Contract - Section 2(h) of the Indian Contract Act, 1872

 

INDIAN CONTRACT ACT, 1872

According to Section 2(h) of the Indian Contract Act, 1872 defines a contract as “An agreement enforceable by Law is a Contract.”

Agreement = Offer + Acceptance

Contract = Agreement + Enforceable by law

1.       Agreement: According to Section 2(e) in The Indian Contract Act, 1872

“Every promise and every set of promises, forming the consideration for each other, is an agreement.”

 

Promise : According to Section 2(e) in The Indian Contract Act, 1872

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Essentials/Formation of a Valid Contract

1.       1. Agreement: 

2.        2. Intention to create legal relationship:
For Example : M promises his wife N to give her a saree if she will sing a song. N sang the song but M did not bring the saree for her. N cannot bring an action in a court to enforce the agreement as it lacked the intention to create legal relation.

3.       3. Lawful Consideration: 

4.       4. Capacity of parties: In order to be competent to contract the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject (Section 11).

FoExample: Ramesh, a minor borrowed 4,000 from Suresh and executed mortgage of his property in favour of the lender. This was not valid and the money advanced to minor could not be recovered.

5.       5. Free consent: There must be free consent to the parties to the contract. According to section 14, consent is said to be free when it is not caused by :
(i) Coercion.
(ii) Undue influences.
(iii) Fraud.
(iv) Misrepresentation.
(v) Mistake.
If the consent of the parties is not free then no valid contract comes into existence.
For Example : X threatens to kill Y if he does not sell his house to X. Y agrees to sell his horse to X. In this case, y's consent has been obtained by coercion and therefore, it cannot be regarded as free.

6.       6. Lawful objects : Section (23) 

7.        7. Writing and registration : Section (25) 

8.       8. Certainty : Section 29 

ExEample : A agree to sell ‘B’ a hundred tons of oil”. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

9.       9. Possibility of Performance or Doctrine of Frustration : 

The doctrine of frustration applies when, after a contract has been entered into, some supervening event occurs that makes performance of the contract radically different from what the parties had contemplated when they entered into the contract.

 10. Agreement not Declared Void or Lawful Agreement