Indian contract act 1872 in arif creation

INDIAN CONTRACT ACT, 1872
PRELIMINARY
1. Short title
This Act may be called be the Indian Contract Act, 1872.
Extent, commencement - It extends to the whole of except the State of Jammu and Kashmir; and it
shall come into force on the first day of September, 1872.
Enactment repealed - [***] Nothing herein contained shall affect the provisions of any Statute, Act
or Regulation not hereby expressly repealed, nor any usage or customs of trade, nor any incident of
any contract, not inconsistent with the provisions of this Act.
2. Interpretation -clause
In this Act the following words and expressions are used in the following senses, unless contrary
intention appears from the context:
(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;
(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to
be accepted. A proposal, when a accepted, becomes a promise;
(c) The person making the proposal is called the “promisor”, and the person accepting the proposal
is called “promisee”,
(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such
act or abstinence or promise is called a consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each other, is an
agreement;
(f) Promises which form the consideration or part of the consideration for each other, are called
reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but
not at the option of the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

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CHAPTER I
OF COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3. Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of proposals and
acceptance, respectively, are deemed to be made by any act or omission of the party proposing,
accepting or revoking, by which he intends to communicated such proposal, acceptance or
revocation, or which has the effect of communicating it.
4. Communication when complete
The communication of a proposal is complete when it becomes to the knowledge of the person to
whom it is made.
The communication of an acceptance is complete -as against the proposer, when it is put in a course
of transmission to him so at to be out of the power of the acceptor; as against the acceptor, when it
comes to the knowledge of the proposer.
The communication of a revocation is complete -as against the person who makes it, when it is put
into a course of transmission to the person to whom it is made, so as to be out of the power of the
person who makes it; as against the person to whom it is made, when it comes to his knowledge.
5. Revocation of Proposals and acceptance
A proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is complete
as against the acceptor, but no afterwards.
6. Revocation how made
A proposal is revoked -
(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the
knowledge of theacceptor before acceptance.
7. Acceptance must be absolute
In order to convert a proposal into a promise the acceptance must -
(1) be absolute and unqualified.
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in
which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted; and the
acceptance is not made in such manner, the proposer may, within a reasonable time after the
acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed
manner, and not otherwise; but; if he fails to do so, he accepts the acceptance.

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8. Acceptance by performing conditions, or receiving consideration
Performance of the conditions of proposal, for the acceptance of any consideration for a reciprocal
promise which may be offered with a proposal, is an acceptance of the proposal.
9. Promise, express and implied
In so far as the proposal or acceptance of any promise is made in words, the promise is said to be
express. In so far as such proposal or acceptance is made otherwise than in words, the promise is
said to be implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS, AND VOID AGREEMENTS
10. What agreements are contracts
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. Nothing herein contained shall affect any law in force in India, and not hereby expressly
repealed, by which any contract is required to be made in writing or in the presence of witnesses, or
any law relating to the registration of documents.
11. Who are competent to contract
Every person is competent to contract who is of the age of majority according to the law to which he
is subject, and who is sound mind and is not disqualified from contracting by any law to which he is
subject.
12. What is a sound mind for the purposes of contracting
A person is said to be of sound mind for the propose of making a contract, if, at the time when he
makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon
his interest. A person who is usually of unsound mind, but occasionally of sound mind, may make a
contract when he is of sound mind. A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of unsound mind.
13. “Consent” defined
Two or more person are said to consent when they agree upon the same thing in the same sense.
14. “Free consent” defined
Consent is said to be free when it is not caused by -
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of section 20,21, and 22.
Consent is said to be so caused when it would not have been given but for the existence of such
coercion, undue influence, fraud, misrepresentation, or mistake.

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15. “Coercion” defined
“Coercion” is the committing, or threating to commit, any act forbidden by the Indian Penal Code
(45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement.
16. “Undue influence” defined
(1) A contract is said to be induced by “under influence” where the relations subsisting between the
parties are such that one of the parties is in a position to dominate the will of the other and uses that
position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generally of the foregoing principle, a person is
deemed to be in a position to dominate the will of another –
(a) where he hold a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with
him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable,
the burden of proving that such contract was not induced by undue influence shall be upon the
person in a position to dominate the will of the other.
Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act,
1872 (1 of 1872)
17. “fraud” defined
“Fraud” means and includes any of the following acts committed by a party to a contract, or with his
connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him
to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
18. “Misrepresentation” defined
“Misrepresentation” means and includes –
(1) the positive assertion, in a manner not warranted by the information of the person making it, of
that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person
committing it, or anyone claiming under him; by misleading another to his prejudice, or to the
prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of
the thing which is subject of the agreement.

