The Indian Contract Act, 1872

 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avoided or rescinded by the party entitled to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.