File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Analysis Of Section 2(H) Of Indian Contract Act,1872

The Indian Contract Act, 1872, establishes the law governing contracts in India and is the most important legislation governing Indian contract law. The Act is built on English Common Law principles. It is valid to all Indian states. It stipulates the grounds under which promises made by contracting parties are legally enforceable.

"A contract is defined as an agreement that is enforceable by law" under Section 2(h) of the Indian Contract Act.

A contract, according to American law, is a promise or a set of promises for the breach of which the law provides a remedy, or the execution of which the law recognises as a duty in some way. The Indian Contract Act, falls under the mercantile laws (Business Laws). It is a matter of private law. It is based on English common law, although it was enacted by the Indian Parliament of Calcutta. The Indian Contract Act was conventional law that had been carefully crafted and properly passed. It pretended to respect the Indian people's feelings, but in practise, it followed English common law ideas.[1]

The necessary element in a contract is that must be an intent to create legal relationship, not a mere social, moral, or religious ones. Essentially, a contract is a legally binding agreement between the parties that establishes some legal relationship involving mutual obligations towards one another in exchange for some mutual gain, as well as the enforcement of these obligations in the event of failure of commitment, then penal provisions must be implemented.

Correct Analysis Of Section2(H) Of Indian Contract Act

The statutory definition of section 2(h) of the Indian Contract Act is," An agreement enforceable by law is a contract".
With the reference to this definition it can be concluded that:
  1. All the contracts are the result of agreements; and
  2. When an there is an element of enforceability by law is present the agreement turns to be a valid contract
  3. All contracts are agreements but necessarily not all agreements are contracts
Agreement + Enforceability at law = Contract.

To understand the term contract one has to go through various terms involved in relation to that. Those terms are as follows:

Proposal/Offer =
  • Acceptance
  • Promise
  • Consideration
  • Agreement
  1. Proposal / offer:
    An offer is the building block of the contract. The primary step to come into a contract is an OFFER. Offer requires a "manifestation of willingness to enter into a bargain."[2] The promise is the essential part of the contract. Until or unless there is an offer made there will be no establishment of a contract.

    There are various types of offers : cross proposal, counter proposal,express, implied and general offers.
    Example : A proposes B his willingness to sell his car for 2 lakhs rupees ; A is the offeror here as he initiates the basis of contract by offering his goods/services.
    Various philosophers have stated in their own definitions:
    "An agreement which defines the obligations between two or more persons is known as a contract." 3 - Salmond

    "Contract means a legally enforceable agreement between two persons wherein two or more persons get a legal right and some have to fulfill corresponding legal responsibilities.4 - Sir William Anson
  2. Acceptance:
    When the person to whom an offer is made gives his assent thereto is said to have accepted the offer.5 Unless or until the offer proposed is accepted, the contract can't be formed.
  3. Promise:
    It should be technically known that without a promise given to each other while dealing with each other, no contract is reliable and acceptable. It is now necessary to make a promise. A promise is required for a contract to be legally binding, and it is supplied as an incentive to make a promise. If the promoter makes no commitment to do anything and thereby ignores a legal contract, the promise is illusory.

    A promise is
    defined in Section 2(b) of the Indian Contract Act, 1872 as a proposition that is regarded accepted when the person to whom the proposal is made consents. When both parties accept the proposal, it becomes a promise.
  4. Consideration:
    Anything that has value in the eyes of law is known as consideration. Its not necessary that mutually consideration should be of the same value as the thing proposed.
    Example: A proposed B to sell his car for rs.20,000, though the value of car in real is rs. 1,50,000 it doesn't matter, as 20,000 has value in the eyes of Law.
  5. Agreement:
    An Agreement is a promise between two entities creating mutual obligations by law 7.
    With the reference to the case of Lalman Shukla vs. Gauri Datt 8
    It involves determining whether a contract is legitimate in the absence of acceptance. In January 1913, the defendant dispatched all of his servants to various locations in effort to locate his nephew, who had gone missing from his home.

Cross Analysis Of Section 2(H) With Other Provisions

  • Section 2(a) of Indian Contract Act, 1872
    Offer : section 2(a) of Indian Contract Act,1872 defines the meaning of the term offer. According to the Section an offer / proposal is said to be made by a person who signifies to the other person his willingness to do or abstain from doing an act with a view to obtain the assent of the other person;

    In section 2 (h) the term agreement is linked to this as an agreement can only be formed in when there is a proposal / offer for the contract. if there is no proposal by the offeror to the offeree then the contract can not be held valid in the eyes of the law.

    If we look at the statutory definition of offer there are two elements that govern it. A person can either do something for the other party or can abstain or stop doing for the other party.
  • Section 2(b) of Indian Contract Act, 1872
    According to this section when an offer made by the an offeror it continues to be an offer until it has been accepted by the offeree. Once accepted the offer turns into a promise.

    There are two conditions that must be met during acceptance in order to form a valid contract: first, the offeree's acceptance must be absolute, and second, the acceptance must be unconditional once the offer has been made and communicated to the offeree.

    The acceptance must be absolute, which means that partial acceptance or agreeing to only a few conditions of the proposal is not acceptable. For an offer to be accepted there should be 'consensus ad item' i.e meeting of minds in the same sense.

