An Overview To Indian Contract Act 1872

indian contract act 1872

The Law of Contract is a very important part of the mercantile or commercial law in India. It mostly affects people from trade and commerce and industry.

Introduction To Indian Contract Act, 1872

The Indian Contract Act, 1872 is the law which governs contracts in India. It entered into force in the year 1872. It is enforceable in all the states except the State of Jammu and Kashmir. It determines the situations in which the promises made by the parties to a contract shall be legally binding on them.


  • General Principles of Law and Contract  —– Section 1 – 75
  • Contracts relating to the Sale of Goods ——– Section 76 to 129
  • Special Contracts ——- Section 125 to 238
  • Contracts relating to Partnership —— Section 239 to 266

Previously, the Indian Contract Act, 1872 contained provisions relating to Sale of Goods (Movable Property) and Partnership. But now these two provisions have been removed from the Act and are placed in two separate acts known as the Sale of Goods Act, 1930 and the Indian Partnership Act, 1932. So at present, the Indian Contract Act includes the General Principles of Contract and Special Contracts only.

The Rights are available under the Indian Contract Act –

There are two kinds of rights, one is Right in rem, and the other is Right in personam.

The Indian Contract Act, 1872 provides right in personam to the parties who have bound their promises in a contract. Thus, the parties in such a situation can only enforce their contractual rights against each other only and not against the world at large.

Example – X and Y enter into a contract for delivering ten books on a specified date. If Y fails to deliver the same to X, then X can sue only Y and not anybody else. The rest of the world is concerned with this contract.

Definition of a Contract –

Section 2(h) of the Indian Contract Act defines the term contract as “an agreement enforceable by law is a contract.” So, a contract is an agreement plus legal enforceability.

Important Terminologies –

  • Agreement – Section 2(e) defines agreement. An agreement results when two minds meet upon a common purpose. They agree to the same thing in the same sense. Section 2(e) defines the term agreement as “every promise and every set of promise, forming the consideration for each other.” An agreement only happens when there is an offer by one party and acceptance by the other party. Therefore, offer + acceptance = agreement.
  • Offer – Section 2(a) defines the term offer or proposal as, “When one party signifies to another his willingness to do or to abstain from doing anything, to obtain the assent of that other to such act or abstinence, he is said to propose.” Offer is the first step for agreeing. An offer can be made to a person or the public at large, known as general offers.
  • Acceptance – When the person to whom the offer is made signifies his assent for the same, then the offer is said to be accepted. Section 2(b) defines the same.
  • Promise –  Offer + Acceptance = Promise. So, when the offer is accepted, it becomes a promise. Section 2(b) defines the same.
  • Consideration – Consideration refers to getting “something in return.” In India, consideration can be past, present or future. A contract without consideration is void. The consideration must be lawful and real, and it need not be adequate.
  • Free Consent – A contract can only be made when there is free consent between the parties. A contract without free consent is voidable, and a contract without consent is void. A contract has to be free of coercion, undue influence, fraud, misrepresentation or mistake.
  • Contract of Indemnity – A contract of indemnity is a contract wherein, one party promises to protect the other party from causing loss to him by the conduct of the promisor himself, or by the conduct of any other person.
  • Bailment –  Bailment refers to transactions whereby one person delivers goods to the other for some purpose based upon a contract that they are when the purpose is accomplished to be returned or otherwise disposed of according to the directions of the person delivering them.

Classification of Contracts –

Contracts can be classified into three broad branches –

  1. Based on Enforceability –
  •  Contract
  • Voidable agreement
  • Void Agreement
  • Agreement
  • Illegal agreement
  • Voidable contract

2. Based on formation –

  • Express contract
  • Tacit contract
  • Implied/Quasi contract

3. Based on performance –

  • Executed contract
  • Executory contract  —- a) Unilateral contract             b) Bilateral contract

Remedies for Breach of Contract –

In case of a breach of contract, the injured party has the option to –

  • Rescind the contract and refuse further performance of the same
  • Sue for damages
  • Sue for specific performance
  • Sue for an injunction
  • Sue on quantum meruit


Every man in his day to day life makes contracts. Man’s contract making ability increases with increasing trade, commerce and industry in modern society. The conferment and protection of the law enable people to strike the best bargain for the contract making purpose. People are permitted to regulate and define their relations in the best possible manner they choose. In India, these general principles are statutorily presented in the Indian Contract Act, 1872. This helps contracts to function legitimately and also provide remedies to the ones affected by it. Therefore, the Indian Contract Act, 1872, is undoubtedly one of the most important statutes in India.

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