Government of India
Bare Act As Per The Government of India

Section 2 of Indian Contract Act

2. Interpretation-clause.— In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:—

(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;

(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;

(c) The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”;

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;

(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

MCQs Based on Section 2 of the Indian Contract Act, 1872

1. What is the term used for an expression of willingness to do or not do something with a view to obtaining assent of another person?

A) Acceptance
B) Consideration
C) Proposal
D) Promise

Correct Answer: C) Proposal
Explanation: As per Section 2(a), this is the definition of a proposal (also called an offer).

2. When is a proposal said to be accepted under the Indian Contract Act, 1872?

A) When the promisor agrees to do something
B) When the promisee gives something in return
C) When the person to whom the proposal is made signifies his assent
D) When both parties sign a document

Correct Answer: C) When the person to whom the proposal is made signifies his assent
Explanation: As per Section 2(b), assent to the proposal is called acceptance, which turns the proposal into a promise.

3. Once a proposal is accepted, it becomes a:

A) Consideration
B) Void agreement
C) Promise
D) Contract

Correct Answer: C) Promise
Explanation: As per Section 2(b), once a proposal is accepted, it becomes a promise.

4. The person who makes the proposal is known as the:

A) Promisee
B) Promisor
C) Offeree
D) Contractor

Correct Answer: B) Promisor
Explanation: As per Section 2(c), the person making the proposal is the promisor.

5. Consideration must be given at whose desire?

A) Promisee
B) Court
C) Promisor
D) Third party

Correct Answer: C) Promisor
Explanation: According to Section 2(d), consideration must be given at the desire of the promisor.

6. What is an agreement?

A) A written promise
B) A promise enforceable by law
C) Every promise or set of promises forming consideration for each other
D) A document signed by both parties

Correct Answer: C) Every promise or set of promises forming consideration for each other
Explanation: Section 2(e) defines agreement as such promises forming mutual consideration.

7. Which of the following is not enforceable by law?

A) Valid contract
B) Agreement
C) Void agreement
D) Promise

Correct Answer: C) Void agreement
Explanation: As per Section 2(g), a void agreement is not enforceable by law.

8. What is a contract?

A) An agreement not enforceable by law
B) A mutual understanding between parties
C) An agreement enforceable by law
D) A proposal accepted in writing only

Correct Answer: C) An agreement enforceable by law
Explanation: Section 2(h) defines a contract as an agreement enforceable by law.

9. A contract which can be enforced by only one party is called:

A) Void contract
B) Valid contract
C) Voidable contract
D) Reciprocal contract

Correct Answer: C) Voidable contract
Explanation: According to Section 2(i), a voidable contract is enforceable by one party but not by the other.

10. A contract that was enforceable but later becomes not enforceable is called:

A) Voidable
B) Void
C) Illegal
D) Agreement

Correct Answer: B) Void
Explanation: As per Section 2(j), such a contract becomes void when it ceases to be enforceable.

11. What are reciprocal promises?

A) Promises to be fulfilled in sequence
B) Promises which are consideration for each other
C) Promises that are legally void
D) One-sided promises

Correct Answer: B) Promises which are consideration for each other
Explanation: Section 2(f) defines reciprocal promises as mutual promises forming consideration for each other.

12. Which one of the following is NOT correctly matched with its definition in Section 2?

A) Proposal – Section 2(a)
B) Consideration – Section 2(d)
C) Void contract – Section 2(h)
D) Contract – Section 2(h)

Correct Answer: C) Void contract – Section 2(h)
Explanation: Section 2(j) defines void contract. Section 2(h) defines contract.

Section 2: Condition-Based Practice Questions

1. Condition: A contract must have a valid consideration.

Question: X promises to gift his old laptop to Y without expecting anything in return. Y accepts the promise. Is this a valid contract under Section 2?

A) Yes, because there is mutual consent
B) No, because there is no consideration
C) Yes, because acceptance was given
D) No, because it was not in writing

Correct Answer: B) No, because there is no consideration
Explanation: As per Section 2(d), a valid contract requires consideration from the promisee or another person, at the desire of the promisor.

2. Condition: A proposal becomes a promise only when it is accepted.

Question: P offers to sell his scooter to Q for ₹30,000. Q does not reply. Has the proposal turned into a promise?

A) Yes, silence is acceptance
B) No, offer is still pending
C) Yes, because P made the offer
D) No, because consideration was not discussed

Correct Answer: B) No, offer is still pending
Explanation: Under Section 2(b), there must be express or implied assent to convert an offer into a promise. Silence is not acceptance.

3. Condition: A contract must be enforceable by law.

Question: A agrees with B to sell stolen goods. B pays an advance. Can this agreement be enforced in court?

A) Yes, as it is a mutual agreement
B) No, because it is a void agreement
C) Yes, because consideration is paid
D) No, because it’s not in writing

Correct Answer: B) No, because it is a void agreement
Explanation: Section 2(g) says an agreement not enforceable by law is void. Illegal acts cannot form valid contracts.

4. Condition: Voidable contracts are enforceable by one party only.

Question: R was forced to sign a property agreement at gunpoint. Later, he goes to court to cancel the contract. What is the nature of this contract?

A) Valid
B) Void
C) Voidable at R’s option
D) Unenforceable

Correct Answer: C) Voidable at R’s option
Explanation: Under Section 2(i), this contract is voidable by the aggrieved party (R).

