Indian Contract Act 1872

1. [Section 1]- Title, Commencement & Scope
2. This section contains the following information:-
3. Title- Name of act. i.e. “Indian Contract Act 1872”
4. Commencement- From 1
5. st September, 1872
6. Scope- Applicable to whole of India except the state of J&K
7. [Section 2] Interpretation-clause
8. (a)  When   one   person  signifies  to   another   his  willingness  to  do or to abstain from 
9. doing  anything,  with  a  view to obtaining the assent of that  other  to  such act or
10. abstinence, he is said to make a proposal.
11. (b)   When the person to whom  the proposal is made signifies his assent thereto, the
12. proposal is said to be accepted.  A proposal, when accepted, becomes a promise.
13. (c)  The person making the proposal is called the   " promisor and the person accepting the
14. proposal is called the It promisee ".
15. (d)  When, at the desire of the promisor, the  promise or  any other person has clone or
16. abstained from  doing or does or abstains from doing, or promises to do or  to abstain from
17. doing, something, such Act or abstinence of  promise is called a consideration for the
18. promise.
19. (e), every promise and   every set of promises, forming the consideration for each other, is
20. an agreement.
21. (f)  Promises, which form the consideration or part, of the consideration for each other are
22. called reciprocal promises.
23. (g)  An agreement not enforceable by law is said to be void
24. (h)  An agreement enforceable by law is a contract
25. (i)  An  agreement which is enforceable by law  at  the  option  of one or more of the partiesthereto, but  not  at  the  option of the other or others,  is  a  voidable  
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27. (j)    A contract which ceases to be enforceable  by law becomes void when it ceases to be
28. enforceable.
29. [Section 3]-. Communication, acceptance and revocation of proposals
30. [Section 4]-. Communication when complete
31. Communication when complete- The, communication of  a proposal is complete when it
32. comes to the knowledge of the person to whom it is made.
33. The communication of an acceptance is complete,--
34.  as against the proposer, when it is put in a course of transmission to  him, so as to be
35. out of the power of the acceptor;
36.  As against the acceptor, when it comes to the, knowledge, of the proposer.
37. The communication of a revocation is complete,
38. as  against the person who makes it, when it is put  into  a  course  of transmission to the
39. person to whom it is made,  so as "to be out of the power of the person who makes it; as
40. against the person. To whom it is made, when it comes to his knowledge.
41. [Section 5]-. Revocation of proposals and acceptances.
42. A  proposal may  be revoked at any time before the communication of its acceptance is
43. complete as against the proposer, but not afterwards.
44. An acceptance may be revoked at any time before the communication  of the acceptance is
45. complete as against the acceptor, but not afterwards.
46. [Section 6]-. Revocation how made.-
47. A proposal is revoked-
48. (1)  By the communication of notice of revocation by the pro poser to the other party
49. (2)  by  the lapse of the time prescribed in  such  proposal  for  its acceptance, or, if no time
50. is so prescribed, by    the  lapse  of  a reasonable time, without  communication  of  the 
51. acceptance;  
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53. (3)  By the failure of the acceptor to fulfill a condition precedent to acceptance; or
54. (4)  by  the death or insanity of the proposer, if the  fact  of  his  death  or insanity comes to 
55. the  knowledge  of  the  acceptor before acceptance. 6. Revocation how made.
56. [Section 7]-. Acceptance must be absolute.
57. In order to  convert a proposal into a promise, the acceptance must be absolute and
58. unqualified;
59. be  expressed  in  Some usual  and  reasonable  manner, unless  the proposal prescribes the
60. manner in which it is  to  be accepted.  If the proposal prescribes a manner in which it  is  to 
61. be accepted, and the acceptance is not made  in  such  manner, the proposer may, within a
62. reasonable time after  the acceptance  is communicated to him, insist that his  proposal 
63. shall   be  accepted  in  the  prescribed  manner,  and   not  otherwise;  but  if  he  fails  to 
64. do  so,  he  accepts  the  acceptance.
65. [Section 8]-. Acceptance by performing conditions or receiving consideration.
66. Performance of the conditions of a proposal, or the acceptance of any consideration for a
67. reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
68. [Section 9]-. Promises express and implied.
69. In so far as the proposal or acceptance of any promise is made in words, the promise is said
70. to be express.   In so far as such proposal or acceptance is made otherwise than in words,
71. the promise is said to be implied.
