SUBJECT: BUSINESS LAW
Code: BC 1.2
B. COM (Hons)
UNIT – I
The Indian Contract Act, 1872
General Principles of Contract
INTRODUCTION
The law of contract is the most important branch of Mercantile Law. Without such a law it would be difficult, if not impossible, to carry on any trade or business in a smooth manner. The law of contract is applicable not only to business but also to all day-to-day personal dealings. In fact, each one of us enters into a number of contracts from sunrise to sunset. When a person buys a newspaper or rides a bus or purchases goods or gives his radio for repairs or borrows a book from library, he is actually entering into a contract. All these transactions are subject to the provisions of the law of contract. The term business law refers to those rules which govern and regulate business transactions. These rules, regulations etc bring a sense of seriousness and definiteness in business dealings. They provide for rules regarding the validity of making contracts and their performances.
INDIAN CONTRACT ACT, 1872
In the year 1861,the third law commission of British India under the chairmanship of Sir John Romily presented the report on contract law for India.The law commission submitted a draft on 28th July 1866.The draft contract law after several amendments was enacted as The Act 9 of 1872 on 25th April 1872 and the INDIAN CONTRACT ACT 1872 came into force w.e.f 1st september 1872.The Indian Contract Act, 1872 is one of the oldest in the Indian law regime, passed by the legislature of pre-independence India; it received its assent on 25th April 1872. The statute contains essential principles for formation of contract along with law relating to indemnity, guarantee, bailment, pledge and agency.
WHAT IS A CONTRACT?
Broadly speaking, a contract is an agreement made between two or more persons to do or to abstain from doing a particular act. A contract invariably creates a legal obligation between the parties by which certain rights are given to one party and a corresponding duty is imposed on the other party. The law of contract is the most important part of mercantile law in India. It determines the circumstances in which the promise made by the parties to a contract shall be binding on them and provides for the remedies available against a person who fails to perform his promise. The law of contract is contained in the Indian Contract Act, 1872, which deals with the general principles of law governing all contracts 'and covers the special provisions relating to contracts like bailment, pledge, indemnity, guarantee and agency. Section 2(h) of the Act states that an agreement enforceable by law is a contract. Let us discuss these two elements in detail. Every contract thus combines two essential elements(i)agreement and (ii)obligation.It creates rights and obligations between the parties to the contract which are correlative,in case a party refuses to honor a contacted obligation it will give right of action to other party.
