Interpretation-clause
Section 2 of the Indian Contract Act, 1872 deals with 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 The Act came into force on 01 Sep 1872.
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.
Section 2, The Indian Contract Act, 1872 (Act 9 of 1872).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Aloka Bose v. Parmatma Devi
Court's Decision & Legal Precedent
Judgment of Main Case order-9.pdf 2008-12-17 DATE VERIFIED. CA 6197/2000. Raveendran/Sathasivam. An agreement of sale is a bilateral contract (promises by both vendor and purchaser), not a unilateral gratuitous promise. It can be oral; a writing signed only by the vendor and delivered to and accepted by the purchaser is a concluded agreement. Map contract-act 2 (interpretation of agreement/promise/contract). Do not pad Contract 10 (already filled) or SRA 16(c) (already filled).
On this section: An agreement of sale is a bilateral contract and may be oral; a writing signed only by the vendor and accepted by the purchaser is a valid concluded agreement (Aloka Bose).
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Commissioner of Central Excise and Customs Surat I vs Surat District Cricket Association through the Secretary
Court's Decision & Legal Precedent
The doctrine of mutuality, based on the principle that members of a club are joint owners of club property and when a club acts as an agent of members in supplying goods or services to them, there is no transfer of property from one distinct person to another, continues to be applicable to both incorporated and unincorporated members' clubs even after the 46th Amendment to the Constitution inserting Article 366(29-A). Article 366(29-A)(e) applies only to unincorporated associations as distinct persons from their members, not to incorporated clubs which are bodies corporate. Article 366(29-A)(f) applies only to supply of food and drink in hotels and restaurants to overcome certain Supreme Court judgments, and does not apply to members' clubs. Therefore, supply of goods or services by members' clubs to their members is not a 'sale' under sales tax law or a 'service' by distinct persons under service tax law, and no sales tax or service tax is leviable on such supplies.
On this section: Applied the definition that consideration must flow from one person to another; argued that in mutuality cases, there is no consideration passing between distinct persons as members are dealing with themselves.
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Commissioner of Central Excise and Customs Surat I vs Surat District Cricket Association through Its Secretary
Court's Decision & Legal Precedent
The doctrine of mutuality continues to be applicable to both incorporated and unincorporated members' clubs even after the 46th Constitutional Amendment inserting Article 366(29-A) into the Constitution of India. When members are the real owners of a club's property and the club acts as their agent or trustee, no transfer of property occurs from one distinct person to another, and consequently no 'sale' within the meaning of sales tax law or 'service' within the meaning of service tax law can be said to take place. The expression 'unincorporated association or body of persons' in Article 366(29-A)(e) refers only to unincorporated associations and does not include incorporated entities such as companies or cooperative societies. Article 366(29-A)(f) applies only to supplies of food and drink in hotels and restaurants where a service element is involved and inseparable from the goods, not to supplies by members' clubs to their members. The Young Men's Indian Association judgment and other judgments applying the doctrine of mutuality to members' clubs continue to hold the field even after the 46th Amendment. Therefore, supplies of goods or services by incorporated members' clubs to their members are not subject to sales tax or service tax.
On this section: Definition of consideration requires reciprocal obligation between two distinct persons. In members' clubs, there is no such reciprocal obligation between club and member because they are the same persons through mutuality doctrine.
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Commissioner of Service Tax, Delhi-i vs Associated Chamber of Commerce and Industry of India through Its Director
Court's Decision & Legal Precedent
The doctrine of mutuality continues to be applicable to both incorporated and unincorporated members' clubs even after the 46th Amendment inserting Article 366(29-A) to the Constitution. Young Men's Indian Association and other judgments applying this doctrine continue to hold the field. Where members of a club are joint owners of club property and the club functions as agent of members in providing goods or services to members, there is no transfer of property or consideration flowing from one distinct person to another, and therefore no taxable sale or service. Article 366(29-A)(e) applies only to unincorporated associations or bodies of persons and does not apply to incorporated clubs. Article 366(29-A)(f) applies only to commercial supply of food and drink in hotels and restaurants, not to member supplies in clubs. Incorporated members' clubs registered under Section 25 of the Companies Act or as registered cooperative societies, where dividends are prohibited and profits are applied to the objects of the club, remain members' clubs to which the doctrine of mutuality applies, regardless of their corporate form.
On this section: Analyzed to show consideration must flow between distinct persons; in mutuality context, member receives own funds, not consideration from another
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Sas Realtors Pvt. LTD vs Sri Maruti Electrical Enterprises
Court's Decision & Legal Precedent
The Limitation Act, 1963 applies to applications filed under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 from the Code's commencement on 01.12.2016. Time-barred debts cannot trigger the Corporate Insolvency Resolution Process. The expression 'debt due' in the Code refers only to debts that are not time-barred and are legally recoverable. Article 137 of the Limitation Act prescribes a three-year limitation period for applications under Sections 7 and 9, and applications filed beyond this period are barred unless delay is condoned under Section 5 of the Limitation Act.
