Law

Prof. Atul Abhiman Agalawe

(M. Com, M. A, B. Ed, D.B.M)

Indian Contract Act, 1872 1

 Law
Law means “Rule made by authority for the
proper regulation of a community or society or
for correct conduct in life”
Law means rules, regulations, principles and
code of conduct framed by government for the
people, how to behave in society.

Indian Contract Act, 1872 2

 Law

Criminal Civil

Indian Contract Act, 1872 3

 Criminal Law
• Criminal law is the body of law that deals with
crime and the legal  punishment of criminal
offenses.
• Theft, assault, robbery, trafficking in controlled
substances, murder, etc.
• Indian Penal Code, 1860,
• Criminal Procedure Code, 1974

Indian Contract Act, 1872 4

 Civil Law
• Civil law deals with the disputes between
individuals,  organizations, or between the two, in
which compensation  is awarded to the victim.
• Landlord/tenant disputes, divorce proceedings,
child  custody proceedings, property disputes,
personal injury, etc.
• Family Law, Administrative Law, Contract Law, Tort
Law, Business Law, Media Law, Intellectual Property
Rights, Sports Law, Tax Law, Consumer Law

Indian Contract Act, 1872 5

 Business Law
• Business Law governs the world of commerce.
• The Business Law governs all dealings of businesses and
the conduct of people associated with such businesses.
• Business Law is known as Mercantile or Commercial Law.
• The Indian Contract Act, 1872
• Negotiable Instrument Act, 1881
• The Sale Of Goods Act, 1930
• The Indian Partnership Act, 1932
• The Limited Liability Partnership Act, 2008
• Companies Act, 2013
Indian Contract Act, 1872 6
 Indian Contract Act,1872
• 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 Act mostly deals with the general principles and
rules governing contracts.

Indian Contract Act, 1872 7

 Contract
• "A contract is an agreement creating and defining
obligations between the parties". --Salmond
• "A contract is an agreement enforceable at law, made
between two or more persons, by whom rights are
acquired by one or more to acts or forbearances on
the part of the other or others". -Anson
• "Every agreement and promise enforceable at law is a
contract". -Sir Fredrick Pollock
• The Indian Contract Act has defined contract in Section
2(h) as "an agreement enforceable by law".
Indian Contract Act, 1872 8
 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

Indian Contract Act, 1872 9

 Agreement
• According to sec.2 (e), every promise or set of
promises forming consideration for each other.
• An agreement occurs when two minds meet
upon a common purpose. They mean the same
thing in the same sense at the same time.
• The meeting of the minds is called consensus-
ad-idem, i.e., consent to the matter.

Indian Contract Act, 1872 10

 Obligation/ Enforceable by Law
• An obligation is the legal duty to do or abstain from doing what
one has promised to do or abstain from doing. A contractual
obligation arises from a bargain between the parties to the
agreement who are called the promisor and the promisee.
• Section 2(b) says that when the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be
accepted; and "a proposal when accepted becomes a promise."
• In broad sense, therefore, a contract is an exchange of promises
by two or more persons, resulting in an obligation to do or
abstain from doing a particular act, where such obligation is
recognized and enforced by law.

Indian Contract Act, 1872 11

 Elements of a Valid Contract
1. An offer or proposal by one party and acceptance of that
offer by another party resulting in an agreement —
consensus-ad-idem.
2. An intention to create legal relations or intent to have legal
consequences.
3. The agreement is supported by a lawful consideration.
4. The parties to the contract are legally capable of contracting.
5. Genuine consent between the parties.
6. The object and consideration of the contract is legal and is
not opposed to public policy.
7. The terms of the contract are certain.

Indian Contract Act, 1872 12

 Example of Contract
• e.g., A agrees with B to sell his car for As.
10,000 to him. In this example the following
rights and obligations have been created:
1. A is under an obligation to deliver the car to
B.B has a corresponding right to receive the
car.
2. B is under an obligation to pay Rs. 10,000 to A.
A has a correlative right to receive Rs. 10,000.

Indian Contract Act, 1872 13

 Offer/ Proposal
• When one person signifies to another his
willingness to do or to abstain from doing
anything with a view to obtaining the assent
of that other to such act or abstinence, he is
said to make a proposal.
• When one party express his willingness to do
or not do something to another party.

Indian Contract Act, 1872 14

 Types of Offer
• Express offer: when an offer is made by words
spoken or written it is called an express offer.
• Implied offer: When an offer is implied by conduct
of parties or circumstances of the case it is called an
implied offer. Example railway ticket
• General offer: When an offer is made to the public
at large it is called general offer. This offer may be
accepted by anyone. For example an offer to give
reward to anybody who finds the lost horse/ watch.

