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MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT, 1872 CHAPTER 1- NATURE OF CONTRACT The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the contracting parties. Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1 st September, 1872. It extends to the whole of India except the state of Jammu and Kashmir. CONTRACT [SECTION 2(h)]: A contract is “an agreement enforceable by law”. Thus, CONTRACT = AGREEMENT (+) ENFORCEABILITY BY LAW All contracts are agreements but all agreements are not contracts” AGREEMENT [SECTION 2(e)]: An agreement means, “Every promise or every set of promises, forming consideration for each other”. AGREEMENT = PROMISE(S) BY ONE PARTY (+) PROMISE(S) BY THE OTHER PARTY PROMISE [SECTION 2(b)]: “ 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.” PROMISE = PROPOSAL + ACCEPTANCE PROPOSAL/OFFER [SECTION 2(a)]: A person is said to make a proposal when “he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence” PROPOSAL = WILLINGNESS TO DO OR ABSTAIN FROM DOING (+) WILLINGNESS’ TO OBTAIN ASSENT OF THE OTHER PARTY TO SUCH ACT OR ABSTINENCE CONSIDERATION [SECTION 2(d)]: “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 cat or abstinence is called consideration”. In other words, consideration is something in return.
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MERCANTILE LAW CA POOJA SHARMA PH NO: 09811599587 THE INDIAN CONTRACT ACT, 1872 ESSENTIAL ELEMENTS OF A VALID CONTRACT [Section 10]: According to Section 10 , “All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void”. The essential elements of a valid contract are: Agreement: To constitute a contract there must be an agreement. There must be two parties to an agreement, i.e. one party making an offer (offeror) and the other party accepting the offer (offeree). The terms of the offer must be definite and acceptance must be absolute and unconditional. The acceptance must be according to the mode prescribed and must be communicated to the offeror. Consensus-ad-idem (meeting of minds): To constitute a valid contract, there must be meeting of minds i.e. consensus-ad-idem. The parties should agree to the same thing in the same sense and at the same time.
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