The Indian Contract Act Is Divisible Into Two Parts.: The First Part (Section 1-75)

Explain Contract Act, 1872 and state the essentials
to the contract
Introduction:-
The Indian Contract Act, 1872[1] prescribes the law relating to contracts
in India and is the key act regulating Indian contract law. The Act is
based on the principles of English Common Law. It is applicable to all
the states of India. It determines the circumstances in which promises
made by the parties to a contract shall be legally binding. Under Section
2(h), the Indian Contract Act defines a contract as an agreement which is
enforceable by law.
The Law of Contract constitutes the most important branch of Mercantile
or Commercial Law. It is the foundation upon which the superstructure of
modern business is built.
It affects everybody, more so, trade, commerce and industry. It may be
said that the contract is the foundation of the civilized world.
The Indian Contract Act is divisible into two parts.
The first part (Section 1-75) deals with the general principles of the law
of contract and therefore applies to all contracts irrespective of their
nature.
The second part (Sections 124-238) deals with certain special kinds of
contracts such as :-
⁎ Contracts of Indemnity and Guarantee
Explain Contract Act, 1872 and state the essentials
to the contract
⁎ Bailment
⁎ Pledge
⁎ Agency.
According to section 2(h) of the Indian Contract Act, 1872 “An
agreement enforceable by law is a contract.“
A contract is a combination of the two elements:
There must be an agreement
Agreement must be enforceable by law (obligation)
Contract = Agreement + Enforcement by law
Agreement
Section 2(e) “Every promise and every set of promises, forming the
consideration for each other, is an agreement.” Thus it is clear from this
definition that a ‘promise’ is an agreement.
Agreement = offer + Acceptance
Agreement
Section 2(e) “Every promise and every set of promises, forming the
consideration for each other, is an agreement.” Thus it is clear from this
definition that a ‘promise’ is an agreement.
Agreement = offer + Acceptance
Promise
Section 2(b) “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.“
An agreement, therefore, comes into existence when one party makes a
proposal or offer to the other party and that other party signifies his assent
thereto.
Following are the characteristics of an agreement:
Plurality of persons: There must be two or more persons to make an

agreement because one person cannot enter into an agreement with
himself.
Consensus ad idem: The meeting of the minds is called consensus-ad-

idem. It means both the parties to an agreement must agree about the
subject matter of the agreement in the same sense and at the same time.
Legal obligation
As stated above, an agreement to become a contract must give rise to a
legal obligation i.e. a duty enforceable by law.
1. Offer 2(a): An offer refers to a promise that is dependent on a certain
act, promise, or forbearance given in exchange for the initial promise.
2. Acceptance 2(b): When the person to whom the proposal is made,

signifies his assent there to, the proposal is said to be accepted.
3. Promise 2(b): A Proposal when accepted becomes a promise. In

simple words, when an offer is accepted it becomes promise.
4. promiser and promisee 2(c): When the proposal is accepted, the

person making the proposal is called as promiser and the person
accepting the proposal is called as promisee.
5. Consideration 2(d): When at the desire of the promiser, the promisee

or any other person has done or abstained from doing or does or abstains
from doing or promises to do or to abstain from doing something such act
or abstinence or promise is called a consideration for the promise. Price
paid by one party for the promise of the other Technical word meaning
QUID-PRO-QUO i.e. something in return.
6. Agreement 2(e): Every promise and every set of promises forming

the consideration for each other. In short,
7. Contract 2(h): An agreement enforceable by Law is a contract.
Therefore, there must be an agreement and it should be enforceable by
law.
8. Reciprocal Promises 2(f): Promises which form the consideration and

part of the consideration for each other are called 'reciprocal promises'.
9. Void agreement 2(g): An agreement not enforceable by law is void.
10. Voidable contract 2(i): An agreement is a voidable contract if it is

enforceable by Law at the option of one or more of the parties there to
(i.e. the aggrieved party), and it is not enforceable by Law at the option of
the other or others.
11. Void contract 2(j): A contract becomes void when it ceases to be

enforceable by law.
According to Section 2(b), "When the person to whom the proposal is

made, signifies his assent thereto, the offer is said to be accepted. A
proposal, when accepted, becomes a promise."
Rules:-
1. Acceptance should be absolute and unqualified.. If the parties are not

concurred on all matters concerning the offer and acceptance, there is no
valid contract. For example, "A" says to "B" "I offer to sell my car for
Rs.50,000/-. "B" replies "I will purchase it for Rs.45,000/-". This is not
acceptance and hence it amounts to a counter offer.
2. It should be Communicated to the offeror. To conclude a contract

between parties, the acceptance must be communicated in some
prescribed form. A mere mental determination on the part of offeree to
accept an offer does not amount to valid acceptance.
3. Acceptance must be in the mode prescribed. If the acceptance is not

according to the mode prescribed or some usual and reasonable mode
(where no mode is prescribed) the offeror may intimate to the offeree
within a reasonable time that acceptance is not according to the mode
prescribed and may insist that the offer be accepted in the prescribed
mode only. If he does not inform the offeree, he is deemed to have
accepted the offer. For example, "A" makes an offer to "B" says to "B"
that "if you accept the offer, reply by voice.”B" sends reply by post. It
will be a valid acceptance, unless "A" informs "B" that the acceptance is
not according to the prescribed mode.
4. Acceptance must be given within a reasonable time before the offer

lapses. If any time limit is specified, the acceptance must be given within
the time, if no time limit is specified it must be given within a reasonable
time.
5. It cannot precede an offer. If the acceptance precedes an offer it is not
a valid acceptance and does not result in contract. For example, in a
company shares were allotted to a person who had not applied for them.
Subsequently, when he applied for shares, he was un aware of the
previous allotment . The allotment of share previous to the application is
not valid.
6. Acceptance by the way of conduct.
7.Mere silence is no acceptance.
Silence does not per-se amounts to communication- Bank of India Ltd.

