Contract Law in Bangladesh: The Contract Act 1872 Explained for 2026

Contract law in Bangladesh: the 2026 framework

Contract law in Bangladesh rests on a statute older than the country itself. The Contract Act 1872 still decides when a promise binds, who can make one, what makes consent real, how performance is discharged and what happens when a contract becomes impossible. Around it sit the Sale of Goods Act 1930, the Specific Relief Act 1877, the Stamp Act 1899, the Registration Act 1908 and the ICT Act 2006, and since January 2026 a dedicated system of Commercial Courts.

This guide is TRW's reference hub on the subject: formation, consent, void agreements, contingent contracts, performance and frustration, the special contracts of indemnity, guarantee, bailment and agency, the sale of goods, electronic contracting, stamping and registration, and the new Commercial Courts. Where TRW has already published a detailed analysis, such as on breach of contract in Bangladesh or employment contracts in Bangladesh, we link to it rather than repeat it.

Summary: An agreement is a contract in Bangladesh when it is made by the free consent of competent parties, for lawful consideration and a lawful object, and is not expressly declared void. The Contract Act 1872 supplies these rules and the law of performance, discharge, indemnity, guarantee, bailment and agency; the Sale of Goods Act 1930, the Specific Relief Act 1877 and the stamp and registration statutes complete the picture. From 2026, most business contract disputes are heard by dedicated Commercial Courts.

Key point: A contract can be perfectly valid and still fail you in court. An instrument that is not duly stamped is generally inadmissible in evidence until duty and penalty are paid, a contract for the sale of immovable property must be registered, and a commercial claim may now have to pass through mediation and a tightly managed Commercial Court timetable. Formalities are part of the bargain, not paperwork after it.

At a glance

Swipe or scroll →

Table of Contents

The legal framework for contract law in Bangladesh

Bangladesh inherited a codified law of contract from British India and has kept it largely intact. The Contract Act 1872 (Act No. IX of 1872) describes its own ambition modestly: to define and amend certain parts of the law relating to contracts.[1] It is not a complete code, and where it is silent courts draw on English, Indian and Pakistani authority.

The structure of the Contract Act 1872

The Act tracks the life of a contract. Chapter I (sections 3 to 9) covers proposals and acceptance; Chapter II (sections 10 to 30C) contracts, voidable contracts and void agreements; Chapter III (sections 31 to 36) contingent contracts; Chapter IV (sections 37 to 67) performance; Chapter V (sections 68 to 72) relations resembling contract; and Chapter VI (sections 73 to 75) breach. The special contracts follow: indemnity and guarantee (sections 124 to 147), bailment and pledge (sections 148 to 181) and agency (sections 182 to 238). Chapter VII on sale of goods and Chapter XI on partnership are repealed, replaced by the Sale of Goods Act 1930 and the Partnership Act 1932.[1]

The companion statutes

Contract law in Bangladesh works as a cluster of statutes. The Sale of Goods Act 1930 governs sales of movables.[3] The Specific Relief Act 1877 governs specific performance, rescission, cancellation and injunctions.[4] The Stamp Act 1899 and the Registration Act 1908 govern formalities.[5] [6] The ICT Act 2006 recognises electronic records and signatures.[7] The Limitation Act 1908 and the Arbitration Act 2001 govern time limits and arbitration, and the Commercial Courts Act 2026 decides where most business disputes are heard.[9] Sector regulation, from labour and consumer law to foreign exchange, sits on top: under section 23 of the Contract Act, an object forbidden by law, or one that would defeat any law, makes the agreement void.[1]

Essentials of a valid contract in Bangladesh

Section 10 states the test. Agreements are contracts if made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and not expressly declared void. The section preserves any other law requiring writing, witnesses or registration.[1]

Proposal and acceptance

A proposal is made when one person signifies to another a willingness to do or abstain from doing something, with a view to obtaining assent; once assent is signified, the proposal is accepted and becomes a promise. An agreement enforceable by law is a contract.[2]

Acceptance must be absolute and unqualified, so a reply that changes the terms is a counter-proposal. Communication of an acceptance is complete against the proposer when it is put in course of transmission, and against the acceptor when it reaches the proposer; a proposal may be revoked before then.[1] Most formation disputes arise from email chains and purchase orders on conflicting standard terms, so record which document was the final offer and how it was accepted.

