MB0051: Legal Aspects of Business
Many times, a point of issue between the parties to a dispute is not covered by any statute orcustom. In such cases, courts are required to apply the personal law of the parties. Thus, incertain matters, we follow the personal laws of Hindus, Mohammedans and Christians.
According to Section 2 (h) of the Indian Contracts Act, 1872, a contract is an agreement enforceableby law made between at least two parties as per which rights and obligations are mutually createdfor both parties. If the party who had agreed to do something fails to do that, then the other partyhas a remedy in law.
D Airlines sells a ticket on 1 January to X for the journey from Mumbai toBangalore on 10 January. The airline is under an obligation or duty to take X from Mumbai toBangalore on 10 January. In case the airline fails to fulfil its promise, X has the right to sue theairlines for breach of contract.
Section 2 (e) of the Contracts Act defines an agreement as every promise and every set of promisesforming a consideration for each other”. For an agreement, a promise becomes essential. Theword promise is defined by Section 2 (b) of the Contracts Act. In a contract, there are at leasttwo parties. One of them makes a proposal (or offer) to the other to do something with a viewof getting approval of the other to such an act. When the person to whom the proposal is madeprovides his/her assent, the proposal is said to be accepted. A proposal, when accepted,becomes a promise according to Section 2 (b).
Enforceability by law:
The agreement must be enforceable by law to become a contract. Thus,there are certain agreements that do not become contracts as the element of enforceability by law isabsent.
Essentials of a contract
Section 10 of the Contracts Act provides that all agreements are contracts if they are made by freeconsent of parties competent to contract for a lawful consideration with a lawful object and are notexpressly declared by law to be void. To constitute a contract, there must be an agreement betweentwo or more parties. One cannot enter into a contract with oneself. An agreement is composed of two elements – offer or proposal by one party and acceptance thereof by the other party. Effect of
Q2. What is a contract? Which test would you apply to ascertain whether an agreement is acontract?