INDIAN CONTRACT ACT, 1872

The Indian Contract Act was enacted in 1872 and came into force on 1^st September 1872. The word ‘contract’ has been derived from the Latin word ‘contructus’ which means ‘to work on contract’. The law of contract is based on the principle of ‘pacta sunt servanda’ which means ‘agreements must be kept’.

Section 2(h) of the Indian Contract Act 1872 defines the term ‘contract’ as an ‘agreement enforceable by law’. As per section 2(e) every promise and every set of promises forming consideration for each other is called an agreement. A promise is an accepted proposal.

An agreement becomes a valid contract when the following essential conditions are satisfied:

1. Offer and acceptance
2. Intention to create legal obligations
3. Lawful consideration
4. Contractual capacity
5. Free consent
6. Lawful object
7. Must not be expressly declared as void
8. Certain terms of the contract
9. Legal formalities

TYPES OF CONTRACT

Contracts may be classified on the basis of enforce-ability, mode of creation, extent of execution or the form of the contract as follows:

• Contracts on the basis of enforce-ability: a contract on the basis of enforce-ability can be of the following kind:

1. Valid contract
2. Voidable contracts
3. Void agreement
4. Unenforceable contract
5. Illegal agreement

• Contract on the basis of mode of creation: a contract on the basis of mode of creation can be of the following kind:

1. Express contract
2. Implied contracts
3. Quasi contract

• Contract on the basis of extent of execution: a contract on the basis of extent of execution can be of the following kind:

1. Executed contracts
2. Executory contract
3. Unilateral contract
4. Bilateral contract

• Contract on the basis of form: a contract on the basis of form can be of the following kind:

1. Ordinary contract
2. Standard contract