Vs. Rustom Cowasjee- AIR 1955 Bom. 419 at P. 430; 57 Bom. L.R. 850-
Mere silence cannot amount to any assent. It does not even amount to any
representation on which any plea of estoppel may be found, unless there
is a duty to make some statement or to do some act free and offerer must
be consent
1. Acceptance must be unambiguous and definite.
2. Acceptance cannot be given before communication of an offer.
3. Contract Act defines a Contract as “An agreement which is

enforceable by Law”. An Agreement is a settlement between two parties,
which contains obligations or promises which both parties need to fulfil.
When such an agreement is made binding by Law it becomes a Contract.
4.Therefore an agreement consists of reciprocal Promises which are to be
performed by parties to the contract. Promises are reciprocal when both
parties have to perform something for the other.
Essentials of a valid contract
Section 10 states conditions which are required for a contract to be

valid.
Offer: Firstly, there must be an offer from either party, without an Offer a
contract cannot arise. However, in some cases, this principle could not be
applied. For instance, Mulla talks about a situation in which offer and
acceptance could not be traced, for instance, a commercial agreement
reached after multiple rounds of negotiations.
Acceptance of the offer: Secondly, the Offer must be accepted and

accepted by the person to whom it was intended. So an offer by A to B
has to be accepted by B only.
Acceptance in ad-idem: Thirdly, though acceptance is important, there

must be “Consensus ad-idem”. Consensus ad-idem means meeting of
minds. It means that parties to the contract should accept the terms of the
contract in the “same sense”. Thus parties to the contract must have the
same understanding of the terms of the contract.
E.g. A contracted with B to purchase rice. Now A wanted a special

type of rice, however, B thought of it to be normal rice. In this case,
although there is a valid acceptance but there lacks meeting of minds
between the parties; meeting of minds concerning the type or quality of
rice.
Similarly, if A contracted with B to buy stocks. What A meant was

stocks in a company, whereas B understood it to be his livestock (farm
animals). In this case, the understanding was not in a similar sense.
Parties must be competent to contract, under the laws they are subjected
to i.e. they must be legally capable to contract
Consideration, for the performance of promises there must be a
consideration. Something given for performance of promise from both
parties to the contract.
Further, the objective and consideration of the contract must be lawful.
Give out a detailed Business Plan with respect to foreign
investments and
taxation of foreign income
Virtually all governments are keen to attract foreign direct investment

(FDI). It can generate new jobs, bring in new technologies and, more
generally, promote growth and employment. The resulting net increase in
domestic income is shared with government through taxation of wages
and profits of foreign-owned companies, and possibly other taxes on
business (e.g. property tax). FDI may also positively affect domestic
income through spillover effects such as the introduction of new
technologies and the enhancement of human capital (skills). Given these
potential benefits, policy makers continually re-examine their tax rules to
ensure they are attractive to inbound investment. Tax policies may also
support direct investment abroad, as outbound investment may provide
efficient access to foreign markets and production scale economies,
leading to increased net domestic income. At the same time, governments
continually balance the desire to offer a competitive tax environment for
FDI, with the need to ensure that an appropriate share of domestic tax is
collected from multinationals. But while tax is recognized as being an
important factor in decisions on where to invest, it is not the main
determinant. FDI is attracted to countries offering: access to markets and
profit opportunities; a predictable and nondiscriminatory legal and
regulatory framework; macroeconomic stability; skilled and responsive
labour markets; and well-developed infrastructure. All of these factors
will influence the long-term profitability of a project.

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Explain Contract Act, 1872 and state the essentials

The Indian Contract Act is divisible into two parts.

Contract = Agreement + Enforcement by law

Agreement = offer + Acceptance

Plurality of persons: There must be two or more persons to make an

Consensus ad idem: The meeting of the minds is called consensus-ad-

2. Acceptance 2(b): When the person to whom the proposal is made,

3. Promise 2(b): A Proposal when accepted becomes a promise. In

4. promiser and promisee 2(c): When the proposal is accepted, the

5. Consideration 2(d): When at the desire of the promiser, the promisee

6. Agreement 2(e): Every promise and every set of promises forming

8. Reciprocal Promises 2(f): Promises which form the consideration and

9. Void agreement 2(g): An agreement not enforceable by law is void.

10. Voidable contract 2(i): An agreement is a voidable contract if it is

11. Void contract 2(j): A contract becomes void when it ceases to be

According to Section 2(b), "When the person to whom the proposal is

1. Acceptance should be absolute and unqualified.. If the parties are not

2. It should be Communicated to the offeror. To conclude a contract

3. Acceptance must be in the mode prescribed. If the acceptance is not

4. Acceptance must be given within a reasonable time before the offer

6. Acceptance by the way of conduct.

7.Mere silence is no acceptance.

Silence does not per-se amounts to communication- Bank of India Ltd.

1. Acceptance must be unambiguous and definite.

2. Acceptance cannot be given before communication of an offer.

3. Contract Act defines a Contract as “An agreement which is

Essentials of a valid contract

Section 10 states conditions which are required for a contract to be

Acceptance of the offer: Secondly, the Offer must be accepted and

Acceptance in ad-idem: Thirdly, though acceptance is important, there

E.g. A contracted with B to purchase rice. Now A wanted a special

Similarly, if A contracted with B to buy stocks. What A meant was

Virtually all governments are keen to attract foreign direct investment

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