CONTRACT ACT 2023 (1966)
Date of publication in Nepal Gazattee:
2023/6/9 (25 sep.1966)
An Act Made to Provide for legal provisions on contract
Preamble : Whereas it is expedient to update legal provisions concerning contract;
Now, therefore, His Majesty the King Mahendra Bir Bikram Shah Dev has, with
the acceptance and advice of National Panchayat, enacted this Act.
Chapter -1
Preliminary
1.
Short Title,extent and Commencement: (1) This Act may be called
Contract Act, 2023 ( 1966) .
(2) This Act shall enforce within the kingdom of Nepal.
(3) It shall come into force 1 Paush 2023.
2.
Definitions: Unless the subject or context otherwise requires; in this Act;
(a)
'Contract' means an agreement concluded between two or more
parties for performing or not performing any work.
(b)
'Proposal' means a proposal presented by one person to another with
intent of obtaining his/her acceptance to do or not to do any work.
(c)
'Acceptance' means the acceptance given by the person to whom a
proposal has been presented in the same meaning of that offer.
3.
Party to conclude Contracts : (1) Any person other than
those mentioned
hereunder may inter into contract;
(a) A person who has not attained 16 years of age.
(b) A person who is of unsound mind.
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(2) The guardian of a person who is incompetent to conclude a contract
under Sub-section (1) may conclude a contract on his/her behalf in his/her interest.
4.
Proposal and Acceptance: (1) A contract shall be deemed to have been
concluded once the person to whom a proposal has been presented by another
person communicates his/her acceptance thereto.
(2) A contract shall not be deemed to have been concluded under Subsection (1), in case the offerer has proposed that the notice of acceptance to the
proposal be given to him/her within a specified period, and the offerer does not
receive the notice of acceptance given by the person to whom the proposal has
been presented within the period.
(3) In case the period for receiving a notice of acceptance is not specified as
referred to in Sub-section (2), and the person to whom the proposal has been
presented does not furnish a notice to the offerer within a reasonable period in
such a condition contract shall not be deemed to have been concluded.
(4)
In case the offerer has mentioned in the proposal that he/she would
deem the proposal to have been accepted unless he/she receives a notice of refusal
within a specified period, the proposal shall not be deemed to have been accepted
in case a notice of refusal has not been finished within that period.
(5) In case the offerer dies or loses his/her senses before receiving
acceptance after presenting the proposal such an offer shall be considered
cancelled.
(6) In case the person to whom a proposal has been presented dies or loses
his/her senses after giving his/her acceptance but before the offerer receives the
acceptance, in such a condition the acceptance shall be deemed cancelled.
(7) In case the person to whom a proposal has been presented accepts it
after altering the proposal or attaching any condition thereto, the proposal shall be
deemed to be refused.
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5.
Proposal or Acceptance may be cancelled: (1) The offerer may cancel his/her
proposal through a notice.
Provided that, in case the offerer has received from the person whom he/she
has presented a proposal a notice to the effect that he/she has accepted the
proposal before receiving a notice of the cancellation of the proposal, the proposal
shall not be deemed to be cancelled.
(2) The person to whom, a proposal has been presented may cancel
proposal through a notice.
Provided that, the acceptance shall not be cancelled in case the offerer has
received the notice of acceptance before receiving the notice of cancellation of
acceptance.
(3) The person who has sent a notice expressing his/her refusal of a
proposal may again send a notice expressing his/her acceptance to the proposal.
Provided that, out of the notices furnished for refused or acceptance of the
proposal, it shall not deem to have concluded contract in case the notice of refusal
is received earlier. It shall be considered to have concluded a contract if the notice
of acceptance is received earlier.
(4) In case the notice mentioned in Sub-section (1) has been sent after
sending the proposal, or the notice mentioned in Sub-section (2) has been sent
after sending a notice of acceptance, or in case a notice has been sent under Subsection (3) after sending a notice of refusal shall not be deemed to have been
concluded a contract if the concerned person receives both the notices at the same
time.
6.
Contract according to a proposal presented before the public:
(1) In
case any person, by means of an advertisement, advances a proposal in public to
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the effect that he/she will pay a specific prize or any person for performing any
work specified in the advertisement, and in case any person performs the work as
mentioned in the advertisement, the advertiser shall pay the specific prize to that
person.
(2) The proposal of sub-section (1) shall be cancelled through the same
channel as published.
(3) In case the notice is published through advertisement pursuant to subsection (1) to do anything within specified time of period, after passing the
prescribed time, such proposal shall be cancelled.
