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Nature of Contract

Synopsis :
1. Introduction
2. Meaning of Business Law
3. Sources of Business Law
4. Business Law in India
5. Contract Act, 1872
6. Meaning of Contract
7. Essential elements of a valid Contract
8. Classification of Contracts
1. INTRODUCTION

Law :
The term `law¶ refers to rules of conduct enforced by the
State to maintain peace and order in the society
Definition of Law :
Austin has defined law in the following words : `A law is
rule of conduct imposed and enforced by the Sovereign.¶¶
Salmand defined law as `the body of principles recognized
and applied by the State in the administration of justice.¶¶
Holland defined law as ``rule of external human actions
enforced by Sovereign Political Authority.¶¶
2. MEANING OF BUSINESS LAW
uusiness law is a branch of General Law. It relates to
industry, trade and commerce. It includes law relating to contracts,
sale of goods, partnerships, negotiable instruments, companies,
cooperative societies etc. Further, consumers are a special
constituent of any business. Consumers Protection Act not only
recognises the importance of safeguarding the rights and interests of
the Consumers but also puts every business on alert and answerable
to the consumer
3. SOURCES OF BUSINESS LAW
1. English Mercantile Law
2. Statutes of Indian Legislature
3. Judicial Decisions
4. Customs and Usage
4. BUSINESS LAW IN INDIA

1. Contract Act, 1872


2. Negotiable Instruments Act, 1881
3. Sale of Goods Act, 1930
4. Partnership Act, 1932
5. Companies Act, 1956
6. Securities Contracts (Regulation) Act, 1956
7. MRTP Act, 1969
8. Foreign Exchange Management Act, 1999
9. Patent Act, 1970; Copy Right Act, 1957; Trade and
Merchandise and Marks Act, 1958
10. Sick Industrial Companies (Special Provision) Act, 1985
11. Consumer Protection Act, 1986
12. Environment (Protection) Act, 1986
13. Essential Commodities Act, 1955
14. Information Technology Act, 2000
15. Competition Act, 2002
5. CONTRACT ACT, 1872
1. Applicability : The Contract Act, 1872 is the most important
constituents of Indian Mercantile Law. It affects every person
since every one of us enters into a contract virtually every day.
2. Coverage of the Act
The act deals with the basic principles of the law of contracts.
It deals with general principles of Contracts and special
contracts as given below in the following chart.
Chart - 1
Indian Contract Act

General Rules
relating to Special types of
Contracts contracts
Sec.1 - 75 Sec. 124 - 238
1. General Principles of Contracts (Sec.1-75) :
General principles of contracts include rules and laws relating to
communication, acceptance and revocation of proposal (Sec.2-9)
voidable contracts (Sec.10-19 A and 22-23), void agreements
(Sec.11,22,30, 32, 36. 56, 57 and 64-67), contingent contracts
(sec.31-36), performance of contracts (Sec.37-67) certain relations
resembling those created by contracts (Sec.68-73) and consequences
of breach of contract (Sec.73-75).
2. Special Types of Contracts :
Sec.124 to 238 deal with special types of contracts. These are
contracts of Indemnity and Guarantee (Sec.124 to 147) uailment and
pledge (Sec.148 ± 181) and Agency Contracts (Sec.182 ± 238).
6. MEANING OF CONTRACT
1. Contract ± Definitions :
Let us go through some definitions relating to contract.
Salmond : A contract is an agreement, creating and defining the
obligation between parties.

Sir William Anson : 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 others.
Sir Fredrick Pollock : Every agreement and promise enforceable
at law is a contract.
Contract Act : Section 2(h) of the Act states that an agreement
enforceable by law is a contract. Therefore, a contract
essentially consists of two elements : (i) an agreement, and
(ii) its enforceability by law.
6.2 Essential Requirements of Contract
1. Two parties
2. An agreement : Agreement = Offer + Acceptance

Consensus-ad-idem
3. Legal obligation
6.3 Agreements which are not contracts :
1. Agreements relating to social matters
2. Domestic agreements between husband and wife
Balfour Vs. Balfour (1919)
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6.4 All contracts are agreements but all agreements are not contracts
6.5 All obligations do not constitute contracts
Ë Torts or civil wrongs
Ë Quasi contracts
Ë Judgements of Courts
Ë Status of obligations like relationships of husband and wife

7. ESSENTIAL ELEMENTS OF A VALID CONTRACT


According to Section 10 all agreements are contracts if
they are made by the free consent of the parties competent to
contract, for a lawful consideration and with a lawful object,
and are not hereby expressly declared to be void. Thus, an
agreement becomes a valid contract if it has the following
elements.
1. Offer and acceptance
2. Intention to create legal relationship :
3. Lawful Consideration
4. Competence of parties to Contract
5. Free consent
6. Lawful object
7. Agreement not declared as void
8. Certainty and possibility of performance :
9. Legal formalities
CLASSIFICATION OF CONTRACTS
Chart ± 2

Classification of Contracts

Validity and Extent of


Enforceability Execution
Mode of Obligation to
Creation perform
Classification of contracts on the basis of validity and
Enforceability :
1. Valid contracts
2. Voidable contracts
3. Void Contract
Classification of contracts on the basis of Mode of Creation :
1. Express Contracts
2. Implied contracts
3. Quasi Contracts
Classification on the basis of extent of execution :
1. Executed Contracts
2. Executory Contract
Classification on the basis of the obligation to perform :
1. Unilateral Contracts
2. Bilateral Contract
  

 
     
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