PRELIMINARY

1. Short title.
2. Interpretation-clause.

CHAPTER I OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

3. Communication, acceptance and revocation of proposals.
4. Communication when complete.
5. Revocation of proposals and acceptances.
6. Revocation how made.
7. Acceptance must be absolute.
8. Acceptance by performing conditions, or receiving consideration.
9. Promises, express and implied.

CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

10. What agreements are contracts.
11. Who are competent to contract.
12. What is a sound mind for the purposes of contracting.
13. “Consent” defined.
14. “Free consent” defined.
15. “Coercion” defined.
16. “Undue influence” defined.
17. “Fraud” defined.
18. “Misrepresentation” defined.
19. Voidability of agreements without free consent. 19A. Power to set aside contract induced by undue influence.
20. Agreement void where both parties are under mistake as to matter of fact.
21. Effect of mistakes as to law.
22. Contract caused by mistake of one party as to matter of fact.
23. What considerations and objects are lawful, and what not.

Void agreements

24. Agreement void, if considerations and objects unlawful in part.
25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.
26. Agreement in restraint of marriage, void.
27. Agreement in restraint of trade, void. Saving of agreement not to carry on business of which good-will is sold.
28. Agreements in restraint of legal proceeding void. Saving of contract to refer to arbitration dispute that may arise. Saving of contract to refer questions that have already arisen. Saving of a guarantee agreement of a bank or a financial institution.
29. Agreements void for uncertainty.
30. Agreements by way of wager, void. Exception in favour of certain prizes for horse-racing. Section 294A of the Indian Penal Code not affected.

CHAPTER III OF CONTINGENT CONTRACTS

31. “Contingent contract” defined.
32. Enforcement of contracts contingent on an event happening.
33. Enforcement of contracts contingent on an event not happening.
34. When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.
35. When contracts become void which are contingent on happening of specified event within fixed time. When contracts may be enforced, which are contingent on specified event not happening within fixed time.
36. Agreement contingent on impossible events void.

CHAPTER IV OF THE PERFORMANCE OF CONTRACTS Contracts which must be performed

37. Obligation of parties to contracts.
38. Effect of refusal to accept offer of performance.
39. Effect of refusal of party to perform promise wholly.

By whom contracts must be performed

40. Person by whom promise is to be performed.
41. Effect of accepting performance from third person.
42. Devolution of joint liabilities.
43. Any one of joint promisors may be compelled to perform. Each promisor may compel contribution. Sharing of loss by default in contribution.
44. Effect of release of one joint promisor.
45. Devolution of joint rights.

Time and place for performance

46. Time for performance of promise, when no application is to be made and no time is specified.
47. Time and place for performance of promise, where time is specified and no application to be made.
48. Application for performance on certain day to be at proper time and place.
49. Place for performance of promise, where no application to be made and no place fixed for performance.
50. Performance in manner or at time prescribed or sanctioned by promisee.

Performance of reciprocal promises

51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.
52. Order of performance of reciprocal promises.
53. Liability of party preventing event on which the contract is to take effect.
54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises.
55. Effect of failure to perform at fixed time, in contract in which time is essential. Effect of such failure when time is not essential. Effect of acceptance of performance at time other than that agreed upon.
56. Agreement to do impossible act. Contract to do an act afterwards becoming impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful.
57. Reciprocal promise to do things legal, and also other things illegal.
58. Alternative promise, one branch being illegal.

Appropriation of payments

59. Application of payment where debt to be discharged is indicated.
60. Application of payment where debt to be discharged is not indicated.
61. Application of payment where neither party appropriates.

Contracts which need not be performed

62. Effect of novation, rescission, and alteration of contract.
63. Promisee may dispense with or remit performance of promise.
64. Consequences of rescission of voidable contract.
65. Obligation of person who has received advantage under void agreement, or contract that becomes void.
66. Mode of communicating or revoking rescission of voidable contract.
67. Effect of neglect of promisee to afford promisor reasonable facilities for performance.

CHAPTER V OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT

68. Claim for necessaries supplied to person incapable of contracting, or on his account.
69. Reimbursement of person paying money due by another, in payment of which he is interested.
70. Obligation of person enjoying benefit of non-gratuitous act.
71. Responsibility of finder of goods.
72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.

CHAPTER VI OF THE CONSEQUENCES OF BREACH OF CONTRACT

73. Compensation for loss or damage caused by breach of contract. Compensation for failure to discharge obligation resembling those created by contract.
74. Compensation for breach of contract where penalty stipulated for.
75. Party rightfully rescinding contract, entitled to compensation.

[CHAPTER VII SALE OF GOODS.][Repealed.].

