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PRATIK DASGUPTA ROLL-10202153 SEC-C MBA-1
UNDER THE GUIDANCE OF PROF(DR) P.K.PATTNAIK(V.F) LAB
In case the Airlines fails to fulfill the promise.with a view to obtaining the assent of that other to such act.Thus.which have their source in agreement are contractual.e. As for example-Airlines sells a ticket on 1 January from Mumbai to Bangalore on 10 January.Mr.Only those legal obligations.When the person to whom the proposal is made signifies his assent thereto.A proposal when accepted becomes a promise. Enforceability by law-The agreement must be such which is enforceable by law so as to become a contract.made between at least two parties by which rights are acquired by one and obligation are created on the part of another.The Airlines is under an obligation to take Mr. So contract =Agreement+ Legal Obligation . For example.ELEMENTS OF CONTRACT It is very important for managers to know some Legal Aspect Of Business happening in day to day life.the other party to the contract(I.there are certain agreements which do not become contracts as this element of enforceability by law is absent. Contract essentially consists of two elements: Agreement Enforceability by law.but nevertheless it is actionable by law.an agreement to go for a stroll together or for a picnic does not become a contract.If the party which had agreed to do something.Mr.fails to do that.Mr.In a contract there is atleast two parties.A corresponding duty is imposed on the Airlines.Mehta has a remedy against it.to do something.As there is a breach of promise by the promisor(The Airlines)..Thus a legal obligation not to create a nuisancefor others does not give rise to contract.Mehta)has a legal remedy.The person making the proposal is called ‗promisor‘and the person accepting the proposal is called ‗promisee‘.Further all legal obligations are not contractual.Every day we fall into contract with one another.pratikh So what is contract? A contract is an agreement.So it is very important to have a idea about contracts as a manager of an organization.enforceable by law.Thus .mehta from Mumbai to Bangalore on 10 January.neither rights nor obligations are created on the part of the parties to the agreement. Agreement-―Every promise and every set of promise forming consideration for each other‖ according to sec2(e).Before coming into elements of contract we should know what is contract.Mehta has a right against the Airlines to be taken from Mumbai to Bangalore on 10 January.one of them makes a proposal (or an offer) to the other.the proposal is said to be accepted.and therefore .then the other party has the remedy.
There must be an intention to enter into a legally binding contract. lets assume a mischief maker has switched price tags so that the latest cd by the hottest jazz sensation is priced at Rs. it can not be accepted unless the person making the offer has renewed it. However.00. acting reasonably. However. Agreement is essential to any contract. If there is no time limit by which the offer must be accepted.5. that is. in law. would an objective bystander. The acceptance must be clear and absolute and without conditions attached. The display of the merchandize does not constitute an offer waiting for a customer to walk in and accept the offer.5. this is an offer which on acceptance will form a contract. If I then cut the lawn. The objective bystander must be able to determine that the offer has been accepted.00. But a lot of people may not be aware of what are the essential elements required to make an enforceable contract. Rather. Without both an offer and an acceptance. If I make the statement to you "I will cut your lawn for Rs. there is a contract between the party. A good illustration is the display of merchandize at a store with a price tag.00". An offer can be withdrawn before acceptance unless one of the terms of the offer is that it will remain open for acceptance . If I proceed to cut the lawn as a result.5. Rather. not merely expressing a general intent to enter into a contract and inviting an offer in keeping with the general intent. In response to my offer to cut the lawn. To illustrate this. then the law requires the offer be left open for acceptance for a reasonable period of time. Most offers contain a time limit within which the offer can be accepted. The offer must be more than just an "invitation to treat". Recently I was asked if a contract not in writing is binding. At that point.Essentials of contract Our whole economy is based on the freedom of individuals to contract and a system of laws that enforces contracts freely entered into. Once the offer has expired. "I accept". to say that the item is mislabelled and will not be sold for that price. it is an invitation to treat by the store owner. there are no particular words that must be used by the parties. The offer must be expressed in a manner capable of acceptance without anything further required of the person receiving the offer other than to indicate acceptance. The offer must be accepted before it is withdrawn. We are so accustomed to seeing contracts in writing that many people assume that a contract must be in writing (and lengthy) before it is enforceable. Acceptance is simply some indication by the person receiving the offer that the offer is accepted. your response "That sounds like a good deal" is not acceptance. To form a contract. there must be a consensus ad idem: that is. It must also be clear that the person making the offer is prepared to be bound by the terms if the offer is accepted. the merchant is free to accept the offer and sell the item. What exactly is a reasonable period of time will depend upon the particular circumstances of each case. An offer is simply a statement or other indication that the individual is prepared to enter into a contract with another on certain terms. there must be a meeting of the minds. The offer is made when the customer presents the merchandize to the cashier and tenders the amount of the price. The acceptance must be made before the offer has expired. Before there can be a contract. there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. if you say words to the effect "we have a deal" or more precisely. there is no contract. The store owner is perfectly entitled. When you take this to the check-out counter. Whether the parties have reached an agreement is determined by an objective standard. the store is not bound to sell the cd to you for this price. there can be no consensus ad idem or a meeting of the minds which is essential to form a contract. looking at all of the facts relevant to the question conclude that the parties had come to an agreement on the essential terms of the contract with the intent to form a legally binding relationship? If so. What each party believes the other to be agreeing to will not be the determining factor. then there is a binding contract. I have an enforceable contract under which I could collect the Rs.
