCEABLE

19. BASED ON FORMATION
• Express Contracts: A contract would be an
express contract if the terms are expressed by
words or in writing. Section 9 of the Act provides
that if a proposal or acceptance of any promise is
made in words the promise is said to be express.
Ex: A sends a text from his phone to person B, proposing to sell
their bike for a cost of Rs. 10,000/-. The person B calls the
first person and agrees to the terms of the promise.
• Implied Contract: An implied contract is a contract
which is made otherwise than by the words
spoken or written. It come into existence on
account of an act or conduct of the parties.
Ex: 1. After eating food in the restaurant, it is implied to pay
bill, it is an implied contract.
2. On boarding a bus, it is implied to buy a ticket.

20. • Quasi contract/ Constructive Contract: Even
in the absence of a contract, certain social
relationships give rise to certain specific
obligations to be performed by certain
persons. These are known as quasi contracts
as they create same obligations as in the case
of regular contract. Quasi contracts are based
on principles of equity, justice and good
conscience.
• E-contracts: All electronically made purchases
are under e contracts

21. ON THE BASIS OF PERFORMANCE
• Executed contract: An executed contract is one in
which both the parties have performed their
respective obligation.
• Executory contract: Contract in which one or both
the parties to the contract have to still perform
their obligations in future.
• Unilateral contract: A unilateral contract is one in
which only one party has to perform his obligation
at the time of the formation of the contract, the
other party having fulfilled his obligation at the
time of the contract or before the contract comes
into existence.

22. • Bilateral contract: A bilateral contract is one
in which the obligation on both the parties to
the contract is outstanding at the time of the
formation of the contract. Bilateral contracts
are also known as contracts with executory
consideration..They are Similar to executory
contract.

23. ON THE BASIS OF VALIDITY OR
ENFORCEABILITY
• Valid contract: An agreement enforceable by law
is a valid contract. • Contract must contain all
essential elements of contract and both the
parties to the contract can enforce the contract.
• Void Contract: • A contract which ceases to be
enforceable by law becomes void. • A valid
contract becomes void under the following
circumstances: Destruction of subject matter,
Contract becoming unlawful, Death of parties,
Parties becoming unlawful.

24. • Voidable contract:An agreement enforceable
by law at the option of one or more of the
parties, there to, but not at the option of the
other or others is a voidable contract.”
• Example: Mukul threatened to kill Raghav, if Raghav
did not agree to sell his house worth Rs.2crores) for
Rs.20 lakhs only. Being, threatened, Raghav entered
into the contract. Later Raghav filed a case against
Mukul to cancel the contract on the grounds of
coercion (physical threat). Held, Raghav can avoid
this contract as it is voidable at the option of only
aggrieved party (Raghav).

25. • Illegal Agreement: An illegal agreement is one
which is forbidden by law. It cannot be
enforced by any court. Any associated or
collateral transaction to an illegal agreement is
also void. No action is allowed on an illegal
agreement.
• Unenforceable contract: A contract which
satisfies all the requirements of the contract
but has technical defects is called an
unenforceable contract. A contract is said to
have a technical defect when it does not fulfill
the legal formalities required by some other
act. When such legal formalities are compiled
with later on, the act becomes enforceable.

26. Essential Elements of Valid contract, (sec10)
• There must be two parties.
Offeror sec2 (a) & Acceptor sec2(b).
• Consensus-ad- idem (identity of minds)
• Capacity to Contract (sec 11)
•Free consent (sec 14)
•Lawful consideration sec 2(d)
•Legal relationship
•Lawful object (sec 23)
•Terms must be certain
•Possibility of performance

27. se
Sec 2(a) defines offer as follows-
“when one person signifies to another, his
willingness to do or to abstain from doing
anything with a view to obtain the assent of
the other to such act or abstinence, he is said
to make a proposal”
• Starting point for formation of contract.
• Person who makes an offer is called offeror
• Person who is given an offer is called offeree
Offer/proposal

28. offeror
offeree
offeror offeree

29. Types of offer
• General/public offer
• Specific offer
• Cross offer
• Counter offer
• Standing/open/continuing offer.

