Indian Contract Law – Core Vocabulary

Key vocabulary terms and concise definitions covering proposals, acceptance, consideration, capacity, free consent, kinds of contracts, void and voidable agreements, special contracts (bailment, pledge, indemnity, guarantee, agency, contingent), doctrines, and damages under Indian Contract Law.

Contract

An agreement enforceable by law; requires offer, acceptance, consideration, competent parties, lawful object, and free consent.

Agreement

Every promise or set of promises forming the consideration for each other (Section 2(e)).

Proposal (Offer)

A signification of willingness to do or abstain from doing something with a view to obtaining assent of another (Section 2(a)).

Acceptance

Assent by the offeree to the offer’s terms, making the proposal a promise (Section 2(b)).

Consideration

Something done, abstained from, or promised at the desire of the promisor, forming the price of the promise (Section 2(d)).

Lawful Object

The purpose of an agreement must not be illegal, fraudulent, immoral, or opposed to public policy.

Competent Party

A person of majority age, sound mind and not disqualified by law, capable of contracting (Section 11).

Free Consent

Consent not caused by coercion, undue influence, fraud, misrepresentation or mistake (Section 14).

Invitation to Offer

A preliminary communication inviting others to make offers; e.g., display of goods on shelves.

General Offer

An offer made to the public at large, acceptable by anyone who performs the conditions.

Specific Offer

An offer addressed to a definite person or group; only they can accept.

Counter-Offer

An acceptance with modifications; terminates the original offer and constitutes a new offer.

Cross Offer

Identical offers made by parties to each other in ignorance of the other’s offer; no contract arises.

Implied Offer

Offer inferred from conduct rather than words, e.g., a coolie lifting luggage.

Express Offer

Offer stated in words, spoken or written, with explicit terms.

Communication of Acceptance

Must be expressed or implied and reach the offeror in prescribed or reasonable mode to bind parties.

Postal Rule

Acceptance is complete against the proposer when posted, and against the acceptor when received by the proposer.

Electronic Mode Rule

In instantaneous communications (phone, email), contract forms when acceptance is received/heard by the proposer.

Revocation of Offer

Withdrawal of the offer anytime before acceptance is dispatched by the offeree.

Revocation of Acceptance

Withdrawal of acceptance anytime before it reaches the proposer.

Past Consideration

An act done before the promise at the promisor’s desire; valid in India.

Present (Executed) Consideration

Consideration which moves simultaneously with the promise, e.g., cash sales.

Future (Executory) Consideration

Consideration to be performed in the future under the contract.

Privity of Consideration

Indian law allows consideration to move from promisee or any other person.

Natural Love and Affection

A written, registered promise between near relatives that is enforceable even without consideration.

Time-Barred Debt

A debt unenforceable by limitation but revivable by a written, signed promise to pay.

Minor

Person under 18 (or 21 if guardian appointed); agreements with a minor are void ab initio.

Person of Unsound Mind

Individual incapable of understanding contract and forming rational judgment; contract void.

Coercion

Committing, or threatening to commit, any act forbidden by IPC or unlawful detaining of property to force agreement (Section 15).

Undue Influence

Use of a dominant position to obtain unfair advantage over another in a contract (Section 16).

Fraud

Intentional deception of another to enter a contract (Section 17).

Misrepresentation

Innocent false statement inducing contract (Section 18).

Mistake

Erroneous belief about a fact; may render contract void if mutual and fundamental.

Consensus ad Idem

Meeting of minds; both parties agree upon the same thing in the same sense.

Bilateral Mistake

Both parties mistaken about essential fact; contract void.

Unilateral Mistake

Only one party mistaken; contract generally valid unless identity or nature fundamentally affected.

Doctrine of Frustration

Contract becomes void when performance becomes impossible or unlawful due to uncontrollable event (Section 56).

Force Majeure Clause

Contractual provision excusing performance on occurrence of specified uncontrollable events (e.g., pandemics, wars).

