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UNIT 9 THE INDIAN CONTRACT ACT, 1872
Structure
9.0 Objectives
9.1 Introduction
9.2 Definitions
9.3 Communication of Proposals and Acceptance
9.3.1 Revocation of Proposal
9.4 Competency to Contract
9.4.1 Lahl Consideration
9.4.2 Void Agreement -
9.4.3 Contingent Contract
9.5 Performance of Contracts
9.5.1 Time and Place for Performance
9.5.2 Rec~procal Promises
9 5.3 Appropriation of Payments
which Need not be Performed
9.5.4 Contract
9.6 Quasi Contracts or Implied Contracts ,
9.7 Breach of Contract
9.7.1 Indemnity and Guarantee
9.8 Bailment
9 8.1 Agency
9 9 Let Us Sum Up
9.10 Answers to Check Your Progress
9.0 OBJECTIVES I
In the earlier u111ts you would have seen that a consumer either purchases goods from a seller
or avails of services fiom a person or other body. When he is dissatisfied as a consulner he
alleges defcct in the goods or deficiency in the services. In either of these cases a contract is
first arrived at between the consurner and the seller or the provider of services. It is necessary
for you to know what is the law regulating the contracts. After going though this unit you will
be able to know:
a The salient provisions of Indian Contract Act, 1872; I
a The relationship this act establishes betwcen trader or provider of services and the
consumer; and
a Consequences of breach of contract
9.1 INTRODUCTION
The Indian Contract Act. 1872 seeks to define and amend certain parts of the law relating to
contract. The first six chapters of the Act contain the general principles of the law of contract.
The remaining chapters relate to particular contracts such as contracts of indemnity and
Consumer Protection : guarantee, bailment and agency. For our purposes it will be necessary to know the general
Some Other Acts principles of law of contract in order to understand the basic relationship between a consumer
and a trader or provider of services.
9.2 DEFINITIONS
Section 2 of the Act provides following definitions:
"2. In this Act the following words and expressions are used in the following senses, unless
a contray intention appears from the contest:
(a) When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal:
(b) When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, whcn accepted, becomes a promise:
(c) The person ~naking the proposal is called the "promisor", and the person accepting
the proposal is called the "promisee":
(d) When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or absralns from doing, or promises LO do or to
abstain from doing something, such act or abst~nence or promise is called a
consideration for the promise
(e) Every promise and every set of promises, forming the consideration for each other,
is an agreement :
(0 Promises which form the consideration or part of the co~~sideration for each othcr
are called reciprocal promises:
(g) An agreement not enforceable by law is said to be void :
(h) An agreement enforceable by law is a contract:
(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.
0) a contract whlch ceases to be enforceable by law becomes void when it ceases to be
enforceable."
"From the above you will see that a promlse is performed when a promise is accepted by the
promisee. The proposal made is an offer which is accepted by the promisee".
Definition of Consideration
Consideration is either a detriment or benefit to the other. An act done at the desire of a third
party is not a consideration.
Agreement and Contract
An agreement which is enforceable in law is a contract. An agreement is a promise or a set of
reciprocal promises.
Void Contract
A contract which is not enforceable by law is a void contract i.e. from its very inception it is
illegal.
Voidable Contract The Indian Contract
Voidable Contracts are those contracts which are brought about as a result of undue influence, Act, 1872
fraqd, inisrepresentation and are voidable at the option of the person whose consent
coercion,
was caused by any one of the aforesaid factors.
Chcrk b%ur Progrcss 1
Notc: I) ~JSC tlrc placc g~vcn below for \our allswcrs
11) Check )our answcrs ulth ~nodcl allswers given a1 the cnd of tlle unlt
1) Distinguish bctneei~ vo~d coillract and illegal contract
2') Wh,ltis an agreement and wllcn it bccornes a coutract')
0
9.3 COMMUNICATION OF PROPOSALS AND
ACCEPTANCE THEREOF
This consnsts of any act or omission d the party proposing, accepting or revolung by which he
intends to cornmunrcat: such proposal, acceptance or revocat~on or which has the effect of
connl.r~;i:caling it.
