20 Essential Contract Law Terms Every CLAT, Judiciary & UPSC Aspirant Must Know

The Law Gurukul
Jun 19
2 min read

Introduction

Contract law forms the foundation of business and personal agreements in India. This Part 3 of our "Legal Lexicon" series explains 20 crucial contract law terms under the Indian Contract Act, 1872, with clear definitions, practical examples, and their relevance to competitive exams.

1. Offer & Acceptance (Sections 2(a) & 2(b))

Definition:

Offer: A proposal to enter into a contract
Acceptance: Unconditional agreement to the offer

Example:
Offer: "I'll sell my bike for ₹50,000"
Acceptance: "I agree to buy your bike for ₹50,000"

2. Consideration (Section 2(d))

Definition: Something of value exchanged between parties

Key Principle:

"No consideration, no contract" (except for gifts)
Example: Paying ₹50,000 for the bike is consideration

3. Capacity to Contract (Section 11)

Who Can Contract?

Adults (18+ years)
Sound mind
Not disqualified by lawExample: A 17-year-old's car purchase agreement is voidable

4. Free Consent (Section 14)

Definition: Agreement without:

✔ Coercion

✔ Undue influence

✔ Fraud

✔ Misrepresentation

✔ Mistake

Example: Signing a property deal under threat makes it voidable

5. Breach of Contract (Section 73)

Definition: Failure to fulfill contractual obligations

Remedies:

Damages (compensation)
Specific Performance (court orders fulfillment)
Injunction (court order to stop an action)

6-20: Key Contract Law Terms

Term	Definition	Section	Example
6. Void Contract	Invalid from beginning	Sec 2(g)	Agreement to commit crime
7. Voidable Contract	Valid until rescinded	Sec 2(i)	Contract signed under fraud
8. Unilateral Contract	One party makes promise	Sec 2(a)	Reward for lost dog
9. Bilateral Contract	Both parties exchange promises	Sec 2(h)	Employment agreement
10. Express Contract	Terms stated explicitly	Sec 9	Written lease agreement
11. Implied Contract	Inferred from conduct	Sec 9	Dining at restaurant → Paying bill
12. Quasi-Contract	Court-imposed obligation	Sec 68-72	Paying for unconscious person's medical care
13. Contingent Contract	Depends on future event	Sec 31	"I'll pay ₹10,000 if it rains tomorrow"
14. Privity of Contract	Only parties can sue	-	Tenant can't sue landlord's contractor
15. Liquidated Damages	Pre-agreed compensation	Sec 74	Penalty for late delivery
16. Anticipatory Breach	Early sign of inability to perform	Sec 39	Builder says "I can't complete project"
17. Novation	Replace old contract with new	Sec 62	Creditor accepts new debtor
18. Rescission	Canceling a contract	Sec 64	Returning defective product
19. Specific Performance	Court orders fulfillment	Specific Relief Act	Rare for personal services
20. Force Majeure	Clause for unforeseen events	-	Pandemic delaying construction

Why These Terms Matter for Aspirants?

✅ Exam Weightage:

CLAT: 8-10 questions annually
Judiciary: 15-20% of paper
UPSC: Case studies in Law Optional

✅ Practical Importance:

Drafting agreements
Consumer protection
Business transactions

How to Master Contract Law Terms?

Case-Based Learning:
- Carlill v. Carbolic Smoke Ball Co. (Unilateral contracts)
- Balfour v. Balfour (Domestic agreements)
Flowcharts: Map contract formation process
Mnemonics:
- "COF" = Consideration, Offer, Free consent
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The Law Gurukul