Definition and Nature of Contract |The Indian Contract Act 1872 Notes|

Definition and Nature of Contract |The Indian Contract Act 1872 Notes|

Contract Act

The Law of contract: Nature Of Contract

As a result of increasing complexities of business environment, innumerable contracts are entered into by the parties in the usual course of carrying on their business. ‘Contract’ is the most usual method of defining the rights and duties in a business transaction. This branch of law is different from other branches of law in a very important respect. It does not prescribe so many rights and duties, which the law will protect or enforce; it contains a number of limiting principles subject to which the parties may create rights and duties for themselves. The Indian Contract Act, 1872 codifies the legal principles that govern ‘contracts’. The Act basically identifies the ingredients of a legally enforceable valid contract in addition to dealing with certain special type of contractual relationships like indemnity, guarantee, bailment, pledge, quasi contracts, contingent contracts etc.

All agreements are not studied under the Indian Contract Act, 1872, as some of those are not contracts. Only those agreements, which are enforceable by law, are contracts.

This unit refers to the essentials of a legally enforceable agreement or contract. It sets out rules for the offer and acceptance and revocation thereof. It states the circumstances when an agreement is voidable or enforceable by one party only, and when the agreements are void, i.e. not enforceable at all.


The term contract is defined under section 2(h) of the Indian Contract Act, 1872 as-
“an agreement enforceable by law”.
The contract consists of two essential elements:
(i) an agreement, and
(ii) its enforceability by law.


Section 1: Commencement and applicability:-

  • Short Title : The Indian contract Act 1872
  • Extent: Applicable to whole Indian except the state of Jammu & Kashmir.
  • Commencement: First day of September 1872(1st Sept. 1872)

  • Prior to this English law of contract was followed in India.It has XI chapter.
  • Law of contract creates jus in personem and not in jus in rem.
  • The Indian Contract Act consists of the following two parts: (a) General principals of the Law of Contract. (b) Special kinds of contracts.
  • The general principals of the Law of Contract are contained in Sections 1 to 75 of the Indian Contract Act. These principles apply to all kinds of contracts irrespective of their nature.
  • Special contracts are contained in Sections 124 to 238 of the Indian Contract Act. These special contracts are Indemnity, Guarantee, Bailment, pledge and Agency.

Note: In our discussion on this part of the book, unless otherwise stated, the sections mentioned are those of the Indian Contract Act, 1872.

Contracts as Defined by Eminent Jurists

  1.  “Every agreement and promise enforceable at law is a contract.” – Pollock
    2. “A Contract is an agreement between two or more persons which is intended to be enforceable at law and is contracted by the acceptance by one party of an offer made to him by the other party to do or abstain from doing some act.” – Halsbury
    3. “A contract is an agreement creating and defining obligation between the parties” – Salmond

Definitions Under Sec 2 of The Indian Contract Act 1872 Notes

  1. Offer(i.e. Proposal) [section 2(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 person either to such act or abstinence, he is said to make a proposal.
  2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to , the proposal is said to be accepted.
  3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes promise.
  4. Promisor and promise 2(c) :- When the proposal is accepted, the person making the proposal is called as promisor and the person accepting the proposal is called as promisee.
  5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person has done or abstained from doing something or does or abstains from doing something or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise.  Price paid by the one party for the promise of the other Technical word meaning QUIDPRO-QUO i.e. something in return.
  6. Agreement 2(e) :- Every promise and set of promises forming the consideration for each other. In short, agreement = offer + acceptance.
  7. Contract 2(h) :- An agreement enforceable by Law is a contract.
  8. Void agreement 2(g):- An agreement not enforceable by law is void.
  9. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the option of one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by Law at the option of the other or others.
  10. Void contract :- A contract which ceases to be enforceable by Law becomes void when it ceases to be enforceable.

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