THE INDIAN CONTRACT ACT, 1872Contract
– Sec.2 (h) – an agreement enforceable by law – give rise to legalobligation. Social obligation, no contract.
– Sec.2 (e) -
every promise and set of promises, forming consideration for each other. Proposal – assent thereto – proposal accepted - promise – agreement.
Consensus ad idem:
meeting of minds in full and final agreement – agree upon thesubject matter of the agreement in same sense and at the same time. No consensus adidem - no contract.Example: A offers to sell his old Fiat car to B. B thinks that he is purchasing A’s newScoda car. There is no consensus ad idem and consequently no contract.
Essential characteristics of a valid contract:
1.Offer and acceptance – two parties, one making the offer and other acceptingit – offer must be definite – acceptance must be absolute and unconditional – acceptance must be communicated to the offeror.2.Intention to create legal relationship – intention of parties to the agreement tocreate legal relationship must – no such intention, no contract – social or domestic agreements do not contemplate legal relationship, as such nocontract.
Balfour v Balfour
– husband promises to pay household allowance to wife – separated – wife sues for allowance – domestic agreement – no contract.
V.Rao Vs. A. Rao
– old widow asked her niece to move in with her - promisedto will some property in exchange – niece moved in and stayed till widow’sdeath – Held, intention to create a legal relationship – niece entitled to share in property.
Rose & Frank Co. v Crompton Bros.
– agency agreement between R and C -clause in agreement stated that agreement not entered into as formal or legal – not subject matter of legal jurisdiction – no intention to create legalrelationship - no contract.3.Lawful consideration - both parties give and get something in return – noconsideration, no contract - consideration may be past, present or future – incash or in kind – must be real and lawful.4.Competent parties – must have attained age of majority – of sound mind – notdisqualified by any law – so, minor, lunatic, idiot, drunkard, etc not competentto contract.5.Free and genuine consent – parties are of same mind when they agree aboutthe subject matter in same sense and at the same time – if induced by coercion,undue influence, fraud, misrepresentation, etc, there is no free consent - nocontract.