Consideration

Consideration exists when, at the desire of the promisor, the promisee or any other person has done, does or promises to do or abstain from doing something.[2] Unlike English law, consideration may move from a third party, and past consideration counts if given at the promisor's desire. Section 25 makes an agreement without consideration void, except a registered written promise made out of natural love and affection between near relations, a promise to compensate for something already done voluntarily, and a written promise to pay a time-barred debt.[1] Consideration need not be adequate, but gross inadequacy can suggest consent was not free.

Capacity

Under section 11, a person is competent to contract if of the age of majority, of sound mind and not disqualified by law.[1] Under the Majority Act 1875 a person under eighteen is a minor, and since the Privy Council's decision in Mohori Bibee v Dharmodas Ghose (1903) an agreement with a minor has been treated as void from the beginning.[12] Suppliers of necessaries are protected by section 68.[1] For companies, capacity is a question of authority: check the articles, board resolution or power of attorney, as explained in our guide to articles of association in Bangladesh.

Lawful object, certainty and writing

Section 23 makes consideration or an object unlawful if forbidden by law, fraudulent, injurious to person or property, immoral or opposed to public policy, and section 29 voids agreements whose meaning is not certain or capable of being made certain.[1] A price "to be agreed" with no mechanism is the classic example. Most contracts can be oral, but writing is mandatory where a statute requires it, as for contracts for the sale of land and arbitration agreements. For any contract of value, write it down, sign it and stamp it.

Free consent under contract law in Bangladesh

Consent is free under section 14 only if not caused by coercion, undue influence, fraud, misrepresentation or mistake.[1]

• Coercion (section 15): committing or threatening an act forbidden by the Penal Code, or unlawfully detaining property, to obtain agreement.
• Undue influence (section 16): using a position of dominance to obtain an unfair advantage; where the bargain looks unconscionable, the dominant party must disprove it.
• Fraud (section 17): deliberate falsehood, active concealment or a promise made with no intention to perform. Silence is not fraud unless there is a duty to speak.
• Misrepresentation (section 18): an innocent but unwarranted assertion that misleads.
• Mistake (sections 20 to 22): a mutual mistake of essential fact makes the agreement void; a unilateral mistake, or a mistake as to Bangladeshi law, does not.

Contracts caused by coercion, fraud or misrepresentation are voidable under section 19, and those caused by undue influence under section 19A, where the court may set them aside absolutely or on terms.[1] The innocent party must elect promptly; affirmation, delay or third-party rights can defeat rescission. In commercial deals, warranties and disclosure schedules allocate this risk far more efficiently than litigation.

Void agreements and voidable contracts

The line between void and voidable runs through all of contract law in Bangladesh. A void agreement is not enforceable by law; a voidable contract is enforceable at the option of one party but not the other; and a contract becomes void when it ceases to be enforceable.[2] Chapter II declares void agreements in restraint of marriage (section 26), in restraint of trade (section 27), restricting legal proceedings or limiting the time to enforce rights (section 28), uncertain agreements (section 29) and wagers (section 30, with sections 30A to 30C).[1]

Section 27 matters most in practice. Unlike English law's reasonableness test, it voids every agreement restraining a lawful trade, profession or business, save for a seller of goodwill who agrees not to compete within specified local limits.[1] Restrictions during a live relationship, such as exclusivity, fare better than post-termination non-competes, so rely on confidentiality, non-solicitation and intellectual property clauses. Section 28 voids clauses shortening limitation but expressly saves arbitration agreements; see our guide to arbitration clauses in Bangladesh.

When a contract fails, sections 64 and 65 require restoration of benefits received under a rescinded voidable contract or a void agreement.[1] This is the route to recovering advances when a deal collapses.

Contingent contracts and quasi-contracts

A contingent contract under section 31 depends on a collateral future event. Under section 32 it cannot be enforced until the event happens and becomes void if the event becomes impossible, and under section 36 a contract contingent on an impossible event is void.[1] Conditions precedent in share purchase and financing documents should say who must procure the condition, by when, and what happens if it fails.

Chapter V imposes obligations without agreement: reimbursement of a person who pays money another is bound to pay (section 69), compensation for the benefit of a non-gratuitous act (section 70), duties of a finder of goods (section 71) and repayment of money paid by mistake or under coercion (section 72).[1] Section 70 is the usual fallback for contractors who worked outside or after a signed contract.

