THE INDIAN CONTACT
ACT, 1872
The law of contract in India is contained in the
Indian Contract Act, 1872. This act is based
mainly on English Common Law which is to a
large extent made up of judicial precedence.
(There being no separate Contract Act in
England). It extends to the whole of India
except the State of Jammu and Kashmir and
came into force on the first day of September
1872. The Act is not exhaustive. It does not deal
with all branches of the law of contract. There
are separate Acts which deal with contracts
relating to negotiable instruments, transfer of
property, sales of goods, partnership, insurance,
etc. Again the Act does not affect any usage or
custom of trade (Sec. 1). A minor amendment in
Section 28 of the Act was made by the Indian
Contract (Amendment) Act, 1996.
Definition of Contract
According to Section 2(h) of the Indian Contract
Act: “An agreement enforceable by law is a
Contract”. A Contract, therefore, is an
agreement the object of which is to create a
legal obligation i.e., a duty enforceable by law.
From the above definition, we can find that a
contract essentially consists of two elements: (a)
An agreement, and (b) Legal obligation i.e., a
duty enforceable by law.
Kinds of Contracts
Valid Contract:
A valid contract is an agreement
enforceable by law. An agreement becomes
enforceable by law when all the essential
elements of a valid contract are present.
Voidable Contract:
According to Section 2 (i), “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, is a
voidable contract”. Thus, a voidable contract
is one which is enforceable by law at the
option of one of the parties. Until it is
avoided or rescinded by the party entitled to
do so by exercising his option in that behalf,
it is a valid contract.
Usually a contract becomes voidable when
the consent of one of the parties to the
contract is obtained by coercion, undue
influence, misrepresentation or fraud. Such a
contract is voidable at the option of the
aggrieved party, i.e., the party whose
consent was so caused (Sec. 19 and Sec. 19
A). But the aggrieved party must exercise
his option of rejecting the contact (a) within
a reasonable time, and (b) before the rights
of third parties intervene, otherwise the
contract cannot be repudiated.
Void Contract:
Literally the word ‘void’ means ‘not
Binding in law’. According to the term ‘void
contract' implies a useless contract which
has no legal effect at all. Such a contract is a
nullity, as for there has been no contract at
all.
Section 2(j) defines:
“ A contract with ceases to be enforceable
by law becomes void, when it ceases to be
enforceable.” It follows from the definition
that a void contract is not void from it’s
inception and that it is valid and binding on
the parties when originally entered but
subsequent to its formation it becomes
invalid and destitute of legal effect because
of certain reasons.
The reasons which transform a valid
contract into a void contract as given in the
Contract Act are as follows:
1. Supervening impossibility (Sec. 56 )
2. Subsequent illegality (Sec. 56)
3. Repudiation of a voidable contract.
4. In the case of a contract contingent
on the happening of an uncertain future
event, if that event becomes impossible.
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