Objects and Elements of Contract With relevant Case References

Objects and elements of Contract 1

Contents
Introduction .......................................................................................................................................3
Conceptual frame work.......................................................................................................................3
Object of a Contract........................................................................................................................4
The Essentials of a Contract.............................................................................................................4
Offer and Acceptance:.................................................................................................................5
Intention to create legal relationship:..........................................................................................5
Lawful Consideration...................................................................................................................6
Capacity of the Parties.................................................................................................................7
Free Consent...............................................................................................................................8
Legality of the object...................................................................................................................8
Certainty.....................................................................................................................................9
Possibility of performance ...........................................................................................................9
Void Agreements:........................................................................................................................9
Writing, Registration and Legal Formalities...................................................................................9
Legal framework..............................................................................................................................10
Present situation in Bangladesh .........................................................................................................12
Recommendation..............................................................................................................................13
Conclusion.......................................................................................................................................13
Reference.........................................................................................................................................13

Objects and Elements of Contract
With relevant Case References
Introduction
People created code of conduct to live in peace and harmony, to maintain sustainability and persistence
and to control human behavior inspired from social beliefs, religion, customs, rational thinking. These are
“Laws” that encompass every aspect of social human being. Regarding business, the first thing that set the
base from where all other issues are sprouted is Contract. Engaged in Contract,people start their dealings,
their insurance policy, employment, engagement, and involvement in sale and buying procedure. Contract
cannot be unadmitted from the omnipresent existence of Law. Since civilization, contract has been
regulated performed of certain laws and the laws regarding a Contract in known as the Law of Contract
which clearly defines the objective and elements required to call an agreement Contract. A contract is a
voluntary arrangement between two or more parties that is enforceable by law as a binding legal
agreement. Contract is a branch of the law of obligations in jurisdictions of the civil law tradition.
Contract law concerns the rights and duties that arise from agreements. Bangladesh adopted The Contract
Act of 1872. Based on English contract law and the British Indian contract law, it was enacted in the 19th
century and re-enacted by the Parliament of Bangladesh after the country's independence which clearly
defines the objects and elements of Contract. As the agreements are made on the decisions of parties to a
contract, The Law of Contract has been an integral part of commercial system as commercial transactions
starts from an agreement between two or more parties.
Conceptualframe work
To understand the objects and elements of Contract, we should start breaking down the definitions of
“Contract” from the perspective of Contract Act that is practiced all over the Bangladesh. In generally,
reasonable agreement created between the parties when enforceable by Law are considered to be Contract
according to the Contract Act 1871.

According to Salmond1
, a contract is “an agreement creating and defining obligations between the
parties.” According to Sir William Anson, “Acontract is an agreement enforceable at lawmade between
two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of
the other or others.”
This paper will proceed to the elements of Contract after proper illustrations of the objects to be engaged
in a contract.
Object of a Contract
The object of The Law of Contract is to introduce definiteness in commercial and other transactions. For
example: Mr. Jaglur enters into a contract to deliver 10 tons of wheat to Mr. Rabi, manager of Well Food
on a certain date. Since the contract is enforceable by the courts, Rabi plans his activities on the basis of
getting wheat on that fixed date to prepare breads. If the Contract is broken, Rabi will get damages from
the court and will not supply any loss.
The objects were to create lawful obligation between parties to a contract. Sir William Anson described
this as,“As the law relating to property had its origin in the attempt to ensure that what a man has
lawfully acquired he shall retain, so the law of contract is intended to ensure that what a man has been
promised to him shall be performed.”
The Essentials of a Contract
The requisite elements that must be established to demonstrate the formation of a legally binding contract
are offer; acceptance; consideration; mutuality of obligation; competency and capacity; and, in certain
circumstances, a written instrument. In another word, when an agreement which come into existence
whenever one or more persons promise to one or others, to do or not to do something will be enforceable
by law when it fulfills certain conditions which are known to be the essential elements of Contract.
1. Offer and Acceptance:
2. Intention to create legal relationship
3. Lawful Consideration
4. Capacity of parties
5. Free Consent
6. Legality of the Object
7. Certainty
8. Possibility of Performance
9. Void Agreements
1 Salmond, Jurisprudence

