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Agreements and contracts are two different things . It is
important to know first what constitutes a contract and what
A   is a legally binding agreement or
constitutes a n agreement. We will then study which
relationship that exists between two or more parties to do or
agreements are contracts, their distinction di fferent types of
abstain from performing certain acts.
agreements and contracts.
An  is a form of cross reference
      When one person signifies to
between different parties, which may be written, oral and
another his willingness to do or abstain from doing anything
lies upon the honor of the parties for its fulfillment rather
with a view to obtaining the assent of that other to such act
than being in any way enforceable.
or abstinence he is said to make a p roposal. 
   because there must be mutual
    When at the desire of the promisor the
understanding between two parties for a contract to be
promisee or any other person has done or abstained from
formed. All parties should agree and adhere to the ter ms and
doing, or does or abstains fro m doing or promises to do or to
conditions of an offer. The following cases illustrate ways in
abstain from doing something such act or ab stinence or
which all contracts are agreements; 1. In the case of
promise is called a consideration for the promise. 
invitation to treat, where an invitation to treat is merely an
Every contract consists of two parts - (1)Promise and
invitation to make an offer. 2. When a firm's offer is
(2)Consideration for the promise. Consideration is the cause
accepted it results into a contract provided other eleme nts of
of the promise. It is the most essential element of the
contracts are accepted.
contract. As a general rule, agreement without conside ration
      until avoided for example,
is void. The promise for a promise in return is consideration.
avoidable contract where one of the parties can withdraw
   : A agrees to sell his house to B for Rs 10,000.
from it if s/he wishes. This occurs due to minor agreement
Here A¶s promise to sell his house is for B¶s consideration to
and misrepresentation or undue influence. Considering a
pay Rs 10,000. Similarly B¶s promise to pay Rs 10,000 is for
case where person A make contract with person B but during
A¶s consideration to sell his house to B.
the contract period B realizes that he was engaged to

           perform an agreement under undue influence.
Every person is competent to contract who is of the age of
       because according to
majority according to the law to which he is subject, and
section 2(h) of the Indian Contract Act: " An agreement
who is of sound mind, and is not disqualifie d from
enforceable by law is a contract." A contract therefore, is an
contacting by any law to which he is subject. 
agreement the object of which is to create a legal obligation
   Parties to a contract must give their consent.
i.e., a duty enforceable by law. From the above definition,
The parties must be ad idem, for example both the parties
we find that a contract essentially consists of two elements:
must agree upon the same thing in the same sense. Two or
(1) An agreement and (2) Legal obligation i.e., a duty
more persons are said to c onsent when they agree upon the
enforceable by law. We shall now examine these elements
same thing in the same sense. Mere consent is not enough.
detail.
Consent of parties must be free, for example it must not have
1! ! As per section 2 (e): " Every promise and
been obtained (1) coercion, (2) undue influenc e, (3) fraud,
every set of promises, forming the consideration for each
(4) misrepresentation, or (5) mistake. 
other, is an agreement." Thus it is clear from this definition
        :
that a 'promise' is an agreement. What is a 'promise'? the
A void agreement is not enforceable by law (Sec 2(g)). It has
answer to this question is contained in section 2 (b) which
no legal sanctity. It does not give rise to any rights and
defines the term." When the person t o whom the proposal is
obligations. Various agreements are expressly declared void
made signifies his assent thereto the proposal is said to be
under the Act.
accepted. A proposal, when accepted, becomes a promise ."
      Oral contract is a valid contact.
An agreement, therefore, comes into existence only when
However the contract must be in writing and registered, if so
one party makes a proposal or offer to the other party and
required by any law, for example, gi ft, mortgage, sale, lease
that other party signifies his assent (i.e., gives his
under the Transfer of Property Act 1882, Memorandum a nd
acceptance) thereto. In short, an agreement is the sum total
Articles of Associ ation of a Company under the Indian
of 'offer' and 'acceptance'.
Companies Act, contract s under sub sections (10 and 3) of
On analyzing the above definition the following
section 25 of the Indian Contract Act, etc. Documents
characteristics of an agreement become evident:
specified under section 17 of the Indian Registration Act,
(a) At least two persons. There must be two or more persons
1908, are required to be registered..
to make an agreement because one person cannot inter into
   Agreements which create legal relations
an agreement with himself.
or are capable of creating legal relations are contracts, for
(b) Consensus-ad-idem. Both the parties to an agreement
example, an invitation to a d inner does not create any legal
must agree about the subject matter of the agreement in the
relation and therefore is not a contract. 
same sense and at the same time.
 : The terms of a contract should be clear. It must
2.   ! As stated above, an agreement to
not be vague. Contracts which are vague cannot be enforced.
become a contract must give rise to a legal obligation i.e., a
 
 
 Contracts based on
duty enforceable by law. If an agreement is incapable of
impossibility of performance are not valid. The contracts
creating a duty enforceable by law. It is not a contrac t. Thus
must be capable of being performed. 
an agreement is a wider term than a contract. " All contracts
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    A contract in order to be valid must
are agreements but all agreements are not contracts,"
be enforceable by law which element
Agreements of moral, religious or social nature e.g., a
distinguishes agreement and contract. It is en forceable by
promise to lunch together at a friend's house or to take a
law it is contract otherwise it is an agreement. The aggrieved
walk together are not contracts because they are not likely to
party should be able to obtain relief through law in the event
create a duty enforceable by law for the simple reason that
of breach of contract. An agreement can also be inferred
the parties never intended that they should be attended by
from correspondence exchanged between the parties. 
legal consequences.

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ßischarge of Contract
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"  !? ?  ? ? ? ?   ? impossibility Sec 56). The ICA provides f or the grounds
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?ënder the Indian Contract Act, a contract may be and where it is not acceptable. Situations under which it
is acceptable(performance is excused): destruction of
discharged under the following grounds:
subject matter, non existence of state of things,
1. 

 : A contract can be
death/incapacity, change of law, and outbreak of war.
discharged by actual performance or attempted
Situations where its not acceptable(performance not
performance. Actual performance occurs when parties to
excused): difficulty of performance, commercial
the contract fulfil their obligations precisely and
impossibility, failure of third party, failure of one of the
completely in accordance to the contract. Attempted
objects, and strikes and lockouts
performance or tender is offer to perform. (except f or
4 . #
 : The breach may be actual
tender of money), when the promissor offers to perform,
(during performance) or anticipatory (bef ore
and the promise refuses to accept, then tender is
performance). The repudiation can be express or implied.
equivalent to actual perfor mance
The party injured has a right to damages, as well as is
2 . " : ³Things may be destroyed
discharged by the contract.
in the same manner in which it is constituted´. It is
5 . $ 
  : The contract may be discharged
necessary f or the parties to the contract to mutually
by the occurrence of death, merger, insolvency,
agree to discharge the contract by agreement. The
unauthorised alteration, and when rights and liabilities
grounds for discharge by agreement are — : this is
devolve on the same party (eg. as in case of a bill of
mutual abandonment of the contract- no consideration is
exchange in the hands of the acceptor, the other parties
required,   : changes in terms of the contract,
are discharged).
ð
  : cancellation of some or all the terms = 
6.  
%: A contract may be discharged due to
   new contract with the same or a third party
lapse of time. This is governed by the Limitation Act
before the expiry of the contract, ð   : acceptance
1963. eg. if the creditor does not file suit f or recovery
of lesser fulfilment,  merger of inferior rights
within three years, then the ebt becomes time barred and
irrecoverable.