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The Indian Contract Act, 1872
(Act no. 9 of 1872)
CONTENTS
Preamble
Preliminary
1 Short title
2 Interpretation clause
Chapter I Of the communication, acceptance and revocation of proposals 3 Communication, acceptance and revocation of proposals 4 Communication when complete
5 Revocation of proposals and acceptances
6 Revocation how made
7 Acceptance must be absolute
8 Acceptance by performing conditions, or receiving consideration
9 Promises, express or implied
Chapter II Of contracts, violable contracts and void agreements
10 What agreements are contracts 11 Who are competent to contract 12 What is a sound mind for the purposes of contracting 13 "Consent" defined 14 "Free consent" defined
15 "Coercion" defined 16 "Undue influence" defined 17 "Fraud" defined 18 "Misrepresentation" defined 19 Voidability of agreements without free consent 19A Power to set aside contract induced by undue influence
20 Agreement void where both parties are under mistake as to matter of fact
21 Effect of mistakes as to law 22 Contract caused by mistake of one party as to matter of fact 23 What considerations and objects are lawful, and what not 24 Agreements void, if consideration and objects unlawful in part
Agreement without consideration void, unless it is in writing and registered, or is a promise to compensation for something done, or is a promise to pay a debt barred by limitation law 26 Agreement in restraint of marriage void
27 Agreement in restraint of trade void
28 Agreements in restraint of legal proceedings void
29 Agreement void for uncertainty
30 Agreements by way of wager, void
Chapter III Of contingent contracts
31 "Contingent contract" defined
32 Enforcement of contracts contingent on an event happening 33 Enforcement of contracts contingent on an event not happening
34 When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person
35 When contracts become void, which are contingent on happening of specified event within fixed time 36 Agreements contingent on impossible events, void
Chapter IV
Of the performance of contracts Contracts which must be performed 37 Obligation of parties to contracts 38 Effect of refusal to accept offer of performance 39 Effect of refusal of party to perform promise wholly
40 Person by whom promise is to be performed 41 Effect of accepting performance from third person 42 Devolution of joint liabilities
43 Any one of joint promisors may be compelled to perform
44 Effect of release of one joint promisor
45 Devolution of joint rights
Time for performance of promise, where no application is to be made and no time is specified
Liability of person to whom money is paid, or thing delivered, by mistake or under coercion
Chapter VI
Of the consequences of breach of contract
73 Compensation for loss or damage caused by breach of contract 74 Compensation for breach of contract where penalty stipulated for 75 Party rightfully rescinding contract entitled to compensation
Chapter VII
Sale of goods
76 to 123 Repealed
Chapter VIII Of indemnity and guarantee
124 "Contract of indemnity" defined 125 Rights of indemnity-holder when sued
126 "Contract of guarantee", "surety", principal debtor" and "Creditor" 127 Consideration for guarantee 128 Surety's liability 129 "Continuing guarantee" 130 Revocation of continuing guarantee 131 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 in other's default 133 Discharge of surety by variance in terms of contract 134 Discharge of surety by release of discharge of principal debtor
135 Discharge of surety shen cerditor 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 137 Creditor's forbearance to sue does not discharge surety 138 Release of one co-surety does not discharge others
139 Discharge of surety by creditor's act or omission impairing surety's eventual remedy 140 Rights of surety on payment or performance
141 Surety's right to benefit of creditor's securities
142 Guarantee obtaiend by misrepresentation, invalid
143 Guarantee obtained by concealment, invalid
Guarantee on contract that creditor shall not act on it until co-sureties joins
145 Implied promise to indemnify surety
146 Co-sureties liable to contribute equally
147 Liability of co-sureties bound in different sums
Chapter IX Of bailment
148 "Bailment", "bailor" and "bailee" defined
149 Delivery to bailee how made
150 Bailor's duty to disclose faults in goods bailed
151 Care to be taken by bailee
152 Bailee when not liable for loss, etc. of thing bailed 153 Termination of bailment by bailee's act inconsistent with conditions 154 Liability of bailee making unauthorized use of goods bailed 155 Effect of mixture, with bailor's consent, of his goods with bailee's
Effect of mixture, without bailor's consent when the goods can be separated
157 Effect of mixture, without bailor's consent, when the goods cannot be separated 158 Repayment, by bailor, of necessary expenses
159 Restoration of goods bailed, on expiration of time or accomplishment of purpose
Return of goods bailed, on expiration of time or accomplishment of purpose 161 Bailee's responsibility when goods are not duly returned 162 Termination of gratuitours bailment by death 163 Bailor entitled to increase or profit from goods bailed 164 Bailor's responsibility to bailee 165 Bailment by several joint owners
166 Bailee not responsible on re-delivery to bailor without title 167 Right of third person claiming goods bailed 168 Right of finder of goods may sue for specific reward offered 169 When Finder of thing commonly on sale may sell it
197 Ratification may be expressed or implied
198 Knowledge requisite for valid ratification
199 Effect of ratifying unauthorized act forming part of transaction
200 Ratification of unauthorized act cannot injure third person
201 Termination of agency
202 Termination of agency, where agent has an interest in subject-matter
203 When principal may revoke agent's authority
204 Revocation where authority has been partly exercised
205 Compensation for revocation by principal, or renunciation by agent
206 Notice of revocation or renunciation
207 Revocation and renunciation may be expressed or implied
When termination of agent's authority takes effect as to agent, and as to third persons
209 Agent's duty on termination of agency by principal's death or insanity
210 Termination of sub-agent's authority
211 Agent's duty in conducting principal's business
212 Skill and diligence required from agent
213 Agent's accounts
214 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
217 Agent's right of retainer out of sums received on principal's account
218 Agent's duty to pay sums received for principal
219 When agent's remuneration becomes due
220 Agent not entitled to remuneration for business misconducted
221 Agent's lien on principal's property
222 Agent to be indemnified against consequences of lawful acts
223 Agent to be indemnified against consequences of acts done in good faith
224 Non-liability of employer of agent to do a criminal act
225 Compensation to agent for for injury caused by principal's neglect
226 Enforcement and consequences of agent's contracts
227 Principal how far bound, when agent exceeds authority
228 Principal not bound when excess of agent's authority is not separable
229 Consequences of notice given to agent
Agent cannot personally enforce, nor be bound by, contracts on behalf of principal
231 Rights of parties to a contract made by agent not disclosed
232 Performance of contract with agent supposed to be principal
233 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
235 Liability of pretended agent
236 Person falsely contracting as agent, not entitled to performance
Liability of principal inducing belief that agent's unauthorised acts were authorised
238 Effect, on agreement, of misrepresentation or fraud by agent
Chapter XI Of partnership
239 to 266 Repealed
Schedule Repealed
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
Chapter I Of the communication, acceptance and revocation of proposals
3. Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicated such proposal, acceptance or revocation, or which has the effect of communicating it.