72. [Section 10]-. What agreements are contracts?
73. All agreements are contracts if they are made by the free consent of parties competent to
74. contract,  for a lawful consideration and with a lawful object, and are not hereby expressly
75. declared to be void.
76. Nothing  herein  contained  shall  affect any  law  in  force  in 1*[India] and not hereby
77. expressly repealed by which any  contract  is required  to be made in writing2* or in the
78. presence of witnesses,  or any law relating to the registration of documents.
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80. [Section 11]-. Who are competent to contract?
81. Every person is competent to contract who is of the age of majority according to the law to
82. which he is subject,  and who  is of sound mind, and  is not disqualified from
83. contracting by any law to which he is subject.
84. [Section 12]-. What is a sound mind for the purposes of contracting?
85. A person  is said to be of sound mind for the purpose of making a  contract if, at the time
86. when he makes it, he is capable of understanding it and of forming a rational judgment as
87. to its effect upon his interests.  A person, who is usually of unsound mind, but occasionally
88. of sound mind, may make a contract when he is of sound mind.
89. A person, who is usually of sound mind, but occasionally of un- sound mind, may not make
90. a contract when he is of unsound mind.
91. [Section 13]-. "Consent" defined
92. Two or more persons are said to consent when they agree upon the same thing in the same
93. sense.
94. [Section 14]-. "Free consent" defined
95. Consent is said to be free when it is not caused by-
96. 1. Coercion, as defined in section 15, or
97. 2. Undue influence, as defined in section 16, or
98. 3. Fraud, as defined in section 17, or
99. 4. Misrepresentation, as defined in section 18, or
100. 5. Mistake, subject to the provisions of sections 20, 21 and 22.
101. Consent is said to be so caused when it would not have been given but for the existence of
102. such coercion, undue influence, fraud, misrepresentation or mistake.
103. [Section 15]-. "Coercion “defined
104. Coercion"  is   the    committing,   or threatening to commit, any act forbidden by the Indian
105. Penal Code,  or the unlawful detaining, or threatening to detain, any property, to the  
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107. prejudice  of any person whatever, with the intention of  causing  any person to enter into
108. an agreement. (45 of 1860.)
109. Explanation.-It is immaterial whether the Indian Penal Code is or  is not in force in the
110. place where the coercion is employed.  (45 of 1860.)
111. Illustration
112. A,  on board an English ship on the high seas, causes B to  enter into  an agreement by an
113. act amounting to criminal intimidation  under the Indian Penal Code. (45 of 1860.)
114. A afterwards sues B for breach of contract at Calcutta.
115. [Section 16]-. "Undue influence" defined
116. 1) A contract is  said  to  be induced  by " undue influence where the relations  subsisting 
117. between the  parties  are  such that one of the parties is in  a  position  to dominate  the 
118. will of the other and uses that position to  obtain  an unfair advantage over the other.
119. (2)  In particular and without prejudice to the generality of the foregoing principle, a person
120. is deemed to be in a position to dominate the will of another-
121. (a)  Where he holds a real or apparent  authority over the other or where he stands in a
122. fiduciary relation to the other; or
123. (b)   Where he makes a contract with a  person whose mental capacity is temporarily or
124. permanently affected by reason of age, illness, or mental or bodily distress.
125. (3)  Where a person who is in a position to dominate the will  of  another, enters into a
126. contract with him, and the transaction appears,  on  the face of it or on the evidence
127. adduced, to  be  unconscionable,  the  burden  of proving that such contract was not 
128. induced  by  undue  influence shall lie upon the person in a position to dominate the will  of
129. the other.
130. Nothing in this sub-section shall affect the provisions of section Ill of the Indian Evidence
131. Act, 1872. (1 of 1872.)
132. Illustrations
133. (a)  A having advanced money to his son, B, during his  minority, upon  B's  coming of age
134. obtains, by misuse of parental  influence,  a bond  from B for a greater amount than the
135. sum due in respect  of  the advance.  An employs undue influence. 
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137. (b)  A, a man enfeebled by disease or age, is induced, by B’s influence over him as his
138. medical attendant, to agree to pay B an unreasonable sum for his professional   services.   B
139. employs   undue influence.
140. (c)  A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms
141. which appear to be unconscionable.  It lies on B to prove that the contract was not induced
142. by undue influence.
143. (d)   A applies to a banker for a loan at a time  when there is stringency in the money
144. market.  The banker declines to make the loan except at an unusually high rate of interest. 