Offer and Acceptance:
There must be a lawful offer by one party and a lawful acceptance of the offer by another party or parties.
A contract is formed when an offer by one party is accepted by the other party.
An offer must be distinguished from mere willingness to deal or negotiate. For example, A offers to make
and sell to M Notebook featuring Australian paintings. Before any agreement is reached on size, quality,
style or price, M decides not to continue. At this stage,there is no legally binding contract between A and
M because there is no definite offer for M to accept until the essential terms of the bargain have been
decided.
An offer need not be made to a specific person. It may be made to a person, a class of people, or to the
whole world.
An offer is a definite promise to be bound, provided the terms of the offer are accepted. This means that
there must be acceptance of precisely what has been offered. For example, a used Fridge dealer offers to
sell M a Hitachi fridge for $1,000, without a roadworthy certificate. If M decides to buy the Hitachi
fridge, but insists on a service warranty for next two years being provided, then M is not accepting the
used Fridge dealer’s offer. Rather,M is making a counter offer. It is then up to the used car dealer to
accept or reject the counter offer.
A person can withdraw the offer that has been proposed before that offer is accepted. For withdrawal to
be effective,the person who has proposed the offer must communicate to the other party that the offer has
been withdrawn. To continue the example above, the used Fridge dealer may say to B that he’ll check
with his supervisor and maybe a service warranty for next two years can be provided. If, while waiting for
a reply, M decides he does not want to buy the used Hitachi Refrigerator and he tells the used fridge
dealer of his change of mind, then there is no binding contract.
Acceptance occurs when the party answering the offer agrees to the offer by way of a statement or an act.
Acceptance must be unequivocal and communicated to the offer or: the law will not deem a person to
have accepted an offer merely because they have not expressly rejected it.
Intention to create legal relationship:
When parties make an agreement, there must be an intention that agreements shall result in or create legal
relations. An agreement to dine out with friend at friend’s house is not an agreement intended to create
legal relation and is not a contract. But an agreement to sell goods or agreement to marry, are agreements
intended to create some legal relationship and therefore are agreements intended to create legalrelations
and are therefore,contracts,provided other essential elements are present. This will rarely be stated
explicitly but will usually be able to be inferred from the circumstances in which the agreement was
made. For example, offering a friend a ride in your car is not usually intended to create a legally binding
relation. You may, however, have agreed with your friend to share the costs of travelling to work on a
regular basis and agree that each Friday your friend will pay you $20 for the running costs of the car.
Here,the law is more likely to recognize that a contract was entered into. Commercially based agreements
are seen as including a rebuttable intention to create a legally binding agreement. However,the law
presumes that domestic or social agreements are not intended to create legal relations. For example, an

arrangement between siblings will not be presumed to be a legally binding contract. A person who wants
to enforce a domestic or social agreement needs to prove that the parties did intend to create a legally
binding agreement.
Case Summary of Balfour Vs. Balfour (1919) 2 K.B. 571
Husband and wife lived together in Ceylon. They went to England during the Husband’s leave from work.
Once the Husband had to return the wife stayed due to her illness (rheumatoid arthritis), and husband
agreed to send her 30lbs per month. Their marriage deteriorated and she sued for the 30lbs per month to
be enforced.
Procedural Posture: Sargant,J from the Kings Bench Division held that the husband was under an
obligation to support his wife, and the parties had contracted that the extent of that obligation should be
defined in terms of so much a month. The consent of the wife to that arrangement was sufficient
consideration to constitute a contract which should be sued upon.
Issue(s): Whether there are some types of agreements were the parties do not intend legal consequences.
Judgment/Disposition: Reversed
Holding: Yes
Rational: The court reasoned that arrangements between husband and wife do not constitute a contract.
This is because,according to the court, it is quite common and it is the natural and inevitable result of the
relationship of husband and wife, that the two spouses should make arrangements for allowances.
Moreover, they are not contracts because the parties did not intent that they should be attended by legal
consequences. At the inception of the arrangement,the parties never intended that they should be sued
upon. Agreements such as these are outside the realm of contracts altogether.
Lawful Consideration
Consideration is an essential element of a valid contract. An agreement without consideration is a bare
promise and is not binding on the parties. Contracts result only when a promise is made in exchange for
in something in return. This something in return is termed as “consideration”. Consideration is the price
paid by the promisee for the obligation of the promisor. Consideration need not be a benefit to the
promisor. If the promisee has suffered some loss or detriment, it will be taken as a sufficient consideration
for the promisor to fulfill his promise.
Example: A agrees to sell his Book to B for a sum of Tk.1000. For A’ a promise the consideration is a
sum of Tk.1000 while for B’s promise consideration is the Book.
Consideration is also the necessary evidence required by law about the intention of the parties to establish
legal relationship. Consideration must be real, and not illusory or illegal. Consideration may be past,
present or future. It may move from the promisee or any other person but it should always be furnished at