For example. the parties have a valid and binding contract. the circumstances of the dealings between the parties may be such that the law would impose a term on the parties to keep the offer open for acceptance for a reasonable period of time. There is no requirement that the contract be in writing except in certain special situations such as the sale of land. To be valid. the acceptance can not be conditional on some other events.5. the parties are merely negotiating and may ultimately reach agreement on the terms of the contract. there is no contract.until a specified time.an exchange of a promise for a promise or act has been made. only the parties can judge whether or not it is a good bargain. The law only requires that there be sufficient consideration. The problem is that if the verbal exchanges of the parties are to be relied upon. It is left to the parties to determine whether or not the consideration is adequate. You have made a counter offer which I am free to accept or reject. It is this consideration that makes the contract binding. if your response is that you will pay me Rs. something of value must be given. If the court can not with reasonable certainty determine the terms that the parties have agreed to. No conditions can be attached to the acceptance and the terms of the offer can not be changed. as long as the basic elements of an offer and acceptance with consideration are present. The contract constitutes a bargain. If conditions are attached or terms are changed. Likewise. In general then. This is subject to the courts refusing to enforce an alleged contract where the consideration is so inadequate as to raise suspicions of fraud or to make the contract unconscionable. The acceptance of the offer is the bargain the parties have struck: . Consideration is some benefit or advantage to the person making the offer and a corresponding cost or prejudice to the person accepting the offer.00 to cut the lawn but I must cut again next month for the same price. it may prove difficult and in some cases impossible to determine precisely the terms of the contract if there in fact is a contract. The consideration can not be something given or promised in the past. the consideration must be a new promise or some fresh benefit exchanged for the offer. There are various types of contract which are on the basis of the following:Enforceability: Valid contract Voidable contract Void contract or agreement Illegal contract Unenforceable agreements . the court can not enforce the alleged contract. It is for this reason that it is wiser to have a contract in writing although writing itself is no assurance that the alleged contract is clear and precise. On occasion.
their distinction different types of agreements and contracts . Sir William Anson observes as follows: ―As the law relating to property had its origin in the attempt to ensure that what a man has lawfully acquired he shall retain. Y will get damages from the court and will not suffer any loss. If the contract is broken.‖ Agreements and contracts are two different things. Y can plan his activities on the basis of getting the coal on the fixed date. X enters into a contract to deliver 10 tons of coal of Y on a certain date. The object of the Law of Contract is to introduce definiteness in commercial and other transactions. so the law of contract is intended to ensure that what a man has been led to expect shall come to pass.Mode of formation:- Express contract Implied contract Quasi contract Performance Executed Executory Uni-lateral Bi –lateral According to Salmond a contract is an ―agreement creating and defining obligations between the parties. and that what has been promised to him shall be performed. ―A contract is an agreement enforceable at law made between two or more persons. by which rights are acquired by one or more to acts or forbearances on the part of the other or others.‖ According to Sir William Anson. We will then study which agreements are contracts. It is important to know first what constitutes a contract and what constitutes an agreement. How this is done can be illustrated by an example. Since such a contract is enforceable by the courts.
