Contract Act, 1872 - Essential/Offer/Acceptance

Indian Contract Act, 1872 is the most important branch of business or mercantile law. Indian Contract Act, 1872 provides all the basics of the contracts. It lays down the ground rules how offer should be made and acceptance should be provided. 

As per Section 2(e) of the Indian Contract Act, 1872 defines AGREEMENT as every promise and every set of promises forming the consideration for each other”. 
As per Section 2(h) of Indian Contract Act, 1872 states that “An agreement enforceable by law is a CONTRACT.”
  • There must be an Intention to create legal obligation among the parties
  • There must be a Proper offer and proper acceptance to create a Valid contract
  • For a valid contract there must be Lawful consideration.
  • Parties entering into contract must have legal capacity to contract. Minor, People of unsound Mind and Persons Barred by law cannot enter into a contract. 
  • Parties entering into contract must have free consent. This means that their consent not caused by (i) coercion, (ii) undue influence, (iii) fraud, (iv) misrepresentation, or (v) mistake. 
  • For an agreement to be valid contract it should be supported by Lawful object
  • All the terms of a contract must be Certainty
  • Contract must be possible to perform both legally and physically. 
  • Agreement by way of Wager, Restrain of Trade and Restrain of Marriage are expressly declared void. 
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Section 2(a) of Indian Contract Act 1872 defines the term 'PROPOSAL' 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.”

  • Offer must intend to create legal relations
  • Terms of offer must be certain, definite and not vague
  • The offer must be distinguished from a mere declaration of intention
  • Offer must be distinguished from invitation to offer
  • Offer must be distinguished from mere statement of intention
  • Offer must be distinguished from communication of information
  • The offer must be communicated
  • Offer should not contain a term the non-compliance of which would amount to acceptance

As per Section 2(b) of the Indian Contract Act, 1872 defines the term 'ACCEPTANCE' as "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.
  • Acceptance must be absolute
  • Acceptance must be communicated
  • Acceptance must be in the prescribed manner
  • Acceptance must be within prescribed or reasonable time
  • Acceptance must be given before the offer lapses or is withdrawn
  • Acceptance must be communicated by a person who has the authority to accept
  • Acceptance cannot be implied by silence
  • Acceptance must not precede Offer

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