Agreements under Indian Contract Act, 1872
Agreements under the Indian Contract Act, 1872
1. Definition of Agreement
Section 2(e) of the Indian Contract Act, 1872 defines an agreement as:
“Every promise and every set of promises, forming the consideration for each other.”
In simple terms, an agreement is the meeting of the minds between two or more parties, where one party promises to do or not do something in return for a promise or act from the other party.
2. Essentials of an Agreement
An agreement generally involves the following key elements:
a. Offer and Acceptance (Consensus ad idem)
One party makes a proposal or offer.
The other party accepts the offer unequivocally.
Acceptance must be absolute and unconditional.
Both parties must have a “meeting of minds” (consensus ad idem).
b. Lawful Consideration
There must be something of value exchanged between parties.
Consideration can be in the form of money, service, or promise.
It must be lawful (not illegal or immoral).
c. Lawful Object
The purpose or object of the agreement must be legal.
Agreements with illegal or immoral objects are void.
d. Capacity to Contract
Parties must be competent to contract (of legal age, sound mind, and not disqualified by law).
e. Free Consent
Consent of parties must be free and not obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
3. Types of Agreements
Express and Implied Agreements:
Express agreements are explicitly stated, either orally or in writing. Implied agreements are inferred from the conduct of parties.
Void and Voidable Agreements:
Void agreements have no legal effect; voidable agreements are valid until annulled by one party.
4. From Agreement to Contract
Section 10 of the Indian Contract Act states that all agreements are not contracts.
For an agreement to become a contract, it must be enforceable by law.
In other words, a contract is an agreement with legal enforceability.
5. Relevant Case Law
a. Carlill v. Carbolic Smoke Ball Co. (1893)
Demonstrated that an offer can be made to the world at large.
The company's advertisement promising to pay £100 to anyone who used their product and still got sick was held to be a valid offer.
Acceptance by performing the condition constituted a binding agreement.
b. Lalman Shukla v. Gauri Dutt (1913)
Demonstrated that acceptance must be communicated.
A person cannot accept an offer if he is unaware of it.
Here, a reward was offered for finding a missing person. A third party who found the person without knowing about the reward was not entitled to it.
c. Harvey v. Facey (1893)
Distinguished between an offer and mere information or statement of price.
A mere statement of the lowest price is not an offer; it is an invitation to treat.
Courts emphasized the necessity of a clear offer.
d. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas (1966)
Highlighted the necessity of lawful consideration.
An agreement without consideration is void unless it falls under certain exceptions (like a promise made out of natural love and affection between close relatives).
6. Importance of Agreement in Contract Formation
The foundation of every contract is an agreement.
Without a valid agreement, a contract cannot exist.
The Indian Contract Act governs all contracts except certain special types like contracts relating to sale of goods, partnership, negotiable instruments, etc.
7. Summary Table
| Element | Description | Example Case |
|---|---|---|
| Offer | Proposal made to another party | Carlill v. Carbolic Smoke Ball Co. |
| Acceptance | Unconditional agreement to offer | Lalman Shukla v. Gauri Dutt |
| Consideration | Something of value exchanged | Bhagwandas Goverdhandas Kedia v. Girdharilal |
| Lawful Object | Legal purpose of agreement | - |
| Free Consent | Consent without coercion or fraud | - |
| Capacity to Contract | Parties competent to contract | - |
8. Conclusion
Agreements under the Indian Contract Act, 1872, form the basis of contract law in India. Understanding the essentials like offer, acceptance, consideration, lawful object, and free consent is crucial for identifying when a contract exists. Case laws like Carlill v. Carbolic Smoke Ball Co. and Lalman Shukla v. Gauri Dutt illustrate key principles such as offer, acceptance, and communication, shaping modern contract jurisprudence.
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