the desire of the promisor. Consideration must be valuable in the eyes of law, i.e., it must result in some
gain to one party and detriment to the other.
Case: Currie v. Misa
A company named Lizardi & Co,then in good credit in the City, sold four bills of exchange to Mr Misa,
drawn from a bank in Cadiz. Mr Currie was the owner of the banking firm and the plaintiff bringing the
action. The bills of exchange were sold on the 11th of February, and by the custom of bill, brokers were
to be paid for on the first foreign post-day following the day of the sale. That first day was the 14th of
February. Lizardi & Co. was much in debt to his banking firm, and being pressed to reduce his balance,
gave to the banker a draft or order on Mr Misa for the amount of the four bills. This draft or order was
dated on the 14th, though it was,in fact, written on the 13th, and then delivered to the banker. On the
morning of the 14th the manager of Misa's business gave a cheque for the amount of the order, which was
then given up to him. Lizardi failed, and on the afternoon of the 14th the manager, learning that fact,
stopped payment of the cheque.
Judgement:
Exchequer Chamber[
Lush J, Archibald J, Quain J held that the banker was entitled to recover its amount from Mr Misa. Lord
Coleridge CJ dissented.
House of Lords
The House of Lords upheld the decision of the majority in the Exchequer Chamber. Lord Chelmsford
gave the opinion, with which Lord Hatherley and Lord O'Hagan concurred.
Lush J said,
“ A valuable consideration, in the sense of the law, may consist either in some right, interest,
profit, or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility,
given, suffered,or undertaken by the other...”
Capacity of the Parties
At least two parties are essential for every valid contract. A person cannot enter into a contract with
oneself except in a different capacity, e.g.,a partner may purchase goods from his own firm. In order that
an agreement may be a binding contract, the parties must have the legal capacity of entering into the
contract.
According to Sec. 11 of the Act “Every person is competent to contract who is of the age of majority
according to the law to which he is subject and who is of sound mind and is not disqualified from
contracting by any law to which he is subject”.
Thus, a contract entered into by a minor or by a lunatic is void, In Bangladesh, a person who has not
completed his 18th year of age is considered to be a minor. However,a lunatic can enter into binding

contracts during his lucid intervals. The legal presumption is that every party to a contract has the
capacity to contract unless contrary is proved and the presumption is rebutted.
Case : Mohiri Bibi Vs. Dhorimondi Ghose(1903)
Dharmodas Ghose lent the MINOR the sum of 20,000 rupees at 12% interest and secured the loan by
way of mortgage executed by the MINOR in favor of the Dharimondi Ghose. Later the mother of the
children claim that the mortgage was void for lack of capacity. Agent of defendant advanced money to
plaintiff, an infant, fully knowing his incompetency to contract, against mortgage of property belonging to
latter. Plaintiff commenced this action to get the mortgage declared as void u/s 2, 10 and 11 of ICA and
repossession of property there under conveyed to defendant
Judgement Based on the Section 10, 11 of the Contract Act:
The council held the contract by the minor as void. The minor has no capacity to contract hence the
mortgage was not valid. He cannot be compelled to repay the amount advanced to him. As he is not
bound by the promise made by him under the contract.
Free Consent
Two or more persons are said to have consented when they agree upon the same thing in the same sense.
Thus, if two persons enter into apparent contract concerning a particular person or thing and it turns out
that each of them was misled by a similarity of name and actually each had a different person or thing in
mind, no contract would exist between them. For example, A has two shirts, one blue and the other red.
He wants to sell his blue shirt, B, who knows of only A’s red shirt, offers to purchase A’s shirt for Tk.
2000. A accepts the offer thinking that it is for his blue shirt. There is no consent because both the parties
are not understanding the same thing in the same sense.
Besides, to make a contract valid not only consent is necessary but the consent must also be free.
According to Sec. 14, consent is said to be free when it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake. A clear distinction must be made between ‘no consent’ and ‘no free
consent’. In the case of ‘no consent’ there is no identity of mind and therefore,in the absence of consent
the agreement is voidable from the very beginning. In the latter case of ‘no free consent’ consent is there
but it not free,the agreement is voidable at the option of the party whose consent is not free.
A thief who deprives a person of his goods without his consent cannot claim any title whatsoever in the
goods. But a dacoit who goods obtains from the other person by obtaining his consent at the point of
pistol (coercion) can retain the goods until the realowner claims them back. The possession of the thief is
void for want of consent but the possession of the dacoit is voidable at the option of the realowner, i.e.,
valid unless challenged by the realowner because it has been obtained with the consent of the realowner
though the consent had not been free.
Legality of the object

