OVERVIEW

The word ‘contract’ may be defined as ‘an agreement

enforceable by law’.
In other words, a contract is an agreement which is
legally binding between the parties.
A contract is an agreement between two or more
persons which creates an obligation to do or not to
do a particular thing.

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 OVERVIEW
The Contract Act lays down the rudiments of the
concepts of offer, acceptance and consideration.
A contract in a legally binding agreement made
between two or more parties whereby one party
undertakes specific obligations and the other party
enjoys specific rights by virtue of that agreement.

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CONCEPTS OF OFFER, ACCEPTANCE
AND CONSIDERATION
Where one party makes an offer and another party
accepts the offer, it becomes a promise.
(S. 2 (b) of Contract Act 1950)
The offer is made by the promisor AND the
acceptance is made by the promisee.
(S. 2 (c) of Contract Act 1950)

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 Example
A offers to sell his house to B for RM100,000.

A (the promisor) makes an offer.

B (the promisee) accepts the offer.

B or any other person can

give the consideration
(RM100,000).
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 EXPLANATION
Where there is a promise (an offer and acceptance),
and consideration is given by the promisee or any other
person, an agreement is formed.
(S. 2 (e) Contract Act 1950)

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 CONTRACT ACT 1950
If the agreement is made with free consent of parties
competent to contract, for a lawful consideration and
with lawful object, the agreement is enforceable and
becomes a contract.
(S. 2 (h) and 10 (1) Contract Act 1950)

An agreement enforceable by law is a contract.

(S. 2 (h) Contract Act 1950)

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 CONTRACT ACT 1950
All agreements are contracts if they are made by the
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.
(S. 10 (1), Contract Act 1950)

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 CONTRACT ACT 1950
S. 10 (2), Contract Act 1950
Contract need not be:-
ØIn writing
ØIn presence of witnesses
ØRegistered

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 PRINCIPLES
4 important principles which flow out from the above
definition:
i. there must be an agreement - there must be the meeting
of the minds;
ii. the parties must intend that their agreement is legally
binding;
iii. the agreement (gives rights and obligations) to the
parties;
iv. the agreement is (recognized and enforced by law)

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 ELEMENTS OF CONTRACT
Every contract is only valid and enforceable if it
contains:
i. there is proposal made by one party;
ii. there is acceptance of that proposal by the other party;
iii. there is consideration;
iv. there is intention to create legal relations;
v. the terms of the agreement are certain;
vi. there is legal capacity;
vii. there is consent;
viii. there is legality of the objects; and
ix. the agreement must by capable of performance.
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 CONCLUSION
A contract is an agreement but not all
agreements are contracts.
Examples of agreements that are not contract
are those so-called domestic and social
agreements.

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