    For turning an offer into an agreement the element of ACCEPTANCE is mandatory.
  • Section 2(e) of Indian Contract Act, 1872
    When compared Section 2(h) of the Indian Contract Act 1872 to other provisions of the Act, Section 2(h) is the first and most prominent provision that comes to mind (e). 'Agreement' has been defined in this section as 'any promise and any promises that take account of each other.' If we claim that a common contract is an agreed proposal/offer that creates legal connections or is enforceable by law, it brings up the question of how a person accepts an offer.

    When he agreed, or, to put it another way, consensus must be obtained ad idem, which is the'meeting of minds' of both contractual parties. The meeting of minds between the parties is at the heart of the agreement. There can be no contrast until there is unanimity ad idem.
  • Section 10 of Indian Contract Act, 187
    In contrast to section 2h, in order to be considered as a contract, an agreement must be legally binding, and it will not be recognised a contract if it is unable to do so.

    The Court noted in the instance of Balfour v Balfour[4]that Mr. Balfour promised to pay his wife 30 per month if she stayed in England for medical reasons. When he failed to pay, Ms. Balfour filed a lawsuit against him. Mr. and Ms. Balfour had no intention of making a legally enforceable agreement, so her case was dismissed. As a result, it's important to remember that no contract can be signed without a thorough explanation of the contractual parties' legal rights and obligations.

    Same was the the case of Carlill vs. Carbolic Smoke Ball10
    Hence, it should be noted down that no contract may be concluded without an adequate explanation of the contracting parties' legal rights and responsibilities.
  • Section 11 of Indian Contract Act
    The focus has been put upon the conditions and valid requirements to have a contract in force. The parties to the contract are the main components to have any agreement become a contract. Now the question arises is whether any person could act as a party to a contract or not?

    All agreements formed with the 'free assent' of parties who are 'capable' to contract are enforceable as contracts, according to Section 10 of the Indian Contract Act, 1872. Section 11 declares that minors lack the legal capacity to enter into contracts. While sections 19, 19A, and 20 of the Act go on to detail out the implications of tainted "consent," they leave out the consequences of contracting with a juvenile.

    Nonetheless, in Mohori Bibee v. Dharmodas Ghose (1903), the Privy Council interpreted the Act as providing a definite answer to this matter, holding that minors' contracts were void ab initio.
    However, if a person is under the age of 18 and a guardian is appointed to him, at the age of 21 he or she shall achieve the majority.10
  • Section 2d of Indian Contract Act
    The enforceability by law is depicting that Consideration is the essential element for a contract to be binding. According to section 2(d) of the Indian Contract Act "when at the desire of the promisor, promisee or any other person has done or abstained from doing or does or abstains from doing or promises to do or to abstain from doing something, such act or abstinence, or promise is called a consideration."
    Consideration may or may not be adequate.

Criticism Of Various Sections
Section 2(h) of Indian contract act, 1872 has some shortcomings such as:
  • The biggest drawback of definition of section 2(h) Is that it is described in various other sections as well ; hence, it couldn't be read alone.
    Hence, a layman is not able to interpret the single definition of section 2(h)
  • In section 2(d) the term consideration according to the section may or may not be adequate, so there might be vague contract like buying a car for rupees 100, hence it must be clear.
  • According to section 11, no minor can enter into a contract but sometimes its relevant for them to enter into a contract of significant nature.

Observational Analysis
After studying to various sections of Indian Contract Act, the observation I drew is that section 2(h) is linked to various other sections and hence can't be understood alone. The Indian Contract Act of 1872 regulates every facet of a contract in great detail. One has to go through all the sections to interpret the true and legal meaning of contract.

Also, contract is the combination of 2 elements:
  1. An agreement, and
  2. Enforceablilty by law
Section 2h of Indian Contract Act, is very wide and difficult for a layman to understand as it has various technicalities involved in it.
If a contract violates a statute or public policy, it is considered illegal. These definitions of all the sections are intertwined and complementary to one another. When using these definitions, we find that rather than interpreting the definitions in isolation, we can get a more effective meaning by combining them with other relevant portions of the Act.

  • Indian Contract Act, 1872
Articles Websites:
  • Lalman Shukla vs. Gauri Datt 1913 40 ALJ 489
  • Indian Majority Act, 1875
  • [1919] 2 KB 571
  • Carlill vs. Carbolic Smoke Ball
  1. The Indian Contract Act : Its Wanderlust and Warmer Climes, Special Issue JILI (1972) 107
  8. Lalman Shukla vs. Gauri Datt 1913 40 ALJ 489
  9. [1919] 2 KB 571
  10. Indian Majority Act, 1875

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers

Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


Increased Age For Girls Marriage


It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

How To File For Mutual Divorce In Delhi


How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Section 482 CrPc - Quashing Of FIR: Guid...


The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

Facade of Social Media


One may very easily get absorbed in the lives of others as one scrolls through a Facebook news ...

Sexually Provocative Outfit Statement In...


Wednesday, Live Law reported that a Kerala court ruled that the Indian Penal Code Section 354, ...

UP Population Control Bill


Population control is a massive problem in our country therefore in view of this problem the Ut...

Lawyers Registration
Lawyers Membership - Get Clients Online

File caveat In Supreme Court Instantly