Important Definitions under Indian Contract Act 1872
Important Definitions under Indian Contract Act, 1872
1. Contract
Definition: As per Section 2(h), a contract is “an agreement enforceable by law.”
Explanation:
It is a legally binding agreement between two or more parties creating obligations which the law will enforce.
Case Law:
Carlill v. Carbolic Smoke Ball Co. (1893)
A famous English case illustrating an enforceable contract by an offer made to the public and acceptance by conduct.
2. Agreement
Definition: As per Section 2(e), an agreement is “every promise and every set of promises, forming the consideration for each other.”
Explanation:
An agreement consists of a proposal (offer) and acceptance of the proposal, resulting in mutual consent.
Case Law:
Harvey v. Facey (1893)
Distinguished between a mere statement of price and a valid offer.
3. Promise
Definition: As per Section 2(b), a promise is “when the person to whom the proposal is made signifies his assent thereto, the proposal becomes a promise.”
Explanation:
Promise is acceptance of the offer.
4. Consideration
Definition: As per Section 2(d), consideration means “when at the desire of the promisor, the promisee or any other person has done or abstained from doing something or promises to do or abstain.”
Explanation:
It is something in return for which the promise is made—can be an act, forbearance, or a promise.
Case Law:
Chinnaya vs Ramayya (1882)
Consideration must move at the desire of the promisor.
5. Contract of Sale
Definition: Under Section 4 of the Sale of Goods Act, 1930 (which complements Contract Act), a contract of sale is a contract where the seller transfers or agrees to transfer the property in goods to the buyer for a price.
6. Competent to Contract
Definition: As per Section 11, a person is competent to contract if they are of the majority age (18 years or more), of sound mind, and not disqualified by law.
Case Law:
Mohori Bibee v. Dharmodas Ghose (1903)
Contracts entered into by a minor are void.
7. Free Consent
Definition: As per Section 14, consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.
Case Law:
Ranganayakamma v. Alwar Setty (1924)
Coercion defined; consent obtained by force is not free.
8. Coercion
Definition: As per Section 15, coercion means committing or threatening to commit any act forbidden by law or unlawful detaining property to compel a party to enter into a contract.
9. Undue Influence
Definition: As per Section 16, undue influence arises when one party dominates the will of another and uses this to obtain an unfair advantage.
Case Law:
All India Radio v. Madhya Pradesh (AIR 1953)
Contract set aside due to undue influence.
10. Fraud
Definition: As per Section 17, fraud includes acts like deception, concealment, false promises, or any act intended to deceive another party.
Case Law:
Derry v. Peek (1889)
Defined fraud as deliberate deception.
11. Misrepresentation
Definition: As per Section 18, misrepresentation means false statements made innocently without intent to deceive.
12. Unlawful Agreement
Definition: Per Section 23, an agreement is unlawful if it is forbidden by law or causes injury or is immoral.
13. Void and Voidable Contract
Void Contract: No legal effect from the beginning (e.g., contract with a minor).
Voidable Contract: Valid until rescinded by the party whose consent is free (e.g., contract obtained by coercion).
Quick Summary Table:
| Term | Section | Key Point | Case Law Example |
|---|---|---|---|
| Contract | 2(h) | Agreement enforceable by law | Carlill v. Carbolic Smoke Ball |
| Agreement | 2(e) | Proposal + Acceptance | Harvey v. Facey |
| Consideration | 2(d) | Something in return | Chinnaya v. Ramayya |
| Competent | 11 | Major, sound mind | Mohori Bibee v. Dharmodas Ghose |
| Free Consent | 14 | No coercion, fraud etc. | Ranganayakamma v. Alwar Setty |
| Coercion | 15 | Threat or force | - |
| Undue Influence | 16 | Dominance of will | AIR 1953 All India Radio |
| Fraud | 17 | Intent to deceive | Derry v. Peek |
| Misrepresentation | 18 | False but innocent statement | - |
| Unlawful Agreement | 23 | Forbidden or immoral | - |
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