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Contract:

Introduction:

In our daily lives, we come across contracts so many times without even realizing it.

Be it buying goods from a shop, availing cable services or installing an app on our phone,

contracts are everywhere. Contracts are an essential part of the business. Every transaction in

some way or the other uses contracts, whether written or verbal. Contracts in Pakistan are

governed by the Pakistan Contracts Act, 1872. The Act extends to the whole of Pakistan.

Definition:

“An agreement enforceable by law”.

Or

“A contract is an exchange of promises between two or more parties to do, or refrain

from doing,which is enforceable in a court of law”.

Pre-requisites Of Contract:

Introduction:

Pre-requisite means important elements of a contract, a contract must contain seven

elements. While more specific requirements may differ by state, the basics of contract law

require that these seven elements exist regardless of where the contract is formed. If even one is

missing, a contract may be voided and the parties will be excused from any obligations.

These are;

 Offer/Proposal.

 Acceptance.
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 Consideration.

 Competence/Capacity.

 Mutual Consent.

 Legality.

 Writing.

Offer / Proposal:

Definition:

Section 2a of Contract act defines,”when one person signifies to another his

willingness to do or abstain from doing anything, with a view to obtaining the assent of that to

such act or abstinence,he is said to make a proposal or offer”.

Ingrediants:

 Offer must be given with an intention to create legal relationship.

 Expression of opinion,preliminary negotiations are not offers.

 Offer must be absolute.

 Offer must be communicated.

 Mere statement of price of a piece is not an offer.

Explanation:

An offer is the beginning of a contract. One party must propose an arrangement to the

other, including definite terms. An offer can be made by express words, spoken or written,An

offer can also be made by conduct of parties and also an offer can be made to a specific person or

group of person or to the public at large.

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Example:

If the proposal is an offer to purchase shirts, it must include quantity, price and a delivery date. When the

offer is communicated to the other party, he has the right to accept, reject or amend the offer. If he rejects

it, the offer dies. If he amends the offer, the original offer dies and his amendments become a new

counteroffer that the other party can accept or reject.

Acceptance:

Definition:

Acceptance is “the expression by the offeree of his willingness to be bound by terms

of the offer”.

Ingrediants:

 Mirror image rule,offeree must unequivocally accept offer.

 It must be given as per the mode prescribed by the offerer.

 It must be given before the lapse of time or within reasonable time.

 It can be given by any person in case of general offer.

 It must be communicated.

Explanation:

An offer can be accepted in writing, in person or over the phone and it must not be

derived from silence. The acceptance must simply be communicated to the offering party, with

an obvious declaration that the accepting party intends to be bound by the buyer's terms. Under

the "Mailbox Rule" used in most states, an offer is deemed accepted when the accepting party

places it in a mailbox or sends an email, even if the offering party never actually receives it.
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Acceptance may be express or implied

Example:

Acceptance by conduct: A trader receives an order from a customer and executes

the order by sending the goods. This is acceptance through conduct.

Implied Acceptance: A enters a bus for traveling to his destination and takes a

seat.This is implied acceptance on the part of A.

Consideration:

Definition:

Section 2 (d) defines “When, at the desire of the promisor, the promisee or any other

person (i) has done or abstained from doing or (ii) does or abstains from doing,or (iii) promises

to do or to abstain from doing, something, such act or abstinence or promise is called a

consideration for the promise”.

Ingrediants:

 It is a value given in return for a promise.

 That is bargained for exchange between the parties.

 It must be real not illusiory.

 It must not be illegal,immoral or opposed to public policy.

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Explanation:

Consideration is considered something of value and usually, it's a defined monetary

amount. But if you offer to provide your knowledge and expertise to an employer, you would

still be giving consideration. In Pakistan consideration may be past and not necessarily present or

future as in England.A past consideration,if given at the request of the promisor,will support a

subsequent promise; the general rule now pprevailing in England is that “every promise,express

or implied,in order to be binding, must be made in contemplation of a present or future benefit to

the promisor”.The only exception according to Anson being when the past act is done at the

request of the promisor and the request is virtually an offer of promise,the precise extent of

which is hereafter to be ascertained or is so clearly made in contemplation of a promise to be

given by the maker of the request,that such a promise may be regarded as apart of the same

transaction..

Executed and Executory:

Consideration is said to be executory when it is a promise given for a promise;it is said

to be executed when it is an act consistituting at once the proposal or acceptance and the

consideration given for it.

