Law of Contracts
What the exam tests
Contract questions test formation, consideration, free consent, discharge, breach and remedies under the Indian Contract Act 1872, with Specific Relief Act concepts where relevant.
Core rules
- Offer plus unconditional acceptance plus consideration plus intention to create legal relations makes a contract.
- Consideration may be past, present or future, but must be real and lawful; s.25 lists exceptions, including natural love and affection between near relatives and promises to compensate past voluntary acts.
- Free consent is vitiated by coercion, undue influence, fraud, misrepresentation or mistake.
- A minor's agreement is void ab initio; a contract with a minor cannot be ratified on majority.
- Breach may be actual or anticipatory; damages under s.73 compensate foreseeable loss, while s.74 deals with liquidated damages and penalty.
- Privity of contract generally bars a third party from suing, subject to exceptions like trust or agency.
Worked example
A advertises a reward of ₹1,000 for anyone who finds his lost dog. B, knowing of the reward, finds the dog and returns it. B can claim the reward: the advertisement is an offer of a unilateral contract, and performance of the condition is acceptance. If B had not known of the reward, the traditional view is that there is no contract because acceptance requires knowledge of the offer.
Traps
A display of goods is usually an invitation to offer, not an offer. Acceptance with variation is a counter-offer. Consideration must be real, not illusory. Do not confuse fraud with misrepresentation; fraud involves intentional deception. A penalty clause may be unenforceable beyond reasonable compensation.