Indian Contract Act

Last updated: December 2020 | 4 min read


The Indian Contract Act occupies the most important place in the Commercial Law. Without contract Act, it would have been difficult to carry on trade or any other business activity and in employment law. It is not only the business community which is concerned with the Contract Act, but it affects everybody.The objective of the Contract Act is to ensure that the rights and obligations arising out of a contract are honored and that legal remedies are made available to those who are affected. According to Indian Contract Act, 1872 Section 1, this Act may be called the Indian Contract Act, 1872.

Division of the Indian Contract Act

General division of the Indian Contract Act, in the past, Indian Contract Act had a wide scope and included from Section 1 to 75 the General Principles of contract, Section 76-123 includes Sale of Goods Act, Sections 124 -147 deals with Contracts of Indemnity and Guarantee, Section 148-181 is about contracts of Bailment and Pledge, Section 182-238 is of Agency, Section 239-266 is of Partnership Act.

  • Contract

As per the Indian Contract Act,1872, a "contract" is an agreement enforceable by law. The agreements are not enforceable by law are not contracts. An "agreement" means 'a promise or a set of promises' forming consideration for each other. And a promise arises when a proposal is accepted. By implication, an agreement is an accepted proposal. In other words, an agreement consists of an 'offer' and its 'acceptance'.

  • Offer

An "offer" is the starting point in the process of making an agreement. Every agreement begins with one party making an offer to sell something or to provide a service, etc. When one person who desires to create a legal obligation, communicates to another his willingness to do or not to do a thing, with a view to obtaining the consent of that other person towards such an act or abstinence, the person is said to be making a proposal or offer.

  • Acceptance

An agreement emerges from the acceptance of the offer. "Acceptance" is thus, the second stage of completing a contract. An acceptance is the act of manifestation by the offeree of his assent to the terms of the offer. It signifies the offeree's willingness to be bound by the terms of the proposal communicated to him. To be valid an acceptance must correspond exactly with the terms of the offer, it must be unconditional and absolute and it must be communicated to the offeror.

  • Agreement

An "agreement" is a contract if 'it is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared to be void'. The contract must be definite and its purpose should be to create a legal relationship. The parties to a contract must have the legal capacity to make it. According to the Contract Act, “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of a sound mind, and is not disqualified from contracting by any law to which he is subject". Thus, minors; persons of unsound mind and Persons disqualified from contracting by any law are incompetent to contract.

  • Consent

Consent is very important part of the contract. The contracts become Void if misrepresentation, mistake or anything like this the fraud will be committed .Incase of a breach of a contract specific performance is granted but it has various exceptions to it, depending on the situation. If the general essentials ingredients of a contract are fulfilled, a valid legal contract is formed and it becomes affective from date it is signed.

  • Consideration

Mutual and lawful consideration for agreement, it should be enforceable by law. Hence, intention should be to create legal relationship. Agreements of social or domestic nature are not contracts, Parties should be competent to contract, and contract should not have been declared as void under Contract Act or any other law is also important elements of a valid contract. The contract becomes Void if any of these elements are not fulfilled.


They are various forms of contracts such as contract of indemnity, contract of guarantee, agency etc. The contract act illustrateselements that need to be fulfilled for a valid contract along with exception and after wards it deals with the sections that illustrates the remedies for both parties in case the contract has been breached or has been considered to be void in case of any of the elements not being fulfilled. It is very important for a normal day to day trading and regular dealing to have a valid and effective contract and it need to be made affective under the Contract act.

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