Performance, discharge and frustration under section 56

Most contract disputes turn not on whether a contract exists but on whether it was performed. Section 37 requires parties to perform or offer to perform unless excused, and section 39 lets a party end the contract where the other refuses, or disables itself from performing, in its entirety. Under section 55, where time is of the essence, late performance makes the contract voidable; where it is not, the contract survives and the innocent party claims compensation for delay.[1] State expressly whether delivery and payment dates are of the essence.

Frustration

Under section 56, an agreement to do an impossible act is void, and a contract to do an act that later becomes impossible, or unlawful through an event the promisor could not prevent, becomes void when that happens. A promisor who knew or should have known of the impossibility must compensate a promisee who did not.[1]

Frustration is rarely established: courts will not release a party from a bargain that has merely become costly, and a frustrated contract ends entirely.[11] Force majeure is different. It is a contractual remedy, available only where the clause covers the event, and it usually requires prompt notice and proof of causation.[11] Name the events, set notice periods and say what happens to payment during suspension.

Variation and waiver

Under section 62 the parties may substitute, rescind or alter a contract, and under section 63 a promisee may remit performance or extend time without fresh consideration.[1] Record every amendment and waiver in writing; informal indulgence is a common source of later disputes.

Indemnity and guarantee

A contract of indemnity under section 124 is a promise to save another from loss caused by the promisor's conduct or another's. A contract of guarantee under section 126 is a promise to perform the promise, or discharge the liability, of a third person on default.[1]

Benefit to the principal debtor is sufficient consideration for the surety (section 127), and the surety's liability is co-extensive with the debtor's (section 128). A continuing guarantee can be revoked for future transactions by notice (section 130). The surety is discharged by any variance in the contract made without its consent (section 133), by release of the debtor (section 134) and by a creditor's act impairing its remedy (section 139). A surety who pays is subrogated to the creditor (section 140).[1]

Because these rules protect sureties, lenders draft guarantees to exclude them. Bank guarantees raise separate autonomy and fraud questions, covered in our analysis of bank guarantees in Bangladesh and whether a performance guarantee can be stopped.

Bailment, pledge and agency

Bailment and pledge

Bailment under section 148 is the delivery of goods for a purpose, to be returned or disposed of as the bailor directs. Warehousing, carriage, repair and equipment hire are bailments. The bailee must take the care a person of ordinary prudence would take of his own goods (section 151), and a bailee who has worked on the goods has a lien until paid (section 170).[1] A pledge (section 172) is a bailment as security; on default the pawnee may sue on the debt or sell the goods after reasonable notice (section 176).[1]

Agency

An agent under section 182 is a person employed to act for, or represent, a principal. No consideration is needed (section 185), authority may be express or implied (section 186), and unauthorised acts may be ratified (section 196). Contracts made by an agent bind the principal (section 226), and a principal who holds out an agent as authorised is bound by the agent's acts (section 237).[1] Under section 201 an agency ends by revocation, renunciation, completion or the death, insanity or insolvency of either party, but an agency coupled with the agent's own interest cannot be revoked to that interest's prejudice (section 202), and reasonable notice of revocation is required.[1] Agency and distribution disputes are now listed Commercial Court categories.[9]

The Sale of Goods Act 1930

For movable goods, contract law in Bangladesh is found mainly in the Sale of Goods Act 1930 (Act No. III of 1930), which covers formation (sections 4 to 17), effects (sections 18 to 30), performance (sections 31 to 44), the unpaid seller's rights (sections 45 to 54) and suits for breach (sections 55 to 61).[3]

Property and risk. Section 4 distinguishes a sale, where property passes at once, from an agreement to sell. Risk prima facie passes with property (section 26). Property in unascertained goods cannot pass until they are ascertained (section 18); for specific goods it passes when the parties intend (section 19), and for specific goods in a deliverable state, when the contract is made (section 20).[3] Draft retention-of-title and risk clauses against these defaults.

Implied terms. Section 12 distinguishes conditions, which allow rejection, from warranties, which sound only in damages. Sections 14 to 17 imply terms as to title, description, quality and fitness, and sample, and section 62 allows the parties to exclude or vary them.[3] Exclusions that work between merchants may not work against consumers.

