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Introduction
The law of contracts in India is contained in the Indian Contract Act, 1872, which lays down the general principles relating to formation, perform¬ance and enforceability of contracts and the rules relating to certain special types of contracts such as indemnity, guarantee, bailment, pledge and agency. The Act is, however, not a complete and exhaustive law; some of the special contracts such as those relating to partnership, sale of goods, negotiable in¬struments, insurance etc
Definition
A contract is defined as 'an agreement in which one party offers to do something for a consideration and the other party accepts that offer'. The bulk of the transactions in trade, commerce and industry are based on these contracts. In India, the Indian Contract Act,1872 is the governing legislation for contracts, which lays down the general principles relating to formation, performance and enforceability of contracts and the rules relating to certain special types of contracts like Indemnity and Guarantee; Bailment and Pledge, and Agency.
What is Contract?
As per the definition, a contract is an agree¬ment enforceable by law. It may be noted that the words 'agreement' and 'contract' are very often used as synonyms, but in fact they are not. All contracts are agreements but all agreements are not necessarily contracts; agreements not enforceable by law are not contracts
According to the Contract 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 a sound mind, and is not disqualified from contracting by any law to which he is subject". Thus, minors; persons of unsound mind and Persons disqualified from contracting by any law are incompetent to contract.
To be legally enforceable, the agreements must satisfy two things, viz.¬ intention to be bound and consideration. However, according to section 10, an agreement is a contract if 'it is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared to be void.
The contract must be definite and its purpose should be to create a legal relationship. A contract creates an obligation i.e. a duty cast upon a person by law. When the parties to a contract exchange promises, it gives rise to a
Contractual obligation. .
For instance, when a person promises to sell his car to another person for a certain sum, the agreement gives rise to a legal obligation on the part of the former to deliver the car and on the part of the latter to pay the price. Such agreement thus becomes a contract.
Essentials of contract
At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree' and the person who accepts the offer is called the 'acceptor'. There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement. Both offer and acceptance should be lawful.
The parties must intend to create a legal obligation. The agreement sought to be enforced should contemplate legal relations between the parties to it.
A contract is basically a bargain between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party. This consideration may be past, present or future, but it must be lawful.
The parties making the contract must be legally competent in the sense that each must be of the age of majority, of a sound mind, and not expressly disqualified from contracting. An agreement by incompetent parties shall be a legal nullity.
The contracting parties must give their consent freely. 'Consent' means that the parties must agree about the subject matter of the agreement in the same sense and at the same time. Consent is said to be free if it is not induced by coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would affect the legal enforceability of a contract.
The object of the agreement must be lawful. An agreement is unlawful, if it is:- (i) illegal (ii) immoral (iii) fraudulent (iv) of a nature that, if permitted, it would defeat the provisions of any law (v) causes injury to the person or property of another (vi) opposed to public policy.
An agreement expressly declared to be void under the Contract Act or under any other law, is not enforceable and is, thus, not a contract. The Contract Act declares void certain types of agreements such as those in restraint of marriage, or trade, or legal proceedings as well as wagering agreements.
The terms of a contract must not be vague or uncertain. If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced. Also, the terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law.
Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with. For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.
Important steps in formation of contract are:
a) Proposal and its acceptance
b) Both parties must give free consent
c) There must be a lawful consideration which is enforceable under law
d) Both parties must be competent to contract i.e. they must be above the age of 18 years, must be of sound mind and must not be disqualified under law. [Section 11 of the Act]
e) The object of the contract should be lawful i.e. a contract to murder somebody is not enforceable under law.
f) There must be certainty and possibility of performance of the contract
The principles with regard to time and place for performance of a contract:-
• Where a contract states the time and place for its performance, the parties must perform accordingly.
• Where the contract does not specify any time for its performance, and the promisor has undertaken to perform without a request from the promisee, then it must be carried out within a reasonable time.
• Where the contract is to be performed on a certain day and the promisor has undertaken to perform without a request from the promisee, the promisor may perform it at any time during the usual hours of business on such day, at the specified place.
• When the promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business.
• When a promise is to be performed without a request by the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at such place.
Types of contracts
Express Contract
A contract wherein both the offer and acceptance are made in words spoken or written, is an express contract.
Implied Contract
A contract wherein the offer and or acceptance are implied from the acts and conduct of the panies is an implied contract.
