AGREEMENT. SOLUTION: The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the contracting parties. Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1st September, 1872. It extends to the whole of India except the state of Jammu and Kashmir. SUBMITTED TO MS. POONAM LUTHRA LECTURER (B. LEGISLATION)


A contract is an agreement enforceable by law .

CONTRACT = AGREEMENT (+) ENFORCEABILITY BY LAW All contracts are agreements but all agreements are not contracts AGREEMENT [SECTION 2(e)]: An agreement means, Every promise or every set of promises, forming consideration for each other . AGREEMENT = PROMISE(S) BY ONE PARTY (+) PROMISE(S) BY THE OTHER PARTY PROMISE [SECTION 2(b)]: When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. PROMISE = PROPOSAL + ACCEPTANCE However, promise cannot be one sided. Only a mutual promise forming consideration for each other is agreement . - - For example, A agrees to pay Rs 100 to B and B agrees to give him a book which is priced at Rs 100. This is set of promises which form consideration for each other. However, if A agrees to pay Rs 100 to B, but B does not promise anything, it is not set of promises forming consideration for each other and hence not an agreement.

PROPOSAL/OFFER [SECTION 2(a)]: A person is said to make a proposal when he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence CONSIDERATION [SECTION 2(d)]: When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something, such act or abstinence is called consideration . In other words, consideration is something in return. It should be noted that the term agreement as defined in Contract Act requires mutual consideration. - - Thus, if A invites B to dinner and B agrees to come, it is not an agreement as defined in Contract Act. Hence on the basis of following following essentials are needed to make all the agreements to be a contract. According to Section 10, All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void . The essential elements of a valid contract are: Agreement: To constitute a contract there must be an agreement. There must be two parties to an agreement, i.e. one party making an offer (offeror) and the other party accepting the offer (offeree). Intention to create legal relationship: When the two parties enter into an agreement, there must be an intention by both parties to legally bind the other as a result of such agreement. Thus, agreements of social or household nature are not contracts. Capacity of parties (competence): The parties to the agreement must be capable of entering into a valid contract. According to Section 11, every person is competent to contract if he or she, 1. is of the age of majority; 2. is of sound mind; and 3. is not disqualified from contracting by any law to which he is subject. Lawful Consideration: An agreement to form a valid contract should be supported by consideration. Consideration means something in return (quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future. However, consideration should be real and lawful. Free consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake.

Lawful object: The object of the agreement must not be illegal or unlawful. Section 23: According to Section 23, the consideration or object of an agreement is lawful, unlessIt is forbidden by law; or Is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or Involves or implies, injury to the person or property of another; or The court regards it as immoral, or opposed to public policy.

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