The law governing contracts in India is outlined in the Indian Contract Act, of 1872. The Act was adopted by British India and is based on English Common Law principles. Except for Jammu & Kashmir, it is applicable to all the states of India. It establishes the conditions under which commitments made by contracting parties shall be enforceable as well as how these rights and obligations will be carried out.
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Contract (Sec 2(h))
A contract is defined as an agreement in Section 2(h) of the Indian Contract Act, of 1872. A promise or a set of promises in return for a promise or a set of promises is considered a legally enforceable agreement under Section 2(e) Contract Act.
A Contract Act that is created, signed, and executed electronically—typically over the Internet—is known as an online or electronic contract. In the event of an online contract, the seller will inform the potential customers of the products, prices, and terms for purchasing them. The interested purchasers can then choose to sign electronically or decide to use the “I Agree” or “Click to Agree” option to indicate their agreement with the terms offered by the seller.
Section 10 of the Indian Contract Act
Section 10 of the Indian Contract Act outlines the necessary components of a legal contract. Here are some of them:
There must be two parties for there to be a contract.
- Offline: The offeree or proposer is the party accepting the offer, and the offerer or proposer is the party making the offer.
- Online: In cases of online contracts, the service provider is the party making the offer, and the party accepting it is the client.
2. Offer And Acceptance
Section 2(a) of the Indian Contract Act states that an offer is made when one person expresses to another his readiness to do something in order to win the latter’s approval for it.
- Offline: A contract is initially an offer, but when the recipient of the offer indicates that he accepts it, it transforms into an agreement. Purchasing clothing that is on sale or accepting an offer, for instance.
- Online: By perusing and selecting the products and services the seller offers, the customer submits a purchase request in response to the seller’s invitation to submit an offer. If the contract is made online, the offer and acceptance can be done by email or by filling out the necessary forms on the website.
3. Intention To Create Legal Relationship
- Offline: Both parties must intend to enter into a legal relationship and commit themselves legally as a result of the agreement. It should be highlighted that agreements of a social or domestic character are not contracts because it is assumed that parties did not intend to establish a legal relationship when they signed the document unless specifically stated otherwise.
- Online: The Court shall, in each situation, have regard to the party’s intentions as evidenced by the terms of the Agreement and the consequences resulting therefrom.
It follows naturally that parties do not intend for agreements governing social connections to have legal repercussions. A marriage invitation sent to a friend or member of the family via email, fax, or another form of telecommunication is not a contract, for instance.
4. Lawful Consideration
According to Section 2(d) of the Indian Contract Act, consideration is “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 does or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.”
- Offline: Consideration is defined as “anything in exchange” (quid pro quo). It could be monetary, in-kind, a deed, or abstinence. However, payment must be legitimate and legal. An agreement is invalid if there is no consideration.
- Online: According to the fundamental principle of consideration, if a party to a contract pledges to uphold his end of the bargain, he or she must receive something in exchange. The method of payment you select, for instance, matters when you place an order online. Real consideration cannot be given to promises that are physically impossible to fulfill.
5. Capacity of The Parties
Section 11 of the Contract Act states that “everyone is competent to contract, who is of the age of majority according to the law to which he is subject, who is of sound mind, and who is not disqualified from contracting by any law to which he is subject.
- Offline: To be legally able to enter into the agreement, all parties must be. One of the prerequisites for a valid and enforceable contract is the capacity of the parties. People who are underage, mentally ill, or intoxicated are not regarded as having the legal capacity to enter into a contract.
- Online: A contract where one or both parties are minors has no legal weight in our nation. It is regarded as void from the beginning. A person is not permitted to enter into a contract involving their property when they have been declared insolvent by any competent Court. As an illustration, if a minor enters into a contract online, his guardians are liable.
6. Free And Genuine Consent
Free consent is defined in Section 14 Contract Act as “consent that is not the result of coercion, fraud, undue influence, deception, or error.”
- Offline: It essentially represents the parties’ convergence of thought. They are said to consent when they both agree on the same matter in the same way. Consent must be freely given, sincere, and not the result of deception or undue influence—that is when one person is in a position to control the will of another.
- Online: When a customer uses a service offered by a website, there is little opportunity for physical interaction; instead, they just assent by selecting the checkbox that guarantees free and honest permission. For instance, it is presumed that by clicking “I agree,” terms and conditions are freely accepted with sincere consent.
7. Lawful Object
Section 23 Contract Act states that an agreement’s object must be lawful unless it is prohibited by law, would violate a law’s provisions, is fraudulent, or indicates harm.
- Offline: A Contract Act must be made for a legal purpose, which is the fourth need. Contracts that are against the law or the public interest won’t be upheld by the courts. Such agreements are regarded as invalid. A gaming contract, for instance, would be prohibited in many states.
- Online: Contract Act is only legally binding when it is made for a legitimate reason. It must not violate any legal requirements and cannot be fraudulent in any way. For instance, a contract entered into on a website created for the sole purpose of selling cocaine online is void.
8. Agreement Not Declared Void
This is addressed under the requirements of Sections 24 to 30 of the Indian Contract Act.
- Offline: Contracts that have been expressly declared void are not legally binding and therefore do not exist. Examples include marriage, a wager, and a trade restraint agreement.
- Online: Certain agreements, such as those whose intent is unclear, who are dependent on improbable occurrences, who are made without deliberation, or whose purpose is illegal, etc., are deemed void and inadmissible in contracts.
9. Possibility Of Performance
According to Contract Act, section 29 of the Indian Contract Act of 1872, a commitment to perform an act that is impossible in and of itself cannot be enforced.
- Offline: A contract must be able to be carried out in order to be valid. A contract to perform an impossibility is void. The agreement cannot be enforced by law if the act is technically or physically impossible to complete.
- Online: The parties often agree on the day, time, and location of the performance of the contract based on their preferences and practical considerations. When time is of the essence in a contract, the promisor is required to fulfill his obligation within the allotted time frame; if he does not, the contract may be voidable at the promise’s discretion.
10. Legal Formalities
Before engaging in a contract, a number of legal requirements must be satisfied.
- Offline: The agreement must adhere to all official requirements, including writing, registrations, stamping, attestations, etc., in order to be legally binding. For instance, the Immovable Properties Act’s rules require that an immovable contract be in writing, registered, and legally stamped, unless otherwise prohibited by law.
- Online: In the case of contracts, the formalities that are required to be completed before accepting an invitation to sign a contract online may include exchanging identifying information, credit card information, and other information.