Remedies. The buyer may examine goods before acceptance (section 41). The unpaid seller has rights of lien, stoppage in transit and resale (section 46 onwards), and may sue for the price (section 55) or for non-acceptance (section 56); the buyer may sue for non-delivery (section 57).[3]

Electronic contracts and digital evidence

Nothing in the Contract Act requires paper, so an email acceptance, click-through or app order can bind. The ICT Act 2006 gives legal recognition to electronic records (section 6) and electronic signatures (section 7), and deals with authentication (section 5), retention (section 9), attribution (section 13), acknowledgement (section 14) and the time and place of dispatch and receipt (section 15). Section 11 confirms no one can be compelled to accept electronic documents.[7] The Evidence (Amendment) Act 2022, passed in November 2022, allows courts to admit digital records such as emails, audio, video and device data, with forensic examination where authenticity is disputed.[8]

Two limits remain. Instruments that must be stamped or registered do not escape those statutes by being signed electronically, because section 10 of the Contract Act preserves them.[1] And consumer-facing platforms carry their own regulatory layer, covered in our guide to e-commerce law in Bangladesh.

Stamp duty and registration

Two old statutes decide whether a valid contract can actually be used, and ignoring them is one of the commonest mistakes in contract law in Bangladesh.

Stamp duty

Instruments listed in Schedule I of the Stamp Act 1899 are chargeable with duty (section 3). Those executed in Bangladesh must be stamped before or at execution (section 17); those executed abroad may be stamped within three months of first receipt in Bangladesh (section 18). Under section 35 an unstamped chargeable instrument is inadmissible in evidence and cannot be acted upon until the duty and a penalty of up to ten times the deficit are paid, and section 33 requires it to be impounded.[6] Rates change through Finance Acts, so check the current schedule before signing.

Registration

Section 17 of the Registration Act 1908 lists documents requiring compulsory registration, chiefly those affecting interests in immovable property, and section 49 sets the consequences of non-registration. Section 17A, inserted in 2004, requires a contract for the sale of immovable property to be in writing and registered; the Registration (Amendment) Act 2026 extended the time for presentation from thirty to sixty days after execution, from 1 January 2026.[5] Section 21A of the Specific Relief Act makes an unregistered contract for sale not specifically enforceable.[4] See our guide to the property registration process in Bangladesh.

Rights of parties and remedies under contract law in Bangladesh

Each party is entitled to performance on the agreed terms, to withhold its own performance where the other fails to perform a prior reciprocal promise, to end the contract on a refusal under section 39, to rescind a voidable contract and to restitution when a contract fails. Third parties generally cannot sue on a contract they are not party to.

On breach, the remedies are compensation for loss under section 73, reasonable compensation up to a named sum under section 74 and compensation on rescission under section 75, together with specific performance, rescission, cancellation and injunctions under the Specific Relief Act 1877, including an injunction to enforce a negative covenant under section 57.[1] [4] Some limitation periods are as short as a year. We analyse each remedy in our guide to breach of contract in Bangladesh and urgent relief in our guide to temporary injunctions. A well-drafted legal notice often secures payment without litigation.

Commercial Courts Act 2026: where contract disputes now go

The Commercial Court Ordinance 2026, issued in early January, was replaced by the Commercial Courts Act 2026 (Act No. 23 of 2026), dated 10 April 2026 and deemed in force from 1 January 2026.[9] [13] It defines commercial disputes by twenty-four categories, including merchants' and bankers' transactions, import and export, carriage, construction and tenders, business premises, franchising, distribution and licensing, consultancy, joint venture and shareholder agreements, commercial agency, partnership, technology, intellectual property, sale of goods and services, insurance, shipbuilding and arbitration. Matters within the High Court Division's original jurisdiction and the Artha Rin Adalat are excluded.[9]

Section 7 requires a plaintiff not seeking urgent interim relief to follow prescribed pre-suit mediation once rules exist, and permits consensual mediation during the case for thirty days, extendable by thirty. The court holds a suit management hearing, hears summary judgment applications within fifteen days of filing, allows each party three adjournments and must complete the final hearing within ninety days. Under section 6, only final judgments are appealable, and an appeal or revision lies to the High Court Division within sixty days.[9]

The regime is still evolving. In May 2026 the Law Minister, Md Asaduzzaman, said the Act had been passed in haste, with regulatory, tax, labour and criminal matters mostly absent, and committed to fill the gaps; a former Dhaka Chamber president cited a World Bank figure of 1,442 days to enforce a contract.[10] Draft dispute clauses with mediation, arbitration and the Commercial Courts all in view, and see our guide to filing a civil suit in Bangladesh.

