Indian Contract Act 1872 Complete Act: What It Covers, How It Works, and Why It Still Matters
The Indian Contract Act, 1872, is the law that governs contracts in India. It lays out the rules for how contracts are made, what makes them valid, how they’re enforced, what happens when things go wrong, and what remedies are available.
Though passed more than 150 years ago during the British Raj, this Act still forms the core of contract law in India today. Every business deal, job offer, service agreement, online sale, rental lease, or loan agreement — in short, any promise between two or more people that involves obligations — is based on the principles in this Act.
The Act Is Divided into 2 Main Parts (Now)
Originally, the Indian Contract Act had 11 chapters. But today, only two parts are in force:
1. General Principles of the Law of Contracts (Sections 1 to 75)
This is the core — it tells you how contracts are formed, what counts as a valid contract, how offers and acceptances work, how consent must be free, and what makes a contract void.
2. Contracts Relating to Special Types (like Contract of Indemnity, Guarantee, Bailment, Pledge, Agency)
These sections explain specific business relationships, like when one person agrees to protect another from losses (indemnity), or when someone gives property temporarily to someone else (bailment or pledge).
Note: Other parts of the original law, like those on contracts related to partnership and sale of goods, have now been carved out and exist as separate laws:
- Indian Partnership Act, 1932
- Sale of Goods Act, 1930
What Makes a Contract “Valid” Under the Act?
To be a valid, enforceable contract under this Act, these 5 things must be there:
- Offer and acceptance: One party makes a proposal. The other agrees without changes.
- Free consent: No force, fraud, coercion, or trickery involved.
- Lawful consideration: Each party must get something in return. No free promises.
- Lawful object: The contract must not involve anything illegal (like drugs or crime).
- Capacity to contract: The parties must be legally able to make a contract (e.g. not minors or mentally unsound persons).
If even one of these is missing, the contract is either void or voidable.
What Happens When a Contract Is Broken?
When one party doesn’t follow through on their side of the deal, it’s called a breach of contract. Under the Act, the affected party has the right to:
- Claim damages (money) for the loss
- Get specific performance (ask the court to force the other side to perform the promise)
- Cancel the contract if it’s no longer fair or possible
- Sue for compensation if they’ve suffered because of the breach
There’s a huge range of real-world use cases — from a builder not finishing a house on time, to a wedding caterer backing out at the last minute, to a business not delivering products as promised.
Some Lesser-Known But Important Sections of the Act
While most people focus on basic contract formation, these parts are also crucial:
Section 19 & 19A – Contracts made under coercion, fraud, or undue influence
If someone is tricked or pressured into signing, that agreement can be cancelled.
Section 23 – Illegal agreements are not enforceable
Even if all other parts of a contract are fine, if the purpose itself is unlawful, the contract won’t hold up in court.
Section 70 – Obligation of a person who enjoys the benefit of a non-gratuitous act
This applies when someone receives a benefit or service that wasn’t free. Even if no formal contract existed, payment can be claimed.
Section 73 – Compensation for loss or damage caused by breach
This is the backbone for claiming money when things go wrong. Courts use this to decide how much someone deserves for losses due to a broken contract.
Why the Indian Contract Act Still Holds Up in 2024
Even with all the new business models and technology we have today — e-commerce, freelancing, remote services, digital contracts — this old law still applies. That’s because the Act doesn’t talk about business types or tools. It talks about human promises, and what happens when they are made, kept, broken, or misunderstood.
According to a 2021 report by the Ministry of Law and Justice, over 70% of civil disputes in district courts in India involve some form of contractual disagreement. That shows just how relevant this law still is in everyday life, from landlords to tech startups.
Final Thoughts: If You’re Making or Signing a Deal, This Law Applies
Whether you’re starting a business, buying a car, taking a loan from a friend, or even agreeing to do someone’s website for ₹10,000, the Indian Contract Act, 1872 is working in the background. It protects both parties, lays out what happens if things go wrong, and gives you the power to go to court if needed.
So don’t ignore it. You don’t need to be a lawyer to understand it. You just need to know how promises work under the law, and this Act spells it out clearly.
Let me know if you want a section-wise summary or a printable reference guide. I can build that out for you, too.