(4) In case the work mentioned in Sub-section (1) is performed by one or
more persons, only the person who has performed the work first shall be paid the
prize money.
Provided that, in case two or more persons have performed the work
mentioned in the proposal at the same time, all of them shall be entitled to share
the prize money among them. In case the prize can not be shared, the proceeds of
the sale of the same shall be equally distributed among them.
7.
Voidable Contracts : (1) The following contracts may be made void by the
aggrieved party:
(a)
A contract concluded through coercion:
Explanation : A person shall be deemed to have indulged in
coercion if he/she, with an objective of compelling any person, to
accept any contract against his/her will, withholds or threatens to
withhold property belonging to him/her, or threatens to defame
him/her, or takes or threatens to take any other action in
contravention of prevailing Nepalese law within or outside the
kingdom of Nepal.
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(b)
A contract concluded through undue influence:
Explanation:
(1)
Undue influence means influence exercised by a person upon
another person who is under his/her influence and is
amenable to his/her personal benefit or interest.
(2)
Without prejudice to the generality of explanation (1), the
following persons shall be deemed to be under the influence
of any person and amenable to his/her wishes:
(i)
A person living under his/her guardianship, protection
or custody.
(ii)
a persons who cannot take care of their interest
temporarily or permanently by reason of old age,
sickness or physical or mental weakness.
(iii)
(c)
a person who may be put in economic influence.
A contract concluded through fraud:
Explanation:
A party to the contract or his/her agent shall be deemed to have
committed fraud if he/she, leads the other party or his/her agent to
believe or takes any action to believe the particular matter is true,
although he/she knows that it is false, or suppresses any information
in his/her possession, or indulges in any other fraudulent act
punishable under prevailing Nepalese law, with the intention of
deceiving the opposite party or his/her agent.
(d)
A contract concluded through deceit:
Explanation: Any of the following act shall be taken as deceit:
(i)
Submission of false particulars on any matter without
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reasonable basis for doing so;
(ii)
Misleading any party so as to aggrieve him/her;
(iii)
Causing any wrong ignorantly on the matter of
contract;
8.
Void Contracts : The following contracts shall be void:
(a)
A Contract preventing anyone from engaging him/herself in any
occupation, profession or trade which is not prohibited by prevailing
Nepalese law.
(b)
A contract restraining marriages other than those prohibited by the
prevailing Nepalese law.
(c)
A contract preventing any one from enjoying the facilities already
being enjoyed by the general public.
(d)
A contract seeking to prevent the legal rights of any person from
being enforced by any government office or court.
(e)
A contract concluded in matters, contrary to or prohibited by the
prevailing Nepalese law.
(f)
A contract concluded for immoral purpose or against Public policy
or public interest.
(g)
A contract which cannot be performed because the parties thereto do
not exactly know about the matter in relation to which it has been
concluded.
(h)
A contract which is considered impossible to fulfill even at the time
is concluded thereafter.
(i)
A contract which is vague as it does not provide reasonable meaning
thereof.
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(2) The condition of contract, that only any part of the contract shall void
pursuant to Sub-section (1) in case it may be separated avoid parts from others
part of contract , only such part shall be void
9.
Indirect contract: Though a contract has not been concluded directly, a contract
shall be deemed to have been concluded as follows in the following
circumstances:
(a)
In case a person who is incompetent to conclude a contract under
this Act or other prevailing Nepal law, or any other person who is to
be maintained by him/her is provided with any material, commodity
or service where material commodity or service paid from the
property of such he/she needs and that is consistent with his social
status, to have the cost of such person to the person so meeting
his/her need.
(b)
In case any person, who is concerned with the payment or nonpayment of any amount to be paid by another person under the
prevailing Nepal law makes such payment him/herself, to have that
payment repaid to him/her from the property of the person who is
actually under obligation to make the payment.
(c)
In case any person gives anything to another person, or employs
him/her at any work, to pay the appropriate cost or remuneration.
(d)
In case any person keeps under his/her personal possession any
property belonging to another person that may be kept as a bailment
( Naso) property.
(e)
In case any person pays any amount (to any person) by mistake, to
refund the same.
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10.
Obligation of contractual party : (1) Each party to a contract shall fulfill
his/her obligation under the contract. In case two or more persons have jointly
signed a contract with any other party, any of the persons jointly signing the
contract shall fulfill or cause to do so for the fulfillment of the obligation under the
contract, except when otherwise provided for in the contract.
(2) In case party to a contract dies or loses his/her senses, at that time
his/her rights and obligation shall devolve on the heir.
