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THE INDIAN CONTRACT ACT,1872

Title : THE INDIAN CONTRACT ACT,1872

Year : 1872

[Act, No. 9 OF 1872]1*
[25th April, 1872]

PREAMBLE

Whereas it is expedient to define and amend certain parts of the law relating to contracts;

It is hereby enacted as follows:-

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1. The Chapters and sections of the Transfer of Property Act, 1882 (4 of 1882), which relate to contracts are, in places in which that Acts, is in force, to be taken as part of this Act-See Act 4 of 1882, section 4.

This Act has been extended to and brought into force in Dadra and Nagar Haveli by Regulation 6 of 1963, section 2 and Schedule I (w.e.f. 1-7-1965), to Goa, Daman and Diu by Regulation 11 of 1963, section 3 and Schedule, to the whole of the Union Territory of Lakshadweep by Regulation 8 of 1965, section 3 and Schedule, to the Union Territory of Poundicherry by Act 26 of 1968, section 3 and Schedule.

The Act has been extended to and brought into force in the State of Sikkim (w.e.f. 1-9-1984) vide S.O. 641 (E), published in the Gazette of India, Extra., Pt. II, Section 3(ii), dated 24th August, 1984.
 
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This Act may be called the Indian Contract Act, 1872.

Extent, Commencement-It extends to the whole of India1*[except the State of Jammu and Kashmir]; and it shall come into force on the first day of September, 1872.

Enactments Repealed-2[* * *] Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act

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1. Substituted by Act 3 of 1951, section 3 and Schedule, for "except part B States".

2. The Words "The enactments mentioned in the Schedule here to are repealed to the extent specified in the third column thereof, but" rep. by Act 10 of 1914, section 3 and Schedule II.

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In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:-

(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;

(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;

(c) The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promisee";

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;

(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.



The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.



The communication of a proposal is complete when it comes 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 as 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;

Illustrations

(a) A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B receives the letter.

(b) B accepts A's proposal by a letter sent by post.
The communication of the acceptance is complete,
as against A when the letter is posted;
as against B, when the letter is received by A.

(c) A revokes his proposal by telegram.

The revocation is complete as against A when the telegram is dispatched.

It is complete as against B when B receives it.

B revokes his acceptance by telegram. B's revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him.



(1) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

(2) An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Illustrations

(a) A proposes, by a letter sent by post, to sell his house to B.

(b) B accepts the proposal by a letter sent by post.

(c) A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

(d) B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.



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 fulfill a condition precedent to acceptance; or

(4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.



In order to convert a proposal into a promise, the acceptance must-

(1) Be absolute and unqualified;

(2) Be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.



Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.



In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

Last updated on July, 2016

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