Contingent Contract
A contract to do or not to do something, if some event, collateral to the contract does or does not happen, is a contingent contract. Thus, a contingent contract is one in which the performance becomes due only upon the happening of some event, certain or uncertain. A contract of insurance is the most prevalent example of contingent contracts. A contingent contract is enforceable only on the happening of the event. If the event becomes impossible, the contract becomes void.
Execllfed Contract
An executed contract is one in which both the parties have performed their respective legal obligations
Execlltory Contract
An executory contract is one in which both the parties have yet to perform their respective obligations
Contracts for Executed Consideration
A contract in which only once party has to fulfill his obligation at the time of the formation of the contract the other party having already fulfilled his obligation, is called a contract for executed consideration
Valid contract
A valid contract is an agreement duly enforceable by Law, with all the essential elements of a contract (enumerated earlier)
Voidable Contract
A voidable contract is one which is, enforceable by law at the option of one of the panies.' For instance, a contract in which the consent of one of the parties is obtained by coercion, undue influence, misrepresentation or fraud, is voidable at the option of the aggrieved party whose consent was so caused. Such a contract shall be a valid contract, until the aggrieved party exercises his option to rescind the contract
Void Contract
A contract becomes void when it ceases to be enforce¬able by law. A valid contract becomes void on account of subsequent impossibility, subsequent illegality or on repudiation of a voidable contract thus c
Quasi-contract
A quasi – contract is not a contract but it is based on equity. It is an obligation which is created by law in the absence of any agreement. Since there are certain terms resembling those of a contract, it is said to be a quasi – contract. The Indian Contract Act stipulates certain contracts as quasi contracts. They are:
a) When a person supplies necessaries to persons incapable of supporting themselves, for e.g. lunatics or minors, then he is entitled to be reimbursed. (Section 68)
b) When a person enjoys benefit of another person’s gratuitous act, he is bound under law to restore or compensate for the same. (Section 70)
c) A finder of goods is considered in a similar position of a bailee. Hence, a finder of goods must take care of the goods as a prudent man would do and also is rightful in asking for the expenses to find the owner of goods or claiming the prize money declared on the lost goods or person. (Section 71)
d) When goods or anything else is delivered by mistake or coercion, then the person to whom it is paid, must repay or return the same.
The law of contracts in India is contained in the Indian Contract Act, 1872, which lays down the general principles relating to formation, perform¬ance and enforceability of contracts and the rules relating to certain special types of contracts such as indemnity, guarantee, bailment, pledge and agency. The Act is, however, not a complete and exhaustive law; some of the special contracts such as those relating to partnership, sale of goods, negotiable in¬struments, insurance etc
Definition
A contract is defined as 'an agreement in which one party offers to do something for a consideration and the other party accepts that offer'. The bulk of the transactions in trade, commerce and industry are based on these contracts. In India, the Indian Contract Act,1872 is the governing legislation for contracts, which lays down the general principles relating to formation, performance and enforceability of contracts and the rules relating to certain special types of contracts like Indemnity and Guarantee; Bailment and Pledge, and Agency.
What is Contract?
As per the definition, a contract is an agree¬ment enforceable by law. It may be noted that the words 'agreement' and 'contract' are very often used as synonyms, but in fact they are not. All contracts are agreements but all agreements are not necessarily contracts; agreements not enforceable by law are not contracts
According to the Contract 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 a sound mind, and is not disqualified from contracting by any law to which he is subject". Thus, minors; persons of unsound mind and Persons disqualified from contracting by any law are incompetent to contract.
To be legally enforceable, the agreements must satisfy two things, viz.¬ intention to be bound and consideration. However, according to section 10, an agreement is a contract if 'it is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared to be void.
The contract must be definite and its purpose should be to create a legal relationship. A contract creates an obligation i.e. a duty cast upon a person by law. When the parties to a contract exchange promises, it gives rise to a
Contractual obligation. .
For instance, when a person promises to sell his car to another person for a certain sum, the agreement gives rise to a legal obligation on the part of the former to deliver the car and on the part of the latter to pay the price. Such agreement thus becomes a contract.
Essentials of contract
At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree' and the person who accepts the offer is called the 'acceptor'. There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement. Both offer and acceptance should be lawful.
The parties must intend to create a legal obligation. The agreement sought to be enforced should contemplate legal relations between the parties to it.
A contract is basically a bargain between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party. This consideration may be past, present or future, but it must be lawful.
