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What is a Contract?
A contract is an agreement between two or more parties that is legally enforceable and expresses the parties' intention to form a legal relationship.
Definitions of Contract:
According to Section-2 (h) of the Indian Contract Act,1872
"An agreement enforceable by law is a contract."
According to Salmond
“Contract is an agreement creating and defining obligations between parties.”
According to Sir Frederick Pollock
"Every agreement and promise enforceable at law is a contract."
According to Anson
"A contract consists of an actionable promise or promises. Every such promise involves two parties, a promisor and a promisee, an expression of the common intention and of expectation as to the act or forbearance promised."
What is the procedure for entering into a contract?
To enter into a contract, there should be a valid agreement between the two or more parties and the agreement must be enforceable by law.
Agreement + Legal Enforcement = Contract
Section-2(e) of the Indian Contract Act, 1872 defines agreement as:
“Every promise and every set of promises, forming the consideration for each other, is an agreement.”
Section-2(h) of the Indian Contract Act, 1872 defines a contract as:
“An agreement enforceable by law is a contract.”
To make an agreement, there should be a promise and consideration of that promise.
Promise + Consideration = Agreement
Section-2(b) of the Indian Contract Act, 1872 defines promise as:
A proposal when accepted, becomes a promise.
Section-2(d) of the Indian Contract Act, 1872 defines consideration as:
“When, at the desire of the promiser, 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.”
Section-2(e) of the Indian Contract Act, 1872 defines an agreement as:
“Every promise and every set of promises, forming the consideration for each other, is an agreement.”
For a promise, offer and acceptance of that offer are required.
Offer+Acceptance = Promise
Section-2(a) of the Indian Contract Act,1872 defines proposal/offer as:
‘‘When a 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 said to make a proposal.’’
Section-2(b) of the Indian Contract Act, 1872 defines acceptance and promise as:
“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.”
Essential elements for a contract?
Presence of two or more parties
There must be an agreement (the agreement must not have been expressly declared to be void)
The agreement must be made for a lawful object
The agreement must be made for some consideration
Intention to create a legal relationship
The agreement must have been made by the free consent of the parties
Fulfillment of other legal requirements
1. Presence of two or more parties
The parties must be competent to contract (Section-11-12 of The Indian Contract Act, 1872 defines it)
The parties should have attained the age of majority and must not be disqualified by law to form a contract.
According to Section-11 of The Indian Contract Act, 1872, these people are not competent to contract:
1. Minors
2. Person of unsound mind
3. Person disqualified by law
4. Alien enemy
2. There must be an agreement
Section-2(e) of the Indian Contract Act, 1872 defines agreement as:
“Every promise and every set of promises, forming the consideration for each other is an agreement.”
3. The agreement must be for a lawful object
Section-23 of the Indian Contract Act, 1872 defines it:
Consideration or object is said to be unlawful if:
1. It is forbidden by law.
2. It is of such a nature that if allowed, it will violate any law's provisions.
3. It is fraudulent.
4. It involves or implies an injury to the person or property of another.
5. It is deemed unethical or contrary to public policy by the court.
4. The agreement must be made for some consideration
Section-25 of the Indian Contract Act, 1872 defines it:
An agreement without consideration is void.
However, there are some exceptions mentioned in Section-25 where a contract without consideration is considered legal.
If someone is donating something with free consent.
If something is gifted to someone with free consent.
5. Intention to create a legal relationship
There must be an intention to create a legal relationship in the mind of both parties.
Case Law
Balfour v. Balfour
The court dismissed this case because there was no intention to create any legal obligation and because they were husband and wife so according to The Indian Contract Act, 1872, there cannot be any contract between friends, husband, and wife on a daily based things.
6. The agreement must have been made by the free consent of the parties
Section-13 to 22 of The Indian Contract Act, 1872 defines it:
They must have agreed to the contract in an expressed or implied way and the consent of any of the parties must not have been obtained by:
Coercion (Section-15)
Undue influence (Section-16)
Fraud (Section-17)
Misrepresentation (Section-18)
Mistake (Section-20,21,22)
7. Other legal requirements
An agreement must fulfill all the requirements or formalities necessitated by any particular law. An agreement must be in writing, attested, and registered, if so required by any law i.e in force in India.
Certain agreements, such as:
Agreement to pay a time-barred debt; or
Agreements to refer the matter to an arbitrator in case of disputes; or
Agreement for transfer of immovable property.
These are such agreements that must be reduced to writing and registered before they can be legally enforced.
Types of Contracts made:
Based on modes of creation
Based on performance
Based on enforceability
1. Based on modes of creation
1. Expressed contract
An express contract is a contract that has been explicitly established by the parties. All elements would be expressly stated in an express contract. The parties' agreement is conveyed in terms, either orally or in writing, in an express contract.
2. Implied contract
A legally binding obligation i.e arisen from the actions, conduct, or circumstances of one or more parties to an agreement.
For Example:- Purchasing a packet of biscuits from a shop and giving money in return according to the print price, without the demand and asking the shopkeeper.
3. Quasi-contract
The quasi-contract constitutes a retroactive arrangement between two parties that have no prior duties. When a party accepts goods or services despite not having demanded them, these arrangements may be enforced. The acceptance then generates a payment expectation.
2. Based on performance
1. Unilateral contract
A unilateral contract is one in which the offeror agrees to pay after the occurrence of a specific event.
2. Bilateral contract/ Executory contract
A Bilateral Contract is a legally binding document that states the set of promises that two parties will exchange in exchange for something.
For Example
Buying something online from an e-commerce website and getting that product by the payment method of “cash on delivery (COD)”.
3. Executed contract
An executed contract is a legal document signed by the necessary persons for its effectiveness. A contract is typically formed between two or more parties, but it may also be formed between an individual and an entity, or between two or more entities.
3. Based on the enforceability
1. Void agreement
An agreement not enforceable by law is said to be void
2. Valid contract
A valid contract is a legally enforceable agreement. In a valid contract, both parties are legally obligated to perform their duties.
3. Voidable contract
A voidable contract is an arrangement between two parties that can be declared void for a variety of legal reasons.
A contract may be voidable for a variety of reasons, including:
Failure by one or both parties to disclose a material fact. A mistake, misrepresentation, or fraud. Undue influence or duress.
4. Unenforceable contract
A contract that is not enforceable by law is called an unenforceable contract.
In contrast to void (or void ab initio) and voidable, the term unenforceable is often used.
5. Illegal agreement
If the creation or execution of the contract causes the parties to engage in unlawful acts, it is illegal.
For example
Agreement to murder someone is illegal.
The writer is pursuing a degree of BA.LL.B (Bachelors of legislative law)
From, Department Of Law, Maharshi Dayanand University (Rohtak) Haryana, INDIA.
Reach her at Instagram @sakshiydv1108
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