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CONTRACT ACT, 1872
9 of 1872
CHAPTER 00: PRELIMINARY
SECTION 01: SHORT TITLE
This Act may be called the Indian Contract Act, 1872. Extent and commencement.-It extends to the whole of India except the State of Jammu and Kashmir; and it shall come into force on the first day of September, 1872. Enactments repealed.-Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.
SECTION 02: INTERPRETATION CLAUSE.
In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context :-
(a) 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:
(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:
(c) The person making the proposal is called the "promisor", and the person accepting the
proposal is called the "promisee":
(d) When, at the desire of the promisor, the promisee 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 act or abstinence or promise is called a consideration for the promise:
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement:
(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises:
(g) An agreement not enforceable by law is said to be void:
(h) An agreement enforceable by law is a contract:
(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract:
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
CHAPTER 01: OF COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
SECTION 03: COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
SECTION 04: COMMUNICATION WHEN COMPLETE
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete,- as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete,- as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.
SECTION 05: REVOCATION OF PROPOSALS AND ACCEPTANCES.
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
SECTION 06: REVOCATION HOW MADE.
A proposal is revoked-
(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge of the acceptor before acceptance.
SECTION 07: ACCEPTANCE MUST BE ABSOLUTE
In order to convert a proposal into a promise, the acceptance must-
(1) be absolute and unqualified ;
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such a manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed mariner, and not otherwise; but if he fails to do so, he accepts the acceptance.
SECTION 08: ACCEPTANCE BY PERFORMING CONDITIONS, OR RECEIVING CONSIDERATION.
Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
SECTION 09: PROMISES, EXPRESS OR IMPLIED.
Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.
CHAPTER 02: OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
Void agreements
SECTION 10: WHAT AGREEMENTS ARE CONTRACTS
All agreements are contracts if they are made by the 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. Nothing herein contained shall effect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.
SECTION 11: WHO ARE COMPETENT TO CONTRACT
Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.
SECTION 12: WHAT IS A SOUND MIND FOR THE PURPOSES OF CONTRACTING
A person is said to be of sound mind for the purposes of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
SECTION 13: "CONSENT" DEFINED
Two or more persons are said to consent when they agree upon the same thing in the same sense.
SECTION 14: "FREE CONSENT" DEFINED
Consent is said to be free when it is not caused by--
(1) coercion, as defined in section 15-, or
(2) undue influence, as defined in section 16-, or
(3) fraud, as defined in section 17-, or
(4) misrepresentation, as defined in section 18-, or
(5) mistake, subject to the provisions of section 20-,21-and22-.
Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.
SECTION 15: "COERCION" DEFINED
"Coercion" is the committing or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860)-, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Explanation: It is immaterial whether the Indian Penal Code (45 of 1860)-is or is not in force in the place where the coercion is employed.
SECTION 16: "UNDUE INFLUENCE" DEFINED
(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the forgoing principle, a person is deemed to be in a position to dominate the will of another-
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person, who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of section 3 of the Indian Evidence Act, 1872 (I of 1872).
SECTION 17: "FRAUD" DEFINED
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:-
(1) the suggestion, as a fact, of that which is not true by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation: Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
SECTION 18: "MISREPRESENTATION" DEFINED
"Misrepresentation" means and includes-
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him ;
(3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.
SECTION 19: VOIDABILITY OF AGREEMENTS WITHOUT FREE CONSENT
When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true. Exception: If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17-, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
SECTION 19A: POWER TO SET ASIDE CONTRACT INDUCED BY UNDUE INFLUENCE
When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely, or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the Court may seem just.
SECTION 20: AGREEMENT VOID WHERE BOTH PARTIES ARE UNDER MISTAKE AS TO MATTER OF FACT
Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Explanation: An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.
SECTION 21: EFFECT OF MISTAKES AS TO LAW
A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact.
