Contract Act Study Notes
(For B.Com (Hons) – Core Commerce – Beginner Friendly)
1️⃣ What is a Contract?
- A contract is a legal promise between two or more people.
- Think of it like a handshake agreement: everyone promises to do something.
Everyday Analogy
- Buying a book: You promise to pay ₹200, the seller promises to give you the book.
- Both sides are bound by the agreement – that is a contract.
2️⃣ How is a Contract Formed?
| Requisite | What it Means | Everyday Analogy |
|---|---|---|
| Offer | One side says, “I will do X for you.” | “I’ll buy your bike for ₹30,000.” |
| Acceptance | The other side says, “I agree.” | “Okay, I’ll sell.” |
| Intention to create legal relation | Both sides actually want the agreement to be enforceable. | You’re not joking – you really want the bike. |
| Consideration | Something of value is exchanged. | Your money for the bike. |
| Capacity | Parties must be legally able to contract (age, mental health, etc.). | You’re 18+ and mentally sound. |
| Free Consent | No force, fraud, or mischief involved. | No one is bribing you to sign. |
| Object & Term | The contract’s purpose must be lawful. | Selling a bike for money is lawful. |
Quick Tip: If any of these are missing, the contract may be void or void‑able.
3️⃣ Types of Contracts
| Type | How it looks | Key Point |
|---|---|---|
| Express Contract | All terms spoken or written. | You say, “I’ll pay ₹30,000 on the 5th.” |
| Implied Contract | Terms understood from actions. | You hand over money, they hand over the bike – no words needed. |
| Void Contract | Law says it never existed. | Contract to sell stolen property. |
| Voidable Contract | Valid but one side can cancel. | Contract entered under duress. |
| Enforceable Contract | Both sides must obey. | All contracts that are valid and not void/voidable. |
4️⃣ How Is a Contract Performed?
- Performance = Doing what you promised.
- Time of Performance = When it should happen.
- Place of Performance = Where it should happen.
- Mode of Performance = How it should happen (e.g., by delivery, payment).
Example: “I’ll deliver the bike tomorrow at 2 PM in the parking lot.”
If you fail to perform, you breach the contract.
5️⃣ Breach of Contract
| Breach Type | What it Means | Example |
|---|---|---|
| Non‑performance | One side simply doesn’t do it. | Seller never delivers the bike. |
| Defective performance | Partial or faulty performance. | Bike delivered but broken. |
| Repudiation | One side says they won’t do it before time. | Seller says “I’m not selling.” |
6️⃣ Remedies for Breach
| Remedy | When it’s used | How it helps |
|---|---|---|
| Damages | Monetary loss caused. | You get ₹3,000 to cover extra costs. |
| Specific Performance | When money isn’t enough. | Court orders seller to deliver the bike. |
| Rescission | Cancels the contract. | Both parties return what they received. |
| Injunction | Stops a party from doing something. | Stops seller from selling the bike elsewhere. |
Remember: Damages are the most common remedy.
7️⃣ Key Legal Terms (Simplified)
| Term | Simple Meaning |
|---|---|
| Void | Never existed. |
| Voidable | Exists but can be cancelled by one side. |
| Enforceable | Must be obeyed. |
| Quasi‑contract | No real contract, but law forces payment (e.g., medical treatment). |
| Consideration | Something worth something (money, service, etc.). |
8️⃣ Tiny Example: A Simple Book Sale
| Step | What Happens | Why It Matters |
|---|---|---|
| 1. Offer | Buyer says, “I’ll pay ₹150 for your book.” | Creates the offer. |
| 2. Acceptance | Seller says, “Deal.” | Creates the acceptance. |
| 3. Consideration | Buyer gives ₹150. | The value exchanged. |
| 4. Capacity | Both are adults. |