The Contract Act-1872
Compiled BY: JBSC
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Why Contract Act ?
• According to Sir Willium Anson –
“The law of contract is intended to ensure that what a
man has to expect shall come to pass and that
what has been promised to him shall be performed”
The objective is –
- to ensure that the rights and obligations arising out
of a contract are honoured
- legal remedies are made available to an aggrieved
party against the party failing to honour his part of
agreement.
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What is Contract Act ?
• Contract Act 1872 (Act No. IX of 1872)
governs the law of contracts in Bangladesh.
The Act came into force in Bengal on 1
September of 1872 .
• This Indian Contract Act of 1872 is the
foundation of law of contract introduced by
British law was adopted in Bangladesh
without change.
• The Act has 238 sections under its 11
chapters.
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Definition of Contract
•
“An agreement enforceable by law is contract”.
-Section-2(h) of the Contract Act-1872
CONTRACT = AGREEMENT+ENFORCEABILITY AT LAW
• “Every promise and every set of promises, forming
consideration for each other is an agreement”
–Section-2(e) of the Contract Act-1872
AGREEMENT = OFFER + ACCEPTANCE + CONSIDERATION
‘All contracts are agreements but
all agreements are not contracts’
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Definition of Contract
• “ When, at the desire of the promisor the
promisee or any other person has done or
abstained from doing something, such act or
abstinence or promise is called a consideration
for the promise .”
- Section 2 (d) of the Contract Act
• Combining two sections aforesaid, we can
opine that“Contract is an agreement between two or
more parties which is supported by
consideration and enforceable by law”
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Interpretation clause
(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 the 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”
(d) The person accepting the proposal is called the
“promisee”
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The Essential Elements of Contract
• An agreement becomes enforceable by law when it
fulfills certain conditions. These conditions are the
essential elements of contract which are as follows :
1. Offer and Acceptance : There must be a lawful offer
by one party and a lawful acceptant of the offer by
the other party or parties.
2. Intention to create Legal Relations: There must be an
intention (among the parties) that the agreement shall
result in or create legal relations (Ch-3).
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The Essential Elements of Contract
3. Lawful consideration: An agreement to do
something for nothing is usually not enforceable
by law. (Ch.4)
4. Lawful Object : The object should not be illegal
or immoral or opposed to public policy .
(Section-23)
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The Essential Elements of Contract
5.Capacity of parties :
Sec-11Contract Act-1872 & Section 3 (1) & (2) of the
Majority Act-1875 –
“Every person is competent to contract who is of –



the age of majority
sound mind and
not disqualified from contracting
( by any law to which he is subject.)
Insolvency Act-1997
• (As per Section 12 of Contract Act-A person is said to
be of sound mind for the purpose of making a
contract if, at the time when he makes it is capable
of understanding it and of forming a rational
judgment as to its effect upon his interests)
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The Essential Elements of Contract
6. Free consent : There is absence of free
consent if the agreement is induced by –
a) Coercion
b) Undue influence
c) Misrepresentation
d) Fraud
e) Mistake
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The Essential Elements of Contract
7. Writing and registration : An oral contract is a
perfectly good contract except in those cases
where writing or registration is required by some
statute.
• In law writing is required in case of lease, gift, sale
and mortgage of immovable property, negotiable
instrument, Memorandum and Articles of
Association of a Company (Section-25)
8. Certainty: “agreements, the meaning of which is
not certain or capable of being made certain, are
void” (Section-29)
9. Possibility of Performance :An agreement to do an
act impossible in itself is void . (Section-56)
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Kinds of contract
Contracts may be classified from 3 points of view-
1.Enforceabilitya)Valid contract b) Voidable contract
c) Void Contract d) Unenforceable
e) Illegal Contract
2. Modes of Creation:
a) Express Contract b) Implied Contract
c) Constructive or Quasi Contract
3.Execution :
a) Executed b) Executory
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Contract Act : At a glance
Chapter
Particulars
Clause
Chapter-1
Proposal or offer & Acceptance
3-9
Chapter-2
Voidable & Void contract
10-30
Chapter-3
Contingent Contract
31-36
Chapter-4
Performance of Contract
37-61
Chapter-5
Certain Relations resembling to Contracts
68-72
Chapter-6
The Consequences of Breach of Contracts
73-75
Chapter-7
Sale of Goods
76-123
Chapter-8
Indemnity & Guarantee
124-147
Chapter-9
Bailment
148-181
Chapter-10
Agency
182-238
Chapter-11
Partnership
239-266
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Why necessary ?
• For any individual, it is essential to know the
elements of a contract if he is engaged in
business or in buying and selling of goods and
properties.
• It is essential for a banker to know the
elements of a contract because a bank
frequently enters into contract with the
depositors, customers and borrowers.
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Why necessary for Bankers
•Opening of accounts is entering into a contract. Both of
the parties i.e. bank and the account holders are bound by
this contract.
•When a banker advances money to a borrower is a
contract with borrower who undertakes to repay.
•Under the broad area of indemnity and guarantee,
chapter eight defines contract of indemnity, contract of
guarantee, surety, and principal debtor and creditor.
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Indemnity
SEC. 124- “A contract by which one party promises
to save the other from loss caused to him by the
conduct of the promisor himself, or by the conduct
of any other person, is called a “Contract of
Indemnity”.
INDEMNITY Features• TWO parties- Indemnity holder & Indemnifier
• Sec. 10- essentials should be satisfied
• Rights of Indemnity Holder:
• To claim damages
• To claim costs & Other payments
• All insurance contracts are contracts of indemnity
except life insurance.
•
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ESSENTIAL FEATURES OF INDEMNITY
 There are two persons , the indemnifier the
indemnified or the indemnity holder
 There must be loss either by the promisor’s
conduct or by any other person’s conduct
 It is a contingent contract by nature
 It may be express or implied
Sec125 deals with the commencement of the
indemnifier’s liability. His liability commences
when the event causing the loss occurs or when
the event saving the indemnified from the loss
becomes impossible
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Guarantee
• SEC. 126- A “Contract of Guarantee” is a
contract to perform the promise, or discharge
the liability, of a third person in case of his
default.
The person who gives the guarantee is called
the ‘surety’.
• The person in respect of whose default the
guarantee is given is called ‘principal debtor’.
• The person to whom the guarantee is given is
called ‘creditor’.
• It is tripartite agreement.
1- principal debtor and creditor.
2- creditor & surety and
3- principal debtor and surety.
•
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Thank YOU
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