LL.B.(Hons.

) SEMESTER-1, CONTRACT– I
UNIT 1- FORMATION OF CONTRACT

SYLLABUS:- Unit I

i. Meaning and Nature of Contract

ii. Offer/Proposal: Definition, Communication, Revocation, General/Specific offer,
Invitation to treat

iii. Acceptance: Definition, Communication, Revocation, Provisional acceptance, Tenders/Auctions

LECTURE-1

TOPIC :- MEANING AND NATURE OF CONTRACT

YOUTUBE LINK :- https://youtu.be/61sokdyTgsQ

PREVIOUS YEAR IMPORTANT QUESTIONS-

1. All contracts are agreement but all agreements are not contract. Comment..(2017)
2. “All contacts are agreement but all agreements are not contract.” Explain this statement and discuss in brief the
essential elements of valid contract. (2019)

NOTES:-

 Contract general-

Every one of us enters into various contracts in his daily life although be may seldom realise it. When a person buys a
pen, lends a book to his friends, takes a seat in a bus or goes to a restaurant and has snacks, in all these and many
similar situations a contract is need. Also many contracts are entered into buy businessman in individual course of
carrying on the business. Thus the Law of Contract is applicable not only to business community but also to others. It
touches every aspect of our life.

 MEANING OF CONTRACT
 Under section 2 (h) of ICA- A contract is an agreement, which is enforceable by law.
 In the case of contract each party is legally bound by the promise made by them.
 Contract is formed in 3 steps given below: –

 Offer + acceptance = Promise

 Promise + consideration = Agreement
 Agreement + enforceable by law = Contract

 NATURE OF CONTRACT
 Freedom of contract-parties must be free to outline terms, conditions and terms of their contract .
 Sanctity of contract- parties are bound to perform and honour the terms of the contract which must
be enforceable in law .
 Good faith-parties must show highest form of honesty and seriousness to the contract. Must not act
mala fide or have bad intentions).
 Privity of contract - contract must create rights and duties to the parties themselves not third
party.

 An agreement is a wider concept then contract where as all contracts are agreements but all agreements are not
contract.

All contracts are agreements , but all agreements are not contracts
  What are the essentials of a valid contract? (Section 10)
1. Proposal and acceptance: – A valid contract must include at least two parties identified by the
contract. One of these parties will propose the offer and the other party will eventually accept it.
2. Agreement : – There is an agreement that is the foundation of a contract.
3. Free consent: – The parties must agree on the same thing in the same sense and at the same time. If the
agreement is not free, the contract is void. Consent of the parties must be genuine. A consent is said to be
free when it is not caused by coercion ,undue influence ,fraud, misrepresentation or mistake.
4. Intention to create a Legal Relationship: – There should be an intention by both parties to form a legal
relationship and to bind themselves legally as a result of such agreement.
5. Contractual Capacity: – According to the Indian contract Act, every person is capable of entering into a
contract, if he or she: –
o is of the age of majority;
o is of sound mind; and
o is not disqualified from contracting by any law.
6. Lawful Consideration: – Something in return is a consideration. . It must be valid and genuine. Consideration
must not be unlawful, immoral or opposed to the public policy.
7. Lawful Object: – Section 23 says object of an agreement should be lawful and legal. Two person
cannot enter into an agreement to do a criminal act.
8. Possibility of performance:- The terms of the agreement should be capable of performance. An
agreement to do an act, impossible in itself cannot be enforced.
9. Not declared void:- The agreement should be such that it should be capable or being enforced by
law. Certain agreements have been expressly declared illegal or void under Indian contract act .
(Example- section 25-30)
10. Necessary legal formalities:- A contract may be oral or in writing. Where a particular type of
contract is required by law to be in writing and registered, it must comply with necessary formalities
as to writing, registration and attestation. If legal formalities are not carried out then the contract is
not enforceable by law.

 KINDS OF CONTRACT

 According to Enforceability

1. Valid Contract :- A valid contract is an agreement enforceable by law. we can say an agreement is a valid
contract when all the essential elements of the contract is fulfilled.
2. Void Contract :- A contract is called void which cannot be enforced by law. when a contract is made but after
its formation it becomes void due to impossibility of performance.
3. Voidable Contract:- When an agreement is enforceable by law at the option of one of the parties to agreement,
but not at the option of the other party of the contract, is called voidable contract.

 According to Formation

1. Express Contract:- An agreement is called express when it is made by words.

2. Implied Contract:- Implied contract is which that is made other than words.

ASSIGNMENT

1. When does an agreement becomes contract?

2. Under which section contract is defined?
3. What is the essentials of valid contract?
4. State difference between express and implied contract.
5. State whether the following statement is true or false.

-“All agreements are not contract but all contracts are an agreement” .
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