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The Indian Contract Act was enforced in September 1872 and is applicable to the whole of India with the exception of J&K.

An agreement enforceable by law, the Act defines the term agreement “"as every promise and every set of promises, forming the consideration for each other”."

VALID CONTRACT [S.10J]

The essential ingredients for formation of a valid contract are

1. Two parties to the contract to make offer and acceptance

2. Intention to create legal relationship

3. Certainty of meaning

4. Possibility of performance of agreement

5. Free consent

6. Presence of consideration

7. Lawful consideration

Offer and acceptance

A proposal/offer is defined as: “"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.”"

Essentials of a valid offer. It must create legal relations, must be clear, not vague, must be communicated to the offeree, can be specific or general.

Acceptance is defined as: "“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.”"

Acceptance must be: absolute + unqualified + communicated + express or implicit.

Consideration

“"When, at the desire of the promisor, the promisee 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.”"

Consideration must be: at promisor'’s desire + from promisee or third person + past or present or future + value in eyes of law + not unlawful.

Discharge of contract

It means making the contract or agreement null and void or ending it. Ways of discharge:

1. Contract performance

2. Release

3. Set off

4. Extinguishing it

5. Lapse of time

6. Bankruptcy

Damages

The Indian Contract Act does not define the term. However in layman'’s terms, it means compensation for injury or loss suffered by one party and given by the party at fault. Thus, "“Damages are the pecuniary compensation, obtainable by success in an action, for a wrong which is either a tort or a breach of contract, the compensation being in the form of a lump sum which is awarded unconditionally.”" 13

Essentials’" suffering to 1 party + award of reparation + pecuniary compensation.

Types: general/special; consequential; pecuniary/ non-pecuniary; compensatory/non-compensatory, etc.

Capacity to contract

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 sound mind and is not disqualified from contracting by any law to which he is subject.

M offers to sell his horse to N for Rs 5, 00,000. N says that he would buy if M agrees to give the horse for Rs. 4, 50,000. This is an example of___

A) implied offer

B) express offer

C) specific offer

D) counter offer