Indian Contract Act 1872
Contract is a vital part of human association. It is an indispensable part of business. The Indian Contract Act 1872 dictates the law regulating the making as well as revocation of contracts in India. The act is applicable to all states in India. The Indian Contract Act consist of 266 sections.
Preamble to the Indian Contract Act
WHEREAS it is expedient to define and amend certain parts of the law relating to contracts;
It is hereby enacted as follows:—
Sections of the Indian Contract Act
PRELIMINARY
- Short title.
Extent.
Commencement.
Saving. - Interpretation-clause.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS - Communication, acceptance and revocation of proposals.
– - Communication when complete.
– - Revocation of proposals and acceptances.
– - Revocation how made.
– - Acceptance must be absolute.
– - Acceptance by performing conditions, or receiving consideration.
– - Promises, express and implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS - What agreements are contracts.
– - Who are competent to contract.
– - What is a sound mind for the purposes of contracting.
– - “Consent” defined.
– - “Free consent” defined.
– - “Coercion” defined.
– - “Undue influence” defined.
– - “Fraud” defined.
– - “Misrepresentation” defined.
– - Voidability of agreements without free consent.
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19A. Power to set aside contract induced by undue influence.
– - Agreement void where both parties are under mistake as to matter of fact.
– - Effect of mistakes as to law.
– - Contract caused by mistake of one party as to matter of fact.
SECTIONS - What considerations and objects are lawful, and what not.
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Void agreements - Agreement void, if considerations and objects unlawful in part.
– - 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.
– - Agreement in restraint of marriage, void.
– - Agreement in restraint of trade, void.
Saving of agreement not to carry on business of which good-will is sold.
– - Agreements in restraint of legal proceeding void.
Saving of contract to refer to arbitration dispute that may arise.
Saving of contract to refer questions that have already arisen.
Saving of a guarantee agreement of a bank or a financial institution.
– - Agreements void for uncertainty.
– - Agreements by way of wager, void.
Exception in favour of certain prizes for horse-racing.
Section 294A of the Indian Penal Code not affected.
CHAPTER III
OF CONTINGENT CONTRACTS - “Contingent contract” defined.
– - Enforcement of contracts contingent on an event happening.
– - Enforcement of contracts contingent on an event not happening.
– - When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.
– - When contracts become void which are contingent on happening of specified event within fixed time.
When contracts may be enforced, which are contingent on specified event not happening within fixed time.
– - Agreement contingent on impossible events void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed - Obligation of parties to contracts.
– - Effect of refusal to accept offer of performance.
– - Effect of refusal of party to perform promise wholly.
By whom contracts must be performed
– - Person by whom promise is to be performed.
– - Effect of accepting performance from third person.
SECTIONS - Devolution of joint liabilities.
– - Any one of joint promisors may be compelled to perform.
Each promisor may compel contribution.
Sharing of loss by default in contribution.
– - Effect of release of one joint promisor.
– - Devolution of joint rights.
Time and place for performance
– - Time for performance of promise, when no application is to be made and no time is specified.
– - Time and place for performance of promise, where time is specified and no application to be made.
– - Application for performance on certain day to be at proper time and place.
– - Place for performance of promise, where no application to be made and no place fixed for performance.
– - Performance in manner or at time prescribed or sanctioned by promise.
Performance of reciprocal promises
– - Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.
– - Order of performance of reciprocal promises.
– - Liability of party preventing event on which the contract is to take effect.
– - Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises.
– - Effect of failure to perform at fixed time, in contract in which time is essential.
Effect of such failure when time is not essential.
Effect of acceptance of performance at time other than that agreed upon.
– - Agreement to do impossible act.
Contract to do an act afterwards becoming impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful.
– - Reciprocal promise to do things legal, and also other things illegal.
– - Alternative promise, one branch being illegal.
Appropriation of payments
– - Application of payment where debt to be discharged is indicated.
– - Application of payment where debt to be discharged is not indicated.
– - Application of payment where neither party appropriates.
Contracts which need not be performed
– - Effect of novation, rescission, and alteration of contract.
