Understanding Contracts: Indian Contract Act 1872
Section 2(h) of the Indian Contract Act, 1872 defines a contract as “An agreement enforceable by law.” Thus, the formation of a contract requires an agreement, and the agreement should be enforceable by law. According to Sir Frederick Pollock, “it is a promise or set of promises which the law will enforce.”
The agreement will create rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, though in some cases, the court may order performance by the party in default.
Agreement Definition [Section 2(e)]
An agreement is defined as “every promise and every set of promises forming the consideration for each other.” A promise is defined as an accepted proposal.
Section 10 states that “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.”
An agreement becomes a contract if the following conditions are met:
- There is some consideration.
- The parties are competent to contract.
- Their consent is free.
- Their object is lawful.
Proposal [Section 2(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. The person making the proposal is called the “promisor,” and the person accepting the proposal is called the “promisee.” 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.
Thus, a proposal may be communicated in any way which has the effect of laying before the offeree the willingness to do or abstain. It may, for example, be done by words of mouth, or by writing, or even by conduct.
Promises, Express and Implied [Section 9]
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. An offer which is expressed by conduct is called an implied offer, and one which is expressed by words, written or spoken, is called an express offer.
Upton Rural District Council v Powell: A fire broke out on the defendant’s farm. He believed that he was entitled to the free services of the Upton Fire Brigade. The Brigade put out the fire. It then turned out that the defendant’s farm was not within the free service zone of Upton, which, therefore, claimed compensation for the service. The court held in favor of the fire service.
Communication: When Complete [Section 4]
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. An offer cannot be accepted unless and until it has been brought to the knowledge of the person to whom it is made. This principle enabled the Allahabad High Court in Lalman v Gauri Datt to deal with a matter involving a very crucial question on this point. The defendant’s nephew absconded from home. He sent his servant in search. When the servant had left, the defendant offered to pay Rs. 501 to the person discovering the boy. The servant came to know of this offer only when he found the child, but his suit for recovery of the reward failed because he did not have knowledge of the offer when he found the missing boy.