The bare act of the contract law is a very comprehensive document. It contains all the provisions that govern contractual transactions in the country. The contract bare act came into force on 1st September 1872, and like many other laws that are operational in India, it derives its existence from the U.K.
The architect of the contract bare act was Sir Fitz James Stephen, and the contractual laws are substantive in nature. It creates a Right in Personam which means that it is available against a specific person with whom the contract has been entered into.
Essential Provisions of Contract Bare act
We shall first take a look at what a contract is and how it is formed according to the contract bare act.
What is a Proposal?
- The first stage of the formation of a contract is a proposal which is defined in section 2 (a) of the act. The proposal simply means when one person signifies to other person that he is willing to do something to obtain the assent of the other person.
- The term proposal of the Indian contract bare act is synonymous with the term offer used in English law.
- A thing to note here is that if a statement is made and it is done so without any intention to obtain the assent of another, then no proposal is made.
What is a Promise?
- After a person has made a proposal and the person to whom the proposal is made accepts the said proposal, it becomes a promise according to Section 2(b) of the contract bare act.
- The person who has made the proposal is not bound by any contractual obligations until his proposal is accepted.
- According to Section 9, if the promise or acceptance of the proposal is made in words, then it’s said to be expressed acceptance, and otherwise, made in words is said to be implied acceptance.
- Also, according to Section 7(a) of the contract bare act, the acceptance of the proposal must be absolute and unqualified. The second clause of the section further states that the acceptance must be made in some usual and reasonable manner, or if the proposer has signified a specific way, then it must be done so in that particular manner.
What is a Consideration?
- Once there has been acceptance and a promise is made, then comes the consideration agreed by the parties for the promise.
- According to section 2(d) of the contract, bare act consideration is when at the desire of the person making the promise the other party has done or does or promises to do something. This act or abstinence or promise is called the consideration of the promise.
- Now a consideration can be positive or negative, but the consideration must be real & certain.
What is a valid Contract?
- After consideration, when both parties have made promises to each other such set of promises for consideration is termed as an agreement.
- Now an agreement is not a contract. It has to pass the test of the validity of the law. According to section 2(g), an agreement that is not enforceable by law is void.
- Conversely, an agreement that is, in fact, enforceable by law is a contract according to section 2(h).
What makes an agreement valid?
- It is only natural to wonder, after all, what makes an agreement enforceable by law, meaning what makes it valid.
- The answer is mentioned in Section 10 of the contract bare act which clearly states that any agreement is transformed into a contract if it’s made by free consent, by parties who are competent to contract, for a lawful consideration, and with a lawful object.
- All these factors mentioned in section 10 are further explained in detail in the bare act for clarity.
What are the Modes of discharge of contract?
- The first and most honorable mode of discharge of any contract is by the performance of a contract. Section 37 – 67 governs the performance of a contract.
- Another way by which a contract is often discharged is by the mutual consent of the parties. Here according to Section 62, If the parties who are contracting with each other agree to novate, rescind or alter it, the original contract need not be performed.
- Quite similarly, in section 63, if one of the parties agree to dispense with, remit wholly or partially, or agree to extend the time for such performance, the original contract need not be performed.
- There is also another mode of discharge according to section 56 in which when there is an agreement to do impossible acts, and the contract stands frustrated.
- The most dishonorable mode of discharge of contract is a breach of contract. Section 73 and 74 of the contract bare act provide for what kind and quantum of damages are payable in case of breach of contract.
- Section 73 provides that compensation of damages payable are of two kinds General damages & Special damages. Special damages are only payable only when the party causing damage knew the damage that would occur by their actions.
- Section 74 provides for liquidated damages and penalties payable in case of breach of contract.
What makes a contract void or voidable?
- A void contract is defined under section 2(g), which simply states that agreements which are not enforceable by law are void, but how what are the conditions which make them void are later mentioned in sections 24 – 30.
- Section 24 states that when considerations or objects are unlawful in part, they render the agreement void.
- Section 25 states when the agreements are made without consideration, they are void, but the section also provides a few exceptions to the rule.
- Section 30 talks about what are wagering agreements and that they are void; however, there is an exception to the rule where a subscription to horse racing is not void.
Hence we see that the contract bare act is a meticulously made document that strives to cover the ambit of contractual obligations. It has even been amended to capture the new changes.