76. Sections 76-123 [Repealed.]

CHAPTERVIII OF INDEMNITY AND GUARANTEE

124. “Contract of indemnity” defined.
125. Rights of indemnity-holder when sued.
126. “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.
127. Consideration for guarantee.
128. Surety‟s liability.
129. “Continuing guarantee”.
130. Revocation of continuing guarantee.
131. Revocation of continuing guarantee by surety‟s death.
132. Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other‟s default.
133. Discharge of surety by variance in terms of contract.
134. Discharge of surety by release or discharge of principal debtor.
135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor.
136. Surety not discharged when agreement made with third person to give time to principal debtor.
137. Creditor‟s forbearance to sue does not discharge surety.
138. Release of one co-surety does not discharge others.
139. Discharge of surety of creditor‟s act or omission impairing surety‟s eventual remedy.
140. Rights of surety on payment or performance.
141. Surety‟s right to benefit of creditor‟s securities.
142. Guarantee obtained by misrepresentation invalid.
143. Guarantee obtained by concealment invalid.
144. Guarantee on contract that creditor shall not act on it until co-surety joins.
145. Implied promise to indemnify surety.
146. Co-sureties liable to contribute equally.
147. Liability of co-sureties bound in different sums.

CHAPTER IX OF BAILMENT

148. “Bailment”, “bailor” and “bailee” defined.
149. Delivery to bailee how made.
150. Bailor‟s duty to disclose faults in goods bailed.
151. Care to be taken by bailee.
152. Bailee when not liable for loss, etc., of thing bailed.
153. Termination of bailment by bailee‟s act inconsistent with conditions.
154. Liability of bailee making unauthorized use of goods bailed.
155. Effect of mixture, with bailor‟s consent, of his goods with bailee‟s.
156. Effect of mixture, without bailor‟s consent, when the goods can be separated.
157. Effect of mixture, without bailor‟s consent, when the goods cannot be separated.
158. Repayment, by bailor, of necessary expenses.
159. Restoration of goods lent gratuitously.
160. Return of goods bailed on expiration of time or accomplishment of purpose.
161. Bailee‟s responsibility when goods are not duly returned.
162. Termination of gratuitous bailment by death.
163. Bailor entitled to increase or profit from goods bailed.
164. Bailor‟s responsibility to bailee.
165. Bailment by several joint owners.
166. Bailee not responsible on re-delivery to bailor without title.
167. Right of third person claiming goods bailed.
168. Right of finder of goods. May sue for specific reward offered.
169. When finder of thing commonly on sale may sell it.
170. Bailee‟s particular lien.
171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers.

Bailments of pledges

172. “Pledge”, “Pawnor” and “Pawnee” defined.
173. Pawnee‟s right of retainer.
174. Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances.
175. Pawnee‟s right as to extraordinary expenses incurred.
176. Pawnee‟s right where pawnor makes default.
177. Defaulting pawnor‟s right to redeem.
178. Pledge by mercantile agent. 178A. Pledge by person in possession under voidable contract.
179. Pledge where pawnor has only a limited interest.

Suits by bailees or bailors against wrong-doers

180. Suit by bailor or bailee against wrong-doer.
181. Apportionment of relief or compensation obtained by such suits.

CHAPTER X AGENCY Appointment and authority of agents

182. “Agent” and “principal” defined.
183. Who may employ agent.
184. Who may be an agent.
185. Consideration not necessary.
186. Agent‟s authority may be expressed or implied.
187. Definitions of express and implied authority.
188. Extent of agent‟s authority.
189. Agent‟s authority in an emergency.

Sub-agents

190. When agent cannot delegate.
191. “Sub-agent” defined.
192. Representation of principal by sub-agent properly appointed. Agent‟s responsibility for sub-agent. Sub-agent‟s responsibility.
193. Agent‟s responsibility for sub-agent appointed without authority.
194. Relation between principal and person duly appointed by agent to act in business of agency.
195. Agent‟s duty in naming such person.

Ratification

196. Right of person as to acts done for him without his authority. Effect of ratification.
197. Ratification may be expressed or implied.
198. Knowledge requisite for valid ratification.
199. Effect of ratifying unauthorized act forming part of a transaction.
200. Ratification of unauthorized act cannot injure third person.

Revocation of authority

201. Termination of agency.
202. Termination of agency, where agent has an interest in subject-matter.
203. When principal may revoke agent‟s authority.
204. Revocation where authority has been partly exercised.
205. Compensation for revocation by principal, or renunciation by agent.
206. Notice of revocation or renunciation.
207. Revocation and renunciation may be expressed or implied.
208. When termination of agent‟s authority takes effect as to agent, and as to third persons.
209. Agent‟s duty on termination of agency by principal‟s death or insanity.
210. Termination of sub-agent‟s authority.