The agreement must not relate to a thing which is contrary to the provisions of any law or has expressly
been forbidden by any law or which is opposed to policy or is immoral. All agreements which are not
lawful cannot be enforced by law. This is because courts will not allow polluted hands to touch the pure
fountains of justice. No agreement can be allowed to defeat the provisions of any law or to cause injury to
the person or property of any person or to achieve fraudulent objects.
Example: A agrees to sell certain goods to B. A knows that the goods are to be smuggled out of the
country. The contract is unlawful and not enforceable.
A person who knowing lets out his home for illegal drug, cannot recover the rent there of because the
purpose of the agreement has been immoral.
Certainty
The agreement must not be vague. It must be possible to ascertain the meaning of the agreement for
otherwise it cannot be enforced.
Possibility ofperformance
The agreement must be capable of being performed. A promise to do an impossible thing cannot be
enforced.
Void Agreements:
An agreement so made must not have been expressly declared to be void. Under Contract Act there are
five categories of agreements which are expressly declared to be void. They are:
a. Agreement in restraint to marriage (Sec. 26)
b. Agreement in restraint to trade (Sec.27)
c. Agreement in restraint to proceedings(Sec. 28)
d. Agreements having uncertain meaning (Sec. 29)
e. Wagering Agreement (Sec. 30)
Writing, Registration and Legal Formalities
An oral contract is perfectly good contract, except in those cases where writing and/or registration is
required by same statute. In India, writing is required by some statute. In Bangladesh writing is required
in cases of lease,gift, sale and mortgage of immovable property: negotiable instruments, memorandum
and articles of association of a company etc. Registration is compulsory in cases of documents coming
within the preview of section 17 of the registration Act, mortgage deeds covering immovable property.
The terms of oral agreement are sometimes difficult to prove. Therefore important agreements are usually
entered into in writing even in cases where writing is not necessary.

Legalframework
Contract act 1872 governs the law of contract in Bangladesh.
Section 2(h) of the Indian Contract Act providesthat, “An agreement enforceable by law is a
contract.” Therefore, it exposes that a contract there must be (1) an agreement and (2) the agreement
must be enforceable by law. An agreement comes into the existence whenever one or more persons
promise to one or others, to do or not to do something.
According to Sec.2(e),“Every promise and every set of promises, forming consideration for each
other, is an agreement. Some agreements cannot be enforced through the courts of law, e.g., an
agreement to play cards or go to a cinema. An agreement, which can be enforced through the courts of
law, is called a contract.”
The act of 1872, defines in third chapter the laws regarding the elements of Contract. It defines when an
agreement can be called a Contract as follows:
Act 1872, According to Section 10 of the Act. “All agreements are contracts,if they are made by the free
consent of parties, competent to contract,for a lawful consideration and with a lawful object, and not
hereby expressly declared to be void.”
So this act includes the elements needed to make a contract valid and enforceable by law. To go deep
down into the prerequisites, there are other sections mentioned below:
Who are competent to contract:
11. Every person is competent to contract who is of the age of majority according to the law to which he
is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is
subject.
What is a sound mind for the purposes ofcontracting
12. A person is said to be of sound mind for the purpose of making a contract if, at the time when he
makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his
interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when
he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract
when he is of unsound mind.
Illustrations: A man when drunk cannot understand the terms of contract cannot be eligible to contract.
"Consent” defined:
13. Two or more persons are said to consent when they agree upon the same thing in the same sense
"Free consent" defined
14. Consent is said to be free when it is not caused by-

(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16,or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22.
Coercion Defined:
15. "Coercion" is the committing, or threatening to commit, any act forbidden by the PenalCode or the
unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever,with
the intention of causing any person to enter into an agreement.
Explanation - It is immaterial whether the PenalCode is or is not in force in the place where the
coercion is employed.
"Fraud" defined
17. "Fraud" means and includes any of the following acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to
enter into the contract:-
(1) the suggestion, as a fact,of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation – Mere silence as to facts likely to affect the willingness of a person to enter into a contract
is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
What considerations and objects are lawful and what not
23. The consideration or object of an agreement is lawful, unless- it is forbidden by law; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or
is fraudulent; or
involves or implies injury to the person or property of another; or the Court regards it as immoral, or
opposed to public policy.
In each of these cases,the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is void.
Agreement without consideration void, unless it is in writing and registered,or is a promise to
compensate for something done,or is a promise to pay a debt barred by limitation law

