General Principles & Formation of Contract

The Indian Contract Act, 1872 (Act No. 9 of 1872) came into force on 1 September 1872, forming the foundation of commercial and civil transactions in India. It defines what constitutes a contract, lays down essential elements for validity, and provides the legal framework governing agreements.

Key Provisions and Sections

• Section 2: Defines proposal (2a), acceptance (2b), promise, agreement, and contract (2h).

• Section 10: Explains when agreements become contracts — i.e., when made by free consent of competent parties, for lawful consideration and lawful object, and not expressly declared void.

• Section 11: Competency to contract (majority, sound mind, and not disqualified).

• Section 13–14: Define consent and free consent.

• Sections 15–21: Explain coercion, undue influence, fraud, misrepresentation, and mistake.

• Sections 3–9: Deal with communication, acceptance, and revocation of proposals.

Recent Amendments and Updates

The Indian Contract (Amendment) Bill, 2024, introduced in Parliament, proposes to broaden Section 15 (Coercion) — replacing “act forbidden by the Indian Penal Code” with “act punishable under any law for the time being in force.”
This extends the definition of coercion beyond IPC offences to include acts punishable under other statutes — ensuring broader protection for parties under pressure.

Additionally, the Mediation Act, 2023, emphasises pre-litigation mediation, encouraging alternative dispute resolution in contractual matters to reduce court burden.

Practical Implications

Students must understand how these changes strengthen fairness in contracts. Free consent remains the foundation of enforceability — any form of coercion, fraud, or undue influence renders a contract voidable.

Review Questions (Lesson 1)

1. What are the essential elements of a valid contract under Section 10 of the Indian Contract Act, 1872?

2. How does the 2024 Amendment Bill redefine coercion under Section 15?

3. Explain the difference between fraud and misrepresentation with examples.

4. What role does free consent play in the validity of a contract?

5. How has the Mediation Act, 2023 influenced contractual dispute resolution in India?