Legal relationship. Consideration – lawful consideration with a lawful object. Legal Purpose/Objective Mutuality of Obligation – also known as the ―meeting of the minds‖ Consideration Competent Parties Proposal and Acceptance: When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence he is said to make a proposal. their distinction different types of agreements and contracts. Writing and Registration if so required by law. Lawful consideration. An agreement must not be expressly declared to be void. The first step towards creating a contract is that one person shall signify or make a proposal or offer to the other. Enforceable by law. Legal obligation. An Acceptance in strict compliance with the terms of the offer. . They are as under: Proposal and acceptance. Possibility of performance. Intent of the Parties to Contract. Competent parties. We will then study which agreements are contracts.Now as we have some idea what contract is we should discuss about elements of contract. Capacity of parties to contract – competent parties. Object of the Contract. Essentials Elements of a Valid Contract: Different sections of the Indian Contract Act lay down the essential elements of the contract. Free consent. Legal formalities Capacity of the Parties to Contract. Offer and acceptance. Certainty . Minimum two parties. Lawful object. Agreements and contracts are two different things. It is important to know first what constitutes a contract and what constitutes an agreement. A proposal when accepted becomes a promise. with a view to obtaining the acceptance of that another person to whom the offer is made.
Consideration is the cause of the promise. or does or abstains from doing or promises to do or to abstain from doing something such act or abstinence or promise is called a consideration for the promise. or (4) involves or implies injury to the person or property of another (5) the court regards it as immoral or opposed to public policy In each of these cases. consideration here. for example it must not have been obtained Coercion .000. Illustrations: A agrees to sell his house to B for Rs 10. Every agreement if which the object or consideration is unlawful is void. As a general rule. Consideration: When at the desire of the promisor the promisee or any other person has done or abstained from doing. Mere consent is not enough. Every contract consist of two parts – Promise Consideration A promise is often made in return for a promise for example a buyer realizes the goods for the price. The parties must be ad idem.000 is for A‘s consideration to sell his house to B. An agreement is a contract. for example both the parties must agree upon the same thing in the same sense. Here A‘s promise to sell his house is for B‘s consideration to pay Rs 10. Similarly B‘s promise to pay Rs 10. agreement without consideration is void. It is the most essential element of the contract. Capacity of parties to contract – Competent parties: Every person is competent to contract who is of the age of majority according to the law to which he is subject. A proposal when accepted becomes a promise. and who is of sound mind. Consent of parties must be free. if permitted it would defeat the provisions of any laws (3) is fraudulent. Free Consent: Parties to a contract must give their consent. the consideration or object of an agreement is said to be unlawful. The consideration or object of an agreements is unlawful if — (1) it is forbidden by law. Price for goods is therefore.When the person to whom the proposal is made signifies his assent thereof the proposal is said to be accepted. The promise for a promise in return is consideration. only if it is made for a lawful consideration and with a lawful object. or (2) is of such a nature that.000. and is not disqualified from contacting by any law to which he is subject. Two or more persons are said to consent when they agree upon the same thing in the same sense.
in order to constitute a valid contract. contracts under sub sections (10 and 3) of section 25 of the Indian Contract Act. fraud. Minimum two parties :. for example. gift. However the contract must be in writing and registered. mortgage. Writing and registration: Oral contract is a valid contact. Various agreements are expressly declared void under the Act. As for ex-Mr. One party has to make an offer and other must accept it. It does not give rise to any rights and obligations.Atleast two parties are needed to enter into a contact. No particular form of writing is required to constitute a contract. Documents specified under section 17 of the Indian Registration Act. Certainty: The terms of a contract should be clear.x purchases house from Mr.y and here the contract made by both the parties are made legally so any avoidance of rules one can take strict action. sale. Enforceable by Law: A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. But any contract which has been made legally then it will always come into legal relationship. are required to be registered. the contract must not be vague. etc. Legal relationship: Agreements which create legal relations or are capable of creating legal relations are contracts. Possibility of performance: Contracts based on impossibility of performance are not valid. undue influence. The contracts must be capable of being performed. for example. misrepresentation mistake An agreement must not be expressly declared to be void: A void agreement is not enforceable by law (Sec 2(g)). lease under the Transfer of Property Act 1882. An agreement can also be inferred from correspondence exchanged between the parties. The aggrieved party should be able to obtain relief through law in the event of breach of contract. In other words. 1908. Intentions of the parties to enter into a particular contract and to give effect to it must be manifest in it. It has no legal sanctity. if so required by any law. . an invitation to a dinner does not create any legal relation and therefore is not a contract. Memorandum and Articles of Association of a Company under the Indian Companies Act. It is enforceable by law it is contract otherwise it is an agreement. Contracts which are vague cannot be enforced. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'.