Example:

X agrees to sell his car to Y for Rs.600,000 here Y’s promise to pay Rs.600,000 is the

consideration for X’s promise to sell his car and X’s promise to sell the car is the consideration

for Y’s promise to pay Rs.600,000.

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Competence/Capacity:

Introduction:

Every person is competent to contract and if any one claims to be incompetent to enter

into contract, he must prove such incapacity.

Ingrediants:

 He/she must be major.

 He/she must be of sound mind.

 He/she must not be disqualified by any other law.

 There is lawful consideration.

 There is lawful objects.

Explanation:

Competence, also called legal capacity, is a party's ability to enter into a contract. The

most common reason for incompetence is age. A party must be at least 18 years old to enter into

a contract or according to the law to which he is subject.If a minor signs a contract, she has the

right to cancel it. Another reason for incapacity is mental illness. A person incapacitated by a

disease or disability, who does not understand the terms of a contract he entered, has the right to

rescind his acceptance of an offer, voiding the contract. Lastly, a person under the influence of

drugs or alcohol may be considered incompetent if the other party knew or should have known

that the person's impairment affected his ability to understand and freely consent to the contract.
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Example:

X a minor borrowed Rs.8000 from Y and executed mortgage of his property in favor of

lender.This was not a valid contract because X is not a competent to contract.

Consent:

Definition:

Section 13 defines Consent as “Consent means that two or more persons agree upon

the same thing in the same sense”.

Ingrediants:

 Meeting of person mind upon the same thing same sense.

 Both the parties must give there consent voluntarily.

Explanation:

Consent contract law relates to how the parties in a contract understand the terms of

the agreement.Consent is one of three important elements that makeup a legal contract.A

contract cannot be valid or legally binding unless consent is given under pressure.If one or both

parties provided their consent under duress,the contract will not be legal but if there is undue

influence or duress,it is presumed that it is not possible for the parties to have freely given their

consent.both can cause a contract to voidable. Meaning thereby Consensus ad idem is present i.e.

meeting of minds is there.

Clearly, Free Consent means the absence of any kind of coercion, undue influence, fraud,

misrepresentation or mistake. When the consent which is given is affected by these elements it
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calls into question whether the consent given was free and voluntary. The objective of this

principle is to ensure that judgment of the parties while entering into the contract wasn’t clouded.

Example:

A agrees to sell House No. 1 to B, whereas B thinks that A is proposing to sell House

No. 2. So there is no meeting of mind as consent on same item is missing.

Legality:

A contract is only enforceable if the activity in the contract is legal  the contract terms

must adhere to the laws and regulations in the state where the contract exists.

Ingrediants:

 Contract is valid if the object and the consideration are legal.

 Any agreement must not be forbidden by law.

 An moral agreement.

 An agreement not to create damage to person or property.

 Contract must be made by free consent of the parties.

Expalanation:

Contracts cannot be created to govern the trade of illegal products or services.it meana

that the object of entering an agreement should not be illegal or immoral against the public
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policy.Each party must show legal intent, meaning that they intend for the results of their

agreement to be completely legal. If there is no intention to create legal relationship, there is no

contract between parties. 

Example:

A,B and C,reach an agreement regarding the division of grain amongst themselves.This

grain which they have divided,they intend to get by fraud.The object of the agreement is

unlawful therefore it would be declared void.

Writing:

Introduction:

Not all contracts need to be in writing, but under the Statute of Frauds, certain contracts

must be in writing in order to be enforceable. A written contract is required for all transactions

involving real estate (i.e., lease or sale of a home), any promises to marry, any agreements to pay

a third party's debt and any transaction in which performance cannot be completed within one

year of the contract signing.

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Ingrediants:

 It need not to be evidenced in a signal document.

 It’s not necessary for existence that party should put signatures.

Explanation:

A written agreement is a instrument whereby parties perform the act declaring their

consent as to any act or thing to be done by some or one of those persons for the use of the

others,or other of them through the process of writing.it does not need always be a contract

signed by both parties,and may consist of exchange of correspondence of a letter,written one and

assented to,by promisor without signature.

Conclusion:

At last we have concluded that a contract must have these seven elements without these

elements it will not be so called a contract.As a contract must be made with an offer, lawful

consideration,lawful objects,by the free consent of the both parties,the parties must not be

minor,he will attain the age of majority or the age prescribed by the law and also it will be in

written form.