Contract

The law of contract is the foundation upon which the superstructure of modern business is built. It is
common knowledge that in business transactions quite often promises are made at one time and the
performance follows later. In such a situation if either of the parties were free to go back on its promise
without incurring any liability, there would be endless complications and it would be impossible to carry
on trade and commerce. Hence the law of contract enacted which lays down the legal rules relating to
promises: their formation, their performance, and their enforceability.

Object of the law of contract. According to Sir William Anson,” The law of contract is intended to ensure
what a man has been led to expect shall come to pass; that what has been promised to him shall be
performed.

The law of contract is applicable not only to the business community, but also to others. Every one enter
to a number of contracts of us almost every day, and most of the time we do so without realizing what
we are doing from the point of law, a person seldom realizes that when he entrusts his scooter to the
mechanic for repairs, he is entering in to a contract of bailment; or when he buys packet of cigarettes,
he is making a contract of sales of goods.

Definition of contract.” An agreement enforceable by law is a contract. A contract is therefore is an

agreement the object of which to create legal obligation i.e. a duty enforceable by law.

Essentials of a valid contract.

1. Agreement. (offer and acceptance) every promise or every set of promises, forming the
consideration of each other, is an agreement. There must be lawful offer and lawful acceptance
of the offer, thus resulting in an agreement. There must be two or more persons to make an
agreement because one person cannot enter in to an agreement with himself. Both the parties
to an agreement must agree about the subject-matter of the agreement in the same sense and
at the same time.
2. Intention to create legal relation. There must be an intention among the parties that agreement
should be attached by legal consequence and create legal obligation. Agreement of social or
domestic nature do not competence legal relation, and as such do not give rise to a contract.
Agreement to dine at friend’s house is not an agreement. Agreement between husband and
wife also lack the intention to create legal relationship and thus do not result in contracts.
3. Lawful Consideration. It is an essential element of valid contract. Consideration has been
defined as the price paid by one party for the promise of the other. An agreement is legally
enforceable only when each of the parties to it gives something. The something given or
obtained is the price for the promise and it is called ‘consideration’. Subject to certain
exceptions, gratuitous promises are not enforceable at law.
4. Capacity of parties. The parties to an agreement must be competent to contract, otherwise it
cannot be enforced by a court of law. In order to be competent to contract parties must be the
age of majority and of sound mind and must not be disqualified from contracting by any law. If
any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness etc. The
agreement is not enforceable at law, except in some special cases, in case of necessaries
supplied to a minor or lunatic, the supplier of goods is entitled to reimbursed from their estate.
5. Free consent. Consent means that the parties must have agreed upon the same thing in the
same sense. There is absence of free consent if the agreement is induced by (1) coercion, (2)
undue influence (3) fraud (4) miss-representation (5) mistake. If the consent obtained by first
four factors, the contract would be voidable and cannot be enforced by the party guilty, the
other party (aggrieved party) can either reject the contract or accept it. If the agreement is
induced by mutual mistake which material to the agreement, it would be void.
6. Lawful object. The object for which the agreement has been entered in to must not be
fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the
person or property of another. If the object is unlawful for one or the other of the reason
mentioned above the agreement is void.
7. Writing and registration. According to the contract act contract may be oral or in writing. But in
some cases valid contract must be in writing or /and registered, such as agreement to pay time
barred debt and agreement to make a gift for mutual love and affection.
8. Certainty. The terms of agreement must not be vague and uncertain. It must be possible to
ascertain the meaning of the agreement, for otherwise, it cannot be enforced. For A agrees to
sell B a hundred ton of oil but it fail to show which kind of oil, agreement is void for uncertainty.
9. Possibility of performance. Valid contract is that it must be capable of performance. ‘An
agreement to do an act impossible in itself is void. A agrees with B, to discover treasure by
magic. The agreement is not enforceable.

Practical problems

Attempt the following problems, giving reasons for your answers.

1. A invites B to a dinner. B accept the invitation. A made elaborate arrangement but B failed to
turn up. Can A sue for the loss he has suffered.
2. A agrees to pay B Rs 100 and in consideration B write for him 100 pages within 5 minutes, is it a
valid contract.