Agent’s duty to principal

211. Agent‟s duty in conducting principal‟s business.
212. Skill and diligence required from agent.
213. Agent‟s accounts.
214. Agent‟s duty to communicate with principal.
215. Right of principal when agent deals, on his own account, in business of agency without principal‟s consent.
216. Principal‟s right to benefit gained by agent dealing on his own account in business of agency.
217. Agent‟s right of retainer out of sums received on principal‟s account.
218. Agent‟s duty to pay sums received for principal.
219. When agent‟s remuneration becomes due.
220. Agent not entitled to remuneration for business misconducted.
221. Agent‟s lien on principal‟s property.

Principal’s duty to agent

222. Agent to be indemnified against consequences of lawful acts.
223. Agent to be indemnified against consequences of acts done in good faith.
224. Non-liability of employer of agent to do a criminal act.
225. Compensation to agent for injury caused by principal‟s neglect.

Effect of agency on contracts with third persons

226. Enforcement and consequences of agent‟s contracts.
227. Principal how far bound, when agent exceeds authority.
228. Principal not bound when excess of agent‟s authority is not separable.
229. Consequences of notice given to agent.
230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal. Presumption of contract to contrary.
231. Rights of parties to a contract made by agent not disclosed.
232. Performance of contract with agent supposed to be principal.
233. Right of person dealing with agent personally liable.
234. Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable.
235. Liability of pretended agent.
236. Person falsely contracting as agent not entitled to performance.
237. Liability of principal inducing belief that agent‟s unauthorized acts were authorized.
238. Effect, on agreement, of misrepresentation or fraud by agent.

CHAPTER XI OF PARTNERSHIP

239. Sections 239-266 [Repealed.] SCHEDULE—[Repealed.]

1. Short title.

This Act may be called be the Indian Contract Act, 1872. Extent, commencement– It extends to the whole of India; and it shall come into force on the first day of September, 1872. (The words “except the State of Jammu and Kashmir” omitted by Act 34 of 2019, s. 95 and the Fifth Schedule (w.e.f. 31-10-2019).)

Enactment repealed:Saving– Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or customs of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

2. Interpretation-clause.

In this Act the following words and expressions are used in the following senses, unless contrary intention appears from the context:

(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 that other to such act or abstinence, he is said to make a proposal;

(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when a accepted, becomes a promise;

(c) The person making the proposal is called the “promisor“, and the person accepting the proposal is called “promisee”

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;

(f) Promises which form the consideration or part of the consideration for each other, are called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

3. Communication, acceptance and revocation of proposals.

The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicated such proposal, acceptance or revocation, or which has the effect of communicating it.

4. Communication when complete.

The communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made.

The communication of an acceptance is complete-
as against the proposer, when it is put in a course of transmission to him so at to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete-
as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it;
as against the person to whom it is made, when it comes to his knowledge.

Illustrations-
(a) A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B receives the letter.

_(b) B accepts A’ s proposal by a letter sent by post.
The communication of the acceptance is complete-
as against A when the letter is posted;
_as against B, when the letter is received by A.

_(c) A revokes his proposal by telegram.
_The revocation is complete as against A when the telegram is dispatched. It is complete as against B when B receives it.

B revokes his acceptance by telegram.
B’s revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him.

5. Revocation of Proposals and acceptance.

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but no afterwards.

_Illustration-
_A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

6. Revocation how made.

A proposal is revoked-
(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge of the acceptor before acceptance.

7. Acceptance must be absolute.

In order to convert a proposal into a promise the acceptance must-
(1) be absolute and unqualified.
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted;
and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but; if he fails to do so, he accepts the acceptance.

8. Acceptance by performing conditions, or receiving consideration.

Performance of the conditions of proposal, for the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

9. Promise, express and implied.

In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

10. What agreements are contracts

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

11. Who are competent to contract

Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

12. What is a sound mind for the purposes of contracting

A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. Illustrations (a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals. (b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.

13. “Consent” defined

Two or more persons are said to consent when they agree upon the same thing in the same sense.

14. “Free consent” defined

Consent is said to be free when it is not caused by— (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

15. “Coercion” defined

"Coercion” is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860)or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

Explanation.—It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.

Illustration A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code (45 of 1860). A afterwards sues B for breach of contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code (45 of 1860) was not in force at the time when or place where the act was done.

16.“Undue influence” defined

(1) A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. (2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another— (a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. (3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872). Illustrations (a) A having advanced money to his son, B, during his minority, upon B's coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence. (b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. B employs undue influence. ( c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence. (d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.

17. “Fraud” defined

"Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:— (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent. Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. Illustrations (a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse's unsoundness. This is not fraud in A. (b) B is A‟s daughter and has just come of age. Here, the relation between the parties would make it A‟s duty to tell B if the horse is unsound. (c) B says to A—“If you do not deny it, I shall assume that the horse is sound.” A says nothing. Here, A‟s silence is equivalent to speech. (d) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B‟s willingness to proceed with the contract. A is not bound to inform B.