When Communication is Complete
Comr.:uniczition of a proposal is complcte when it comes to !he knowledge oi the person to
whom ~t IS made and the cornmumcation of an acccptance IS complete when the proposer puts
it in the course of transmission so ils to be oul of the power oi the acceptor It 1s complete as
against the acceptor when it comes to the knowledge or the proposer So is the case wlth
communication of a revocation.
9.3.1 Revocation of Proposal
This is brought about by communication of n~tice of revocation by the proposer to the other
party at aiay time before the communication of its acceptance is complete as against the
proposer b11t not afterwards. Acceptance can he revoked at any time before the communication
11 is also revoked by
of the acceptance is complete as against the acceptor, but not afterwards.
lapse of time prescribed or lapse of reasonable tinic without communication of acceptance. It is
also caused by failure of the acceptor to fulfil a condition precedent to tl~e acceptance or by the
death or insanity of the proposer. Acceptaxe inust bc absolutc and unqualified and be
in ilslial and reasonable manner. A proposal is acceptcd when a condition of the
expressed
proposal is pedonued. Promises can be expressed in words or can be implied from conduct.
Consumer Protection :
Some Other ~cts 9.4 COMPETENCY TO CONTRACT
Every person is competent to contract if he is of theage of majority and is in sound mind and
not disqualified by any law to which he is subject. When necessaries are supplied to a minor
who is incapable of entering into a contract his estate is liable for the same though there is no
personal liability incurred by him.
Sound Mind
For the purpose of making a contract if, at the time when he rnakes it, a person is capable of
understanding it and is forming rational judgement as to its effect upon his interest, he is said
to be of sound mind. A person who 1s occasionally of sound mind he can make a contract when
he is of sound mind.
Consent
Two or more persons are said to consent freely when they agree upon the same thing in the
same sense. It is free consent when it is not caused by coercion, undue irlfluence, fraud,
misrepresentation or mistake. Where both parties enter into an agreement under a mistake of
fact essential to thc agreement the agreement is void. But a contract is not voidable if it was
caused by a mistake as to any law in force in India.
9.4.1 Lawful Consideration
The col~sideralion or object of an agreenlerll is lawful if it is not forbidden by law, if it does
not dcfcat the provisions of law, if it is not fraudulent. if it involves or implies injury to the
person or propefly of another or the court regards it as ilnmoral or opposed to public policy.
Any agreeniellt without law-fill consideration is void. The agrcenient also becomes void if an)-
part of any consideration is unla\vful. An agreemellt without consideration is void unless it is
a registered docmmerrt and is made on account of love and airectior~ or is a proinisc to
compensate for a voluntary act or is a pron~ise to pay a dcbt that is barred by limitation.
9.4.2 Void Agreement
Every agreement which is in restraint of marriage of any person other than a minor is void
E\.ery agreement by which nriy one is restrained from exercising a lawful professions trade or
business of any kind is to that extent void. Any agreement restraining a pa* from e~lforcilig
his rights by legal proceedings in the ordinarq. triburlals or which lirr~lts the tirne within which
he may thus enforce his right or extinguishes the rights of any pafly or discharging any party
from his liability on the expiry of ;I specified period is void to Illat extent. An Agreer~ler~t the
~neanirlg of which is not certain or capable of being made certain are void. Agreements by way
of wager are void.
9.4.3 Contingent Contracts
A contingent contract is a contract to do or not to do somethi~ig if some event collaterill to
s1lc11 contract does or does not happen. Contingent contract to do or not to do anything if an
unccrbin future event llappens cannot be cnforced by law unless and until that event has
happened. If the event becomes ir~lpossible thc contract bcco~lles enforceable. Such contract
would also beco~llc void if it does not happen within the time fixed or bccornes impossible
before the tirnc fixed. Contingent agreements dependent on impossible evcnt are void.
Check Your Progress 2 *
Note: i) Use the place given below for your answers
ii) Check your answers with model answers given at the end of the 1111it.
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