Contract is derived from the Latin word “Contractum” which means drawn together. Contract is defined under Indian contract act 1872 in Section (2)h an agreement enforceable by law. In other words the contract is an agreement between two parties which creates mutual legal obligations for some consideration. A contract may be in written or oral. It is better if in written form because it is comprehensive. In earlier contracts were recognized through transaction sale, mortgage, loan, pledge, bailment etc. In modern era all business agreement revolves around contract. The essential for the valid contract are an offer, acceptance, valuable consideration, legal intention, performance of contract by valid party .
The Indian Contract Act brings within its ambit the contractual rights that have been granted to the citizens of India. It endows rights, duties and obligations on the contracting parties to help them to successfully conclude business- from everyday life transactions to evidencing the businesses of multi-national companies. Indian Contract Act, which was passed on 25th April, 1872, came into force with effect from 1st September, 1872. The law of contract is contained in the Indian Contract Act 1872, which deals with the general principles of law governing all contracts and covers the special provisions relating to contract like bailment, pledge ,indemnity, guarantee, and agency. Originally, before 1930, this Act also contained the special provisions relating to contracts of sale of goods and partnership. In 1930, however, these provisions were repealed and separate acts called the ‘Sale of Goods Act’ and the ‘Indian Partnership Act’ were passed governing the contracts of partnership.
There are many sources that influenced the contract law but mainly it classified into 3 major categories:
1) Judicial decisions
In the era of globalisation and liberalisation mutual relationship between the country is essential for the stepping development. The factors of globalisation also influence the contract law any country. It pursue a country to be update or amend the contractual obligations with respect to modern circumstances. In India Indian contract of 1872 is applicable throughout the country in uniform manner.