Contract law is a significant aspect of the legal system that governs the rights and obligations of the parties in a contract. In Nepal, the contract law is regulated by the Contract Act, 2056 BS (1999 AD). This act lays down the rules and regulations that govern the contracts made between two or more parties.

In this article, we will explore the key provisions of contract law in Nepal and why it is important for everyone to understand the basics of the act.

Key provisions of the Contract Act, 2056 BS:

1. Offer and Acceptance: In Nepal, for a contract to be valid, there must be an offer and acceptance between the parties. An offer is an expression of willingness to enter into a contract and is made by one party to the other. Acceptance is the other party`s agreement to the terms of the offer.

2. Consideration: For a contract to be legally binding, there must be consideration. Consideration is something of value that is exchanged between the parties. It can be in the form of money, goods, or services.

3. Capacity: The parties entering into a contract must have the legal capacity to do so. This means that they must be of legal age and must not be under any legal disability.

4. Free consent: The parties must enter into a contract with free consent. This means that there must be no coercion, undue influence, fraud, misrepresentation, or mistake.

5. Lawful object: The object of the contract must be lawful. Any agreement that is against public policy or is illegal is not enforceable.

6. Performance of the contract: The parties must perform the contract as per the terms and conditions agreed upon. Failure to do so can result in a breach of contract.

Why is it important to understand contract law in Nepal?

Understanding the basics of contract law is essential for anyone who intends to enter into a contract in Nepal. It ensures that you know your rights and obligations under the contract and can protect your interests.

Moreover, having a good understanding of Nepalese contract law can help you avoid legal disputes and take appropriate measures in case of a contractual breach. It can also help you negotiate and draft contracts that are legally binding and enforceable.


In conclusion, contract law in Nepal is an essential aspect of the legal system that governs the rights and obligations of the parties in a contract. The Contract Act, 2056 BS lays down the rules and regulations that must be followed while entering into a contract. Therefore, it is essential to have a good understanding of the act to avoid legal disputes and protect your interests.