The Indian Contract Act, 1872, establishes the law governing contracts in India
and is the most important legislation governing Indian contract law. The Act is
built on English Common Law principles. It is valid to all Indian states. It
stipulates the grounds under which promises made by contracting parties are
"A contract is defined as an agreement that is enforceable by law" under Section
2(h) of the Indian Contract Act.
A contract, according to American law, is a promise or a set of promises for the
breach of which the law provides a remedy, or the execution of which the law
recognises as a duty in some way. The Indian Contract Act, falls under the
mercantile laws (Business Laws). It is a matter of private law. It is based on
English common law, although it was enacted by the Indian Parliament of
Calcutta. The Indian Contract Act was conventional law that had been carefully
crafted and properly passed. It pretended to respect the Indian people's
feelings, but in practise, it followed English common law ideas.
The necessary element in a contract is that must be an intent to create legal
relationship, not a mere social, moral, or religious ones. Essentially, a
contract is a legally binding agreement between the parties that establishes
some legal relationship involving mutual obligations towards one another
in exchange for some mutual gain, as well as the enforcement of these
obligations in the event of failure of commitment, then penal provisions must be
Correct Analysis Of Section2(H) Of Indian Contract Act
The statutory definition of section 2(h) of the Indian Contract Act is," An
agreement enforceable by law is a contract".
With the reference to this
definition it can be concluded that:
- All the contracts are the result of agreements; and
- When an there is an element of enforceability by law is present the
agreement turns to be a valid contract
- All contracts are agreements but necessarily not all agreements are
Agreement + Enforceability at law = Contract.
To understand the term contract one has to go through various terms involved in
relation to that. Those terms are as follows:
- Proposal / offer:
An offer is the building block of the contract. The primary step to come
into a contract is an OFFER. Offer requires a "manifestation of willingness
to enter into a bargain." The promise is the essential part of the
contract. Until or unless there is an offer made there will be no
establishment of a contract.
There are various types of offers : cross proposal, counter
proposal,express, implied and general offers.
Example : A proposes B his willingness to sell his car for 2 lakhs rupees ; A
is the offeror here as he initiates the basis of contract by offering his
Various philosophers have stated in their own definitions:
"An agreement which defines the obligations between two or more persons is
known as a contract." 3 - Salmond
"Contract means a legally enforceable agreement between two persons
wherein two or more persons get a legal right and some have to fulfill
corresponding legal responsibilities.4
- Sir William Anson
When the person to whom an offer is made gives his assent
thereto is said to have accepted the offer.5 Unless or until the offer proposed
is accepted, the contract can't be formed.
It should be technically known that without a promise given to each other while
dealing with each other, no contract is reliable and acceptable. It is now
make a promise. A promise is required for a contract to be legally binding, and
it is supplied as an incentive to make a promise. If the promoter makes no
do anything and thereby ignores a legal contract, the promise is illusory.
defined in Section 2(b) of the Indian Contract Act, 1872 as a proposition that
is regarded accepted when the person to whom the proposal is made consents. When
both parties accept the proposal, it becomes a promise.
Anything that has value in the eyes of law is known as consideration.
Its not necessary that mutually consideration should be of the same value as
the thing proposed.
Example: A proposed B to sell his car for rs.20,000, though the value
of car in real is rs. 1,50,000 it doesn't matter, as 20,000 has value in the
eyes of Law.
An Agreement is a promise between two entities creating mutual
obligations by law 7.
With the reference to the case of Lalman Shukla vs. Gauri Datt 8
It involves determining whether a contract is legitimate in the absence of
acceptance. In January 1913, the defendant dispatched all of his servants to
various locations in effort to locate his nephew, who had gone missing from his
Cross Analysis Of Section 2(H) With Other Provisions
Criticism Of Various Sections
- Section 2(a) of Indian Contract Act, 1872
Offer : section 2(a) of Indian Contract Act,1872 defines the meaning of the
term offer. According to the Section an offer / proposal is said to be made
by a person who signifies to the other person his willingness to do or abstain
from doing an act with a view to obtain the assent of the other person;
In section 2 (h) the term agreement is linked to this as an agreement can only
be formed in when there is a proposal / offer for the contract. if there is no
proposal by the offeror to the offeree then the contract can not be held valid
in the eyes of the law.
If we look at the statutory definition of offer there are two elements that
govern it. A person can either do something for the other party or can abstain
or stop doing for the other party.
- Section 2(b) of Indian Contract Act, 1872
According to this section when an offer made by the an offeror it continues to
be an offer until it has been accepted by the offeree. Once accepted the offer
turns into a promise.
