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Basics of Indian Contract Act, 1872

Updated: Jun 8, 2023

Written by: Sakshi Shitole

Basics of Indian Contract Act, 1872

Contracts are indispensable for every field. Contracts are fundamentally a written agreement in which two parties enter into them for accomplishing their respective work. Everyone enters into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and obligations upon the contracting parties. To deal with every contract and keep an account of it, Indian Contract Act, 1872 was implemented.

Indian Contract Act, 1872 was enforced from 1st September, 1872. It stretches to the whole of India except the state of Jammu and Kashmir. The law of contract is that branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. Recording commitments, preventing conflicts, maintaining law and order, increasing efficiency among the parties or organizations are some of the significant components of contracts.


Under section 2(h) of Indian Contract Act, 1872, the term “contract” has been defined as “an agreement enforceable by law”.

Under section 2(e) of Indian Contract Act, 1872, the term “agreement” has been defined as “every promise or set of promises forming the consideration for each other.

Under section 2(d) of Indian Contract Act, 1872, the term “consideration” is defined as “When at the desire of the promisor, the promisee or any other person has done or abstained from doing something or does or abstains from doing something or promises to do or abstain from doing something”.

Under Section 2(b) of the act, when the offer is accepted, then it becomes a “promise”. At the point when an individual to whom the offer is made, connotes his consent then we can say that the offer is accepted.

  • Offer + Acceptance = Promise

  • Promise + Consideration = Agreement

  • Agreement + Enforceability by Law = Contract

Essential Elements of Valid Contract Act are

  • An offer or proposal is made by one party and is accepted by another party converting it into an agreement.

  • Free consent of both parties.

  • Parties must be of sound mind.

  • Intention of Legal Obligations.

  • Possibility of Performance.

  • Consideration must be present.

  • Lawful object and lawful consideration.

Types of Contracts

On the basis of enforceability

  1. Valid Contract: An agreement which can be enforced by law is a valid contract.

  2. Voidable Contract: An agreement which can be enforced by the law at the choice of one or more parties present but not at the option of others is a voidable contract.

  3. Void Contract: An agreement which cannot be enforce by law is a void contract. A valid contract may become void too after a certain stage after entering into the contract.

On the basis of Formation

  1. Express Contract: A contract which is explicitly agreed by both the parties (written or spoken) is an express contract.

  2. Implied Contract: A contract in which an offer or acceptance is made otherwise than in words or by implied actions is an implied contract.

  3. Quasi Contract: A contract which is created by law is a quasi-contract.

On the basis of Execution

  1. Executed Contract: A contract in which both the parties have completed their respective duties is an executed contract.

  2. Executory Contract: A contract in which one party or both the parties have still to perform their duties in future is an executory contract.

Breach of Contract occurs when one of the parties of the contract does not perform his promise resulting in an infringement of the said contract. It tends to be any minor or major violation. Actual breach of contract occurs when one party fails to fulfill his promise in a specific due date. Anticipatory breach of contract occurs when the party declares his intention of not performing the contract before the performance is due.

Remedies for Breach of Contract

  • Suing for Damages.

  • Rescind the Contract.

  • Sue for injunction.

  • Sue for Specific Performance.

  • Sue for Quantum Meruit.


Indian Contract Act, 1872 also considers certain special sort of contractual relationships like indemnity, guarantee, bailment, pledge, quasi contracts, contingent contracts, law of agency and so forth. It has many nuances which explain all the relationships of these components.

Monica, an Overview on Indian Contract Act, 8th March 2019 -

Ironclad, Six essential elements of contract, 5th October 2020 -

CA Mayur Agarwal, Economic, Business and Commercial Laws, Pg no. 334 (Inspire Academy, Pune.)

Indian Contract Act, 1872 Part 1 -

Concord Editorial, The Case for Contracts in 7 Reasons, 10th April 2018 -

Will Kenton, Breach of Contract, Nov 19, 2020 -

The Indian Contract Act, 1872 Notes -

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