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19. Voidability of agreements without free consent
When consent to an agreement is caused by coercion, [***] fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent was so caused. A party to
contract, whose consent was caused by fraud or mispresentation, may, if he thinks fit, insist that the
contract shall be performed, and that he shall be put on the position in which he would have been if
the representations made had been true.
Exception : If such consent was caused by misrepresentation or by silence, fraudulent within the
meaning of section 17, the contract, neverthless, is not voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary diligence.
Explanation : A fraud or misrepresentation which did not cause the consent to a contract of the party
on whom such fraud was practised, or to whom such misrepresentation was made, does not render a
contract voidable.
20. Agreement void where both parties are under mistake as to matter of fact
Explanation : An erroneous opinion as to the value of the things which forms the subject-matter of
the agreement,is not be deemed a mistake as to a matter of fact.
21. Effect of mistake as to law
A contract is not voidable because it was caused by a mistake as to any law in force in India; but
mistake as to a law not in force in India has the same effect as a mistake of fact.
22. Contract caused by mistake of one party as to matter of fact
A contract is not voidable merely because it was caused by one of the parties to it being under a
mistake as to a matter of fact.
23. What consideration and objects are lawful, and what not
The consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such
nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or
implies, injury to the person or property of another; or the Court regards it as immoral, or opposed
to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is void.
24. Agreements void, if consideration are objects unlawful in part
If any part of a single consideration for one or more objects, or any one or any part of any one of
several consideration of a single object, is unlawful, the agreement is void.

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25. Agreement without consideration, void, unless it is in writing and registered or is a
promise to compensate for something done or is a promise to pay a debt barred by limitation
law
An agreement made without consideration is void, unless -
(1) it is expressed in writing and registered under the law for the time being in force for the
registration of documents, and is made on account of natural love and affection between parties
standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do; or
unless
(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent
generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor
might have enforced payment but for the law for the limitation of suits. In any of these cases, such
an agreement is a contract.
Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of
any gift actually made.
Explanation 2 : An agreement to which the consent of the promisor is freely given is not void
merely because the consideration is inadequate; but the inadequacy of the consideration may be
taken into account by the Court in determining the question whether the consent of the promisor
was freely given.
26. Agreement in restraint of marriage, void
Every agreement in restraint of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of trade, void
Every agreement by which anyone is restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void.
Exception 1 : Saving of agreement not to carry on business of which good will is sold - One who
sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar
business, within specified local limits, so long as the buyer, or any person deriving title to the
goodwill from him, carries on a like business therein, provided that such limits appear to the court
reasonable, regard being had to the nature of the business.[***]
28. Agreements in restrain of legal proceedings, void
Every agreement, by which any party thereto is restricted absolutely from enforcing his rights
under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or
which limits the time within which he may thus enforce his rights, is void to the extent.
Exception 1 : Saving of contract to refer to arbitration dispute that may arise. This section shall not
render illegal contract, by which two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subject shall be referred to arbitration, and that
only and amount awarded in such arbitration shall be recoverable in respect of the dispute so
referred. [***]

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Exception 2: Saving of contract to refer question that have already arisen - Nor shall this section
render illegal any contract in writing, by which two or more persons agree to refer to arbitration any
question between them which has already arisen, or affect any provision of any law in force for the
time being as to reference to arbitration.
29. Agreements void for uncertainty
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
30. Agreements by way of wager, void
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged
to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain
event on which may wager is made. Exception on favour of certain prizes for horse-racing: This
section shall not be deemed to render unlawful a subscription or contribution, or agreement to
subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the
value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any
horse-race.
Section 294A of the Indian Penal Code not affected: Nothing in this section shall be deemed to
legalize any transaction connected with horse-racing, to which the provisions of section 294A of
the Indian Penal Code (45 of 1860) apply.
CHAPTER III
OF CONTINGENT CONTRACTS
31. “Contingent contract” defined
A “contingent contract” is a contract to do or not to do something, if some event, collateral to such
contract, does or does not happen.
32. Enforcement of Contracts contingent on an event happening
Contingent contracts to do or not to do anything in an uncertain future event happens, cannot be
enforced by law unless and until that event has happened. If the event becomes impossible, such
contracts become void.
33. Enforcement of contract contingent on an event not happening
Contingent contracts to do or not to do anything if an uncertain future event does not happen, can be
enforced when the happening of that event becomes impossible, and not before.
34. When event on which contract is contingent to be deemed impossible, if it is the future
conduct of a living person
If the future event on which a contract is contingent is the way in which a person will act at an
unspecified time, the event shall be considered to become impossible when such person does
anything which renders it impossible that the should so act within any definite time, or otherwise
than under further contingencies.