Promissory Estoppel

Principle preventing a promisor from denying a promise relied upon by promisee to his detriment.

Privity of Contract

Only parties to a contract can sue or be sued on it, subject to certain exceptions.

Valid Contract

Agreement satisfying all essentials and enforceable in court.

Void Contract

Agreement without legal effect; unenforceable from the beginning or becomes void later.

Voidable Contract

Agreement enforceable at option of one party whose consent was not free.

Restraint of Marriage

Agreement restricting marriage (other than of minor) is void (Section 26).

Restraint of Trade

Agreement restraining a lawful profession, trade or business is void (Section 27) with limited exceptions.

Restraint of Legal Proceedings

Agreement absolutely restricting a party from enforcing rights in courts or limiting time is void (Section 28).

Uncertain Agreement

Agreement whose meaning is not certain or capable of being made certain; void (Section 29).

Wagering Agreement

Promise dependent on uncertain event where parties have no interest except winning or losing; void (Section 30).

Bailment

Delivery of movable goods for some purpose to be returned or disposed as directed (Section 148).

Gratuitous Bailment

Bailment without consideration; done voluntarily for benefit of bailor or bailee.

Non-Gratuitous Bailment

Bailment for reward; both parties derive benefit.

Bailee

Person to whom goods are delivered in bailment; owes duty of reasonable care.

Pledge (Pawn)

Bailment of goods as security for debt or promise (Section 172).

Pawnor

Bailor in a pledge; pledges goods as security.

Pawnee

Bailee in a pledge; may sell pledged goods on default after notice.

Hypothecation

Charge on movable assets where possession remains with borrower; lender may seize on default.

Mortgage

Transfer of interest in specific immovable property to secure loan or performance of obligation.

Contingent Contract

Contract dependent on occurrence or non-occurrence of uncertain collateral event (Section 31).

Contract of Indemnity

Promise to save another from loss caused by promisor’s or third-party’s conduct (Section 124).

Contract of Guarantee

Promise to discharge liability of a third person in case of default (Section 126).

Surety

Person giving guarantee; secondary liability arises on principal debtor’s default.

Principal Debtor

Person whose default is guaranteed in a contract of guarantee.

Creditor

Party to whom guarantee is given; can sue surety on default.

Agent

Person authorized to act for another (principal) in dealings with third parties (Section 182).

Principal

Person who authorizes agent to act on his behalf and is bound by agent’s acts.

Agency of Necessity

Authority arising when person entrusted with property must act to preserve it without express authority.

Termination of Agency

Ends by revocation, renunciation, completion, death, insanity, or insolvency; irrevocable when coupled with interest.

Quasi-Contract

Obligation imposed by law to prevent unjust enrichment despite absence of agreement.

Unjust Enrichment

One person’s unjust benefit at another’s expense; foundation of quasi-contract liability.

General Damages

Losses that arise naturally from breach in ordinary course of events.

Special Damages

Losses arising from special circumstances communicated to or known by the breaching party.

Compensatory Damages

Monetary award aiming to place injured party in position as if contract performed or tort not committed.

Punitive (Exemplary) Damages

Damages awarded to punish defendant for willful or gross misconduct, not merely to compensate.

Nominal Damages

Token sum awarded when legal right is violated but no substantial loss proved.

Remoteness of Damages

Doctrine that limits recovery to losses foreseeable or within contemplation of parties (Hadley v Baxendale principle).

Measure of Damages

Method court uses to quantify monetary compensation based on natural and probable consequences of breach.

Hadley v. Baxendale

Leading case establishing two-limb test for recoverable contract damages: ordinary and special losses.

Finder of Goods

Person who takes possession of lost goods; has rights and duties similar to bailee under quasi-contract.

Doctrine of Nemo Debet Locupletari

Principle that no one should be unjustly enriched at another’s expense; basis of quasi-contracts.