Law and You > Business Laws > Indian Contract Act, 1872 > Introduction to Indian Contract Act, 1872
Prior to the Indian Contract Act, English law of the contract was followed in India. The extent of modifications made in the Act as per the Indian conditions and its adaptability to the Indian economy. Before the act was enacted , the contractual relationship was governed by the personal laws of different religious communities like different laws for Hindu and Muslims. In this article, let us have Introduction to Indian Contract Act, 1872
Introduction to Indian Contract Act, 1872:
Purpose or Objectives of the Act:
- According to the preamble of the Act, the main purpose is to define and amend certain parts of the law relating to contracts.
- To ensure reasonable fulfilment of expectations created by the promises of the parties and also enforcement of obligations prescribed by an agreement between the parties.
- The object of the Act is also to introduce definiteness in commercial transactions.
Salient Features of the Act:
- The Indian Contract Act, 1872 has 11 chapters.
- Law of contract creates jus in personum and not in jus in rem. The Latin word ‘Jus in personum’ means right against person. It is a right impose a particular person’s duty by initiating an action against such person. “Jus in rem” means a right enforceable against anyone in the world interfering with that right founded on some specific relationship, status, or particular property accorded legal protection from interference by anyone.
- The Indian Contract Act consists of the following two parts: (a) General principals of the Law of Contract and (b) Special kinds of contracts. The general principals of the Law of Contract are contained in Sections 1 to 75 of the Indian Contract Act. These principles apply to all kinds of contracts irrespective of their nature. Special contracts are contained in Sections 124 to 238 of the Indian Contract Act. These special contracts are Indemnity, Guarantee, Bailment, pledge, and Agency.
- The Act is neither retrospective (dealing with past events or situations) nor exhaustive (considering all elements). It seals mainly with the general principles of embodying contracts and Special Contract.
- The Act doesn’t cover the whole field of contract law. Besides the contract act, other regulating laws are the Transfer of Property Act (deals with the transfer of immovable property), the Sale of Goods Act (deals with the sale of goods), the Partnership Act (deals with the partnership agreements), etc.
- The Act applies only to those agreements which are valid and enforceable by law. An agreement which does not give rise to any legal obligations will not be enforceable by law.
- Social, religious and moral obligations, like marriage, conveyance of gifts, etc., are not enforceable by law as contracts.
- The Act only provides rules and regulations for the purpose of the contract.
- The Act does not list any rights and liabilities between parties to the contract. The contracting parties are at liberty to make rules and regulations about the enforcement of their rights and the fulfilment of their duties. Rights and liabilities and their manner of performance are decided by the parties themselves under the contract but it is within the purview of the act.
- The Act does not affect particular customs and usages of trade, which are not inconsistent with any of the provisions of law.
- The Act does not cover the agreements which result in the transfer or the destruction of rights.
- In case, a particular matter is not covered by any section of the Contract Act or by any other law in force in India, the courts may follow the principles of English Common Law, provided they are not inconsistent with Indian conditions and circumstances.
According to Section 1 of the Indian Contract Act, the Act may be called the Indian Contract Act, 1872. It extends to the whole of India and it shall come into force on the first day of September, 1872. The Act is enacted on 25th April, 1872.
Conclusion:
The Indian Contract Act, 1872, serves as a foundational framework for contract law in India, establishing essential principles governing agreements and their enforcement. Its primary aim is to create a legal environment where parties can enter into agreements with certainty and security, fostering trust and facilitating commerce.
The Act delineates the essential elements of a valid contract: offer, acceptance, consideration, and the intention to create legal relations. It emphasizes that for an agreement to be enforceable, it must be supported by consideration, which is a crucial aspect distinguishing enforceable contracts from mere social agreements.
Furthermore, the Act categorizes contracts into various types—such as valid, void, voidable, and contingent contracts—providing clarity on the enforceability of different agreements. This classification is significant for parties seeking legal recourse, as it helps ascertain their rights and obligations under various circumstances.
The provisions regarding performance of contracts and breach are pivotal in defining the liabilities of parties. The Act outlines rules for fulfilling contractual obligations and the consequences of non-performance, including remedies such as damages, specific performance, and injunctions. This framework ensures that parties have recourse in the event of a breach, thereby promoting accountability in contractual dealings.
Another critical aspect of the Act is its provisions on voidable contracts and the capacity to contract. The law recognizes that certain individuals, such as minors or persons of unsound mind, may lack the capacity to enter into contracts, thus protecting vulnerable parties. It also addresses issues of coercion, undue influence, fraud, and misrepresentation, emphasizing the need for genuine consent.
While the Indian Contract Act is comprehensive, it also interacts with various other laws, such as the Sale of Goods Act and the Specific Relief Act, which deal with specific types of contracts and remedies. This interplay creates a holistic legal ecosystem for commercial transactions.
In conclusion, the Indian Contract Act, 1872, plays a vital role in the Indian legal landscape by ensuring that contracts are enforceable and that the principles of fairness and justice govern contractual relationships. Its adaptability and comprehensive nature allow it to evolve with changing societal needs, making it an enduring pillar of commercial law in India.