– - Promise may dispense with or remit performance of promise.
– - Consequences of rescission of voidable contract.
– - Obligation of person who has received advantage under void agreement, or contract that becomes void.
– - Mode of communicating or revoking rescission of voidable contract.
– - Effect of neglect of promisee to afford promisor reasonable facilities for performance.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT SECTIONS - Claim for necessaries supplied to person incapable of contracting, or on his account.
– - Reimbursement of person paying money due by another, in payment of which he is interested.
– - Obligation of person enjoying benefit of non-gratuitous act.
– - Responsibility of finder of goods.
– - Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.
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CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT - Compensation for loss or damage caused by breach of contract.
Compensation for failure to discharge obligation resembling those created by contract.
– - Compensation for breach of contract where penalty stipulated for.
– - Party rightfully rescinding contract, entitled to compensation.
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[CHAPTER VII SALE OF GOODS.] [Repealed.]. - [Repealed.].
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[DELIVERY.] [Repealed.]. - [Repealed.].
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[SELLER’S LIEN.] [Repealed.]. - [Repealed.].
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[STOPPAGE IN TRANSIT.] [Repealed.]. - [Repealed.].
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SECTIONS - [Repealed.].
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[RESALE.] [Repealed.]. - [Repealed.].
[TITLE.] [Repealed.]. - [Repealed.].
[WARRANTY.] Repealed.]. - [Repealed.].
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[MISCELLANEOUS.] [Repealed.]. - [Repealed.].
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CHAPTERVIII
OF INDEMNITY AND GUARANTEE - “Contract of indemnity” defined.
– - Rights of indemnity-holder when sued.
– - “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.
– - Consideration for guarantee.
– - Surety‟s liability.
– - “Continuing guarantee”.
– - Revocation of continuing guarantee.
– - Revocation of continuing guarantee by surety’s death.
– - Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other’s default.
– - Discharge of surety by variance in terms of contract.
– - Discharge of surety by release or discharge of principal debtor.
– - Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor.
– - Surety not discharged when agreement made with third person to give time to principal debtor.
– - Creditor’s forbearance to sue does not discharge surety.
SECTIONS - Release of one co-surety does not discharge others.
– - Discharge of surety of creditor‟s act or omission impairing surety’s eventual remedy.
– - Rights of surety on payment or performance.
– - Surety‟s right to benefit of creditor‟s securities.
– - Guarantee obtained by misrepresentation invalid.
– - Guarantee obtained by concealment invalid.
– - Guarantee on contract that creditor shall not act on it until co-surety joins.
– - Implied promise to indemnify surety.
– - Co-sureties liable to contribute equally.
– - Liability of co-sureties bound in different sums.
CHAPTER IX
OF BAILMENT - “Bailment”, “bailor” and “bailee” defined.
– - Delivery to bailee how made.
– - Bailor‟s duty to disclose faults in goods bailed.
– - Care to be taken by bailee.
– - Bailee when not liable for loss, etc., of thing bailed.
– - Termination of bailment by bailee‟s act inconsistent with conditions.
– - Liability of bailee making unauthorized use of goods bailed.
– - Effect of mixture, with bailor‟s consent, of his goods with bailee‟s.
– - Effect of mixture, without bailor‟s consent, when the good can be separated.
– - Effect of mixture, without bailor‟s consent, when the goods cannot be separated.
– - Repayment, by bailor, of necessary expenses.
– - Restoration of goods lent gratuitously.
– - Return of goods bailed, on expiration of time or accomplishment of purpose.
– - Bailee‟s responsibility when goods are not duly returned.
– - Termination of gratuitous bailment by death.
– - Bailor entitled to increase or profit from goods bailed.
– - Bailor‟s responsibility to bailee.
– - Bailment by several joint owners.
– - Bailee not responsible on re-delivery to bailor without title.
– - Right of third person claiming goods bailed.
– - Right of finder of goods.
May sue for specific reward offered.
– - When finder of thing commonly on sale may sell it.
– - Bailee‟s particular lien.
– - General lien of bankers, factors, wharfingers, attorneys and policy-brokers.
