|| THE INDIAN CONTRACT ACT, 1872 || Introduction || Section 1 ||
Preamble—WHEREAS it is expedient to define and amend certain parts of the law relating to contracts;
It is hereby enacted as follows:—
PRELIMINARY
1. Short title.—This Act may be called the Indian Contract Act, 1872.
Extent, Commencement.—It extends to the whole of India 2[ 3***]; and it shall come into force on the first day of September, 1872.
Saving—4*** Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.
Law of contract is the most important and basic part of Mercantile law. It is the foundation for many other laws falling in the category of mercantile laws. It is not only the mercantile or trader but every person who lives in the organised society, consciously or unconsciously enters into contract from sunrise to sunset. When a person hires a taxi, or orders something in a hotel or buys something form a shop, purchases a newspaper, ride a bus etc. he actually enters into and performs contract though he may be unaware of this fact. Such contracts at times create legal relations giving rise to certain rights and obligations.
The law relating to contracts in India is contained in Indian Contract Act, 1872. The Act came into force with effect from September 1, 1872. It is applicable to the whole of India (As per Section 1).
SCHEME OF THE ACT: The scheme can be divided into two main groups. The Act as enacted originally had 266 Sections divided into following groups:
| PROVISIONS | SECTIONS |
|---|---|
| General Principles of Law of Contract | 1 to 75 |
| Contract relating to contract of Sale of Goods | 76 to 124* |
| Special kinds of Contracts (for example: Indemnity, Guarantee, Bailment, Pledge and Agency) | 125 to 238 |
| Contracts relating to Partnership | 239 to 266** |
These sections were repealed from the Contract Act, 1872 and two new Acts were enacted for the same:
*SALE OF GOOD ACT, 1930
**PARTNERSHIP ACT, 1932
PRESENT FORM OF INDIAN CONTRACT ACT
Law of Contract basically relates to the essentials of a valid contract, the rules for performance and discharge of a contract and the remedies available to the aggrieved party in cases of the breach of the contract.
The Indian Contract Act, in its present form may be divided into two parts-
- The First part of the enactment i.e. Section 1 to 75 deals with the general principles of the law of contract which apply to all types of contracts irrespective of their nature.
- The second part (i.e. Section 124 to 238) deals with special types of contracts namely indemnity and guarantee, bailment and pledge, agency etc.
Enforcement of Act: The Indian Contract Act was passed in 1872 and came into force from 1st September, 1872. Prior to this English law of contract was followed in India. Law of contract creates jus in personam and not jus in rem. It extends to whole of India.
OBJECTIVE OF THE ACT: The objective of the Contract Act, 1872 is to ensure that the rights and obligations arising out of a contract are honoured and that legal remedies are made available to an aggrieved party against the party failing to honour his part of agreement. Act lays down the basic principles of the formation, performance and enforceability of contracts. Although, law of contract is not the whole law of agreements or that of obligations.
1. For the Statement of Objects and Reasons for the Bill which was based on a a report of Her Majesty’s Commissioners appointed to prepare a body of substantive law for India, dated 6th July, 1866, see Gazette of India, 1867 Extraordinary, p. 34; for the Report of the Select Committee, see ibid., Extraordinary, dated 28th March, 1872; for discussions in Council, see ibid., 1867, Supplement, p. 1064; ibid., 1871, p. 313, and ibid., 1872, p. 527. It has been amended in C.P. by C.P. Act 1 of 1915 and in C.P. and Berar by C.P. and Berar Act 15 of 1938.
The Chapters and sections of the Transfer of Property Act, 1882 (4 of 1882), which relate to contracts are, in places in which that Act is in force, to be taken as part of this Act—see Act 4 of 1882, s. 4.
This Act has been extended to Berar by the Berar Laws Act, 1941 (4 of 1941) to Dadra and Nagar Haveli by Reg. 6 of 1963, s. 2 and Sch. I to Goa, Daman and Diu by Reg. 11 of 1963, s. 3 and Sch., (w.e.f. 1-10-1965) to Laccadive, Minicoy and Amindivi Islands by Reg. 8 of 1965, s. 3 and Sch., to Pondicherry by Act 26 of 1968, s. 3 and Sch. and has been declared to be in force in—
the Sonthal Parganas—see Sonthal Parganas Settlement Regulation, 1872 (3 of 1872), s. 3, as amended by the Sonthal Parganas Justice and Laws Regulation, 1899 (3 of 1899), s. 3.
Panth Piploda—see the Panth Piploda Law Regulation, 1929 (1 of 1929), s. 2.
It has been declared, by notification under s. 3(a) of the Scheduled Districts Act, 1874 (14 of 1874), to be in force in—
The Tarai of the Province of Agra—see Gazette of India, 1876, Pt. I, p. 505;
the Districts of Hazari bagh, Lohardaga and Manbhum, and Pargana Dhalbhum and the Kolhan in the District of Singhbhum—see Gazette of India, 1881, pt. I, p. 504.—The District of Lohardaga included at this time the present District of Palamau which was separated in 1894. The District of Lohardaga is now called the Ranchi District—see Calcutta Gazette, 1899, pt. I, p. 44.
2. Subs. by Act 3 of 1951, s. 3 and Sch., for “except Part B States.”
3. 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).
4. The words “The enactments mentioned in the Schedule hereto are repealed to the extent specified in the third column thereof, but” rep. by Act 10 of 1914, s. 3 and the Second Schedule.