Introduction:
Significance of the Act in Real Estate:
In India, the Indian Contract Act, 1872 is the governing legislation for contracts, which lays down the general principles relating to formation, performance and enforceability of contracts and the rules relating to certain special types of contracts like Indemnity and Guarantee, Bailment and Pledge. The bulk of the transactions in real estate, commerce and industry are based on these contracts.
The various modes of transfer of property like sale, mortgage, lease, exchange, gift are subject to general principles of Transfer of Property and contract under the Indian Contract Act, 1872. The Act lays down conditions for a valid Agreement, situations when a contract is said to be discharged, what amounts to a breach of contract and others.
Main Provisions:
The main provisions of the Act pertain to essential elements of a valid contract, consequences of void, voidable or illegal contracts, legal capacity and competence of parties involved, lawful object of Agreement, free consent of contracting parties, the principles with regard to time and place for performance of a contract and related issues.
To be valid an acceptance must correspond exactly with the terms of the 'offer', it must be unconditional and absolute and it must be communicated to the 'offeror'.
As per the Act, a "contract" is an agreement enforceable by law. An "agreement" means 'a promise or a set of promises' forming consideration for each other. Consideration is the price for which the promise of the other is bought. A contract without consideration is void. The absence of free consent would also affect the legal enforceability of a contract.
According to the Contract Act, "Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of a sound mind, and is not disqualified from contracting by any law to which he is subject". Thus, minors; persons of unsound mind and persons disqualified from contracting by any law in force like insolvency Act are incompetent to contract.
Types of Contract:
Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even necessitate registration. Therefore, where law demands an agreement to be put in writing or be registered, the same must be complied with.
- Oral Contracts - A spoken declaration made
and accepted by the contracting parties.
- Written Contracts - A hand written or preferably
printed declaration made and signed by the parties involved.
Contracts are of various types:-
- Express Contract
- Implied Contract
- Quasi Contract
- Valid Contract
- Void Agreement
- Void Contract
- Voidable Contract
Once a written Contract (as specified in Indian Contract Act, 1872) is signed, as a rule, it becomes a legally binding agreement Following are some exceptional contracts that are legally mandatory to be presented in writing. These are:
List of contracts that must be in writing:
- Sale of Immovable property
- Bill of Exchange or Promissory Note
- Trust
- Any contract without consideration on account of natural love and affection
The Contract Act declares void certain types of agreements such as those in restraint of marriage, or trade, or legal proceedings as well as wagering agreements. If a contract is declared as void, the transferee of property would not get valid title to the property, the position of parties is like as if they are not entered into the contract at all. Void contracts are not enforceable.
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