The parties making the contract must be legally competent in the sense that each must be of the age of majority, of a sound mind, and not expressly disqualified from contracting. An agreement by incompetent parties shall be a legal nullity.
The contracting parties must give their consent freely. 'Consent' means that the parties must agree about the subject matter of the agreement in the same sense and at the same time. Consent is said to be free if it is not induced by coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would affect the legal enforceability of a contract.
The object of the agreement must be lawful. An agreement is unlawful, if it is:- (i) illegal (ii) immoral (iii) fraudulent (iv) of a nature that, if permitted, it would defeat the provisions of any law (v) causes injury to the person or property of another (vi) opposed to public policy.
An agreement expressly declared to be void under the Contract Act or under any other law, is not enforceable and is, thus, not a contract. The Contract Act declares void certain types of agreements such as those in restraint of marriage, or trade, or legal proceedings as well as wagering agreements.
The terms of a contract must not be vague or uncertain. If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced. Also, the terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law.
Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with. For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.
Important steps in formation of contract are:
a) Proposal and its acceptance
b) Both parties must give free consent
c) There must be a lawful consideration which is enforceable under law
d) Both parties must be competent to contract i.e. they must be above the age of 18 years, must be of sound mind and must not be disqualified under law. [Section 11 of the Act]
e) The object of the contract should be lawful i.e. a contract to murder somebody is not enforceable under law.
f) There must be certainty and possibility of performance of the contract
The principles with regard to time and place for performance of a contract:-
• Where a contract states the time and place for its performance, the parties must perform accordingly.
• Where the contract does not specify any time for its performance, and the promisor has undertaken to perform without a request from the promisee, then it must be carried out within a reasonable time.
• Where the contract is to be performed on a certain day and the promisor has undertaken to perform without a request from the promisee, the promisor may perform it at any time during the usual hours of business on such day, at the specified place.
• When the promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business.
• When a promise is to be performed without a request by the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at such place.
Types of contracts
Express Contract
A contract wherein both the offer and acceptance are made in words spoken or written, is an express contract.
Implied Contract
A contract wherein the offer and or acceptance are implied from the acts and conduct of the panies is an implied contract.
Contingent Contract
A contract to do or not to do something, if some event, collateral to the contract does or does not happen, is a contingent contract. Thus, a contingent contract is one in which the performance becomes due only upon the happening of some event, certain or uncertain. A contract of insurance is the most prevalent example of contingent contracts. A contingent contract is enforceable only on the happening of the event. If the event becomes impossible, the contract becomes void.
Execllfed Contract
An executed contract is one in which both the parties have performed their respective legal obligations
Execlltory Contract
An executory contract is one in which both the parties have yet to perform their respective obligations
Contracts for Executed Consideration
A contract in which only once party has to fulfill his obligation at the time of the formation of the contract the other party having already fulfilled his obligation, is called a contract for executed consideration
Valid contract
A valid contract is an agreement duly enforceable by Law, with all the essential elements of a contract (enumerated earlier)
Voidable Contract
A voidable contract is one which is, enforceable by law at the option of one of the panies.' For instance, a contract in which the consent of one of the parties is obtained by coercion, undue influence, misrepresentation or fraud, is voidable at the option of the aggrieved party whose consent was so caused. Such a contract shall be a valid contract, until the aggrieved party exercises his option to rescind the contract
Void Contract
A contract becomes void when it ceases to be enforce¬able by law. A valid contract becomes void on account of subsequent impossibility, subsequent illegality or on repudiation of a voidable contract thus c
Quasi-contract
A quasi – contract is not a contract but it is based on equity. It is an obligation which is created by law in the absence of any agreement. Since there are certain terms resembling those of a contract, it is said to be a quasi – contract. The Indian Contract Act stipulates certain contracts as quasi contracts. They are:
a) When a person supplies necessaries to persons incapable of supporting themselves, for e.g. lunatics or minors, then he is entitled to be reimbursed. (Section 68)
b) When a person enjoys benefit of another person’s gratuitous act, he is bound under law to restore or compensate for the same. (Section 70)
c) A finder of goods is considered in a similar position of a bailee. Hence, a finder of goods must take care of the goods as a prudent man would do and also is rightful in asking for the expenses to find the owner of goods or claiming the prize money declared on the lost goods or person. (Section 71)
d) When goods or anything else is delivered by mistake or coercion, then the person to whom it is paid, must repay or return the same.