and not expressly disqualified from contracting. An agreement by incompetent parties shall be a legal nullity. Competent parties:.There must be an 'offer' and an 'acceptance' to the offer. A contract without consideration is void.An offer is synonymous with proposal.Here the act of Amin is a negative one that is he is offering to abstain from filing a suit. This 'something' is described in law as 'consideration'. The consideration may be in the form of money. 2)Amin is making an offer to Bedi with a view to obtaining Bedi‘s assent thereto.that is to sell her a book. If there is no legal obligation then there is a chance to grow of mis use of offer or breaking of promises. services rendered. Offer and acceptance :. resulting into an agreement.The parties making the contract must be legally competent in the sense that each must be of the age of majority.The agreement sought to be enforced should contemplate legal relations between the parties to it. of a sound mind. goods exchanged or a sacrifice which is of value to the other party. Offer is not only one of the essential elements of a contract but it is the basic building block also. the person to whom the offer is made is called the 'offeree' and the person who accepts the offer is called the 'acceptor'. Lawful consideration:. Both offer and acceptance should be lawful.there may be ‗positive‘ or ‗negative‘ acts which the offeror is willing to do.It is a positive act on the part of the offeror.Thus.A contract is basically a bargain between two parties.The contracting parties must give their consent freely.if the latter pays Amin the amount of act or abstinence Rs.Legal obligation helps the parties to do work legally and it minimizes the risk of loss for both the parties. This consideration may be past. present or future. An offer is made with a view to obtaining the assent of the offeree to the proposed act or abstinence. As for example1)Anna offers to sell her a book to Begum. Consideration is an essential element of a valid contract. Legal obligations :.The offeror or proposer expresses his willingness ―to do‖ or ―not to do‖(abstain from doing) something with a view to obtain acceptance of the other party to such act or abstinence. Free consent:. Consent is said to be . 2)Amin offers not to file suit against Bedi. each receiving 'something' of value or benefit to them. It is the price for which the promise of the other is bought.10000 outstanding. 'Consent' means that the parties must agree about the subject matter of the agreement in the same sense and at the same time.it can be properly understood by the following two examples:1)Anna is making an offer to sell a book with a view to obtaining the assent of Begum.The parties must intend to create a legal obligation.Anna is making an offer to do something.While. but it must be lawful.
Capacity of the Parties to Contract. if it is: Illegal Immoral Fraudulent Of a nature that.free consent is one of the essentials of a valid contract. is not enforceable and is.An agreement expressly declared to be void under the Contract Act or under any other law. certain contracts are required to be in writing and may even require registration.misrepresentation or mistake. it cannot be enforced.Thus. not a contract. The absence of free consent would affect the legal enforceability of a contract. For a contract to be valid it is not only necessary that the parties consent but also that they consent freely. For example. The Contract Act declares void certain types of agreements such as those in restraint of marriage. A person who is trying to avoid a contract would have to plead his or her lack of capacity to contract against the party who is trying to enforce the contract. he would have to prove that he was a minor.The object of the agreement must be lawful. Therefore. Often this is the most difficult burdens of proof to overcome due to the presumption of one's ability to contract. It has been held by the courts that there can be no contract unless all the . It is a basic requirement to the formation of any contract. Certainity and possibility of performance:.free if it is not induced by coercion. A consent is said to be free when it is not caused by: Coercion Undue influence Fraud Misrepresentation Mistake Lawful object:. be it oral or written. the same must be complied with.Where there is a consent but no free consent the contract is voidable at the option of the party whose consent was not free. fraud. the Indian Trusts Act requires the creation of a trust to be reduced to writing. The general presumption of the law is that all people have a capacity to contract. or trade.The terms of a contract must not be vague or uncertain. and so forth.it would defeat the provisions of any law. a contract may be oral or in writing. Also. Intent of the Parties to Contract. Not expressly declared void:. causes injury to the person or property of another opposed to public policy.the terms of a contract must be such as are capable of performance. For instance.Generally. However. Legal formalities:. or legal proceedings as well as wagering agreements. An agreement to do an impossible act is void and is not enforceable by law. An agreement is unlawful. undue influence. that there has to be a mutual assent or a "meeting of the minds" of the parties on all proposed terms and essential elements of the contract. adjudged incompetent or drunk or drugged.if permitted. where law requires an agreement to be put in writing or be registered. thus. If an agreement is vague and its meaning cannot be ascertained.
