Section- 2(h) of Indian Contract Act defines contract as "Agreement which is enforceable by law". Indian Contract Act, 1872 is an act which deals with the principles of law of contract. This act came into force from 1st September,1872. It extends to whole of India except Jammu & Kashmir. The act was passed by the British India and is based on the principles of English common law. Contract act has different stages for formation of contract with some essential elements, breach of contract, and the remedies for breach of contract which all collectively may create certain rights or duties for themselves.

Contract Defined:

A contract is agreement which is enforceable by law. The agreement is always between two parties. An agreement consists of a promise between the two parties for forming contract. All contracts are agreements but all agreements are not contracts.

For an agreement to become a contract there must be following essential:

-two or more parties

-offer & acceptance

-intention to create legal relation

-lawful objet & consideration

-capacity to contract

-agreement must not be void

-possibilty of performance

-it should be enforcable by law

Need of Indian Contract Act, 1872:

Indian Contract Act was drafted by "Sir James Fitzames Stephen" during the British regime and after the independence it continued by the virtue of the act. This act came into effect at the time when India was ruled by the British government or the pre independence era. In India we have Indian contract Act, 1872 to govern the contracts executed in India so that in the went of dispute their legality or validity can be established and the judiciary will have uniform approach to see or judge the suits on merits. Originally contracts governed under the Sales of Goods Act were part of Indian Contract Act & only in 1930, the provisions governing sales of goods were separated from the original Indian Contract Act in order to have smooth trade commodities after independence India has adopted the Indian Contract Act, 1872  as it is because not much changes felt necessary at that point of time. After forming Indian Contract Act, 1872 it helped the people to get to know about their legal rights. Before that the people were not given justice against the injustice they were facing but Indian Contract Act, 1872 helped them to get fair treatment in the eyes of laws and help to recognize their rights.

There are in total 266 Sections in Indian Contract Act, 1872 which are further divided into following groups-

-General principles of Law of Contract (Section 1-75)

-Contracts relating to Sales of Goods (Section 76-124)

-Special kinds of Contracts (Indemnity, Guarantee, Bailment & Pledge (Section 125-238)

-Contracts relating to Partnership (Section 239-266)

Sections Repealed & Newly Inacted:

-Sales of goods act 1930

-Partnership act 1932

Important Case Laws:

Balfour v/s Balfour (Intention to Create Legal Obligation)

This case is related to husband (DEFENDANT) and wife (PLAINTIFF) who had a vacation in England and Mrs. Balfour (wife) got sick & husband Mr. Balfour had returned to his home leaving his wife in England, It was held that husband will send 30 Pounds as allowances to plaintiff (wife) but later they got divorced  and defendant stopped the allowances to plaintiff. So his wife (plaintiff) filed a suit.

Judgement: court decided that this contract is null & void because when they were doing agreement their was no intention to create a legal obligation and for valid contract  their  must be legal obligation. So this case is null and void.

Lalman Shukla v/s Gauri Datt (Case related to Communication)

Plaintiff: Lalman Shukla

Defendant: Gauri Datt.

In this case, the plaintiff is a servant at defendant's house & was asked to find the nephew of defendant who was missing from serveal days but the plaintiff dosen’t knew about reward of Rs.500 announced by the defendant after telling the plaintiff  to find his nephew. The servant found the nephew & claimed the reward but the defendant refused to pay the reward so he filed a suit against him.

Judgement: The court dismissed the case and the decision by Justice Banerjee contended that there was no communication between the defendant and the plaintiff which means plaintiff was not knowing about the reward by the defendant so he cant claim the reward by the defendant.

Carbill  v/s  Carboil  Smoke Ball

(Offer & Acceptance Case)

Carbill: Plaintiff

Carboil: Defendant

Carboil smoke ball is a company which  produces a product. The defendant claims that whosoever is using his product according to the description will not be in the contact of any influenza cold and if any customer is having cold during the period of using his product, then he would be given 100 pounds. So, the plaintiff  took his product according to the description but gets infected with cold and claims for 100 pounds but the company refuses. So the plaintiff files the suit.

Reasons given by company in court were:

-It was just the add

-No time limit was given

-There was no legal intention

-It was not for particular person nor company  knew the plaintiff


Court said that the offer was made publicly so if the plaintiff accepted the offer then there was an agreement between defendant and plaintiff and the statement given by defendant that they have 1000 pounds in there bank shows the seriousness of the company. The court also contended that the acceptance can be made either expressly or implied. So, in this case acceptance was made expressly & thus the case is valid. The court held that the plaintiff was to be given the reward of 100 pounds.

Moribbi v/s Dharmodas Gupta

(Contract with Minor is Void)’

Money Lender: Bromodatt

Agent: Kedarnath

Minor: Dharmodas Gupta

Dharmodas gupta lends money from Bromodatt Rs.20000 and they give first installment then Dharmodas' mother gets to know about the contract she then tells Kedarnath that he was minor while Contract came into existence so Kedarnath asked to give his money back.


According to  Session courts and Kolkata High Court's decision this case was null and void, then they filed the suit in Supreme Court till then Bromodatt died and case was filed by Moribbi so this case was named as "Moribbi v/s Dharmodas Gupta". According to Supreme Court the case was considered null & void & no compensation was given to Moribbi because the contract done by minor is always null & void.

Chinnaya v/s Ramaya

(Considertion and Privity of  Contract)

Privity of contract states that no third party can sue who itself has no personal interest in the agreement between the two parties.

An old lady had a land & gave some amount  of it to her sister (Chinnaya) & later gift it to her daughter (Ramaya) on the condition to give Rs.631 to Chinnaya and signs the agreement but later daughter refused to pay the amount. So Chinnaya  filed the suit and daughter says that she has got it as a gift from her mother so she is not liable to pay to her mother.


The Supreme Court contended that the daughter is liable to pay consideration because that was the condition for the gift of land by mother to daughter .So chinnaya was paid Rs.631 by Ramaya monthly.