30. Essential elements of valid offer
1. Offer may be expressed or implied
EXPRESSED OFFER IMPLIED OFFER
ORAL
WRITTEN

31. 2. It must create legal relationship- An offer for
social or moral act is not an offer.
• Eg: despite invitation to lunch, fail to arrange.
Case law: Balfour vs Balfour, 1919(wife n hus)
3.Terms must be clear and certain.
Caselaw: Taylor vs portington,1885(house on lease
for 3yrs provided remodeled)
4. Offer may be specific or public.
Case law: Carlill vs Carbolic Smoke Ball Co,1893
(challenge reward money of 1000 pounds to
prevent disease influenza)
Case law: Har bajan Lal vs Har charan lal,1925

32. 5. Offer or invitation to offer- it is offer to
receive offer.
• Eg: price list of goods, tenders and ads.
Caselaw: Harvey vs Facie,1893 (Bumper Hall Pen
house)
Case law: Harris vs Nickerson,1873 (sale by
auction)
6. Offer must be communicated to the offeree.
Case law: Lakshman Shukla vs Gowri Dutt, 1957
(Missing nephew)

33. Acceptance sec 2(b)
• Sec 2 (b) defines acceptance as follows-
“when the person to whom proposal is made
signifies his assent thereto, the proposal is
said to be accepted.”
• It is the second stage in the formation of the
contract.
• A contract is created only when acceptance is
made.

34. acceptance

35. Elements of Acceptance
1. It must be absolute and unqualified.
Case law: Hyde vs Wrench,1840 (Farm sale)
2. It must be given in usual mode or in
prescribed manner.
Case law: Eliason vs Henshaw,1819 (wheat flour)
3. It must be communicated within reasonable
time.
Case law: RamsGate Victoria Hotel vs
Montefiore, 1866. (28 june..23 nov)

36. 4. Acceptance must be given before revocation
of offer.
Case law: Hentron vs Fraser,1892.
5. Acceptance must be communicated.
Caselaw : powell vs lee,1908 (headmaster
interview)

37. Consideration sec 2(d)
• Sec 2 (d) defines consideration as follows-
“ when at the desire of the promisor, the promisee
or any other person has done or abstained from
doing,something such act or abstinence or
promise is called a consideration.”
• In simple ,It is “some thing in return” i.e the
price paid for the contract.
• “Ex neudo pacto non oritur actio”= out of a
nude fact no cause of action arises. Hence
contract with of consideration is void.

38. Types of considerations
1. Past consideration-A promise in lieu of past
act/action.
Caselaw: Roscorla vs Thomas,1842 (vicious
horse)
Caselaw: Siva saran vs Kesav Prasad, 1918 (claim
for pension)
2. Present consideration.

39. 3. Future consideration: A promise to do an act
in future for consideration.
Note: In India all there considerations are Valid
but in England past consideration is not Valid

40. Elements of consideration
1. It must move at the desire of the promisor.
Caselaw: Durga prasad vs Baldeo,1880.
(commission for shops in market)
2. Consideration must move from promisee or
any other person.
Caselaw: Chinnaya vs Ramayya, 1881. (annuity
of 653 to brother)
Note: Privity of contract-stranger to a contract
cannot sue. But Indian law permits this

41. 3. consideration must be real and not illusory.
Caselaw : White vs Bluett,1853 (father n sons
agreement)
4. It need not be adequate.
5. It may be past, present or future.
6. It must not be illegal, immoral or opposed to
public policy.