On this section: Section 2(d) defines consideration including past consideration. Section 25(3) recognizes barred debt as good consideration for fresh promise. Sections 60-61 allow creditor to apply payment to time-barred debts, recognizing distinction between loss of remedy and loss of right.
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Commissioner of Central Excise and Customs Surat I vs Surat City Gym Khana through Its Manager
Court's Decision & Legal Precedent
The doctrine of mutuality continues to apply to incorporated and unincorporated members' clubs after the 46th Amendment to the Constitution. Young Men's Indian Association (1970) 1 SCC 462 and judgments applying the doctrine of mutuality continue to hold good even after the 46th Amendment. Article 366(29-A)(e) by using the expression 'unincorporated association or body of persons' applies only to unincorporated clubs and does not extend to incorporated clubs or cooperative societies. Article 366(29-A)(f) applies only to supplies of food and drinks in hotels and restaurants and does not apply to members' clubs. Accordingly, incorporated members' clubs registered under the Companies Act, 1956 (including Section 25 companies) or as registered cooperative societies are not liable to sales tax or service tax on supplies made to their members, as the doctrine of mutuality operates to prevent any taxable transaction between the club and its members.
On this section: Court held that 'consideration' necessarily implies a flow from one person to another, and in members' clubs where members are both contributors and recipients, no real consideration passes between distinct persons
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Garware Wall Ropers LTD vs Coastal Marine Constructions Engineering LTD
Court's Decision & Legal Precedent
An arbitration clause contained in an unstamped agreement cannot be acted upon or enforced until the agreement is properly stamped and all stamp duty and penalty (if any) are paid. The mandatory provisions of the Indian Stamp Act requiring impounding of unstamped instruments apply to judicial authorities hearing Section 11 applications under the Arbitration and Conciliation Act, 1996. Section 11(6A), which limits judicial examination to the existence of an arbitration agreement, does not override these mandatory stamp duty requirements. The 'existence' of an arbitration agreement must be understood in context of all legal requirements for enforceability, including stamp duty compliance. The High Court must impound unstamped agreements and hand them to the stamp authority for adjudication of stamp duty issues before proceeding with the Section 11 application.
On this section: The Court used the definition of 'contract' as an agreement enforceable by law to establish that an unstamped agreement does not become a contract until stamp duty is paid. This was used to support the argument that an arbitration clause in an unstamped agreement cannot be acted upon.
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Bank of India vs O. P. Swarnakar
Court's Decision & Legal Precedent
An employee who submits an application for voluntary retirement under a scheme floated by a nationalised bank or the State Bank of India can withdraw such application before it is accepted by the competent authority, notwithstanding any contractual clause in the scheme stating that the application is irrevocable. The voluntary retirement scheme constitutes an invitation to treat and not an offer; the employee's application is an offer which can be revoked before acceptance under Section 5 of the Indian Contract Act. The jural relationship between employer and employee continues until the employee is actually relieved from service. However, employees who have accepted ex-gratia payments or other benefits under the scheme are estopped from subsequently challenging the scheme or withdrawing their applications.
On this section: Court applied contract law principles to determine that the scheme is an invitation to treat and employee applications are offers. Section 5 was applied to hold that offers can be revoked before acceptance. Court held that without consideration, the contractual bar clause is void
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 2
What have the courts held on Section 2 of the Indian Contract Act?
Aloka Bose v. Parmatma Devi (17 Dec 2008) is the leading judgment on this section among those set out below: An agreement of sale is a bilateral contract and may be oral; a writing signed only by the vendor and accepted by the purchaser is a valid concluded agreement (Aloka Bose). Another 7 judgments on this section are set out below, all of them from the Supreme Court. They run from 2002 to 2019.
How do I find court cases under Section 2 of the Indian Contract Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Contract Act 2, section 2 Contract Act, section 2 of the Indian Contract Act. People searching for it also type contract act 2 notes. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 8 reported judgments on this section are set out on this page, beginning with Aloka Bose v. Parmatma Devi (17 Dec 2008).
When did Section 2 of the Indian Contract Act come into force?
Section 2 of the Indian Contract Act, cited as Contract Act 2, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.
Other sections of this Act
- 73. Compensation for loss or damage caused by breach of contract1822 words
- 23. What considerations and objects are lawful, and what not596 words
- 74. Compensation for breach of contract where penalty stipulated for577 words
- 28. Agreements in restraint of legal proceeding void512 words
- 25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law423 words
- 16. "Undue influence" defined397 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.