There is absence of genuine consent if the agreement is induced by coercion. dog races. A party to contract. Yet in some states these types of contracts are valid.free consent is one of the essentials of a valid contract. whose consent was caused by fraud or mispresentation. insist that the contract shall be performed. an agreement must be based on the free consent of all the parties. mere negotiations to arrive at a mutual agreement or assent to a contract would not be considered an offer and acceptance even thought the parties agree on some of the terms which are being negotiated. horse races. a contract which violates those statutes would be illegal and unenforceable. If such consent was caused by misrepreentation or by silence.Thus. undue influence. or other forms of gambling would be considered illegal contracts. The other party (the aggrieved party) can enforce it. and fraud.Where there is a consent but no free consent the contract is voidable at the option of the party whose consent was not free. This is true for drugs and prostitution or any other activity if considered criminal. is not voidable. if he thinks fit. price-fixing and monopolies illegal. This intent is determined by the outward actions or actual words of the parties and not just their secret intentions or desires. the agreement is a contract voidable at the option of the party whose consent was so caused. In many jurisdictions contracts predicated upon lotteries. Free and genuine consent When consent to an agreement is caused by coercion. and that he shall be put on the position in which he would have been if the representations made had been true. or to whom such misrepresentation was made.parties involved intended to enter into one. subject to rules laid down in the Act. may. misrepresentation. A consent is said to be free when it is not caused by: Coercion Undue influence . Therefore. In order to be enforceable. A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised. Object of the Contract. Therefore. cannot enforce the agreement. does not render a contract voidable. Federal and some state laws make contracts in restraint of trade. if theparty whose consent was so caused had the means of discovering the truth withordinary diligence. A contract is not enforceable if its object is considered to be illegal or against public policy. fraudulent neverthless. mistake. undue influence etc. For a contract to be valid it is not only necessary that the parties consent but also that they consent freely. Both parties must have intended to enter into the contract and one can not have been misled by the other. That is why fraud or certain mistakes can make a contract voidable. A person guilty of coercion. fraud or misrepresentation.
and who is of sound mind.Every person is competent to contract who is of the age of majority according to the law to which he is subject. Who are competent to contract . A valid contract (may) bind both the parties under contract for their respective obligations in the contract. Here that minors' parents/guardians can be made to pay for or on behalf of the minors. Every person is competent to contract who is of the age of majority according to the law to which he is subject. A company can safely assume all those contracts undertaken by its promoters even before its actual/legal incorporation. idiocy. and similar other factors. so even before its birth. each receiving 'something' of value or benefit to them.a private Limited company can enter into a contract the very next moment it gets incorporated (born). drunkenness. A company is a person capable to enter into a contract. lunacy. This 'something' is described in law as 'consideration'. except in some special cases. A contract without consideration is void. An individual is competent for contracts at 18 years and above but the company can do so the very next moment it gets incorporated. This consideration may be past. verbally or in writing. goods exchanged or a sacrifice which is of value to the other party. If any of the parties to the agreement suffers from any such disability. otherwise it cannot be enforced by a court of law. services rendered. but it must be lawful. and is not disqualified from contacting by any law to which he is subject. . Fraud Misrepresentation Mistake Parties competent to contract The parties to an agreement must be legally capable of entering into an agreement. present or future. and who is of sound mind. Lawful consideration A contract is basically a bargain between two parties. Yet competent parties can enter into contracts with minors safely in certain situations. Consideration is an essential element of a valid contract. The consideration may be in the form of money. Examples: Aged even 1 moment . Want of capacity arises from minority.means a minor can enforce the contract to his/her benefit and still may not pay anything for it! The other competent party to such contracts becomes helpless. the agreement is not enforceable by law. and is not disqualified from contracting by any law to which he is subject. A contract with a minor individual is void at the option of the minor . It is the price for which the promise of the other is bought. A competent person (aged even 1 moment) can enter into a contract with another person (normally but not essentially competent).
The object of the agreement must be lawful. The consideration may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract.Subject to certain exceptions. The objective of the agreement must be lawful. if it is: Illegal Immoral Fraudulent Of a nature that.it would defeat the provisions of any law. The consideration or object of an agreement is lawful. But only those considerations are valid which are ―lawful‖. unless -It is forbidden by law. causes injury to the person or property of another opposed to public policy Agreements not declared void or illegal . An agreement to do something for nothing is usually not enforceable by law. An agreement is unlawful. Hence such agreement cannot be treated as a valid contract. an agreement is legally enforceable only when each of the parties to it gives something and gets something. Lawful objective The object for which the agreement has been entered into must not be illegal or immortal or opposed to public policy. A rents out his house for the business of prostitution or for making bomb.if permitted. the acts performing there are unlawful. It may also be present or future. Consideration may be past (something already done or not done). The something given or obtained is called consideration.