4. Communication when complete
The communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete -as against the proposer, when it is put in a course of transmission to him so at to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete -as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it;as against the person to whom it is made, when it comes to his knowledge.
5. Revocation of Proposals and acceptance
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but no afterwards.
6. Revocation how made
A proposal is revoked -
(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge of theacceptor before acceptance.
7. Acceptance must be absolute
In order to convert a proposal into a promise the acceptance must -
Chapter II Of contracts, violable contracts and void agreements
10. What agreements are contracts
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.
11. Who are competent to contract
Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is sound mind and is not disqualified from contracting by any law to which he is subject.
12. What is a sound mind for the purposes of contracting
A person is said to be of sound mind for the propose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interest.A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
13. "Consent" defined -
Two or more person are said to consent when they agree upon the same thing in the same sense.
14. "Free consent" defined -
Consent is said to be free when it is not caused by -
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of section 20,21, and 22.
Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake.
15. "Coercion" defined
"Coercion" is the committing, or threating to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
16. "Undue influence" defined
(1) A contract is said to be induced by "under influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generally of the foregoing principle, a person is deemed to be in a position to dominate the will of another -
(a) where he hold a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.
Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872)
17. "fraud defined
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
18. "Misrepresentation" defined
"Misrepresentation" means and includes -
(1) the positive assertion, in a manner not warranted by the information of the
23. What consideration and objects are lawful, and what not
The consideration or object of an agreement is lawful, unless -It is forbidden by law; oris of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; ofinvolves or implies, injury to the person or property of another; orthe Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
24. Agreements void, if consideration are objects unlawful in part
If any part of a single consideration for one or more objects, or any one or any part of any one of several consideration of a single object, is unlawful, the agreement is void.
25. 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 -
An agreement made without consideration is void, unless -
(1) it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless.
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.
Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2 : An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
26. Agreement in restraint of marriage, void
Every agreement in restraint of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of trade, void
Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception 1 : Saving of agreement not to carry on business of which good will is sold
- One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business. 28. Agreements in restrain of legal proceedings, void
Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to the extent.
Exception 1 : Saving of contract to refer to arbitration dispute that may arise.This section shall not render illegal contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subject shall be referred to arbitration, and that only and amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.
Exception 2: Saving of contract to refer question that have already arisen - Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to reference to arbitration.
Related Judgements
THYSSEN STAHLUNION GMBH v. STEEL AUTHORITY OF INDIA LTD.
29. Agreements void for uncertainty
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
30. Agreements by way of wager, void
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which may wager is made. Exception on favour of certain prizes for horse-racing: This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.
Section 294A of the Indian Penal Code not affected : Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply.
Chapter IV Of the performance of contracts Contracts which must be performed
37. Obligations of parties to contract
The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance in dispensed with or excused under the provision of this Act, or of any other law.
Promises bind the representative of the promisor in case of the death of such promisors before performance, unless a contrary intention appears from the contract.
38. Effect of refusal to accept offer of performance
Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.
Every such offer must fulfil the following conditions -
(1) it must be unconditional;
(2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is been made is able and willing there and then to do the whole of what he is bound by his promise to do;
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
39. Effect of refusal of party to perform promise wholly
When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract,unless he has signified, by words or conduct, his acquiescence in its continuance.
40. Person by whom promises is to be performed
If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contain in it should be performed by the promisor himself, such promise must be performed by the promisor.
In other cases, the promisor or his representative may employ a competent person to perform it.
41. Effect of accepting performance from this person
When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.
42. Devolution of joint liabilities
When two or more person have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor the representatives of all jointly, must fulfil the promise.
43. Any one of joint promisors may be compelled to perform
When two or more persons make a joint promise, the promise may, in the absence of express agreements to the contrary, compel any one or more of such joint promisors to perform the whole promise.
Each promisor may compel contribution : Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
Sharing of loss by default in contribution : If any one of two or more joint promisors make default in such contribution, the remaining joint promisors mus bear the loss arising from such default in equal shares.
Explanation : Nothing in this section shall prevent a surety from recovering, from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal.
44. Effect of release of one joint promisor
Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor,neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.
45. Devolution of joint rights
When a person has made a promise to two or more persons jointly, then unless contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any one of them, with the representative of such deceased person jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly.
46. Time for performance of promise, where no application is to be made and no time is specified
Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time.