145. A accepts the loan on these terms.   This is a transaction in the ordinary course of business,
146. and the contract is not induced by undue influence.]
147. [Section 17]-. "Fraud" defined
148. "Fraud"   means  and  includes  any   of  the following  acts  committed  by  a party to a 
149. contract,  or  with  his connivance, or by his agent, with  intent  to  deceive another party
150. thereto of his  agent,  or  to induce him to enter into the contract:-
151. 1) The suggestion, as a fact, of that which is not true, by one who does not believe it to
152. be true;
153. 2) the  active  concealment  of  a  fact  by  one   having knowledge or belief of the fact ;
154. 3) A promise made without any intention of performing it
155. 4) Any other act fitted to deceive;
156. 5) Any such act or omission as the law specially declares to be fraudulent.
157. Explanation.-Mere  silence  as  to facts  likely  to  affect  the willingness of a person to enter
158. into a contract is not fraud,  unless the circumstances of the case are such that, regard
159. being had to them, it is the duty of the person keeping silence to speak,1* or unless his
160. silence is, in itself, equivalent to speech.
161. [Section 18]-."Misrepresentation" defined
162. "Misrepresentation"   means and includes-
163. 1) The positive assertion, in a manner not warranted by the information of the person
164. making it, of that which is not true, though he believes it to be true
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166. 2) any  breach,  of  duty  which,  without  an  intent  to deceive,  gains an advantage to
167. the person committing it,  or any  one  claiming under him, by misleading  another 
168. to  his prejudice or to the prejudice of any one claiming under him;
169. 3) Causing, however innocently, a party to an agreement to make a mistake as to the
170. substance of the thing which is the subject of the agreement.
171. [Section 19]- Voidability of agreements without free consent
172. When consent to an  agreement is caused by coercion, fraud  or misrepresentation, the
173. agreement is a contract voidable at the option of the party whose consent was so caused.
174. A party to a contract whose consent was caused by fraud  or misrepresentation, may, if he
175. thinks fit, insist that the  contract shall be performed, and that he shall be put in the
176. position in which he would have been if the representations made had been true.
177. Exception.-If such consent was caused by misrepresentation or  by silence,  fraudulent
178. within the meaning of section 17,  the  contract, nevertheless,  is  not  voidable, if the party
179. whose  consent  was  so caused had the means of discovering the truth with ordinary
180. diligence.
181. Explanation.-A fraud or misrepresentation which did not cause the consent to a contract of
182. the party on whom such fraud was practiced, or to whom such misrepresentation was made,
183. does not render a contract voidable.
184. [Section 20]-. Agreement void where both parties are under mistake as to matter
185. of fact
186. Where both the parties to an agreement are  under  a mistake  as  to  a  matter of fact
187. essential  to  the  agreement,  the agreement is void.
188. Explanation.-An erroneous opinion as to the value  of the thing which forms the subjectmatter of the agreement is not to be deemed a mistake as to a matter of fact.
189. [Section 21]-.   Effect of mistakes as to law
190.  | 
191. A contract is not voidable because it was  caused by a mistake as to any law in force in
192. [India]; but a mistake as to a law not in force in [India] has the same effect as a mistake of
193. fact.
194. A and B make a contract grounded on the erroneous belief that a particular debt is barred
195. by the Indian Law of Limitation:  the contract is not voidable.
196.     
197. [Section 22]-. Contract caused by mistake of one party as to matter of fact
198. A contract is not voidable merely because it was caused by one  of the parties to it being
199. under a mistake as to a matter of fact.
200. [Section 23]-. What considerations and objects are lawful and what not
201. The consideration or object of an agreement is lawful, unlessIt is forbidden by law;
202. Or is of such a nature that, if permitted, it would defeat the provisions of any law;
203. Or is fraudulent;
204. Or involves or implies injury to the person or property of another
205. Or; the Court regards it as immoral, or opposed to public policy. 
206. In each of these cases, the consideration or object of an agreement is said to be unlawful. 
207. Every agreement of which the object or consideration is unlawful is void.
208. [Section 24]-. Agreement void, if considerations and objects unlawful in part
209. If any part of a single consideration for one or more objects, or any one or any part of any
210. one of several considerations for a single object, is unlawful, the agreement is void.
