Introduction to Contract Law: What You Need to Know
By upGrad
Updated on Jun 25, 2025 | 12 min read | 9.46K+ views
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By upGrad
Updated on Jun 25, 2025 | 12 min read | 9.46K+ views
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Did you know? A contract doesn’t always have to be in writing—oral contracts can also be legally binding if certain conditions are met. |
Contract law is all about the rules that make agreements between people or businesses legally binding. It tells you what your rights and responsibilities are when you sign a deal—whether it’s a job offer, a freelance gig, or a business partnership. For example, if a company hires a freelancer, both are bound by a contract, and if either fails to deliver, the law decides what happens next.
In this blog, we’ll break down the Indian Contract Act, 1872, in simple terms, covering basics like what a contract is, how offers and acceptances work, what makes an agreement valid, and types of contracts like indemnity, bailment, and agency.
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Keep reading to learn all about the Indian Contract Act.
A contract is a legally enforceable agreement between two or more parties—individuals, companies, or businesses. It can be made verbally, in writing, or through actions, as long as it involves a valid offer, acceptance, and the intent to create legal obligations.
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As per Section 2(h) of the Indian Contract Act, 1872, a contract is “an agreement enforceable by law.” Social, moral, or religious agreements don’t count—only those meant to create legal rights and duties do. |
Simply put, every contract is an agreement, but not every agreement is a contract.
Contracts come in various forms, depending on how they’re created, how enforceable they are, the type of obligations involved, and their stage of completion.
Let’s explore them with simple explanations and examples.
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For any contract to be legally valid and enforceable, it must meet certain key requirements. These essentials ensure that all parties involved are entering the agreement with clarity, consent, and a lawful purpose. Without these elements, a contract may be considered void or voidable in the eyes of the law.
Here are the fundamental elements of a valid contract under the Indian Contract Act, 1872:
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Section 10 of the Indian Contract Act, 1872, lays down the essential conditions that must be fulfilled for an agreement to be considered a valid contract in the eyes of the law. If any of these elements are missing, the contract may not be enforceable.
Here are the key essentials under Section 10:
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Under Section 2(a) of the Indian Contract Act, 1872, an offer (or proposal) is defined as follows:
A person is said to make a proposal when they express their willingness to do or not do something, with the intention of obtaining the other party’s acceptance. |
In simple terms, an offer is the starting point of a contract—it shows one party’s readiness to enter into a legal agreement.
To be legally valid, an offer must meet these key conditions:
There are two primary types of offers under contract law:
Under Section 2(b) of the Indian Contract Act, 1872, acceptance is defined as:
“When the person to whom the proposal is made signifies their assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.” |
In simpler terms, acceptance is when the person receiving the offer agrees to it in the manner intended. Once accepted, the offer turns into a binding promise, leading to the formation of a contract.
To be legally valid and binding, an acceptance must meet the following conditions:
Consideration is one of the core elements that make a contract legally valid. Without it, an agreement is usually not enforceable.
As per Section 2(d) of the Indian Contract Act, 1872,
“When, at the desire of the promisor, the promisee or any other person does or abstains from doing something, or has done or abstained from doing something, such act or abstinence or promise is called a consideration for the promise.” |
In simpler terms, consideration is what each party brings to the table—be it money, services, a promise, or even refraining from an action. It’s the "give and get" of any contract.
Normally, a contract without consideration is void under Indian law. However, Section 25 of the Indian Contract Act, 1872 outlines some important exceptions where an agreement can still be legally valid, even if no consideration is involved:
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The Doctrine of Privity of Contract means that only the parties involved in a contract have the right to sue or be sued under it. In simpler terms, a contract creates rights and obligations only between the people who signed it, not third parties.
So, if you're not a party to the agreement, you generally can’t enforce or challenge it in court.
While this rule is strict, there are a few important exceptions where a third party can have legal rights or obligations under a contract:
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When a contract is breached, it means one or more parties have failed to meet their legal obligations under the agreement. This breach can be minor (partial) or major (complete), and it can disrupt the entire purpose of the contract.
In such cases, the non-breaching party has the legal right to seek remedies to recover their losses or enforce the terms of the contract. These remedies may include:
The type of remedy awarded depends on the nature and impact of the breach. In India, these are governed under the Indian Contract Act, 1872, and related legal provisions.
Example : Suppose a company hires a freelancer to design a website, agreeing to pay ₹50,000 on delivery. The freelancer delivers only half the project and stops responding. Here, the company can sue for breach of contract and seek either compensation (damages) or a refund, or request the court to order the freelancer to complete the job (specific performance), depending on the situation.
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The Indian Contract Law plays a vital role in shaping legally binding relationships and resolving disputes fairly. It not only enforces agreements but also protects the rights of individuals and businesses, making it a cornerstone of India’s legal system.
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