SECTION 22: CONTRACT CAUSED BY MISTAKE OF ONE PARTY AS TO MATTER OF FACT
A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
SECTION 23: WHAT CONSIDERATIONS AND OBJECTS ARE LAWFUL AND WHAT NOT
The consideration or object of an agreement is lawful, unless- it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
SECTION 24: AGREEMENTS VOID, IF CONSIDERATIONS AND OBJECTS UNLAWFUL IN PART
If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for & single object, is unlawful, the agreement is void.
SECTION 25: AGREEMENT VOID, IF MADE WITHOUT CONSIDERATION
An agreement made without consideration is void, unless-
(1) Agreement without consideration void. unless it is in writing and registered.-It is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other, or unless
(2) or is a promise to compensate for something done.- It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do, or unless
(3) or is a promise to pay a debt barred by limitation law.- It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.
Explanation I: Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. Explanation 2: An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate ; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
SECTION 26: AGREEMENT IN RESTRAINT OF MARRIAGE VOID
Every agreement in restraint of the marriage of any person, other than a minor, is void.
SECTION 27: AGREEMENT IN RESTRAINT OF TRADE VOID
Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Saving of agreement not to carry on business of which goodwill is sold.- Exception 1.-One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business, therein : Provided that such limits appear to the Court reasonable, regard being had to the nature of the business.
SECTION 28: AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS VOID
1[Every agreement,-
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights is void to that extent.]
2.-Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.
SECTION 29: AGREEMENTS VOID FOR UNCERTAINTY
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
(d) A agrees to sell to B "all the grain in my granary at Ramnagar". There is no uncertainty here to make the agreement void.
(e) A agrees to sell to B "one thousand maunds of rice at a price to be fixed by C". As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand". There is nothing to show which of the two prices was to be given. The agreement is void.
SECTION 30: AGREEMENTS BY WAY OF WAGER VOID
Agreements by way of wager are void ; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to a person to abide by the result of any game or other uncertain event on which any wager is made. Exception in favour of certain prizes for horse-racing.-This section shall not be deemed to render unlawful a subscription, or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race. Section 294A of the Indian Penal Code-not affected.-Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860)-apply.
CHAPTER 03: OF CONTINGENT CONTRACTS
SECTION 31: "CONTINGENT CONTRACT" DEFINED
, A "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
SECTION 32: ENFORCEMENT OF CONTRACTS CONTINGENT ON AN EVENT HAPPENING
Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.
SECTION 33: ENFORCEMENT OF CONTRACTS CONTINGENT ON AN EVENT NOT HAPPENING
Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.
SECTION 34: WHEN EVENT ON WHICH CONTRACT IS CONTINGENT TO BE DEEMED IMPOSSIBLE, IF IT IS THE FUTURE CONDUCT OF A LIVING PERSON
If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.
SECTION 35: WHEN CONTRACTS BECOME VOID WHICH ARE CONTINGENT ON HAPPENING OF SPECIFIED EVENT WITHIN FIXED TIME
Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible. When contracts may be enforced -which are contingent on specified event not happening within fixed time.-Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and such event has not happened, or, before the time fixed has expired, if it becomes certain that such event will not happen.
SECTION 36: AGREEMENTS CONTINGENT ON IMPOSSIBLE EVENTS VOID
Contingent agreements to do or not to do anything if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.
CHAPTER 04: OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed By whom contracts must be performed Time and place for performance Performance of reciprocal promises Appropriation of Payments Contracts which need not be performed
SECTION 37: OBLIGATION OF PARTIES TO CONTRACTS
The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.
Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.
SECTION 38: EFFECT OF REFUSAL TO ACCEPT OFFER OF PERFORMANCE
Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non- performance, nor does he thereby lose his rights under the contract. Every such offer must fulfil the following conditions :-
(1) it must be unconditional :
(2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do:
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
SECTION 39: EFFECT OF REFUSAL OF PARTY TO PERFORM PROMISE WHOLLY
When a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
SECTION 40: PERSON BY WHOM PROMISE IS TO BE PERFORMED
If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.
SECTION 41: EFFECT OF ACCEPTING PERFORMANCE FROM THIRD PERSON
When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.
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