Indian Contract Act, 1872

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Nature and kinds of contracts
Concepts related to offer
Acceptance and consideration

The dictionary meaning of the word law is “rule made by authority for the proper regulation of a community or society or for correct conduct in life”. In general we can say that law denotes rules and principles either enforced by an authority or self-imposed by the members of the society to control and regulate people’s behaviour with a view to securing justice, peaceful living and social security. Mercantile or business law is that branch of law which comprises laws concerning trade, industry and commerce. There are two concepts of law –

1.Ignorance of law is no excuse.
2.Every person is presumed to know the law.

Brief history - prior to the enactment of the various Acts constituting mercantile law, business transactions were regulated by the personal laws of the parties to the suit. Eg – where both parties Hindus, they were regulated by the Hindu law and incase of Muslims, Mohammadan law was applied. In cases where one party was a Hindu and the other was a Muslim, the personal law of the defendant was applied. In case of persons other than Hindus and Muslims and also where laws and usages of Hindus or Muslims were silent at on any point, the courts generally applied the principles of English law. The main sources of Indian mercantile law are as follows – 1.English mercantile law – it is the foundation on which the super structure of our law has been built. Our courts generally take recourse to the English law where some principles are not expressly dealt within an Act, or where there is ambiguity. 2.Statute law – when a bill is passed by the parliament and signed by the president, it becomes an Act or a statute.

3.Judicial decisions or case – judicial decisions are usually referred to as precedents and are binding on all courts having jurisdiction lower to that of the court which gave the judgement. Whenever an act is silent on a point or there is ambiguity, the judge has to decide the case according to the principles of justice, equity and good conscience.

4.Customs and usages – these also guide the courts in deciding disputes arising out of mercantile transactions, but such a custom or usage must be widely known, certain and reasonable, and must not be opposed to any legislative enactment.

Meaning of contract-
According to sec 2(h) “an agreement enforceable by law is a contract” From this definition we can find that a contract essentially consists of 2 elements - a.An agreement
b.Legal obligation
Agreement –
As per sec 2(e) “every promise and every set of promises, forming the consideration for each other, is an agreement” In simple words, an agreement comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent (i.e. gives his acceptance) thereto. Agreement = offer + acceptance

Characteristics of agreement –
1.Plurality of persons – there must be two or more persons to make an agreement. 2.Consensus-ad-idem – both parties to an agreement must agree about the subject matter in the same sense and at the same time.

Legal obligation – an agreement to become a contract must give rise to a legal obligation i.e. a duty enforceable by law. CASE - Balfour vs. Balfour (1919)
A husband working in Ceylon, had agreed in writing to pay a housekeeping allowance to his spouse living in England. On receiving information that she was unfaithful to him, he stopped the allowance. It was held that the agreement was without any intention of creating a legal obligation. Hence, there was no contract.

“All contracts are agreements but all agreements are not contracts.”

Essential elements of a valid contract-
In addition to sec 2(h) law requires fulfillment of sec 10.

According to sec 10, all agreements are...
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