Contract law for businesses and small businesses

For a business, contract law in Bangladesh is mostly about a handful of contracts that carry the risk.

Smaller businesses tend to make the same mistakes: trading on quotations and messaging-app confirmations with no agreed terms; signing a counterparty's standard form without reading the liability cap or the exclusion of implied terms; leaving agreements unstamped; relying on a personal guarantee that section 133 can easily discharge; and inserting post-termination non-competes that section 27 voids while neglecting confidentiality.[1] [3] The clauses that earn their keep are correct parties and authority, an objective acceptance test, payment and late-payment terms, whether time is of the essence, risk and title, a liability cap with a genuine liquidated damages schedule, force majeure and a clear dispute route. Our guide to commercial agreements in Bangladesh works through deal architecture clause by clause.

Step-by-step: building an enforceable contract

This is how TRW takes a commercial contract from term sheet to signature and beyond.

Swipe or scroll →

When to seek legal advice from contract lawyers

A routine purchase on tested terms can be handled in-house. Advice pays for itself when a contract is high value or long term; involves a foreign party, foreign law or foreign currency; transfers land, shares or intellectual property; contains guarantees, security or exclusivity; needs regulatory approval; or when the relationship is already under strain.

A good contract lawyer checks capacity, authority, regulation, stamping and registration before signature; knows which risks are market-standard in Bangladesh; manages notices, variations and waivers during performance; and, when things go wrong, preserves evidence, chooses between mediation, arbitration and the Commercial Courts and acts within limitation. Look for real transactional and disputes experience under Bangladeshi law, transparent fees and fluency in both English and Bangla. Our corporate and commercial advisory practice drafts and negotiates contracts, and our alternative dispute resolution practice handles mediation and arbitration.

Resources and further reading on contract law in Bangladesh

The primary texts are on the official Laws of Bangladesh portal and are listed in the source register below; always read the current consolidated text, as stamp and registration provisions change often.[1] [9] From TRW, read breach of contract for remedies and limitation, commercial agreements for drafting, employment contracts for workforce terms, e-commerce law for online selling and cheque dishonour for failed payment instruments.

Frequently asked questions

What is the main law governing contract law in Bangladesh?

The Contract Act 1872, supported by the Sale of Goods Act 1930, the Specific Relief Act 1877, the Stamp Act 1899, the Registration Act 1908, the ICT Act 2006 and, for business disputes, the Commercial Courts Act 2026.[1] [9]

What are the essential elements of a valid contract?

Under section 10 of the Contract Act, free consent of competent parties, lawful consideration, a lawful object, and no express declaration that the agreement is void, plus compliance with any law requiring writing or registration.[1]

Is an oral contract binding in Bangladesh?

Generally yes, unless a statute requires writing, as it does for contracts for the sale of immovable property. Oral contracts are, however, hard to prove.[5]

Can a minor enter into a contract in Bangladesh?

No. A person under eighteen is a minor, and an agreement with a minor is void from the beginning, following Mohori Bibee v Dharmodas Ghose. Suppliers of necessaries are protected by section 68.[1] [12]

Are non-compete clauses enforceable in Bangladesh?

Section 27 voids agreements in restraint of trade, except on a sale of goodwill. Restrictions during a live contract fare better than post-termination bans, so confidentiality and non-solicitation clauses are safer.[1]

Does section 56 excuse performance after an unforeseen event?

Only if the event makes performance impossible or unlawful. Hardship or cost is not enough, which is why a force majeure clause is essential.[1] [11]

Are electronic contracts and e-signatures valid in Bangladesh?

Yes. The ICT Act 2006 recognises electronic records and signatures, and the Evidence (Amendment) Act 2022 allows courts to admit digital records. Stamping and registration rules still apply.[7] [8]

What happens if a contract is not stamped?

Under section 35 of the Stamp Act 1899, it is inadmissible in evidence and cannot be acted upon until the duty and a penalty are paid, and it may be impounded.[6]

Must a contract for the sale of land be registered?

Yes. Section 17A of the Registration Act 1908 requires registration, with presentation within sixty days of execution since 1 January 2026, and an unregistered contract for sale cannot be specifically enforced.[4] [5]

Which court hears a commercial contract dispute in 2026?

Disputes in the twenty-four categories of the Commercial Courts Act 2026, including sale of goods, services, agency, distribution, construction and shareholder agreements, go to the Commercial Courts, with appeals to the High Court Division within sixty days.[9]