Meaning of Contract

Section 2 (h) of Indian Contract Act, 1872 defines ‘Contract’

“An agreement enforceable by law is called as contract.”

Contract = Agreement + Enforceability

The key components of this definition involve two fundamental elements: “agreement” and “enforceability by law.”

1. Agreement:

An agreement arises when one person makes a proposal or offer to another, and the other person accepts it. Thus, an agreement is composed of an offer and an acceptance.

2. Enforceability by Law:

For an agreement to be considered a contract, it must create legal obligations between the parties involved. This means that if one party fails to fulfill their part of the agreement, the other party can seek enforcement through the legal system.

Elements of a Valid Contract

To further understand the concept of a contract under the Indian Contract Act, 1872, it is essential to consider the elements that make an agreement legally enforceable. These include:

1. Offer and Acceptance: There must be a clear offer by one party and an unqualified acceptance by the other.

2. Legal Purpose: The purpose of the contract must be lawful.

3. Lawful Consideration: There must be something of value exchanged between the parties.

4. Capacity: The parties must have the legal capacity to enter into a contract, meaning they are of legal age, sound mind, and not disqualified by law.

5. Free Consent: Consent of the parties must be free and not obtained through coercion, undue influence, fraud, misrepresentation, or mistake.

6. Certainty and Possibility of Performance: The terms of the contract must be clear and the performance must be possible.

7. Not Declared Void: The contract should not be one which is expressly declared void under the Indian Contract Act or any other law.

Types of Contracts

The Indian Contract Act, 1872 recognizes various types of contracts, including:

1. Express and Implied Contracts: Express contracts are stated in words (written or spoken), while implied contracts are inferred from the actions or conduct of the parties.

2. Bilateral and Unilateral Contracts: Bilateral contracts involve mutual promises between two parties, whereas unilateral contracts involve a promise by one party in exchange for the performance of an act by the other.

3. Contingent Contracts: These are contracts that depend on the happening or non-happening of a specific event.

4. Quasi-Contracts: These are not actual contracts but are treated as such by law to prevent unjust enrichment.

Important Sections

-Section 2(h): Defines a contract as an agreement enforceable by law.

– Section 2(e): Defines an agreement as every promise and every set of promises forming the consideration for each other.

– Section 10: Lays down the conditions for enforceability, such as lawful consideration, free consent, competent parties, etc.

Conclusion:

The Indian Contract Act, 1872 provides a comprehensive legal framework for the creation and enforcement of contracts in India. By defining what constitutes a contract and outlining the essential elements that make an agreement legally binding, the Act ensures clarity and consistency in contractual dealings.