Indian Contract Act, 1872 15

• Special/Specific Offer: When the offer is made to
a specific or a particular person, it is known as
Specific offer. Example Jayesh offer to sell his
bike to Mahesh at a certain cost
• Cross Offer: When two parties exchange
identical offers in ignorance at the time of each
other’s offer, the offers are called cross offers.
For example Jaya makes a offer to Maya to sell
his car for Rs. 2 lac. At the same time Maya offer
to Jaya purchase the same car at same cost.
Indian Contract Act, 1872 16
• Counter Offer: counter offer by the offeree
terminates the original offer. When in place of
accepting the terms of an offer as they are, the
offeree accepts the same subject to certain
condition or qualification, then a counter offer
is said to be made.
• Standing or continuing or open offer: An offer
which is allowed to remain open for acceptance
over a period of time is known as Standing or
continuing or open offer. For example Tenders
Indian Contract Act, 1872 17
Contract

Indian Contract Act, 1872 18

 Classification of Contract

Validity Formation Performance

Valid Express Executed

Void Implied Executory

Voidable Quasi Unilateral

Illegal Tacit Bilateral

Unenforceable
Indian Contract Act, 1872 19
 On the Basis of the validity
 Valid Contract: An agreement which fulfills all the essentials
prescribed by law on the basis of its creation. For example S
offers to sell his car for Rs.2,00,000 to T. T agrees to buy it. It is a
Valid Contract.
 Void Contract (2(j)): A contract which ceases to be enforceable
by law. A contract which does not satisfy any of the essential
elements of a valid contract is said to be Void. For example A
contract between drug dealers to buy and sell drugs is a void
contract.
 Voidable Contract 2(i): An agreement which is enforceable by
law at the option of one or more parties but not at the option of
the other or others is a voidable contract. This is the result of
coercion, undue influence, fraud and misrepresentation.
Indian Contract Act, 1872 20
 On the Basis of the validity
 Illegal Contract: It is a contract which is forbidden by law. All
illegal agreements are Void but all void agreements or contracts
are not necessarily illegal. Contract that is immoral or opposed
to public policy are illegal in nature.
 Unlike illegal agreements there is no punishment to the
parties to a void agreement.
 Illegal agreements are void from the very beginning but
sometimes valid contracts may subsequently become void.
 Unenforceable Contract: Where a contract is not possible to
implement due to some technical defect i.e. absence in writing
barred by imitation etc. If the parties perform the contract it will
be valid, but the court will not compel them if they do not

Indian Contract Act, 1872 21

 On the Basis of the Formation
 Express Contract: A contract made by word spoken or
written. According to Section. 9, in so for as the proposal or
acceptance of any promise is made in words, the promise is
said to be express. For example P says to Q ‘will you buy my
bicycle for Rs.1,000?” Q says to P “Yes”.
 Implied Contract: The implied contract is one, which is not
expressly written but understood by the conduct of parties.
Where the proposal or acceptance of any promise is made
otherwise than in words, the promise is said to be implied.
For example A gets into a public bus, there is an implied
contract that he will pay the bus fare.

Indian Contract Act, 1872 22

 On the Basis of the Formation
 Quasi Contract: It is a contract created by law. Actually, there
is no contract. It is based on the principle that “a person shall
not be allowed to enrich himself unjustly at the expense of
the other”. In other words it is an obligation of one party to
another imposed by law independent of an agreement
between the parties.
 Tacit Contract: A contract is said to be tacit when it has to be
inferred from the conduct of the parties. For example
obtaining cash through automatic teller machine, sale by fall
of hammer of an auction sale.

Indian Contract Act, 1872 23

 On the Basis of Performance
 Executed Contract: A contract in which both the parties have
fulfilled their obligations under the contract. For example X
contracts to buy a car from Y by paying cash, Y instantly
delivers his car.
 Executory Contract: A contract in which both the parties are
yet to fulfill their obligations, it is said to be an executory
contract. For example A agrees to buy B’s cycle by promising
to pay cash on 15th June. B agrees to deliver the cycle on 20th
June.

Indian Contract Act, 1872 24

 On the Basis of Performance
 Unilateral Contract: A unilateral contract is a one sided
contract in which only one party has performed his promise
or obligation, the other party has to perform his promise or
obligation. For example X promises to pay Y a sum of
Rs.10,000 for the goods to be delivered by Y. X paid the
money and Y is yet to deliver the goods.
 Bilateral Contract: A contract in which both the parties
commit to perform their respective promises is called a
bilateral contract. For example R offers to sell his fiat car to S
for Rs.10,00,000 on acceptance of R’s offer by S, there is a
promise by R to Sell the car and there is a promise by S to
purchase the car, there are two promises.
Indian Contract Act, 1872 25