01 - ICICI - 1 - Pre-Class - PPT - v2 0

Session
1:
The Indian Contracts
Act, 1872
ntroduction
This session discusses the law of

contracts in detail and the salient
features of a contract as provided
under the Indian Contracts Act, 1872.
You will first study how contracts are
created, as it is important to
understand, that we enter into
contracts voluntarily, for example,
purchase or sale of shares of a
company or a plot of land.
There are other types of contracts
entered into without our volition, for
example, hiring a taxi, buying a book,
earning Objectives
e end of this session, you will be able to:

Define a valid contract
List the essential features of a contract
Differentiate between a contract and
agreement
Classify contracts according to formation
and validity
Indian Contracts Act, 1872
Indian Contract Act, 1872 contains the

law relating to contracts in India. The
Act was passed by British India and is
based on the principles of English
Common Law.
The Act is applicable to whole of India
except the state of Jammu and
Kashmir.
The Act determines the circumstances
in which promises made by the parties
to a contract shall be legally binding on
them.
finition of a Contract
According to the Indian Contracts Act,

1872, a contract is an agreement
enforceable by law made between at
least two parties as per which rights
and obligations are mutually created
for both parties.
If the party who had agreed to do
something fails to do that, then the
other party has a remedy in law.
Example:
D Airlines sells a ticket on 1
January to X for the journey
from Mumbai to Bangalore
on 10 January. The airline is
under an obligation or duty
to take X from Mumbai to
Bangalore on 10 January. In
case the airline fails to fulfil
its promise, X has the right
to sue the airlines for
breach of contract.
finition of a Contract
Contracts, irrespective of the method

of formation, confer legal rights on one
party and subject the other party to
some form of legal obligation.
Contracts are the life blood of a
business as every business transaction
is built on the usage of contracts. Thus,
business
executives,
corporate
counsels,
entrepreneurs
and
professionals
in
different
fields
frequently deal with contracts.
ntract vs Agreement
CONTRACT
AGREEMENT
In a contract, there are at least

two parties. One of them makes a
proposal (or offer) to the other to
do something with a view of
getting approval of the other to
such an act.
Contracts
Act
defines
an
agreement as every promise and
every set of promises forming a
consideration for each other.
When the person to whom the

proposal is made provides his/her
assent, the proposal is said to be
accepted. A proposal, when
accepted, becomes a promise.
The
agreement
must
be
enforceable by law to become a
contract. Thus, there are certain
agreements that do not become
contracts as the element of
enforceability by law is absent.
ntract vs Agreement
CONTRACT
AGREEMENT
The Contracts Act provides that all Certain agreements that do not
agreements are contracts if they
become contracts as the element of
are:
enforceability by law is absent.
made by free consent of parties
competent to contract for a
lawful consideration with a lawful
object and
not expressly declared by law to
All be
agreements
are not contracts; but all contracts are agreements
void.
eck Your Understanding
01
The contract which possesses all the elements of a

contract as mentioned in the Indian Contracts Act is a
__________ .
a) Valid contract
b) Void contract
c) Voidable contract
d) Non-enforceable
01
The contract which possesses all the elements of a

contract as mentioned in the Indian Contracts Act is a
__________ .
a) Valid contract
b) Void contract
c) Voidable contract
d) Non-enforceable
Essentials of a Contract
Essentials of a contract can be classified
into:
Proposal/Offer
In this session you will learn about
Promise
Proposal/Offer,
Promise
and
Explain the definition of The Indian Agreement.
The
remaining
Contract
Act, 1872
essentials will be covered in the
Agreement
next session.
Free Consent
Contractual Capacity
Lawful
Consideration/Object
Legal Obligation and
Formalities
into:
Proposal/Offer
Explain the definition of The Indian

Contract Act, 1872
Promise
Agreement
Proposal/Offer
into:
Proposal/Offer

Contract Act, 1872
Promise
Agreement
When one person signifies to

another his/her willingness to do or
to abstain from doing anything, with
a view to obtaining the assent of
that other to such act or abstinence.
Proposal/Offer
into:
Proposal/Offer

Contract Act, 18
Example:
Shyam wants to sell his car. He
looks out for potential buyers
and finds Anil.
Promise
Shyam to Anil Sir, are you

interested in buying my car for
INR 100,000.
Agreement
Shyam
has
made
a
proposal/offer to Anil. In this
example since Shyam made the
proposal/offer
he
is
the
Proposer (Offerer) and Anil is
the Proposee (Offeree).
Proposal/Offer
Essentials of a contract can be classifiedWhile making a proposal or an offer
into:
Shyam needs to take care of three
things:
Proposal/Offer
Shyam has to

Intention
Contract Act, 1872
Promise
Agreement
Communica
tion
Await
Response
make up his
mind to sell the
car.
Proposal/Offer
into:
things:
Proposal/Offer

Intention
Contract Act, 1872
Promise
Agreement
Communica
tion
Await
Response
Shyam informs
Anil about his
intention to sell,
either verbally
or through
written
communication.
Proposal/Offer
into:
things:
Proposal/Offer

Intention
Contract Act, 1872
Promise
Agreement
Communica
tion
Await
Response
Shyam awaits a
response from
Anil
Proposal/Offer
into:
things:
Proposal/Offer

