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Quick Answer
The Contract Act 1872 codifies general contract law. Key sections: Section 10 (essentials of valid contract — offer, acceptance, lawful consideration, capacity, free consent, lawful object); Sections 13-22 (free consent — fraud, misrepresentation, undue influence, coercion, mistake); Sections 23-24 (lawful object); Sections 73-75 (damages for breach); Section 73 follows the Hadley v. Baxendale rule — damages limited to losses naturally arising or in contemplation. Specific Relief Act 1963 governs specific performance and injunctions for contract enforcement.
Statutory reference
Indian Contract Act 1872
Three provisions do most of the Act's commercial work. Section 73 gives compensation for loss naturally arising from breach — but only loss actually proved, with a duty to mitigate; Section 74 caps liquidated-damages clauses at reasonable compensation, so the ₹10-lakh-per-day penalty in the contract is a ceiling for negotiation, not an entitlement (Kailash Nath v. DDA is the governing statement). Section 27 renders agreements in restraint of trade void — which is why post-employment non-compete clauses in Indian employment contracts are generally unenforceable however solemnly signed, while confidentiality and (narrowly drawn) non-solicitation obligations survive. Around these sit the daily disciplines: free consent (coercion and undue influence unwind contracts signed under pressure), and the rule that a contract can be terminated only per its own notice clause — termination in breach of the clause is itself a breach.
Worked example
A Gurgaon IT firm sues a departed engineer on a two-year non-compete and simultaneously invokes the contract's ₹15 lakh liquidated-damages clause. The non-compete claim fails at the threshold — Section 27 makes a post-employment restraint void, and the injunction application is dismissed. The damages claim survives but shrinks: under Section 74 the firm must still prove actual loss, and its evidence supports only the cost of one delayed project deliverable. It recovers ₹2.1 lakh, not ₹15 lakh. The clause that holds is the narrowly drafted non-solicitation covenant — the engineer is restrained from poaching the two named clients he serviced, because that restraint protects goodwill rather than barring him from his trade.
Related practice areas
Foundational contract statute. Defines agreement, contract, consideration, capacity, free consent, and lawful object. Sections 73-75 govern remedies for breach.
Indian Contract Act 1872 is governed by Indian Contract Act 1872. The Contract Act 1872 codifies general contract law. Key sections: Section 10 (essentials of valid contract — offer, acceptance, lawful consideration, capacity, free consent, lawful object); Sections 13-22 (free consent — fraud, misrepresentation, undue influence, coercion, mistake); Sections 23-24 (lawful object); Sections 73-75 (damages for breach); Section 73 follows the Hadley v. Baxendale rule — damages limited to losses naturally arising or in contemplation. Specific Relief Act 1963 governs specific performance and injunctions for contract enforcement.
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