Provided that, the rights and liabilities accruing on the basis of personal
qualification shall not devolve on such heir.
(3) In case any person or persons are forced to fulfill their obligation
through by the party among contractual parties of under Sub-section (1), the
person so fulfilling the obligations may recover compensation or loss on a
proportionate basis from the other persons jointly signing the contract.
11.
Facilities to be provided: The parties to a contract shall provide facilities
needed for executing the contract from their respective sides. In case the contract
can not be executed due to failure of providing such facilities, the party failing to
execute the contract in that manner shall not be held responsible.
12.
All or any Provisions of Contract may be altered: (1) In case the parties to a
contract agree, all or any of the portions of the work to be performed under the
contract may be given up or the time-limit for performing any work under the
contract extended or a new work may be done as a replacement of the original
work.
(2) A party to contract may cause to perform his/her obligation by any other
person unless it is otherwise provided by the contract.
13.
Times and Procedure of performing contract: (1) In case the time and
procedure of performing the contract has been mentioned in the contract, it shall
be performed within the specified time and according to the specified procedure.
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(2) In case no time or procedure of performing the work mentioned in the
contract has been specified, whereas, in case the work can be performed only at
any specific time or according to any specific procedure, the contract shall be
deemed to have been concluded so as to perform the work at that time and
according to that procedure.
(3)
Except in the circumstances mentioned in Sub-section (2), in case
the time and procedure of performing the contract has not been mentioned in the
contract, the contract shall be performed within a reasonable time by adapting a
reasonable procedure.
14.
Place for performing contract: (1)
In case any specific place has been
specified in the contract for performing the work, the work shall be performed at
the same place.
(2)
In case any party has to hand over or deliver goods to the other party
under the contract, and the place where those goods are to be handed over or
delivered has not been specified in the contract, the contract shall be deemed to
have been concluded with a provision to and over or deliver the goods at the place
where those goods are stored.
(3)
In case the specific place where the work mentioned in the contract
has to be performed, has not been specified in the contract, and where as that work
can be performed only in a specific place, or in case the work needs to be
performed in any specific place due to the general practice and custom or the
nature of the work, the contract shall be deemed to have been concluded with a
provision to perform the work at such place.
(4) In circumstances other than those referred to in Sub-sections (2) and
(3), in case the place for performing the work prescribed in the contract is not
mentioned in the contract, the party performing the work according to the contract
shall inform the other party to specify a reasonable place for performing the work,
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and the other party shall specify a reasonable place to perform the work.
15.
Compensation: (1) Incase a contract has been breached by any party, the other
party is entitled to recover the compensation.
(2) In case the contract provides for any specific amount or compensation,
the same shall be paid in the event of breach of contract; and if such provision is
not mentioned in a contract, the party making a claim for such compensation, shall
be entitled for a reasonable amount in consideration of the direct and actual loss or
damage shall be recovered. No compensation shall be recovered for any indirect or
imaginary loss or damage.
16.
The result of cancellation or void of contract: (1) In case a contract is
terminated with the mutual acceptance of both parties or it is no longer necessary
to perform the contract under this Act or other prevailing Nepal laws, or in case
the contract is made void under the law or becomes void or cancelled under this
Act, after one party has already received some amount in cash or in kind or any
other benefit from the other party as per the contract, the cash or goods which have
to be refunded after adjusting the accounts until the term of the contract expires
from the amount paid in cash or in kind shall be refunded. In case any service or
benefit other than cash or goods has been provided, the beneficiary must pay a
reasonable amount to the other party in consideration thereof.
17.
Other Prevailing Nepal law to be abided : In performing the obligation out
of the contract concluded pursuant this Act, no provision of this Act shall be
considered to have created any obstacle/hindrance, in performing any act or
following any procedure as per the prevailing Nepal Law.
16.
Limitation: (1)
In case prevailing Nepal law prescribes any specific
limitation in respect to any specific contract or any specific matter relating to a
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contract, such time limit shall be applicable.
(2)
Except otherwise provided in Sub-section (1), in case of any other
contracts, no case (litigation) shall be heard unless such a case is filed within the
following limitation.
(a)
In the case void contract at any time to cause to declare it void.
(b)
In the case of a voidable contract pursuant to Section 7, within
Thirty Five Days from the date when the party that can have the
contract declared void learns about the reason for having the contract
declared to be void;
(c)
In the case of any other claim under this Act, within Three Months
from the date of emergence of the reason for filing a lawsuit for such
a claim.
90.
Repeal and saving: The No 37 of Chapter on General Transaction of the Muluki
Ain (Legal Code) have been repealed.
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