Section 2: Problem-Based Practice Questions

1. Problem:

A offers to sell his car to B for ₹2,00,000. B says, “Let me think about it.” The next day, A sells the car to C. B now wants to sue A.

Question: Has a contract been formed between A and B?

A) Yes, because offer was made
B) No, because B did not accept the offer
C) Yes, because B was considering it
D) No, because car was sold to C

Correct Answer: B) No, because B did not accept the offer
Explanation: As per Section 2(b), only when the offer is accepted, it becomes a promise. Here, B never accepted.

2. Problem:

X promises to pay Y ₹50,000 if Y paints X’s house. Y paints the house. Later, X refuses to pay, saying Y didn’t inform him before starting.

Question: Is Y entitled to payment?

A) No, because no written agreement
B) Yes, because performance of act is valid consideration
C) No, because acceptance was not communicated
D) Yes, but only half the amount

Correct Answer: B) Yes, because performance of act is valid consideration
Explanation: Under Section 2(d), Y’s act done at the desire of X is a valid consideration. The act of painting was done accordingly.

3. Problem:

M offers to rent his shop to N for ₹20,000/month. N replies, “I accept, but only if you also give me the storeroom free.” What is the legal position?

A) Valid acceptance
B) Counter-offer, no acceptance
C) Void agreement
D) Illegal agreement

Correct Answer: B) Counter-offer, no acceptance
Explanation: This is not acceptance under Section 2(b) but a counter-offer. The original proposal is not yet accepted.

4. Problem:

A minor agrees to buy a bike from B. Both sign a written agreement. Later, the minor refuses to pay. Can B sue him?

A) Yes, because it’s a written contract
B) No, because there is no mutual assent
C) No, because a minor cannot enter into a valid contract
D) Yes, but only for partial payment

Correct Answer: C) No, because a minor cannot enter into a valid contract
Explanation: Although not directly in Section 2, the enforceability requirement under Section 2(h) implies the parties must be competent (as per Section 11), which minors are not.

5. Problem:

Z agrees to deliver 100 chairs to Y in 10 days. Y agrees to pay on delivery. What type of promises are these?

A) Void
B) Reciprocal promises
C) Unilateral promises
D) Voidable promises

Correct Answer: B) Reciprocal promises
Explanation: As per Section 2(f), these are reciprocal promises — each is a consideration for the other.

Final Thoughts

Introduction

Section 2 of this Act is called the Interpretation Clause. It defines key terms which are used in the Act. Let’s understand each sub-clause (a) to (j) in simple words.

Section 2(a) – Proposal

When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

Explanation:

Example: Ramesh says to Suresh, “I will sell you my bike for ₹40,000.” This is a proposal.

Section 2(b) – Acceptance

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Explanation:

Example: Suresh says, “Yes, I agree to buy your bike for ₹40,000.” Now it is a promise.

Section 2(c) – Promisor and Promisee

The person making the proposal is called the ‘promisor’, and the person accepting the proposal is called the ‘promisee’.

Explanation:

Example: In the above example, Ramesh is the promisor, and Suresh is the promisee.

Section 2(d) – Consideration

When, at the desire of the promisor, the promisee or any other person has done or abstained from doing… something, such act or abstinence or promise is called a consideration for the promise.

Explanation:

Example: Ramesh agrees to sell his bike to Suresh for ₹40,000. The bike is Ramesh’s consideration, and ₹40,000 is Suresh’s consideration.

Section 2(e) – Agreement

Every promise and every set of promises, forming the consideration for each other, is an agreement.

Explanation: When both parties make mutual promises and give consideration, it becomes an agreement.

Example: Ramesh promises to give his bike, and Suresh promises to pay ₹40,000. This is an agreement.

Section 2(f) – Reciprocal Promises

Promises which form the consideration or part of the consideration for each other are called reciprocal promises.

Explanation: Mutual promises made by both parties, which depend on each other, are called reciprocal promises.

Example: Ramesh will give the bike only when Suresh pays ₹40,000. And Suresh will pay only when he gets the bike. These are reciprocal promises.

Section 2(g) – Void Agreement

An agreement not enforceable by law is said to be void.

Explanation:

Example: A and B agree to do a job which is illegal (e.g., smuggling). This agreement is void.

Section 2(h) – Contract

An agreement enforceable by law is a contract.

Explanation:

Example: Ramesh and Suresh sign a written agreement for the sale of the bike, and it meets all legal requirements. This is a contract.

Section 2(i) – Voidable Contract

An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

Explanation:

A voidable contract is valid, but one party has the option to cancel it.
Usually happens due to coercion, fraud, misrepresentation, etc.

Example: If A forces B to sign a contract at gunpoint, the contract is voidable at B’s option.

Section 2(j) – Void Contract

A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

Explanation:

A contract that was once valid, but later becomes unenforceable by law, is called a void contract.
It becomes void after some time or event.

Example: A agrees to sell goods to B, but later, a new law bans the sale of such goods. Now the contract becomes void.

Conclusion

Section 2 of the Indian Contract Act, 1872 is very important. It gives basic legal meanings to the terms used in the Act. To understand contracts properly, you must understand all these definitions. They help in deciding whether a contract is valid, void, or voidable.