Contract - Faq

Contract - FAQ

1) Define Agreement

According to Section 2 (e) of Indian contract Act, 1872 Every promise and every set of promises forming the consideration for each other is an agreement.

Example: A promise to deliver 100 bags of wheat and in return C agreed to pay a sum of Rs.10000/- . This is said to be an agreement between A and C

2) Define Contract

According to Section 2 (h) of Indian Contract Act, 1872, “ The agreement enforceable by law is a contract”

All agreements are not contracts but all contracts are agreement.

Example: The agreement which is enforceable by law is only contract. The agreements which are not enforceable by law is not a contract. For example, an agreement to go to shopping is a mere agreement which is not binding on both the parties if they are not agree and accepted the same.


3) Void Agreements:

According to Section 2 (g) , an agreement not enforceable by law is said to be void.

Example Agreements with Minor


4) Voidable Contracts:

According to Section 2 (j), 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 is a voidable contract.
Example: while executing the contract that one of essential is that there should be free consent among parties to the contract. When the consent of a party to a contract has been obtained by coercion, undue influence, fraud or misrepresentation, the contract is voidable at the option of the party whose consent has been so obtained.

5) Essentials of valid contract:

1) There should be an agreement between the parties. An agreement is the result of a proposal or an offer by one party and the same has been accepted by the other.

2) Agreement between persons who are competent to contract

3) There should be a lawful consideration and lawful object in respect of that agreement

4) There should be free consent between the parties while entering into the agreement

5) The agreement must not be one which have been expressly declared to be void


6) Define proposal

According to Section 2 (a) of the Indian Contract Act, 1872 defines when one person signifies to another for willingness to do or abstains from doing anything with a view to obtaining the assent of that other to such act or abstinence he said to make a proposal.

7. What is cross offers?

When the offers made by two persons to each other containing similar terms and conditions of bargain cross each other to post, they are known as cross offers.

Example: Whenever any offer is known to other parties then the other parties to accept the offer. Otherwise it is not a contract. On 25th November, 2009 A wanted to sell 1000 sugar bags for Rs.50000/- and posted the same to B. On the same day B also writes to A making an offer to purchase 1000 sugar bags for Rs.50000/-/ Both of them not aware of the each others offer even though the amount is same. The cross offers are not constituted as contract.


8. Specific and General offers”

When the offer is made to a specific or ascertained or identified persons then it is called as Specific offer

When the offer is made to public at large, it is known as General offers.

9. Standing offers or open offer or Continuing offer

An offer which is allowed to remain open for acceptance over a period of time is known as a standing offer or open offer or Continuing offer.

10> Acceptance

According to Section 2 (b) defines 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.

11.Essentials of valid acceptance:

The acceptance must satisfy the following conditions.

a) The acceptance should be communicated by the offeree to the offeror

b) There should be an absolute and unqualified acceptance


c) The acceptance should be made in some usual or reasonable manner unless the proposal prescribes the manner of acceptance.
d) Acceptance should be made while the offer is still subsisting.

12. What is mode of revocation of offer?

According to Section 6 of the Indian Contract Act, 1872 provides various modes of revocation of offer. The details are as under

A proposal or offer is revoked

a) by the communication of notice of revocation by the proposer or offeror to the other party
b) by the lapse of the time described in such proposal for the acceptance or if the time is no prescribed, by the lapse of reasonable time, without communication of the acceptance.
c) By the failure of the acceptor to fulfill a condition precedent to acceptance or
d) By the death or insanity of the proposer, if the fact of the death of insanity comes to the knowledge of the acceptor before acceptance.

13. Define consideration

According to Section 2 (d) of the Indian Contract Act, 1872, “ when at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promise to do or to abstain from doing something, made not or abstinence or promise is called a consideration for promise.

14. Privity of Contract:

The idea behind doctrine of privity of contract is that only those persons who are parties to the contract can enforce. The stranger to the contract cannot enforce a contract.

A and B is entered into a contract and some benefit have been conferred upon C. Here A and B are the parties to enforce the contract or sue each other. C is a stranger to the contract and he cannot sue to enforce the contract.

15. Doctrine of promissory estoppel

There is an equitable estoppel preventing a person from denying what he asserted earlier. The person making the promise is bound by the same. This is due to that other person has acted on the faith of such promise or representation.

Example: The state government has announced tax holiday for five years to the new industries in the state. The industrialists set up the industries based on the promise of the state government for five year tax holiday, Here the state is bound by estoppel and cannot be allowed to withdraw the tax holiday earlier than promised by it.

16. Who is minor?

According to Section 3 of the Indian Majority Act, 1875 provides abut the age of majority. The section says that a person deemed to have attained the age of majority only when completes the age of 18 years. Thus a person who has not attained the age of majority is a minor.


17. Competent to Contract:

According to Section 11 of Indian Contract Act, 1872, 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 of sound mind and is not disqualified from contracting by any law to which he is subject.

18. Briefly explain persons who are not competent to contract

a) a person who has not attained the majority
b) a person who is of unsound mind
c) A person who has been disqualified from contracting by any law.


19. What is free consent?

The parties to the contract to give free consent for the arrangement. According to Section 14 of the Indian Contract Act, 1872, consent is said to be free when it is not caused by

a) coercion as defined in section 15, or
b) undue influence as defined in section 16 or
c) Fraud as defined in section 17, or
d) Misrepresentation as defined in section 18 or
e) Mistake subject to the provisions of sections 20, 21 and 22

20. Define Coercion?

According to Section 15 of the Indian Contract Act, 1872 coercion is the committing or threatening to commit, any act forbidden by the Indian Penal Code or 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.

21. Define undue influence:

According to Section 16 of the Indian Contract Act, 1872, A contract is said to be induced by “undue influence” which 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.