25. An agreement made without consideration is void, unless–
(1) it is expressed in writing and registered under the law for the time being in force for the registration of
documents, and is made on account of natural love and affection between parties standing in a near
relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something
for the promisor, or something which the promisor was legally compellable to do, or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent
generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might
have enforced payment but for the law for the limitation of suits.
Presentsituation in Bangladesh
The Contract Act,1872 is the chief contract law in Bangladesh. Based on English contract law and the
British Indian contract law, it was enacted in the 19th century and re-enacted by the Parliament of
Bangladesh after the country's independence. The Act has 238 sections under its 11 chapters. It begins
with the preliminary aspects,including a short preamble and title, extent and date of commencement and
interpretation of words and expressions used in the act. It includes chapters on offer and acceptance,
voidable contracts,contingent contracts,performance, breach of contract,contractual relations, the sale of
goods, bailment, agency and partnership. It also covers topics such as consideration, misrepresentation
and indemnity.
However,the elements of a valid contract are being necessary to form a contract in Bangladesh. Breach of
contract is punishable in Bangladesh and aggrieved party can recover his losses if he goes to the Court.
Sometimes Bangladeshi law differs from British law in certain cases. Such situations are mentioned only
for one of the important element consideration:
Consideration in Bangladeshi law differs in two important aspects from that in English law, namely:
(i) In Bangladeshi law past consideration is a good consideration. In Sinha vs. Abraham it was held that
an agreement which was for compensating past services rendered by the plaintiff to the defendant was a
valid one.
(ii) Consideration may move either from the promise or from someone other than the promisee. Thus in
Chinnya vs.Ratnyyo,A,by a deed of gift, made over a certain property to her daughter on condition that
the daughter should pay an annuity to A's brother as had been done by A. On the same date the daughter
promised in writing to pay the said annuity. The daughter having subsequently declined to fulfill her
promise, the brother sued the daughter to recover the amount due under the agreement. It was contended
by the daughter that no consideration proceeded from the brother and that he, being a stranger to the
consideration, had no right to sue. It was held that the "consideration indirectly moved from the brother to
the daughter" and that he was,therefore,entitled to maintain the suit.
Though the law has derived from the basic Contract Act 18&2, Bangladeshi Laws has some deviation in
some situations keeping the elements and objectives fixed with the main act to cope with the situation
arrived in Bangladesh.

Recommendation
Bangladeshi legislator followed the British Contract Act while codification the acts of Bangladesh which
sometimes were not appropriate for modern business settings. In India, Insurance company2
suffered due
to the section 28 of the Contract Act. They preferred amendment of the codes. The elements of Contract
according to the contract act are needed to be updated day by day for modern and new business settings.
New explanations will be provided by the law maker to keep abreast with the modern world. New
situation may require new dimension of elements for proper judgement. So contract must have that
flexibility. Everyday every financial transaction, bank accounts all are contracts so the facts should be
more crystal clear to the people engaged in the activity. Government should create awareness among the
masses.
Conclusion
If we look at the sections of the Contract Act 1872, it’s evident that the elements mentioned above are all
must be present in a contract. Absent of any one of the item, will make the agreement ended up in a void
or voidable agreement rather than making it a contract. So an agreement which has the capacity to fulfill
the all essential elements is enforceable by law making all agreements not to contract,but all contract to
an agreement having all the characteristics as par as the Contract Act 1872. So before engaging into any
contract, both party must keep in mind whether there is a loophole in the agreement. So ensuring the
essential qualities is a must for a valid contract.
Reference
1. Sen, Arun Kumar & Mitra, Jitendra, (1956), Commercial Law and Industrial Law(25th
edition), Kolkata, The World Press Private Limited,13-25
2. Sol.du.ac.in. (2017). Study Material-1 : Lesson 1 CONTRACT : ITS ESSENTIALS. [online]
Available at: https://sol.du.ac.in/mod/book/view.php?id=1569&chapterid=1553.
3. The Law Handbook. (2017). Elements of a contract - The Law Handbook. [online] Available
at: http://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/
4. Anon, (2017). [online] Available at: http://bdlaws.minlaw.gov.bd/print_sections_all.php?id=26
5. En.wikipedia.org.(2017). Contract Act, 1872 (Bangladesh). [online] Available at:
https://en.wikipedia.org/wiki/Contract_Act,_1872_(Bangladesh).
2 http://www.livelaw.in/should-section-28-of-the-indian-contract-act-be-amended-yet-again/

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