CA Foundation Law - Indian Contract Act 1872 (Key Concepts)

A set of practice Q&A flashcards covering core topics from CA Foundation Law on Offer, Acceptance, Consideration, Capacity, Free Consent, and Essential Elements of a Contract, drawn from the provided lecture notes.

What is a contract as defined in the Indian Contract Act, 1872 (Section 2(h))?

An agreement enforceable by law; a contract consists of an agreement and its enforceability by law.

What are the two parts of the Indian Contract Act, 1872 and what do they cover?

General principles of the law of contract (Sections 1-75) and certain special kinds of contracts (Sections 124-238).

What are the essential elements of a valid contract?

Two parties; intention to create legal obligations; lawful consideration and lawful object; the agreement must not be void by law and must be enforceable.

Define 'offer' or 'proposal' under Section 2(a) of the Indian Contract Act, 1872.

Willingness to do or abstain from doing something with a view to obtaining the assent of the other to such act or abstinence; promisor is the offeror, offeree is the person to whom the offer is made; acceptance becomes a promise.

Who are the main parties involved in an offer and its acceptance?

Promisor/offeror (maker of the proposal), offeree (to whom the proposal is made), and promisee (the one who accepts).

What is 'acceptance' under Section 2(b)?

When the offeree signifies assent to the proposal, the proposal is accepted and becomes a promise.

What are the general modes by which acceptance can be communicated?

Acceptance can be by act or omission intended to communicate, including conduct; for instantaneous communication, acceptance is complete when received; otherwise, time of communication matters.

When is the communication of offer and acceptance considered complete in contracts formed by post?

Offer is complete when it comes to the knowledge of the offeree; acceptance is complete against the proposer when posted and against the offeree when received.

What is the difference between an invitation to offer and an offer?

An invitation to offer is not an offer; it is a circulation inviting offers (e.g., price lists, advertisements); an offer is definite and capable of creating a binding contract.

What is a 'general offer' and which case is commonly cited?

An offer made to the public at large; can be accepted by anyone who fulfils the conditions; Carlill v. Carbolic Smoke Ball Co. is a famous example.

What is a 'specific offer' and how does it differ from a general offer?

An offer made to a specific or ascertainable person and can be accepted only by that person.

What is a 'cross offer' and why does it create no binding contract?

Two parties exchange identical offers unaware of each other’s proposals; not an acceptance of the other’s offer, hence no contract.

What is a 'counter offer' and its effect on the original offer?

A proposal by the offeree with modifications to the terms; amounts to rejection of the original offer and may terminate it.

What is a 'standing/open/continuing offer'?

An offer kept open for acceptance over a period of time, such as tenders.

What does 'capacity to contract' mean and who is typically considered incapable?

Competence to contract as per Section 11; includes age of majority (18 years in India), sound mind, and not disqualified by law; minors and some disqualified persons are typically incapable.

What is the status of a contract with a minor?

Void ab initio (void from the start); a minor cannot ratify; however, a minor may be a beneficiary and may be admitted to the benefits of certain contracts with guardians; minors can act as agents in some cases.

Can a minor be held liable for necessaries?

Yes, a minor’s estate may be liable for necessaries supplied to the minor, but the minor himself is not personally liable beyond the value of the necessaries.

What is 'free consent' and which elements vitiate it?

Consent must be free; it can be vitiated by coercion, undue influence, fraud, misrepresentation, or mistake (Sections 15-22).

What is 'coercion' (Section 15) and its consequences?

Committing or threatening to commit an act forbidden by law or detaining property to the prejudice of another; consent obtained by coercion is voidable at the option of the coerced party; benefits must be restored if rescission occurs.

What is 'undue influence' (Section 16) and how is it demonstrated?

One party dominates the will of the other in a relationship of trust or influence (e.g., fiduciary or authority relationships); a contract induced by undue influence is voidable; burden of proof lies on the party alleging undue influence.

What is 'fraud' (Section 17) and its remedies?

Intentional deception by one party or their agent to induce another to enter into a contract; remedies include rescission, damages, or enforcement on terms as if truth were known; silence is not always fraud.

What is 'misrepresentation' (Section 18) and how does it differ from fraud?

A false statement of fact or failure to disclose known facts without intent to deceive; remedies include rescission or damages; distinction lies in intent to deceive.

What is 'mistake' (Sections 20-22) and how does it affect contract validity?

Mistake can be bilateral (both parties) or unilateral (one party); if essential to the agreement, it may render the contract void; mistake of law generally does not void a contract unless induced or special circumstances apply.

What does 'lawful consideration and object' (Section 23) require?

Both consideration and object of the contract must be lawful; agreements involving illegal, fraudulent, immoral, or public-policy-contrary purposes are void.

What is the 'doctrine of privity of contract' and its exceptions?

Only parties to a contract can sue on it; exceptions include trusts (beneficiaries), family settlements, assignment of contract, estoppel, covenants running with the land, and agency.

What are some key exceptions to the rule that without consideration there is no contract (Section 25)?

Natural love and affection (with conditions), compensation for past voluntary services, promise to pay time-barred debt, agency, completed gifts, bailment, and certain charitable promises.

What is 'public policy' in contract law and give examples of agreements opposed to it?

Contracts that go against public welfare or policy are void; examples include trading with enemies during war, stifling prosecution, maintenance/champerty, monopolies, and marriage brokerage in some contexts.