Summary of Indian Contract Act 1872

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. 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 honoured and that legal remedies are made available to an aggrieved party against the party failing to honour his part of agreement. The Indian Contract Act makes it obligatory that this is done and compels the defaulters to honour their commitments. According to Sir William Anson. “The objective of law is to maintain order because only in a state of order can a man feel safe and secure.”

Historical Background :

According to Indian Contract Act, 1872 Section 1, this Act may be called the Indian Contract Act, 1872.

Extent and Commencement :

It extends to the whole of India except the State of Jammu and Kashmir; and it shall come into force on the first day of September, 1872.

According to Section 1 of the Act:- “Nothing contained herein shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.”

Division of the Indian Contract Act :

In the past, Indian Contract Act had a wide scope and included:

1. General Principles of Contract – Sections 1 to 75.

2. Sale of Goods Act – Sections 76-123.

3. Contracts of Indemnity and Guarantee – Sections 124 = 147.

4. Contracts of Bailment and Pledge – Sections 148-181.

5. Contracts of Agency – Sections 182 – 238.

6. Partnership Act – Sections 239-266.

Present Positions:

Today, the scope of the Indian Contract Act has been restricted. The sale of Goods was repealed from this Indian Contract Act in 1930. Contracts relating to partnership were repealed in 1932.

Past Contract Act

(i) Basic Principles of Contract (Sections 1 to 75)

(ii) Sale of Goods Act (Sections 76 to 123)

(iii) Indemnity and Guarantee (Sections 124 to 147)

(iv) Bailment

(Sections 148 to 181) Agency (Sees. 182 to 238)

(v) Partnership Act (Sees. 239 to 266)

Present Contract Act

(i) Basic Principles of Contract (Sections 1 to 75)

(ii) Indemnity and Guarantee (Sections 124 to 147)

(iii) Bailment

(Sections 148 to 181)

(iv) Agency

(Sections 182 to 238)

Fundamental Definitions:

Interpretation Clause:

In this Act, the following words and expressions are used in the following senses, unless a contrary intention appears from the context:

(a) “Proposal”:

When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other to such act or abstinence, he said to make a proposal.

(b) “Promise”:

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.

(c) “Promisor and Promise”:

The person making the proposal is called the “Promisor” and the person accepting the proposal is called the “promise”.

(d) “Consideration”:

When at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.

(e) “Agreement”:

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

(f) “Reciprocal Promises”:

Promises which form the consideration or part of the consideration for each other are called reciprocal promises.

(g) “Void agreement”:

An agreement not enforceable by law is said to be void.

(h) “Contract” – An agreement enforceable by law is a contract.

(i) “Voidable Contract”:

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.

(j) “Void Contract”:

A contract which ceases to be enforceable by law becomes a void contract.

(k) “Plaintiff”:

A person who files a suit in a court of law against the another for breech of contract is called the plaintiff.

(l) “Defendant”:

The person against whom a suit has been filed in court and who has to defend against the charges of breech of contract is called the defendant.