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Bussines Law

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Course: Commerce
Book: Bussines Law
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Date: Wednesday, 20 March 2019, 9:33 PM

1. Meaning and kind of Contracts

Subject : Commerce 
Lesson : Meaning and kind of Contracts 
Content Developer : Preeti Singh 
University /Department: Jesus & Mary College, University of Delhi

2. Introduction: Part 1-Indian Contract Act 1872

The Indian Contract Act was passed in the year 1872 and it came into force on the 1st day of September, 1872. The Act extends to the whole of India except the State of Jammu and Kashmir. It consists of 238 sections. It has been divided into 10 chapters. Chapter VII of the Contract Act is wholly repealed by the Indian Sale of Goods Act, 1930 (vide section 65). The Contract Act deals with particular contracts in separate chapters. The provisions of the Act do not apply to contracts made before the Act came into force. Broadly speaking, The Indian Contract Act deals with all facets of contract, more particularly the stages of formation of a contract, the elements of a contract, the performance of a contract, breach of contract and available remedies when there is a breach of contract. In case of a contract in which two or more countries are involved in respect of its performance, questions arise as to the law of which country would govern such a contract. In the first instance, the law which would govern such a contract would be the law expressed by the parties themselves in the contract. 

In the absence of an expressed intention, the rule to apply is to infer an intention from the terms and nature of the contract and the general circumstances of the case. Such circumstances may be (i) the country in which the contract was entered into or (ii) The country where the payment was to be made. In such a contract, if a payment is to be made, it should be of the legal tender governing the country in which payment is to be made.

3. The scope of the Unit is given below:

1.1 Meaning and Definition of Contract 

1.2 Characteristics / Essential Elements of a Valid Contract 

1.3 Classification of Contracts 

1.4 Classification According to Enforceability 

1.5 Classification According to Mode of Creation 

1.6 Classification According to Performance

4. 1.1 Meaning and Definition of a Contract

The meaning and definition of a contract are discussed below with reference to some eminent jurists. 

1.1.1 Meaning An agreement enforceable by law is a contract. As per Indian Contract Act 1872 “

An agreement is an accepted proposal”. Thus it can be said that a contract is an agreement; an agreement is a promise and a promise is an accepted proposal. Every agreement in its ultimate analysis, is the result of a proposal from one side and its acceptance by the other. Hence it is a bilateral transaction.

1.1.2 E-Contract

The latest mode of making instant contract within and outside a country is to enter into contracts through the internet. This mode is known as E-contract. By exchange of communication of offer and acceptance between the parties through internet, contracts can be created and the legality and enforceability of the E-contracts is in no way affected by the fact that the formation of the contract depended on the electronic record.

1.1.3 Definition

Section 2h of the Indian contract Act of 1872 defines “a contract as an agreement enforceable by law”.

According to Section 2h of the Act there are two main aspects of a contract -

(a) An agreement 

(b) Agreement enforceable by law 

Some eminent jurists have also made an attempt to define the term contract which are useful for interpretation of the various provisions of the Contract Act. For more Information on Eminent Jurists click below


True or False: 

State whether the following are True or False 

1. All contracts are agreements. 

2. All agreements are contracts. 

3. Past judicial decisions on contract law are not important. 

4. The Indian Contract Act of 1872 is not applicable to Jammu and Kashmir. 

5. A void contract is unenforceable from the time it is formed. It is void ab initio. 

6. A valid contract is one, which satisfies the essential elements described in section 10 of the Indian Contract Act. 

7. Agreements made for restraint in marriage are void under the Indian Contract Act.

8. If one party to a contract has the option of enforcing the contract by law, but not at the option of the other or others, it is a voidable contract. 

9. All illegal agreements are void. 

10. An executory contract is one in which both parties have fulfilled their respective obligations. 

Long answer questions: 

1. “All contracts are agreements but all agreements are not contracts”. Discuss this statement. 

2. What is a contract? Discuss the essential elements of a contract? 

3. “The law of contracts is not the whole law of agreements, nor is it the whole law of obligations”. Discuss. 

4. What are void contracts? How do you distinguish them from voidable contracts? What are the rights and obligations of the parties of such contracts? 

5. Write notes on the following: (a)Valid contract ((b) Void agreement (c) Void contract (d) Unenforceable contract.(e) Implied contract (f) Quasi contract (g) Illegal contract. 

6. Distinguish between (a) Void contracts and void agreements. (b) Valid contract and voidable contract. (c) Void agreements and voidable contracts. (d) Void and illegal agreements. 

7. All illegal agreements are void but all void agreements are not illegal. Explain. 

8. What is an Express Contract? How is it different from an Implied contract? 

9. Distinguish between (1) Void agreement and voidable contract. (2) Void and illegal agreements. (3) Illegal and unenforceable agreement.

6. Practical Problems

1. Rani agrees to sell “My red car for Rs 50,000 or Rs 1,00,000”. Is this agreement valid? Answer: The agreement is not valid because there is no certainty in the terms of agreement. There are two prices quoted. Which is the one acceptable for sale? The agreement is void of certainty (Section 29). 

2. Jasmine purchased three kilos of sugar and one kilo of rice from a grocery store for her personal consumption. She is a minor. She does not want to pay. Can the shopkeeper recover the amount?

3. Shashi invited two of her friends for dinner. At the last moment, they decided to come but not have dinner with her. She had made elaborate arrangements of decorations, lighting and food. She was very angry. Can Shashi sue her friends for the loss she has suffered?

4. Mohan entered into an agreement with Subhash to write 500 pages in 3 days for a sum of Rs 1,00,000 as consideration. The manuscript was required urgently for publication. Subhash could not deliver the manuscript. Can Mohan sue Subhash for the loss?

5. Meeta made an agreement with Shanti to design her teeth and make her look beautiful. On the day of the appointment, there was an earthquake and Meeta‟s clinic was completely destroyed. Can Shanti sue Meeta?

6. Mona agrees to sell her car to her friend Anu for Rs 3,00,000 and deliver it on the 15th of June. On the 12th of June she sells and delivers the car to Amit because he is giving her Rs 3,20,000 for the car. If Anu sues Mona will she succeed?

7. Roja inserts a coin to get a trolley at an airport. Is this a legally enforceable contract?

8. Mani promises to give her daughter pocket money of Rs 1000 every week. She gives her the money for 3 weeks and then decides that the amount is very high and so she stops paying her the amount. Can her daughter sue her?


1. Chadha P.R and Bagrial Ashok (2007): Business Law, Pragati Publictions, New Delhi 

2. Maheshwari S.N. and Maheshwari S.K. (2007): Business Law, Himalaya Publishing, Mumbai 

3. Singh A. (2004): Law of Contract, Eastern Book Company, Lucknow

8. Websites:




9. Summary