CONTRACTS (PSDA)

Submitted to-
Dr. Isha Saluja

Submitted by-
Shiksha Gaur
Section – D
A3211122292
BA., LL.B ( HONS)
 ACKNOWLEDGEMENT
I would like to express my special thanks to my Professor Dr. Isha Saluja, who gave me this
wonderful opportunity to do this assignment which made me do lots of research and I came to
know about many things which further enhanced my knowledge base.
Secondly, I would also like to thank my parents and cousins who helped me in delivering
this assignment within the time limit.
THANK YOU
 MODULE 1: Formation of Contract

• Contract: meaning, nature, essentials and kinds

Definition of Contract- The term “contract” is defined in Section 2 (h) of the Indian
Contract Act,1872, as follows: “An agreement enforceable by law is a contract”.
Thus for the formation of a contract there must be – (1) an agreement, and (2) the agreement
should be enforceable by law.
Meaning of an Agreement - An Agreement is a promise between two entities creating
mutual obligations by law. According to section 2(e) of the Act, every promise and every set
of promises forming the consideration for each other is an agreement. In an agreement, there
are promises from both the sides. 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.
For Example: – ‘A’ promises to deliver his watch to ‘B’, and in return ‘B’ promises to pay a
sum of Rs. 2,000 to ‘A’. There is said to be an agreement between ‘A’ and ‘B’.

Section 2 (b) defines promise as-

“when the person to whom the proposal is made signifies his assent there to, the proposal is
said to be accepted. Proposal when accepted, becomes a promise”.
The following points emerge from the above definition :
1. when the person to whom the proposal is made
2. signifies his assent on that proposal which is made to him
3. the proposal becomes accepted
4. accepted proposal becomes promise
• Thus we say that an agreement is the result of the proposal made by one party to the
other party and that other party gives his acceptance thereto of course for mutual
consideration.
NATURE OF CONTRACT
The nature of contract is that it’s the branch of law which determines the circumstances in
which promises made by the parties to a contract shall be legally binding on them. It does not
lay down the duties and responsibilities which the law will enforce but It consists a number of
limiting principles, subject to which; the parties may create rights & duties for themselves
which the law will upload.

Nature of contract, a contract is an understanding enforceable at law, made between two or

more persons, by which rights are acquired on the one side to acts or forbearances on the
other. To make an agreement which results in a contract, there must be an offer and an
acceptance; and to the promises which stem from the offer and acceptance the law attaches a
binding force of obligation.
William Anson observed “ The Law of Contract” is intended to ensure that what a man has
led to expect shall come to pass and that what has been promised to him shall be perfomed.
• ‘The Law of Contract’ in India is contained in Indian Contract Act, 1872. This act is
based mainly on English Common Law consisting of Judicial Precedents. This Act is
not exhaustive as it does not deal with all the branches of Law of Contract.
• There are separate acts which deal with contracts relating to transfer of property, sale
of goods, partnership, etc.
• An agreement is a wider term than a ‘Contract’. Every contract is an agreement but
every agreement is not a Contract.
• An agreement becomes a contract when the following conditions are satisfied
(Section 10)-
1. Free Consent of Parties.
2. Competent to Contract.
3. Lawful consideration.
4. Lawful object.
5. Not declared to be void.
How a Contract is formed?
Contract is formed in 3 steps given below: –
Offer + acceptance = Promise
Promise + consideration = Agreement
Agreement + enforceable by law = Contract
BASIS OF AGREEMENT
DIFFERENCES
Meaning Every promise and every set
of promises,
forming the consideration
for each other.
Offer + Acceptance
Scope It’s a wider term including
both legal and
social agreement.
Legal obligation It may not create legal
obligation. An
agreement does not always
grant rights
to the parties
Nature All agreement are not
contracts.
CONTRACT
Agreement enforceable by
law.
Agreement + Legal
enforceability
It is used in a narrow sense
with the
specification that contract is
only legally
enforceable agreement.
Necessarily creates a legal
obligation. A
contract always grants
certain rights to
every party.
All contracts are
agreements.
KINDS OF CONTRACTS-
Contracts may be classified as follows-
On the basis of enforceability-
A.VALID CONTRACTS- Valid contracts must satisfy all the contract requirements, making it
legally binding and enforceable. These requirements include:
1.The making of offer and its acceptance, making it eligible for registration.
2.The existence of a legal relationship.
3.The existence of a lawful consideration and object.
4.The parties concerned are competent to form a contract.
5.Free consent of the parties.
6.Certainty in the terms of the contract.
7.The capability of performance (of the contract).
8.The contract hasn’t been expressly declared void under the contract laws.

