Contract Law
Big idea
A contract is a legally enforceable promise — and Indian commercial life runs on them. The Indian Contract Act, 1872 sets out what makes a promise enforceable: offer + acceptance + consideration + capacity + free consent + lawful object + not expressly declared void. Miss any one of these and the contract is either void (no legal existence), voidable (one party can walk), or unenforceable. For managers, the practical takeaway from Prof. I. Sridhar's session is sharper than the textbook: courts increasingly read commercial conduct, not just the written words, and honouring contracts is a corporate-governance issue tied directly to ease of doing business, FDI flows, and reputation.
Key concepts
- The seven essentials of a valid contract. Offer, acceptance, consideration, capacity, free consent, lawful object, not expressly declared void by law (s. 10, Indian Contract Act 1872). Miss any one and the contract becomes void, voidable or unenforceable.
- Classification of contracts. Valid, void, voidable, illegal, unenforceable; express vs implied; executed vs executory; unilateral vs bilateral. The classification determines what remedy (if any) is available when things go wrong.
- Free consent and vitiating factors. Coercion (s. 15), undue influence (s. 16), fraud (s. 17), misrepresentation (s. 18), mistake (s. 20–22). Each makes the contract voidable at the option of the aggrieved party — valid until set aside.
- Performance, breach, remedies. Damages (s. 73), specific performance, injunction, rescission, quantum meruit. The Specific Relief (Amendment) Act 2018 made specific performance the default remedy for commercial contracts, not an exceptional one.
- Special contracts. Indemnity (s. 124–125), guarantee (s. 126–147), bailment (s. 148–171), agency (s. 182–238). Each has its own statutory grammar that overrides the generic contract rules.
- Corporate governance angle. Contracts honoured = trust + FDI + ease of doing business. Courts increasingly read commercial conduct, not just the written words — integrity in performance is not optional, it is part of the legal frame.
Self-check
A managing director signs a 5-year supply contract with a vendor while suffering from a serious illness that materially impairs judgement — a fact known to the vendor, who pressures the signing. The contract terms are commercially harsh. What is the most accurate legal characterisation?
- A. Void ab initio — no contract ever existed
- B. Valid — once signed, a contract is binding
- C. Voidable at the option of the company because consent was not free (undue influence)
- D. Illegal contract requiring criminal action
Click the card to flip
Continue learning
- Pick one major contract your firm signed last year. Walk through the seven essentials — does it pass on every one?
- Has your firm ever invoked specific performance vs only sought damages? Why or why not, and what would the 2018 Amendment change for next time?
- Identify one supplier or partner agreement that depends on goodwill rather than enforceable rights. What is the risk if the relationship sours next quarter?
📝 Going deeper. Avtar Singh, Contract and Specific Relief is the standard Indian reference. For the practical commercial-litigation angle, follow the Supreme Court of India judgments portal and the daily commentary on Bar and Bench or LiveLaw. The Indian Contract Act bare text on India Code is the authoritative statute.