The Indian Contract Act, 1872: Nature and Purpose of Contract

  Unit 1. Nature and Purpose of Contract

In this post we going to learn some basic concepts of Contract Act in very simple language. we have discussed in this post some important terms of Indian Contract Act,1872. Such as:

What is contract?

Ans.     As per section 2(h) of the Indian Contract Act, 1872, Contract means an agreement which is enforceable by law.

Now, 

What does mean by enforceability by law?

Ans. An agreement to become a contract must give rise a legal obligation.

What is an Agreement ??

Ans. As per section 2(e) Every promise or set of promise forming consideration for each other called an agreement.

Consideration means Something in Return

Lets understand what is promise ?

Promise: As per section 2(b) when the person to whom proposal is made signifies his assent thereto, proposal is said to be accepted and when the proposal accepted it becomes promise.

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Essentials of a Valid Contract (section10)

Not given in section 10 but are essential to a valid contract

1. Two Parties

2. Intention to create legal relationship

3. fulfillment of legal formalities 

4. certainty of meaning 

5. possibility of performance

Now lets understand meaning of every points.

1. What does mean by Two Parties?

Ans. one person can not make contract with himself. A contract must involves atleast two person. One party making an offer and another one is accepting it.

2. Intention to create legal relationship:

There must be intention to create a legal relationship between the parties. A contract without intention to create legal relationship is not valid as it can not enforce by the law.

3. Fulfillment of legal formalities:

A contract may be in written or oral. as to the legal effect, both oral and written agreement is valid but in some contract there must be an written agreement such as Insurance etc.

4. Certainty of meaning:

A contract must be certain not vague or indefinite. i.e. meaning of the contract should be clear and understandable to the parties. 

5. Possibility of performance:

The term agreement should be capable to perform. An agreement to do an act impossible in itself cannot be enforced.

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