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510922671 Nilanchal Sahu
AssignmentSubject Code-ML0035
Q-1 All contracts are agreement but all agreement are not contracts
Answer; A
contract
is a legally binding agreement or relationship that exists between twoor more parties to do or abstain from performing certain acts. A contract can also be definedas a legally binding exchange of promises between two or more parties that the law willenforce. For a contract to be formed an offer made must backed acceptance of which theremust be consideration. Both parties involved must intend to create legal relation on a lawfulmatter which must be entered into freely and should be possible to perform.An
agreement
is a form of cross reference between different parties, which may bewritten, oral and lies upon the honor of the parties for its fulfillment rather than being in anyway enforceable.
All contracts are agreement
because there must be mutual understanding between twoparties for a contract to be formed. All parties should agree and adhere to the terms andconditions of an offer.
The following cases illustrate ways in which all contracts are agreements
;In the case of invitation to treat, where an invitation to treat is merely an invitation to makean offer. When a firm's offer is accepted it results into a contract provided other elements of contracts are accepted.Considering person A buying a radio on hire purchase from person B who deals withelectronics and its appliances. Both parties must come to an agreement on payment of monthly installment within specified period of time. Such an agreement result to specialtycontract which a contract under seal.
All
 
contracts are agreement
until avoided for example, avoidable contract where one of the parties can withdraw from it if s/he wishes. This occurs due to minor agreement andmisrepresentation or undue influence. Considering a case where person A make contractwith person B but during the contract period B realizes that he was engaged to perform anagreement under undue influence.
Definition of contract
 According to section 2(h) of the Indian Contract Act: " An agreement enforceable by law is acontract." A contract therefore, is an agreement the object of which is to create a legalobligation i.e., a duty enforceable by law.From the above definition, we find that a contract essentially consists of two elements: (1)An agreement and (2) Legal obligation i.e., a duty enforceable by law. We shall nowexamine these elements detail.1
. Agreement.
As per section 2 (e): " Every promise and every set of promises, formingthe consideration for each other, is an agreement." Thus it is clear from this definition that a
 
510922671 Nilanchal Sahu
'promise' is an agreement. What is a 'promise'? the answer to this question is contained insection 2 (b) which defines the term." When the person to whom the proposal is madesignifies his assent thereto the proposal is said to be accepted. A proposal, when accepted,becomes a promise."An agreement, therefore, comes into existence only when one party makes a proposal oroffer to the other party and that other party signifies his assent (i.e., gives his acceptance)thereto. In short, an agreement is the sum total of 'offer' and 'acceptance'.On analyzing the above definition the following characteristics of an agreement becomeevident:(a) At least two persons. There must be two or more persons to make an agreementbecause one person cannot inter into an agreement with himself.(b) Consensus-ad-idem. Both the parties to an agreement must agree about the subjectmatter of the agreement in the same sense and at the same time.2.
L
egal obligation.
As stated above, an agreement to become a contract must give rise toa legal obligation i.e., a duty enforceable by law. If an agreement is incapable of creating aduty enforceable by law. It is not a contract. Thus an agreement is a wider term than acontract. " All contracts are agreements but all agreements are not contracts,"Agreements of moral, religious or social nature e.g., a promise to lunch together at afriend's house or to take a walk together are not contracts because they are not likely tocreate a duty enforceable by law for the simple reason that the parties never intended thatthey should be attended by legal consequences
Essential Elements of a Valid Contract
 A contract has been defined in section 2(h) as "an agreement enforceable by law." To beenforceable by law, an agreement must possess the essential elements of a valid contractas contained in sections 10, 29 and 56. According to section 10, all agreements arecontracts if they are made by the free consent of the parties, competent to contract, for alawful consideration, with a lawful object, are not expressly declared by the Act to be void,and where necessary, satisfy the requirements of any law as to writing or attention orregistration. As the details of these essentials form the subject matter of our subsequentchapters, we propose to discuss them in brief here.The essential elements of a valid contract are as follows.1. Offer and acceptance. There must a 'lawful offer' and a 'lawful acceptance' of the offer,thus resulting in an agreement. The adjective 'lawful' implies that the offer and acceptancemust satisfy the requirements of the contract act in relation thereto.2. Intention to create legal relations. There must be an intention among the parties that theagreement should be attached by legal consequences and create legal obligations.Agreements of a social or domestic nature do not contemplate legal relations, and as suchthey do not give rise to a contract. An agreement to dine at a friend's house in not anagreement intended to create legal relations and therefore is not a contract. Agreements
 
510922671 Nilanchal Sahu
between husband and wife also lack the intention to create legal relationship and thus donot result in contracts.Try to work out the solution in the following cases and then go to the answer.3. Lawful consideration. The third essential element of a valid contract is the presence of 'consideration'. Consideration has been defined as the price paid by one party for thepromise of the other. An agreement is legally enforceable only when each of the parties to itgives something and gets something. The something given or obtained is the price for thepromise and is called 'consideration' subject to certain exceptions; gratuitous promises arenot enforceable at law.The 'consideration' may be an act (doing something) or forbearance (not doing something)or a promise to do or not to do something. It may be past, present or future. But only thoseconsiderations are valid which are 'lawful'. The consideration is 'lawful'. unless it is forbiddenby law; or is of such a nature that, if permitted it would defeat The provisions of any law; oris fraudulent; or involves or implies injury to the person or property of another; or isimmoral; or is opposed to public policy (sec.23).4. Capacity of parties. The parties to an agreement must be competent to contract. But thequestion that arises now is that what parties are competent and what are not. Thecontracting parties must be of the age of majority and of sound mind and must not bedisqualified by any law to which they are subject (sec.11). If any of the parties to theagreement suffers form minority, lunacy, idiocy, drunkenness etc. The agreement is notenforceable at law, except in some special cases e.g., in the case of necessaries supplied toa minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (sec68).5. Free consent. Free consent of all the parties to an agreement is another essentialelement. This concept has two aspects.(1) consent should be made and (2) it should be freeof any pressure or misunderstanding. 'Consent' means that the parties must have agreedupon the same thing in the same sense (sec. 13). There is absence of 'free consent,' if theagreement is induced by (i)coercion, (ii) undue influence, (iii) fraud, (iv) mis-representation, or (v) mistake (sec. 14). If the agreement is vitiated by any of the first fourfactors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence etc. The other party (i.e., the aggrieved party) can either rejectthe contract or accept it, subject to the rules laid down in the act. If the agreement isinduced by mutual mistake which is material to the agreement, it would be void (sec. 20)6. Lawful object. For the formation of a valid contract it is also necessary that the parties toan agreement must agree for a lawful object. The object for which the agreement has beenentered into must not be fraudulent or illegal or immoral or opposed to public policy or mustmot imply injury to the person or the other of the seasons mentioned above the agreementis void. Thus, when a landlord knowinglylets a house to a prostitute to carry on prostitution,he cannot recover the rent through a court of law or a contract for committing a murder is avoid contract and unenforceable by law.7. Writing and registration. According to the Indian contract Act, a contract to be valid,must be in writing and registered. For example, it requires that an agreement to pay a timebarred debt must be in writing and an agreement to make a gift for natural love andaffection must be in writing and registered to make the agreement enforceable by law whichmust be observed.

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