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35. When contracts become void, which are contingent on happening of specified event within
fixed time
Contingent contracts to do or not to do anything, if a specified uncertain event happens within a
fixed time, become void, if, at the expiration of the time fixed, such event has not happened, or if,
before the time fixed, such event becomes impossible.
When contracts may be enforced, which are contingent on specified event not happening within
fixed time : Contingent contract tutu or not to do anything, if a specified uncertain event does not
happen within a fixed time, may be enforced by law when the time fixed has expired and such event
has not happened, or before the time fixed has expired, if it become certain that such event will not
happen.
36. Agreements contingent on impossible event void
Contingent agreements to do or not to do anything, if an impossible event happens, are void,
whether the impossibility of the event is known or not to the parties to agreement at the time when it
is made.
CHAPTER IV
OF PERFORMANCE OF CONTRACTS,
CONTRACTS WHICH MUST BE PERFORMED
37. Obligations of parties to contract
The parties to a contract must either perform, or offer to perform, their respective promises, unless
such performance in dispensed with or excused under the provision of this Act, or of any other law.
Promises bind the representative of the promisor in case of the death of such promisors before
performance, unless a contrary intention appears from the contract.
38. Effect of refusal to accept offer of performance
Where a promisor has made an offer of performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights
under the contract.
Every such offer must fulfil the following conditions –
(1) it must be unconditional;
(2) it must be made at a proper time and place, and under such circumstances that the person to
whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is
been made is able and willing there and then to do the whole of what he is bound by his promise to
do;
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable
opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise
to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to
all of them.

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39. Effect of refusal of party to perform promise wholly
When a party to a contract has refused to perform, or disabled himself from performing, his promise
in its entirety, the promisee may put an end to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.
40. Person by whom promises is to be performed
If it appears from the nature of the case that it was the intention of the parties to any contract that any
promise contain in it should be performed by the promisor himself, such promise must be
performed by the promisor.
In other cases, the promisor or his representative may employ a competent person to perform it.
41. Effect of accepting performance from this person
When a promisee accepts performance of the promise from a third person, he cannot afterwards
enforce it against the promisor.
42. Devolution of joint liabilities
When two or more person have made a joint promise, then, unless a contrary intention appears by
the contract, all such persons, during their joint lives, and, after the death of any of them, his
representative jointly with the survivor or survivors, and, after the death of the last survivor the
representatives of all jointly, must fulfil the promise.
43. Any one of joint promisors may be compelled to perform
When two or more persons make a joint promise, the promise may, in the absence of express
agreements to the contrary, compel any one or more of such joint promisors to perform the whole
promise.
Each promisor may compel contribution : Each of two or more joint promisors may compel every
other joint promisor to contribute equally with himself to the performance of the promise, unless a
contrary intention appears from the contract.
Sharing of loss by default in contribution : If any one of two or more joint promisors make default in
such contribution, the remaining joint promisors must bear the loss arising from such default in
equal shares.
Explanation : Nothing in this section shall prevent a surety from recovering, from his principal,
payments made by the surety on behalf of the principal, or entitle the principal to recover anything
from the surety on account of payments made by the principal.
44. Effect of release of one joint promisor
Where two or more persons have made a joint promise, a release of one of such joint promisors by
the promisee does not discharge the other joint promisor, neither does it free the joint promisor so
released from responsibility to the other joint promisor or joint promisors.

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45. Devolution of joint rights
When a person has made a promise to two or more persons jointly, then unless contrary intention
appears from the contract, the right to claim performance rests, as between him and them, with them
during their joint lives, and, after the death of any one of them, with the representative of such
deceased person jointly with the survivor or survivors, and, after the death of the last survivor, with
the representatives of all jointly.
46. Time for performance of promise, where no application is to be made and no time is
specified
Where, by the contract, a promisor is to perform his promise without application by the promisee,
and no time for performance is specified, the engagement must be performed within a reasonable
time.
Explanation : The question “what is a reasonable time” is, in each particular case, a question of fact.
47. Time and place for performance of promise, where time is specified and no application to
be made
When a promise is to be performed on a certain day, and the promisor has undertaken to perform it
without the application by the promisee, the promisor may perform it at any time during the usual
hours of business on such day and at the place at which the promise ought to be performed.
48. Application for performance on certain day to be at proper time and place
When a promise is to be performed on a certain day, and the promisor has not undertaken to perform
it without application by the promisee, it is the duty of the promisee to apply for the performance at
a proper place within the usual hours of business.
Explanation : The question “what is proper time and place” is, in each particular case, a question of
fact.
49. Place for the performance of promise, where no application to be made and no place fixed
for performance
When a promise is to be performed without application by the promisee, and not place is fixed for
the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable
place for the performance of the promise, and to perform it at such a place.
50. Performance in manner or at time prescribed or sanctioned by promise
The performance of any promise may be made in any manner, or at any time which the promisee
prescribes or sanctions.
51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform
When a contract consists of reciprocal promises to be simultaneously performed, no promisor need
perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

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