This document discusses the key elements and nature of contracts under Indian law. It provides definitions of contracts from various legal scholars and the Indian Contract Act. The main points are:
1. A contract is an agreement that is enforceable by law, containing an offer, acceptance, and consideration. It requires lawful consent between two or more parties.
2. There are several essential elements for a valid contract including offer/acceptance, lawful object and consideration, capacity of parties, free consent, certainty and possibility of performance.
3. Not all agreements are contracts as they must satisfy the requirements of intent to create legal obligations, lawful consideration, and enforceability under law. Certain types of agreements are specifically prohibited or regulated by
2. Definition and Nature of
Contract
Mamta Sharma,Asstt. Prof.in Management
What is Law?
“A rule of conduct imposed and enforced by the sovereign”
by Austin
Contract (sec. 2h)
Acc. To sec.2h “ an agreement enforceable by law.” “Law is the body of
principles recognised and applied by the state in the administration of justice.”
by Salmond
Law of Contract
It is that branch of law which determine the circumstances in which a promise or
an agreement shall be legally binding on the person making it.
“Contract is an agreement creating and defining obligations between the parties.”
Salmond
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According to Sir William Anson.” An agreement between two or more persons which
is intended to be enforceable at law and is constituted by the acceptance by one
party of an offer made to him by the other party to do or to abstain from doing
some act.”
According to Sir Fredrick Pollock , there are two essential elements of a contract
1. An Agreement 2. Enforceability at law
1. Agreement : (sec 2e) “ every promise or every set of promises forming the
consideration for each other.”
Promise “ (sec 2b) “ a proposal when accepted becomes a promise.”
Offer + Acceptance= Agreement
2. Enforceable at Law: An agreement must give rise to a legal obligation. The
common acceptance formed and communicated between the two parties
must create legal relations and not merely the relations which are purely
social or domestic in nature.
the leading case in this is BALFOUR VS BALFOUR(1919)
THUS Contract = Agreement + Enforceability
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Therefore, All contracts are agreement but all agreements are not contracts.
1. There are atleast two parties under an obligation and the other party entitled to
enforce that obligation.
2. Obligation must be in respect of doing or abstaining from doing definite acts.
3. The obligation must relate to legal matters and not to social affairs.
There are several agreements which donot give rise to legal bligations and therefore are
not contracts. But certain agreements which do not spring from agreements but
enforceable at law. Sources of such obligation are
1. Torts or civil wrong
2. Quasi contract
3. Decrees by Courts
Right in Personam : a right against or in respect of a particular person.
Right in rem : a right against or in respect of a thing. This right is available against the
whole world.
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Essential Elements of a valid contract
1. Offer and Acceptance : both offer and acceptance should be lawful according to the
rules laid down in the Indian Contract Act regarding valid ‘offer and acceptance’ and its
communicaton.
2. Intention to create Legal Relationship : if there is no intention on the part of parties
there is no contract. Agreements of social or domestic nature donot form legal relations.
3. Lawful Consideration: according to Pollock , “Consideration is the price for which the
promise of another is brought.” it is also known as ‘quid pro’quo’ or something in return
it can be in any form like money,goods services , a promise to marry , a promise to
forbear from suing the promise etc. it may be in past , present or future.
4. Capacity of Parties: According to sec. 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.”
The following persons are incompetent to cntract
Minors, Person of unsound mind , person disqualified by law
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5. Free Consent : Consent means the parties must have agree upon the same thing in the
same sense.
According to sec.13, “ Two or more person ar said to consent when they agree upon the
same thing in same sense..” this is called Consensus ad idem in Engligh Law.
According to sec. 14 , consent is not free when it is caused by
Coercion, Undue Influence , fraud, Mis-representation and Mistake
6. Lawful Object : means the purpose or design of contract. The object is said to be
unlawful if
1. it is forbidden by law
2. It is of such nature that if permitted it would defeat the provisions of any law.
3. it is fraudulent
4. it involves an injury to the person or property of any other.
5. the court regards it as immoral or opposed to public policy.
7. Certainty of Meaning : sec. 29 , “ Agreements the meaning of which is not certain or
capable of being made certain are void.” terms of contract must be precise and
certain. It cannot be vague.
7. Possibility of Performance : if it is impossible physically or iegally to perform the
contract it cannot be forced.
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9. Not declared to be void or illegal : the agreement satisfying all the conditions of a valid
contract must not have been expressly declared void by any law inforce in the country.
Sec. 24 to 30 have been expressly declared to be void like agreement in restraint of
trade, marriage legal proceeding etc.
9. Legal Formalities: an oral contract is valid except in those cases where written or
registration of contract is required by some statute. In India writing is required in
contract of sale, mortgage, lease and gift of immovable proprerty, negotiable
instruments,MOA AND AOA of companies etc. Registration is required in case of
documents which comes in sec. 17 of |registration act.
All these elements must be present in a valid contract . If any one of them is absent the
agreement does not become a contract.