There are two conditions that must be met during acceptance in order to form a
valid contract: first, the offeree's acceptance must be absolute, and second,
the acceptance must be unconditional once the offer has been made and
communicated to the offeree.
The acceptance must be absolute, which means that partial acceptance or agreeing
to only a few conditions of the proposal is not acceptable. For an offer to be
accepted there should be 'consensus ad item' i.e meeting of minds in the same
For turning an offer into an agreement the element of ACCEPTANCE is
- Section 2(e) of Indian Contract Act, 1872
When compared Section 2(h) of the Indian Contract Act 1872 to other provisions
of the Act, Section 2(h) is the first and most prominent provision that comes to
mind (e). 'Agreement' has been defined in this section as 'any promise and any
promises that take account of each other.' If we claim that a common contract is
an agreed proposal/offer that creates legal connections or is enforceable by
law, it brings up the question of how a person accepts an offer.
When he agreed,
or, to put it another way, consensus must be obtained ad idem, which is the'meeting of minds' of both contractual parties. The meeting of minds between
the parties is at the heart of the agreement. There can be no contrast until
there is unanimity ad idem.
- Section 10 of Indian Contract Act, 187
In contrast to section 2h, in order to be considered as a contract, an
agreement must be legally binding, and it will not be recognised a contract if
it is unable to do so.
The Court noted in the instance of Balfour v Balfourthat Mr. Balfour promised
to pay his wife £30 per month if she stayed in England for medical reasons. When
he failed to pay, Ms. Balfour filed a lawsuit against him. Mr. and Ms. Balfour
had no intention of making a legally enforceable agreement, so her case was
dismissed. As a result, it's important to remember that no contract can be
signed without a thorough explanation of the contractual parties' legal rights
Same was the the case of Carlill vs. Carbolic Smoke Ball10
Hence, it should be noted down that no contract may be concluded without an
adequate explanation of the contracting parties' legal rights and
- Section 11 of Indian Contract Act
The focus has been put upon the conditions and valid requirements to have a
contract in force. The parties to the contract are the main components to have
any agreement become a contract. Now the question arises is whether any person
could act as a party to a contract or not?
All agreements formed with the 'free assent' of parties who are 'capable' to
contract are enforceable as contracts, according to Section 10 of the Indian
Contract Act, 1872. Section 11 declares that minors lack the legal capacity to
enter into contracts. While sections 19, 19A, and 20 of the Act go on to detail
out the implications of tainted "consent," they leave out the consequences of
contracting with a juvenile.
Nonetheless, in Mohori Bibee v. Dharmodas Ghose
(1903), the Privy Council interpreted the Act as providing a definite answer to
this matter, holding that minors' contracts were void ab initio.
However, if a person is under the age of 18 and a guardian is appointed to him,
at the age of 21 he or she shall achieve the majority.10
- Section 2d of Indian Contract Act
The enforceability by law is depicting that
Consideration is the essential
element for a contract to be binding. According to section 2(d) of the Indian
Contract Act "when at the desire of the promisor, 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."
Consideration may or may not be adequate.
Section 2(h) of Indian contract act, 1872 has some shortcomings such as:
- The biggest drawback of definition of section 2(h) Is that it is
described in various other sections as well ; hence, it couldn't be read
Hence, a layman is not able to interpret the single definition of section 2(h)
- In section 2(d) the term consideration according to the section may or
may not be adequate, so there might be vague contract like buying a car for
rupees 100, hence it must be clear.
- According to section 11, no minor can enter into a contract but
sometimes its relevant for them to enter into a contract of significant
After studying to various sections of Indian Contract Act, the observation I
drew is that section 2(h) is linked to various other sections and hence can't be
understood alone. The Indian Contract Act of 1872 regulates every facet of a
contract in great detail. One has to go through all the sections to interpret
the true and legal meaning of contract.
Also, contract is the combination of 2 elements:
- An agreement, and
- Enforceablilty by law
Section 2h of Indian Contract Act, is very wide and difficult for a layman to
understand as it has various technicalities involved in it.
If a contract violates a statute or public policy, it is considered illegal.
These definitions of all the sections are intertwined and complementary to one
another. When using these definitions, we find that rather than interpreting the
definitions in isolation, we can get a more effective meaning by combining them
with other relevant portions of the Act.ReferencesStatutes
- Indian Contract Act, 1872
- Lalman Shukla vs. Gauri Datt 1913 40 ALJ 489
- Indian Majority Act, 1875
-  2 KB 571
- Carlill vs. Carbolic Smoke Ball
- The Indian Contract Act : Its Wanderlust and Warmer Climes, Special
Issue JILI (1972) 107
- Lalman Shukla vs. Gauri Datt 1913 40 ALJ 489
-  2 KB 571
- Indian Majority Act, 1875