The History of law of contract in Nepal is not very long due to belated development of industry and commerce some provisions relating to contract could be found in Muluki Ain 1853. However the provisions of said Act were not sufficient
There was pressing need to enact new Contract Act to cope with the demand of commercial sector. As a result, separate Contract Act was enacted in 1966 a fairly detailed enactment on the law relating to contracts
The Contract Act 1966
The Contract Act 1966 had defined contract as an agreement act between two or more parties to do or not to do any act. Similarly, the Act had defined proposal, consent . It had made incompetence of parties to enter in to contract who was under the age of 16 years and person of unsound mind .
However it was very short insufficient and contradictory in some respects in comparison to the principle of law of contract .So It was pressed to enact new Contract Act by the stakeholders to address the growing demands of industry and commerce . As a result new, Contract Act was enacted in 1999 and came in to force on 2000 .
The Contract Act 1999
The Act has made effort to address the new aspects of contract law developed in the developed countries as the demand of industry and Commerce. The Act contains 90 sections in all. Section 2 has defined ‘contract’ as an agreement concluded between two or more parties for performing or not performing any act which could be executed according to law . Similarly other terms offer acceptance and considerations has been defined.
Reference: http://www.supremecourt.gov.np/main.php?d=lawmaterial&f=law_of_contract_in_nepal (10-March-2013)