INDIAN CONTRACT ACT 1872

Section 2(h) – Indian Contract Act 1872

defines contract as
“An agreement enforceable by law is a
contract.”
 ESSENTIAL ELEMENTS OF A VALID
CONTRACT
• Offer and Acceptance
• Intention to create legal relations
• Lawful Consideration
• Capacity of parties
• Free and genuine consent
• Lawful object
• Agreement not declared void
• Certainty and possibility of performance
• Legal formalities
4 MAIN INGREDIENTS OF A CONTRACT
• Intention

• Agreement

• Certainty

• Consideration
 PROPOSAL OR OFFER
• Offer may be express or implied
• Offer must be capable of creating legal relations
• Terms of the offer must be clear
• An invitation to offer is not an offer
• An offer may be specific or general
• Offer must be communicated to the offeree
• Offer should not contain a term the non-compliance of
which would amount to acceptance
• An offer may be made subject to any terms and
conditions
• Two identical cross-offers do not make a contract
 THE ACCEPTANCE
• Acceptance must be given only by the person to whom
the offer is made
• Acceptance must be expressed in some usual and
reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted
• Acceptance must be communicated by the acceptor
• Acceptance must be given within a reasonable time
and before the offer lapses and/or is revoked
• Acceptance must succeed the offer
• Rejected offers can be accepted only if renewed
 CONSIDERATION
• Consideration must move at the desire of the
promisor

• Consideration may move from the promisee or

any other person

• Consideration may be past present or future

• Consideration must be something of value

 NO CONSIDERATION NECESSARY
• Agreement made on account of natural love
and affection
• Agreement to compensate for past voluntary
service
• Agreement to pay a time-barred debt
• Completed gift
• Contract of agency
• Contribution to charity
 FREE CONSENT
• Consent is said to be free when it is not caused by-

• Coercion,or

• Undue influence, or

• Misrepresentation,or

• Fraud,or

• Mistake
 COERCION
• Coercion is the committing or threatening to
commit any act forbidden by the Indian Penal
Code or the unlawful detaining or threatening
to detain any property to the prejudice of any
person whatever with the intention of causing
any person to enter into an agreement.
 UNDUE INFLUENCE
• A contract is said to be induced by undue
influence where, the relations subsisting
between the parties are such that one of the
parties is in a position to dominate the will of
the other, and he uses the position to obtain
an unfair advantage over the other.
 MISREPRESENTATION
• A representation when wrongly made, either
innocently or intentionally, is termed as a
misrepresentation.

• Misrepresentation is innocent, Fraud is

deliberate misrepresentation with an
intention to deceive.
 FRAUD
• Fraud means and includes any of the following acts
committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive or
to induce another party thereto or his agent to enter
into the contract.

• Section 17 Indian Contract Act 1872

 ACTS CONSTITUTING FRAUD
• 1. False statement intentionally made is fraud.
Made by one who does not himself believe it
to be true.

• Supressio Veri, Suggestio Falsi

 ACTS CONSTITUTING FRAUD
• 2. Active concealment is also fraud.

• Concealment of a material fact

• Mere non-disclosure is not fraud, where there

is no duty to disclose.

• Caveat Emptor or Buyer Beware.

 ACTS CONSTITUTING FRAUD
• 3. A promise made without any intention of
performing it.

• 4. Any other act fitted to deceive

• 5. Any such act or omission as the law

specially declares to be fraudulent.
 CAN SILENCE BE FRAUDULENT ?
• Silence is not fraud where there is no duty to
disclose. No duty cast by law.

• Silence is fraudulent when it is the duty of the

person keeping silent to speak.

• Silence is fraudulent where the circumstances

are such that silence is , in itself , equivalent to
speech.
 DISCHARGE OF CONTRACT
• A Contract is said to be terminated or
discharged when the rights and obligations
arising out of the contract are extinguished.

• Discharge of a contract means that the parties

are no more liable under the contract.
MODES OF DISCHARGE OF CONTRACT
• By Performance
• By Agreement
• By Impossibility of Performance
• By Lapse of Time
• By Operation of Law
• By Breach of Contract
 MODES OF DISCHARGE contd
• By Performance which maybe Actual or Attempted
• Discharge by Mutual consent or Agreement- by
Novation, Alteration, Rescission, Remission and Waiver.
• By Supervening Impossibility or Illegality like
Destruction of subject matter, Failure of Ultimate
Purpose, Death or personal incapacity of promissor.
• Discharge by Lapse of Time.
• By Operation of Law as in Death, Insolvency,Merger,
Unauthorised material alteration.
• By Breach of Contract. Anticipatory or Actual.
REMEDIES FOR BREACH OF CONTRACT
• Rescission of the contract.
• Suit for Damages which can be Ordinary,
Special, Vindictive and Nominal.
• Suit for Specific Performance
• Suit for Injunction
• Suit upon Quantum Meruit
 LIQUIDATED DAMAGES AND
PENALTY
• Section 74 – Courts are required to allow reasonable
compensation so as to cover the actual loss sustained, not
exceeding the amount so named in the contract. This is the
maximum limit of liability in case of breach of contract.

• Liquidated damages means a sum, fixed up in advance,

which is a fair and genuine pre-estimate of the probable
loss that is likely to result from the breach.

• Penalty means a sum fixed up in advance , which is

extravagant and unconscionable in amount in comparison
with the greatest loss that could conceivably br proved to
have followed fom the breach.