is not enforceable and is. Section 24 to 30 specify certain types of agreement which have been expressly declared void. The terms of an oral contract are sometimes difficult to prove. So on the ground of uncertainty. If an agreement is vague and its meaning cannot be ascertained. But this agreement cannot be treated as a valid contract owing to the fact that. Wagering agreement. memorandum and articles of association of a company etc. If the meaning of the agreement can be made certain by the circumstances. In India writing is required in cases of lease. Some of the agreement which have been expressly declared void are agreement in restraint of legal proceedings. the agreement is void. 6. Possibility of performance . Registration is compulsory in cases of documents coming within the purview of Section 17 of the Registration Act. 3. For example. thus. the meaning of the agreement can be made certain by the circumstance and in that case. mortgage deeds covering immovable property. not a contract. gift. is unlawful. agreement in restraint of trade. Agreement in restraint of trade. 5. sale and mortgage of immovable property: negotiable instruments. Therefore important agreements are usually entered into writing even in cases where wiring is not compulsory. If any part of a single consideration for one or more objects. Suppose John agrees to sell 500 tons of oil to Mathew.Void Agreements: An agreement so made must not have been expressly declared to be void. An agreement expressly declared to be void under the Contract Act or under any other law. Agreement in restraint of proceedings. the terms of a contract must be such as are capable of performance.g. But. this agreement stands void. or any one or any part of any one of several consideration of a single object. An agreement to do an impossible act is void and is not enforceable by law. If John promises to pay $50 to Mary if she does not marry throughout her life and Mary promise not to marry at all. Wording of the agreement must be clear and not uncertain or vague. if John and Mathew are sole trader of coconut oil. 4. Writing Registration and Legal Formalities: An oral contract is a perfectly good contract. it could be treated as a valid contract. Certainty of meaning The agreement must not be vague. Agreement in restraint to marriage. it cannot be enforced. Also. e. It must be possible to ascertain the meaning of the agreement. except in those cases where writing and/or registration is required by some statute. what kind of oil is not mentioned clearly. under section 26 restraint of marriage expressly declared void. For example Restraint of marriage which has been expressly declared void under Section 26. In India writing and/or registration is required by some statute. 2.. agreement in restraint of marriage and agreement by way of wager. Agreements having uncertain meaning. for otherwise it cannot be enforced. Under Indian Contract Act there are five categories of agreements which are expressly declared to be void They are: 1.
the agreement cannot be enforced by law. These agreement are valid only when they fulfill the formalities like writing. In essence. it cannot be treated as a valid contract. . Impossible agreements like one claim to run at a speed of 1000km/hour or Jump to a height of 100feet etc. registration. In many jurisdictions contracts predicated upon lotteries. would not create a valid agreement. Therefore. Enforceable by Law: A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. it could be oral. signing by the both the parties are completed. a contract which violates those statutes would be illegal and unenforceable. The aggrieved party should be able to obtain relief through law in the event of breach of contract. horse races. there must be possibility of performance must be there to create a valid contract. physically or legally.The agreement must be capable of being performed. All such acts which are impossible of performance would not create a valid contract and cannot treat as a valid contract. If the act is impossible of performance. If these legal formalities are not completed. Federal and some state laws make contracts in restraint of trade. An agreement can also be inferred from correspondence exchanged between the parties Legal formalities The contract act does not insist that the agreement must be in writing. Yet in some states these types of contracts are valid. in some cases the law strictly insist that the agreement must be in writing like agreement to sell immovable property must be in writing and should be registered under the Transfer of Property Act. It is enforceable by law it is contract otherwise it is an agreement. There must be possibility of performance of the agreement. dog races. This is true for drugs and prostitution or any other activity if considered criminal. price-fixing and monopolies illegal. Object of the Contract A contract is not enforceable if its object is considered to be illegal or against public policy. But. 1882. A promise to do an impossible thing cannot be enforced. or other forms of gambling would be considered illegal contracts.
Legal relationship: Agreements which create legal relations or are capable of creating legal relations are contracts. Conclusion So these are the elements of contract which we have to keep in mind while taking any managerial decisions which every manager while taking decisions have to follow. As for ex-Mr. an invitation to a dinner does not create any legal relation and therefore is not a contract. for example. But any contract which has been made legally then it will always come into legal relationship.x purchases house from Mr. .y and here the contract made by both the parties are made legally so any avoidance of rules one can take strict action.