The main contract law in India is codified in the Indian Contract Act, which came into effect on 1 September 1872 and extends to all India except the state of Jammu and Kashmir. It governs entrance into contract, and effects of breach of contract. Indian Contract law is popularly known as mercantile law of India. Originally Indian Sales of Goods Act and Partnership Act were part of Indian Contract act, but due to needed amendment these acts were separated from Contract Act. The Contract act is the main and most used act of legal agreements in India.
The law relating to contracts in India is contained in INDIAN CONTRACT ACT, 1872. The Act was passed by British India and is based on the principles of English Common Law. It is applicable to all the states of India except the state of Jammu and Kashmir. It determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties on the contracting parties. Hence this legislation, Indian Contract Act of 1872, being of skeletal nature, deals with the enforcement of these rights and duties on the parties in India.
The Act as enacted originally had 266 Sections, it had wide scope and included.
- General Principles of Law of Contract- Sections 01 to 75
- Contract relating to Sale of Goods- Sections 76 to 123
- Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238
- Contracts relating to Partnership- Sections 239 to 266
Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and Partnership. The developments of modern business world found the provisions contained in the Indian Contract Act inadequate to deal with the new regulations or give effect to the new principles. Subsequently the provisions relating to the Sale of Goods and Partnership contained in the Indian Contract Act were repealed respectively in the year 1930 and 1932 and new enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership act 1932 were re-enacted.
At present the Indian Contract Act may be divided into two parts
- Part 1 : deals with the General Principles of Law of Contract Sections 1 to 75
- Part 2 : deals with Special kinds of Contracts such as Contract of Indemnity and Guarantee, Contract of Bailment and Pledge and Contract of Agency