Last Updated: April 2026
The Indian Contract Act, 1872 is one of the oldest and most frequently tested statutes in CLAT legal reasoning. With 238 sections governing agreements from their formation to enforcement and breach, the Act provides the legal backbone for all commercial transactions in India.
What Is a Contract?
Section 2(h) of the Indian Contract Act defines a contract as “an agreement enforceable by law.” This deceptively simple definition contains two requirements: (1) an agreement, and (2) enforceability by law.
Essentials of a Valid Contract
Section 10 lists the conditions for validity. All of the following must be present:
| Essential | Explanation | Relevant Provision |
|---|---|---|
| Free consent (consensus ad idem) | Genuine meeting of minds, free from vitiating factors | Sections 13-22 |
| Competent parties | Major age, sound mind, not disqualified by law | Section 11 |
| Lawful consideration | Something of value exchanged; cannot be past/inadequate | Sections 2(d), 23, 25 |
| Lawful object | Object not forbidden, not fraudulent, not immoral | Section 23 |
| Not expressly declared void | Contract not hit by Sections 26-30 (wagering, restraint, etc.) | Sections 26-30 |
Offer and Acceptance — The Building Blocks
Offer (Proposal)
Section 2(a): “When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other, he is said to make a proposal.”
Key rules:
- Offer must be communicated to be effective
- General offer can be accepted by anyone (Carlill v. Carbolic Smoke Ball Co.)
- Counter-offer is rejection + new offer
- Cross-offers do not make a contract
Acceptance
Section 2(b): When the person to whom the offer is made signifies his assent, the proposal is said to be accepted. Key rules:
- Must be absolute and unqualified
- Must be communicated
- Postal rule: acceptance complete when letter is posted (Section 4)
Consideration
Section 2(d): “When, at the desire of the promisor, the promisee or any other person has done or abstained from doing… something, such act, abstinence or promise is called a consideration.”
Rules Governing Consideration
- Must move at desire of promisor (not spontaneously)
- Can move from promisee or third party (Indian law is broader than English law)
- Past, present, or future consideration is valid
- Need not be adequate but must be real
Agreements Without Consideration
Section 25 provides three exceptions where agreements without consideration are valid:
- Love and affection (registered agreement between near relatives)
- Compensation for past voluntary service
- Promise to pay a time-barred debt (in writing)
Vitiating Factors — When Consent Is Not Free
| Vitiating Factor | Section | Effect on Contract |
|---|---|---|
| Coercion | 15 | Voidable (aggrieved party can rescind) |
| Undue Influence | 16 | Voidable |
| Fraud | 17 | Voidable + right to claim damages |
| Misrepresentation | 18 | Voidable (no damages for innocent misrepresentation) |
| Mistake of fact (mutual) | 20 | Void |
| Mistake of law (Indian law) | 21 | Not voidable — ignorance of law is no excuse |
Void vs. Voidable Contracts — Critical Distinction for CLAT
| Feature | Void Contract | Voidable Contract |
|---|---|---|
| Status | Not enforceable at all | Valid until avoided by aggrieved party |
| Who can avoid | Neither party can enforce | Only the aggrieved party |
| Examples | Minor’s contract, agreement to do impossible act | Contract under coercion, fraud, misrepresentation |
| Legal effect | No rights created from the start | Rights exist until avoidance |
Doctrine of Frustration — Section 56
An agreement to do an act impossible in itself is void (Section 56, para 1). More importantly, when performance becomes impossible after the contract is formed due to an event beyond the parties’ control (frustration), the contract becomes void (Section 56, para 2).
Key cases:
- Taylor v. Caldwell (1863): Music hall destroyed by fire; contract frustrated
- Satyabrata Ghose v. Mugneeram Bangur (1954): SC held Indian doctrine of frustration under Section 56 is narrower than English law; parties must have included provision in contract or prove actual impossibility
Remedies for Breach of Contract
- Damages (Section 73): Compensation for loss naturally arising from breach; remoteness of damage rule
- Specific Performance: Court orders performance where damages inadequate (Specific Relief Act, 1963)
- Rescission: Contract is cancelled; parties restored to original position
- Injunction: Court prevents party from doing something in breach of contract
- Quantum Meruit: Payment for work done before breach
FAQ: Contract Law for CLAT
Can a minor ratify a contract upon attaining majority?
No. Since a minor’s contract is void ab initio (not voidable), there is nothing to ratify. The minor cannot upon attaining majority make the earlier contract valid by ratification. A fresh contract with fresh consideration is needed.
What is the “stranger to contract” rule?
Only parties to a contract can sue to enforce it. A third party (stranger) who benefits from the contract cannot enforce it. Indian law has limited exceptions through agency, trust, and family settlement cases.
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