Important Definitions under Indian Contract Act, 1872

The Indian Contract Act 1872 is a piece of legislation that the British passed in India to regulate contracts and agreements. It was written to safeguard both parties from unfair terms they might not have been aware of when consenting to them and to lay out guidelines for what happens when one side violates the terms of the agreement. For persons who enter into agreements with others in India or overseas, this act, which is still in effect today, offers legal safeguards.

What does Indian Contract Act of 1872 Define?

The law that controls India's contract law is known as the Indian Contract Act, which was passed by the Indian Parliament in 1872. The Act establishes the laws and guidelines that control the creation and enforcement of contracts in India. It explains the fundamental ideas of offer, acceptance, consideration, and the desire to establish legal relations. It also describes the legal repercussions of contract breach.

All agreements made in India, including those made by people, businesses, and the government, are subject to the Indian Contract Act, 1872. It is a thorough law that addresses every facet of contract law and offers a framework for addressing disagreements that arise from contractual interactions. To keep up with evolving commercial needs, the Act has undergone numerous amendments.

Rights under Indian Contract Act

There are two types of right which is guaranteed under Indian Contract Act 1872-

  • Right in rem

  • Right in personam

Example: A contract is made between Akku and Ram for the delivery of ten books on a specific day. If Ram does not provide the same to Akku, Akku may only sue Ram and not anyone else. This deal worries the rest of the globe.

Important Definition under Indian Contract Act 1872

The given table highlights terms that defined under the Indian Contract Act −

Important Definitions
Sec 2(h)Contract
Sec 2(e)Agreement
Sec 2(d)Consideration
Sec 2(b)Promise
Sec 2(a)Proposal
Sec 2(c)Promisor /Promisee
Sec 2(f)Reciprocal Promises
Sec 2(g)Void Agreement
Sec 2(i)Voidable Contract
Sec 2(j)Void Contract

Definition of Contract

Simply described, a contract is an agreement between two parties that is expressed in writing and that has specific obligations (promises) that must be fulfilled by both parties. When this written agreement is made enforceable by law, it is referred to as a contract. When an agreement is "enforceable by law," it indicates that it only applies to the parties to it and that breaking any of its terms could result in legal action, including the termination of the entire agreement.

  • According to the Contract Act, a contract is "an agreement that is enforceable by Law." An agreement between two parties is a settlement that includes commitments or pledges that both parties must keep. Such a deal becomes a contract when it is rendered legally binding.

  • According to Salmond, a contract is an arrangement between two or more people that establishes and specifies obligations and allows for the acquisition of rights by one or more parties to the actions or forbearance of others.

  • According to Anson: "The law of contracts is the area of law that establishes the conditions under which a promise shall be deemed legally binding on the maker."

Definition of Agreement

As defined in Section 2(e), agreement. When two minds come to a consensus on a goal, an agreement is produced. They both concur on the same idea in the same way. Every promise and every combination of promises that serve as consideration for one another are referred to as agreements in Section 2(e). A contract is only formed when one party makes an offer and the other party accepts it.

Therefore, Offer + Acceptance = Agreement

Definition of Consideration

An offer made by person A to person B results in the formation of a contract when that offer is accepted by the other party.

  • Consideration is the value offered in exchange for keeping a promise. It need not be money, but it should be something that both parties have agreed upon and that has some value.

  • A contract without consideration is often void; however, Section 25 of the Contract Act lists some exceptions.

  • Though it need not be sufficient, consideration must have some worth. Performing an act or refraining from performing an act is considered consideration for a promise. The act of paying money is also a part of performing an act.

Definition of Promise

A contract whereby the promisor commits to acting in the other party's best interests by performing or doing something for them.

  • When a promise is made, everything mentioned at the time in connection to it must be taken into account; as a result, if a guy makes a promise to pay whatever he owes while also denying that he owes anything, no action will be taken to carry out that promise. And when the promise is conditional, the condition must be met before it becomes binding. Express or implied promises are made.

Definition of Proposal

The Indian Contract Act of 1872 defines proposal as "when one person will indicate to another person his willingness to do or not do something (abstain) with a view to obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an offer" in Section 2(a).

Definition of Promisor/Promisee

When a promise is made, everything mentioned at the time in connection with it must be taken into account; as a result, if a guy makes a promise to pay whatever he owes while also denying that he owes anything, no action will be taken to carry out that promise. And when the promise is conditional, the condition must be met before it becomes binding. Express or implied promises are made.

One who makes a promise.

The promisor is obligated to follow through on his promise, unless it is against the law, such as a promise to steal or assault and battery; when the fulfillment is prevented by an act of God, such as when someone has promised to teach someone drawing but loses his sight and cannot do so; when the promisee prevents the promisor from carrying out his obligation; when the promisee has released the promisor from his obligation; or when the promise has been made without the promisor's knowledge.

Definition of Reciprocal Promise

Sec 59 defines the definition of reciprocal promise as- It's possible that the parties entered into the contract with the intention of performing legal actions. However, they agreed to commit crimes under particular circumstances after the contract was made. In this case, the previous legal acts are valid and the preceding illegal acts are held void.

Definition of Voidable Contract

The term ‘voidable’ signifies ‘capable of being voided’. A voidable contract is initially believed to be legitimate and enforceable, but if flaws are found, one party may reject it. The contract remains valid and enforceable if a party with the authority to reject it chooses not to reject it despite the flaw. In most cases, entering into a voidable contract only hurts one of the parties because that party doesn't recognise the other party's dishonesty or fraud.


Contracts are a daily occurrence for every man. As trade, business, and industry grow in modern civilization, so too does man's capacity for contract-making. People can negotiate the finest deal possible for the aim of making contracts thanks to the law's protection and conferral of rights.

Individuals are free to control and define their relationships however they see fit. The Indian Contract Act of 1872, which is a statute in India, lays out these general principles. As a result, contracts can operate legally and give those who are harmed by them recourse. As a result, one of India's most significant laws is the Indian Contract Act of 1872.


Q1. An agrees to trade B 500 kg of grains for 300 liters of oil. Is this a valid offer?

Ans. No, this is not a valid offer. The details of the offer are rather ambiguous. There is no mention of what oil A will be selling to B. Is it cooking or crude oil? There is no mention. Additionally, he will receive 500 kg of grains in exchange, though it is unclear which kind. Since the specific terms are not mentioned, this is not a valid offer.

Q2. What is a promise in a contract called?

Ans. Consideration is a promise, performance, or forbearance bargained by a promisor in exchange for their promise. Consideration is the main element of a contract. Without consideration by both parties, a contract cannot be enforceable.

Q3. Who defined the law of contract?

Ans. According to Anson, the law of contract is that branch of law which determines the circumstances in which a promise shall be legally binding on the person making it. According to Section 2(h) of the Indian Contract Act, 1872, An agreement enforceable by law is a contract.

Updated on: 11-Apr-2023


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