Intention
Contract Act, 1872
Promise
Agreement
Communica
tion
Await
Response
In the example, Anil

may accept or reject
Shyams offer. Anil
can also make an
inclination to accept
Shyams
proposal
with
certain
modifications which is
known as Counter
Offer.
Shyam awaits a
response from
Anil
Essentials of a Contract Promise

into:
Proposal/Offer

Contract Act, 1872
Promise
Agreement
When a 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.
Essentials of a Contract Promise

into:
Proposal/Offer

Contract Act, 18
Promise
Agreement
Continuing with our previous

example - In response to
Shyams proposal/offer, Anil
has given back a positive
response.
Anil to Shyam Shyam, I
am fine with your proposal/
offer.
When Anil accepts the
proposal/offer
made
by
Shyam,
the
offer
is
converted into a Promise.
Promisor/Promisee
into:
Proposal/Offer

Contract Act, 1872
Promise
Both Shyam & Anil make mutual

promises for buying and selling at the
agreed price. This mutual promise is
called Reciprocal Promise.
Agreement
The person making the proposal is

called the "promisor", and the person
accepting the proposal is called
"promisee. In this example, Shyam
Agreement
into:
Proposal/Offer

Contract Act, 1872
Promise
Agreement
Every promise and every set of

promises, forming the consideration
for each other, is an agreement.
In the example, if Anil accepts
Shyams offer with a condition "Can I pay you Rs. 50,000 now and
remaining money after a month?".
In such a case the acceptance
becomes conditional.
In order to convert a proposal/offer
into a promise the acceptance

02
___________ is the basic building block on which a

contract rests.
a) Acceptance
b) Offer
c) Consent
d) Promise

02
___________ is the basic building block on which a

contract rests.
a) Acceptance
b) Offer
c) Consent
d) Promise
assification of Contracts
Contracts can be classified into:
Express In
writing or by
Classifica
spoken words
tion
accordin
Implied - Inferred
g to
from the conduct
Formati
of parties or
on
circumstances of
the case
Classifica
tion
accordin
g to
Validity
Valid
Void
Voidable
Non-enforceable
illegal
Express In
writing or by
Classifica
spoken words
tion
accordin
Implied - Inferred
g to
from the conduct
Formati
of parties or
on
circumstances of
the case
Classifica
tion
accordin
g to
Validity
Valid
Void
Voidable
Non-enforceable
illegal
Valid means that the contract

possesses all the elements of a
contract as mentioned in the Indian
Contracts Act.
If one or more of the essential
elements are missing, the contract is:
Void An agreement which is void
from
inception
and
is
NOT
enforceable by law.
Voidable An agreement which is
enforceable by law at the option of
one or more of the parties thereto,
but not at the option of the other
or others.
Non-enforceable An agreement
which is otherwise valid; but
Express In
writing or by
Classifica
spoken words
tion
accordin
Implied - Inferred
g to
from the conduct
Formati
of parties or
on
circumstances of
the case
Classifica
tion
accordin
g to
Validity
Valid
Void
Voidable
Non-enforceable
illegal
Contracts are also classified as formal

or informal on the basis of their
formation.
A formal contract is one in which the
law gives special effect because of
formalities or special language used in
creating it. The formalities include
legalization by recording the terms
and conditions, signatures of parties,
witness, notarization, stamp duty etc.
The best example of formal contracts
are negotiable instruments such as
cheques.
Summary
re is a recap of what you learnt:

A contract is an agreement enforceable by law made between
at least two parties as per which rights and obligations are
mutually created for both parties.
All agreements are not contracts, but all contracts are
agreements.
Essentials of a contract covered in this session are Proposal/Offer, Promise and Agreement.
Contracts can be classified into two based on formation and
validity. Contracts can also be classified as formal and
informal.
Contracts classified on the basis of formation are - Express and
Implied.
Contracts classified on the basis of validity are Valid, Void,

Voidable, Non-enforceable, illegal.
Thank
You

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Session

This session discusses the law of

e end of this session, you will be able to:

Indian Contracts Act, 1872

Indian Contract Act, 1872 contains the

According to the Indian Contracts Act,

Contracts, irrespective of the method

In a contract, there are at least

When the person to whom the

eck Your Understanding

The contract which possesses all the elements of a

eck Your Understanding

The contract which possesses all the elements of a

Explain the definition of The Indian

Explain the definition of The Indian

When one person signifies to

Explain the definition of The Indian

Shyam to Anil Sir, are you

Explain the definition of The Indian

Explain the definition of The Indian

Explain the definition of The Indian

Explain the definition of The Indian

In the example, Anil

Essentials of a Contract Promise

Explain the definition of The Indian

When a person to whom the proposal

Essentials of a Contract Promise

Explain the definition of The Indian

Continuing with our previous

Explain the definition of The Indian

Both Shyam & Anil make mutual

The person making the proposal is

Explain the definition of The Indian

Every promise and every set of

eck Your Understanding

___________ is the basic building block on which a

eck Your Understanding

___________ is the basic building block on which a

Valid means that the contract

Contracts are also classified as formal

re is a recap of what you learnt:

Contracts classified on the basis of validity are Valid, Void,

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