Explain the importance of Contract Act in Business Law.

State the nature and

rules of lawful offer.
CONTRACT & AGREEMENT
As per the Indian Contract Act 1872 –
A "Contract" is an agreement enforceable by law.
An "Agreement" means ‘a promise or a set of promises’ forming consideration for each other, and a
promise arises when a proposal is accepted. By implication, an agreement is an accepted proposal.

Contract
Legally
Enforceable
Voidable
Proposal Promise Consideration Agreement Agreement

Legally Not Void

Enforceable Agreement

Important Elements of Contract

THE INDIAN CONTRACT ACT, 1872

The Indian Contract Act is the most important legislation act under Business Law. The objective of the
Contract Act is to ensure that the rights and obligations arising out of a contract are honoured and
that legal remedies are made available to those who are affected.
According to Indian Contract Act, 1872 Section 1, this Act is called the Indian Contract Act, 1872.

Sec. 1-75
General
Principles of
Contract

Sec. 239-266 Sec. 76-123

Partnership Sales of
Act Goods Act

Indian
Contract Act,
1872
Sec. 124-147
Sec. 182-238 Contracts of
Contracts of Indemnity
Agency and
Guarantee
Sec. 148-181
Contracts of
Bailment &
Pledge

Sub-division of Indian Contract Act, 1872

IMPORTANCE OF CONTRACT ACT IN BUSINESS LAW
 It determines the circumstances under which promises made by the contracting
parties shall be legally binding on them.
 It specifies the remedies that are available against a person who fails to perform the
contract entered into by him, in a Court of Law.
 It defines the conditions under which the remedies are available
 It provides clear understanding of the goal or objectives that the parties intend to
achieve through the transaction.
 The law of contract is essential to carry on trade or commerce smoothly, because it
introduces definiteness in the business. It does not mean that it affects only the
business people; it affects the entire society.
 It specifies grounds of termination of the contract
 It helps in growth of trade and commerce in India.
 It includes terms on rights and obligations of the business parties involved in business.
 It provides security for the new entrants in the business as per defined structure.
 It removes uncertainty from daily operations of business and provides clear guidelines
for smooth operation of business.

OFFER
When a person signifies to another his willingness to do or abstain from doing something with
a view to obtain the assent of that other to such act of abstinence, he makes an Offer.

THE NATURE AND RULES OF LAWFUL OFFER

 An offer must be capable of creating legal relations: An offer must be such that when
accepted it will result in a valid contract. A mere social invitation cannot be regarded
as an offer, because if such an invitation is accepted it will not give rise to any legal
relationship.
 The offer must be distinguished from mere statement of intention: The terms of an
offer should be clear so that there is no confusion whether; it is a valid offer or a mere
statement of intention. Sometimes, a person declares that he has the intention to do
something; this does not amount to an offer. Such statements merely indicate the
intentions that an offer will be made in future or an offer will be invited in future.
 An offer may be express or implied: An express offer is made by words of mouth or it
is written, while an implied offer means an offer made by conduct.
 An offer may be general or specific: A specific offer is one which is made to an
ascertained person. And a general offer is made to the public at large. It may be noted
that in case of a general offer, the contract is not made with the entire world. But it is
 made only with the person, who having the knowledge of the offer, comes forward
and acts according to the conditions of the offer.
 An offer may be conditional: An offer to be valid may contain a condition and in that
case, it has to be accepted along with the condition stated therein. However, no offer
can contain a term or condition the non-compliance of which would amount to
acceptance.
 The terms of an offer must be certain, definite and not vague: The terms of an offer
must be definite, clear and certain. If the terms of the offer are vague and uncertain,
no contract will come into existence.
 An offer must be communicated to the other party: It is an important and essential
element of a valid offer. The first part of the definition of the offer emphasises this
requirement. According to this, the willingness to make offer should be ‘signified’ (i.e.
indicated or declared). In other words, the offer is completed only when it has been
communicated to the offeree. It may be noted that until the offer is communicated, it
cannot be accepted.
 The offer must be made with a view to obtain the consent of the offeree: The second
part of the definition of offer emphasises the requirement that an offer must be made
with a view to obtain the consent of the offeree to the proposed act or abstinence.