Bailments of pledges
– - “Pledge”, “Pawnor” and “Pawnee” defined.
– - Pawnee‟s right of retainer.
SECTIONS - Pawnee not to retain for debt or promise other than that for which goods pledged.
Presumption in case of subsequent advances.
– - Pawnee‟s right as to extraordinary expenses incurred.
– - Pawnee‟s right where pawnor makes default.
– - Defaulting pawnor‟s right to redeem.
– - Pledge by mercantile agent.
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178A. Pledge by person in possession under voidable contract.
– - Pledge where pawnor has only a limited interest.
Suits by bailees or bailors against wrong-doers
– - Suit by bailor or bailee against wrong-doer.
– - Apportionment of relief or compensation obtained by such suits.
CHAPTER X
AGENCY
Appointment and authority of agents
– - “Agent” and “principal” defined.
– - Who may employ agent.
– - Who may be an agent.
– - Consideration not necessary.
– - Agent‟s authority may be expressed or implied.
– - Definitions of express and implied authority.
– - Extent of agent‟s authority.
– - Agent‟s authority in an emergency.
Sub-agents
– - When agent cannot delegate.
– - “Sub-agent” defined.
– - Representation of principal by sub-agent properly appointed.
Agent‟s responsibility for sub-agent.
Sub-agent‟s responsibility.
– - Agent‟s responsibility for sub-agent appointed without authority.
– - Relation between principal and person duly appointed by agent to act in business of agency.
– - Agent‟s duty in naming such person.
Ratification
– - Right of person as to acts done for him without his authority.
Effect of ratification.
– - Ratification may be expressed or implied.
– - Knowledge requisite for valid ratification.
– - Effect of ratifying unauthorized act forming part of a transaction.
– - Ratification of unauthorized act cannot injure third person.
Revocation of authority
– - Termination of agency.
– - Termination of agency, where agent has an interest in subject-matter.
– - When principal may revoke agent‟s authority.
– - Revocation where authority has been partly exercised.
– - Compensation for revocation by principal, or renunciation by agent.
– - Notice of revocation or renunciation.
– - Revocation and renunciation may be expressed or implied.
– - When termination of agent‟s authority takes effect as to agent, and as to third persons.
– - Agent‟s duty on termination of agency by principal‟s death or insanity.
– - Termination of sub-agent‟s authority.
Agent’s duty to principal
– - Agent‟s duty in conducting principal‟s business.
– - Skill and diligence required from agent.
– - Agent‟s accounts.
– - Agent‟s duty to communicate with principal.
– - Right of principal when agent deals, on his own account, in business of agency without principal‟s consent.
– - Principal‟s right to benefit gained by agent dealing on his own account in business of agency.
– - Agent‟s right of retainer out of sums received on principal‟s account.
– - Agent‟s duty to pay sums received for principal.
– - When agent‟s remuneration becomes due.
– - Agent not entitled to remuneration for business misconducted.
– - Agent‟s lien on principal‟s property.
Principal’s duty to agent
– - Agent to be indemnified against consequences of lawful acts.
– - Agent to be indemnified against consequences of acts done in good faith.
– - Non-liability of employer of agent to do a criminal act.
– - Compensation to agent for injury caused by principal‟s neglect.
Effect of agency on contracts with third persons
– - Enforcement and consequences of agent‟s contracts.
– - Principal how far bound, when agent exceeds authority.
– - Principal not bound when excess of agent‟s authority is not separable.
– - Consequences of notice given to agent.
– - Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.
Presumption of contract to contrary.
– - Rights of parties to a contract made by agent not disclosed.
_ - Performance of contract with agent supposed to be principal.
– - Right of person dealing with agent personally liable.
_ - Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable.
– - Liability of pretended agent.
– - Person falsely contracting as agent, not entitled to performance.
– - Liability of principal inducing belief that agent‟s unauthorized acts were authorized.
– - Effect, on agreement, of misrepresentation or fraud by agent.
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CHAPTER XI
OF PARTNERSHIP - [Repealed.].
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SCHEDULE—[Repealed.].