B. VOIDABLE CONTRACTS- A contract is considered as voidable on the existence of an

agreement which is enforceable by law at the option of one or more of the parties concerned,
but not at the option of the others. In simple terms, at least one of the parties to the contract
must be bound to the terms specified in it. The other party, who could be a minor or is
temporarily incapable of a contract owing to other reasons, isn’t bound by it and may
repudiate or accept the terms of the contract. If the latter chooses to repudiate, the contract
becomes void.
For example: – If the consent is obtained by following ways the contract will be considered
as voidable at the party whose consent is obtained so by Coercion, Fraud, Undue influence or
Misrepresentation

C. VOID CONTRACTS-
A void contract is a formal agreement that is effectively illegitimate and unenforceable
from the moment it is created. 1. A void contract differs from a voidable contract, although
both may indeed be nullified for similar reasons. A contract may be deemed void if it is not
enforceable as it was originally written.
For example: – An agreement by a minor is considered as void agreement.
Key Differences Between Void Agreement and Void Contract
The following points are the difference between void agreement and void contract is
concerned: –

A void agreement is one, which according to law is neither enforceable nor it creates any
legal consequences. The void contract, on the other hand, is a contract which is valid at the
time of formation but becomes unenforceable, due to impossibility or illegality.
A void agreement is void since it has been created. As against this, a void contract is valid at
the time of creation but later on becomes void.
A void agreement is never valid, whereas a void contract is a valid contract, till it does not
lack enforceability.
A void agreement is void due to the absence of one or more necessary elements that result in
a contract. On the contrary, a void contract is one that becomes void due to the impossibility
of performance.
The void agreement does not satisfy the prerequisites of a valid contract, and because of this,
it is considered as void. Conversely, the void contract is one that fulfils all the requirements
of a valid contract, but cannot be enforced due to unexpected circumstances, thus becomes
void.
Restitution or restoration is not granted in the case of void agreement, although in certain
circumstances, restitution is permitted on equitable grounds. On the contrary, restitution is
granted to the concerned party when the valid contract, eventually becomes void.

D. ILLEGAL CONTRACTS- A contract is termed illegal by the court if:

• It allows one or all the parties to break the law or not adhere to society’s norms.
• It is opposed to public policy.
All illegal contracts can be void/voidable/valid, but it cannot be the other way around. For
example, party X may have a contract to sell narcotics to party Y, and the contract may be on
par with the essentials. Such a contract is valid on the basis of these essentials but is
otherwise illegal and non-enforceable by law. Parties in default of these contracts are legally
punishable.
For example: – An agreement to do an impossible act is void which is not opposed to public
policy. An illegal agreement is one which is not permissible by law. An illegal agreement is
void since very beginning.
 On the basis of mode of creation-
a. EXPRESS CONTRACTS- Where the offer or acceptance of any promise is made in
words,the promise is said to be express.
For examples- A has offered to sell his house and B has given acceptance. It is
Express Contract.
b. IMPLIED CONTRACTS- An implied contract is one which is inferred from the acts
of the parties or course of dealings between them. Sitting in a bus can be taken as
example to implied contract between passenger and the owner of the bus.

On the basis of mode of execution-

1. EXECUTED CONTRACTS- In a contract where both the parties have
performed their obligation.
Example- When a book seller sells a book on cash payment.
2. EXECUTORY CONTRACTS- Contract is said executory when either both the
parties to a contract have still perform their share of obligation or there remains
something to be done under the contract on both the sides.
Example- A agrees to coach B from the first day of the next month and B
promises to pay A Rs.500 per month.
 REFERENCES

I have taken all the information from internet websites and books.
• https://legalpaathshala.com
• https://www.studocu.com/in/login
• Book- Law of Contract and Specific Relief by Avtar Singh