42. Exceptions to consideration (sec 25)
1. Contracts arising out of love and affection sec
25(1).
• Venkataswamy vs Ranga swamy ( brother
promises to repay his loan out of love)
2. compensation for voluntary services. Sec 25(2)
3. Promise to pay time barred debt. Sec 25(3)

43. Privity of contract
• The Indian Contract Act. 1872, allows the
‘consideration‘ for an agreement to proceed
from a third-party. However, a stranger (third-
party) to consideration is different from a
stranger to a contract. The law does not allow
a stranger to file a suit on the contract. This
right is available only to a person who is a
party to the contract and is called Doctrine of
Privity of Contract.
• Case law: Tweddle vs Atkinson

44. Exceptions to the Doctrine of Privity of Contract
A stranger or a person who is not a party to a
contract can sue on a contract in the following
cases:
• Beneficiary of a Trust
• Marriage Settlement
• Assignment of a Contract
• Acknowledgement or Estoppel
• A covenant running with the land
• Contract through an agent

45. Capacity to contract sec 11
• Sec 11 of the ICA says that “every person is
competent to contract who is of the age of
majority according to the law to which he is
subject and who is of sound mind (sec12) and
not disqualified from contracting by any law to
which he is subject.”

46. Incapacities to contract
1. Minor- not completed age of 18 yr if nurtured
by parents (Indian Majority Act 1875) and 21
yr under guardians(The Guardians And Wards
Act,1890)
Note: Contract with a minor is “Void ab Initio”
Caselaw: Mohirbibi Vs Dharmadas Gosh

47. 2. Persons of unsound mind: a person who ia
not able to understand the terms in the
contract and cannot make a rational
judgment.
• Lunatics:- mentally deranged due to some
mental strain.
• Idiots:- who completely lost his mental power.
• Drunken/intoxicated
Caselaw: Indersingh Vs Parameshwardari
Singh(1957
3. Persons disqualified by law:-Alien enemies,
Insolvents, Convicts ect

48. Free consent (sec14)
• Consent is said to be free when it is not caused by flaws in
consent i.e –
• Coercion (sec15):Making a person to give his consent by
force or threat.
Caselaw: Chikkam Ammiraju vs Chikkam Sheshamma ,1918
(husband threatens wife n son)
Ranganayakamma vs Alwar setti, 1889 (adopt son)
• Undue influence (sec16): improper use of any power over
the other to make him enter into an agreement.
Case law: Takaridevi vs Ram Dogra,1984
(Illiterate women induced to execute land infavour of
advocate)
Case law: Manali Singal Vs Ravi Singal ,1999
(Wife n husband family settlement)

49. • Fraud (sec17):if the misstatement is intentional
and deliberate to deceive or defraud.
• Misrepresentation (sec18): misstatement is
innocent and unintentional.
• Mistake (sec19,20,21)
Mistake of fact (sec20)
Mistake of law (sec21)
Unilateral
mistake
Bilateral
mistake
Ignorantia facti excusat Ignorantia juris
non excusat

50. Lawful object (sec 23)
• An agreement entered into with unlawful
consideration or object is declared void.
Sec 23 says what is not lawful:
• forbidden by law,
• fraudulent,
• implies any injury or threat
• opposed to public policy

51. Agreements opposed to public policy
• Agreements in restraint of marriage.( Sec 26)
Case law: Rose Fernandez Vs Joseph
Gonslaves,1925
• Agreements in restraint of trade.( sec27)
Caselaws:
krishna murgani vs superinendence company of
india pvt ltd,1979 ( contract of employment not
to join competitors firm or run similar to such)
Madhub chander vs raj coomar, 1874( request to
stop doing same business in same locality)

52. • Agreements in restraint of legal proceedings.
(sec 28) Takaridevi vs Ram Dogra,1984
• Agreements void for uncertainty. (Sec 29)
• Wagering agreement. (Sec 30) Muttu Swamy
Pillai Vs Veera Swamy Pillai,1936
The bombay avoiding of wagers,1865 all
wagering agreements are illegal and void.
• Agreement to commit a crime.
• Agreement with Alien.

53. Thank you