211. [Section 25]- Agreement  without  consideration, void, unless it is in  writing  and
212. registered, or is a promise to compensate for something done, or is  a promise to pay a debt
213. barred by limitation law.
214. An agreement made without consideration is void, unless-
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216. it  is expressed in writing and  registered  under the law for the time being in force for the
217. registration of 1*[documents], and is made on account of natural love and  affection 
218. between  parties  standing  in  a,  near relation to each other ; or unless
219. (2)  it is a promise to compensate, wholly or in  part, a person who has already voluntarily
220. done something  for the  promisor,  or  something  which  the  promisor  was legally
221. compellable to do ; or unless
222. (3)  it is a promise, made in writing and signed by the  person  to  be  charged  therewith,  or 
223. by  his   agent generally or specially authorized in that behalf, to pay  wholly  or  in part a
224. debt of which the  creditor  might  have enforced payment but for the law for the limitation 
225. of suits.
226. In any of these cases, such an agreement is a contract.
227. Explanation 1.-Nothing in this section shall affect the validity, as between the donor and
228. done, of any gift actually made.
229. Explanation 2.-An agreement to which the consent of the promisor is freely given is not void
230. merely because the consideration is  inadequate; but the inadequacy of the consideration
231. may be taken into account by the Court in determining the question whether the consent of
232. the promisor was freely given.
233. [Section 26]-. Agreement in restraint of marriage void
234. Every agreement in restraint of the marriage of any person, other than a minor, is void.
235. [Section 27]-. Agreement in restraint of trade void
236. Every agreement by which any one is restrained from exercising a lawful profession, trade
237. or business of any kind, is to that extent void.
238. Saving  of agreement not to carry on business of which  good-will is  sold.-Exception 1.-One
239. who sells the good-will of a  business  may agree  with the buyer to refrain from carrying on
240. a similar  business, within  specified  local limits, so long as the buyer, or  any  person
241. deriving  title to the good-will from him, carries on a like  business therein,  provided  that
242. such limits appear to the  Court  reasonable, regard being had to the nature of the business.
243. [Section 28]-. Agreements   in restraint of   legal proceedings void
244. Every agreement,-
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246. (a) by which any party thereto is restricted absolutely from enforcing his  rights  under or in
247. respect of any contract, by the  usual  legal proceedings in the ordinary tribunals, or which
248. limits the time within which he may thus enforce his rights;  or
249. (b)  which extinguishes the rights of any party thereto, or discharges any  party  thereto 
250. from bay liability, under or in  respect  of  any contract  on  the expiry of a specified period
251. so as to  restrict  any party from enforcing his rights, is void to that extent.
252. Saving  of  contract  of refer to arbitration  dispute  that  may arise.-Exception 1.-This
253. section shall not render illegal a  contract, by  which two or more persons agree that any
254. dispute which  may  arise between them in respect of any subject or class of subjects shall
255. be referred  to  arbitration, and that only the amount  awarded  in  such arbitration  ?hall 
256. be  recoverable  in  respect  of  the  dispute  so referred.
257. Suits barred by such contracts.-1* When such a contract has been made, a  suit  may be
258. brought for its specific performance) and if  a  suit, other  than for such specific
259. performance, or for the recovery of  the amount  so  awarded, is brought by one party to
260. such contract  against any  other  such party, in respect of any subject which they  have  so
261. agreed  to refer, the existence of such contract shall be a bar to the suit.
262. Saving of contract to refer questions that have already arisen.-
263. Exception  2.-Nor shall this section render, illegal any  contract  in writing,  by which two or
264. more persons agree to refer  to  arbitration any  question  between them which has already
265. arisen,  or  affect  any provision  of any law in force for the time being as to references  to
266. arbitration.2*
267. [Section 29]-. Agreements void for uncertainty
268. Agreements, the meaning of which is not certain, or capable of being made certain, are void.
269. [Section 30]-. Agreements by way of wager void
270. Agreements by way  of  wager are  void  ;  and no suit shall be  brought  for  recovering 
271. anything alleged  to be won on any wager, or entrusted to any person  to  abide the result of
272. any game or other uncertain event on which any wager  is made.
273. Exception in favor of certain prizes for horse-racing.-This section shall not be deemed to
274. render unlawful a subscription or contribution,  or agreement to subscribe or contribute,
275. made or entered into for or toward any plate, prize or sum of money, of the value or amount
276. of five hundred rupees or upwards, to be awarded to the winner or winners of any horserace.1*