How to Enter into a Contract under the Indian Contract Act, 1872?

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The Indian Contract Act, 1872 (hereinafter term as Act) deals with the Law which relates to and regulates contracts. This Act is based mainly on English Common Law. The Indian Contract Act is not exhaustive as it does not deal with all the branches of the law of contract and it leaves room for other legislation, custom and usage on the subject. There are separate Acts which deals with Contracts relating to Negotiable Instruments, Transfer of Property, Sale of Goods, Partnership and Insurance etc. Before 1930, the Act also contained provisions relating to contract of sale of goods and partnership.

What is Contract?

Sec. 2(h) of the Act says Contract is an agreement which is enforceable by law. Anson says that “A contract is a legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of the other or others.”

Essentials of Contract:

  1. There must be an agreement between two or more persons.
  2. There must be lawful consideration for the contract.
  3. Parties must be competent to contract.
  4. The object & purpose of the Contract should not be unlawful.
  5. The Contract should not be opposed to public policy.
  6. The agreement must not be expressly declared to be void by law.
  7. The agreement should not curtail the rights of the other parties.

Note: Every Contract is an agreement but every agreement is not a Contract.

How to enter into a Contract?

  1. Proposal: There should be an offer from one person to enter into contract.
  2. Acceptance: The Proposal, if accepted by other sides, becomes promise.

It is only after the acceptance of the proposal that a contract between the two parties can arise.

(c) Consideration: There must be lawful consideration to form a contract, only then the proposal becomes a contract. An agreement not supported by consideration is void. However, there are exceptions where agreement without consideration is also valid.

 Capacity/competency to enter into a contract:

  • Parties should have completed the age of majority i.e. 18 years.
  • Free consent of parties
  • Sound mind
  • Not disqualified from contracting by any law.

Thus minors, persons of unsound mind and persons disqualified by law are incompetent to contract.

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