Indian contracts acts, 1872 is one of the branch or mercantile law, or also known as commercial law. Contracts are mostly made to show an indication of a transaction between two or more parties.

Contracts in India have been transacted since time in memorial.

In ancient India, the contracts were based on the moral obligations. At the time, the competent person to enter into a contract were considered as king, a Vedic teacher and the head of the household. While, it was agreed by all that the contracts made by fraud or without consent was unenforceable. But, in general women were not allowed to enter into a contract. The laws and provisions laid down in dharmashastra, are crept as usages and custom in general people.

During Muslim rule, the rules, competency and provisions were more strictly laid down. There were different rules laid down for the special contracts i.e., indemnity, guarantee etc.

Under British rule, the charters were slowly introduced the English common law and statute law, they started to indiscriminate the jurisdiction of different subject matters of the cases, and thus after a while a special law was formed for contracts, famously known as Indian Contract Act, 1872.

The contracts are formed by three ways:

  1. By registration under Indian contract act, 1872: The formal contracts are drafted and registered under the act, all the provision levied under the act are to be followed by the parties between whom the contract is formed. Failure to do so results into unenforceability of the contract.
  2. By special acts: The legislative acts for such contracts are differently and specifically made. The contracts made under those acts, have to follows all the provision laid downEx. Sales of good acts, 1930, transfer of property act,1882
  3. Charters: Earlier, it was necessary to take an assent from the kings and queens to enter into a contract with other party or vice-versa. But, now this is abolished and not followed anymore as, India is a democratic republic country.

Sometimes, contracts are made between two people without them realizing about it. There are contracts which are made between two parties on day to day basis.

Example: A boy, goes to the grocery store to buy daily necessities and some groceries. There is an implied contract between the owner of the store and the boy, as the store will get monetary funds for the groceries bought and the boy would get groceries.

Hence, they have a contract with each other.

But how is an agreement between parties differentiated from a contract?

The Indian contract act, 1872 helps to understand all about contracts and what are the requisites for a contract to be incorporated, what are the remedies provided by the breach of the contract, the parties obligations etc.

    According to sec. 2(h) “a contract is an agreement which is enforceable by the law”

The contracts are made by two types:

  1. Express contract: The contract made between the part is expressly done by the words wither spoken or written.
  2. Implied contract: They are those contracts which are not made verbally or written, in other words such contracts are made by the conduct of the parties and they are implied on each other and are not made by the words.

All contracts are agreements, but not all agreements are contracts.

There are few requisites to make a valid contract mentioned under sec. 10 of the Indian contract act, 1872.

  1. Two or more parties: There should be at least two or more parties while entering into a contract, as one person himself cannot make a contract and enter into a contract with himself. If they are no two parties present, then there is no contract.
  2. Consensus-ad-idem: it means meeting of the mind, while making the contract, the parties should agree over the contract in the same manner, at the same time and on the same subject matter. If there is no meeting of mind, then it is not a valid contract.
  3. The offer and acceptance: The offer an acceptance, made by the parties should be in a lawful manner, the way it is prescribed, in the reasonable time, there should be no counter offer or cross offer. The offer and acceptance, made for the contract should be legal in nature, should not oppose any public policy, be immoral, against the provision of the act.
  4. Legal object and consideration: The object, that is the purpose of the contract should be legal and consideration given by the two parties should as well be legal and should not be opposed to any public policy, legislation, provision of the Act, or immoral in nature. If they violate any of these, then the contract would be held as void.
  5. Intention to create a legal relationship: There should be an intention to create a legal relationship amongst the parties, if the relationship of the parties re domestic or the social then, they won’t have any legal consequences and be enforceable in the court of law.  Hence, legal relationship is necessary. Balfour v balfour, a husband working in Ceylone, had agreed in writing to pay a housekeeping allowance to his wife living in England. On receiving information that she was unfaithful to him; he stopped the allowance. He was held to be entitled to do so. This was a mere domestic arrangement with no intention to create legally binding relations. Therefore, there was no contract.
  6. Free consent:  While, entering into the contract, the consent of the parties should be free and they should not be compelled or threatened to enter into contract at any cost, or they would be voidable against promisee. Their consent should be free from coercion (sec. 15), undue influence (sec. 16), fraud (sec. 17), misrepresentation (sec. 18) or mistake (sec. 20).
  7. Capacity of performance: The parties entering into the contract should have the capacity to perform, and should not go against the provision in the Indian contract act,1872.  Sec. 11, talks about the parties who are competent to contract re those who have attained the majority of age, are not disqualifies by law and who are of the sound mind. Contracts with minor, void ab initio, which means they are void since the very beginning, they cannot ratify their acts by attaining majority, they have no estoppel against minor, and the restitution is only provided for those, which are discoverable and traceable. Mohribibi v. dharmodasgose, it was held that the agreement with the minor was void ab initio.

Hence, when once these pre-requisite are fulfilled, a valid contract is formed between the parties which is enforceable by the law. If any one of these requisites is missing, it contract would be considered void.

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