Contract law

Valid Contract ?

According to Section 10:

“All agreements are contracts if they are made by the
free consent of parties, competent to contract, for lawful
consideration and with a lawful object, and are not hereby
expressly declared to be void. Wherever necessary, the
agreements must satisfy the requirements of law regarding
writing, attestation or registration”
 A valid contract is Binding & Enforceable.
 Parties to valid contract are bound for performance.
 A valid contract can be enforced by either party.
 If one party refuses to perform the contract, the
other party can enforce it through a court.
Essentials of a Valid Contract at a glance :

1. Offer and Acceptance

2. Legal Obligation (Intention to create legal relationship)
3. Capacity of parties to Contract
4. Lawful Consideration
5. Free consent
6. Lawful Object
7. Possibility of Performance (Performance to be “Possible”)
8. Not expressly declared void
9. Certainty of Terms
10. Should be in writing if required under specific laws.
 
 Offer/Proposal :

A person is said to make a proposal or offer when he signifies

to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to
such act or abstinence.

An offer must be lawful.

Acceptance :

Acceptance is an act of assenting by the offeree

to an offer.
It is the manifestation by the offeree of his
willingness to be bound by the terms of the
offer.
Acceptance should be absolute, unqualified,
communicated to the offeror, in the mode
prescribed, and be made within the reasonable
time
Offer and Acceptance :

A offers to sell his car to B for Rs.400,000/-. This

is an offer.
If B accepts this offer, then there is an
acceptance.

Payment

Car
Consideration:
Consideration is the benefit to the parties.

It is price paid by one party for the promise of the other party.

An agreement is enforceable only when both parties get & give something. The
something given or obtained is called Consideration (Consideration must be
lawful)

Very simply saying “Consideration is the price of the promise” (Pollock).

Law defines consideration as “ When at the desire of the promisor, the promise or any other
person has done or abstained form doing, or does or abstains from doing something,
such act or abstinence or promise is called a consideration for the promise.”
Consideration:

A agrees to sell his house to B for Rs.1,000,000/-. For A

Rs.1,000,000/- is consideration and for B the House is the
Consideration

A promises B to get him a government job and B promises to

pay Rs.100,000/- to A. The agreement is void as the
consideration is unlawful.
Legal Obligations :

The parties must be willing to establish a legal

relationship or obligation while offering and
accepting otherwise , it would not constitute a valid
contract, e.g., offers or acceptances made in jest
without making the legal obligation in case of
defaults shall not be a binding contract.
It means that if one of them does not fulfill his part of
promise, he shall be liable for breach of the contract
Legal Obligations :

A offers to sell his watch to B for Rs.200/-. B agrees

to buy it. It is a valid contract because it creates a
legal obligation.
A husband promised to pay his wife an allowance
of $30 every month. Later the parties separated and
the husband refused to pay. The wife sued. It was
held that the wife was not entitled as agreement did
not create legal obligations (Belfour VS Belfour)
Capacity of Parties (who is competent to contract ?)

An agreement is enforceable only if it is made by

the parties who are competent to contract.
Every person is competent to contract who is of
the age of majority according to the law to which
he is subject, and who is sound mind and is not
disqualified from contracting by any law to which
he is subject.
A contract by a person of unsound mind is void
ab-initio
Capacity of Parties (who is competent to contract ?)

M, a person of unsound mind agrees to sell his

house to S for Rs.200,000/-. It is not a valid
contract because M is not competent to contract.
A aged 20 years promises to sell his car to B for
Rs.300,000/-. It is a valid contract because A is
competent to contract.
Free consent
Consent means that the parties must agree upon the
same thing in the same sense.
For a valid contract, it is necessary that the consent of
parties must be free.
Consent is free when it is not obtained by coercion, undue
influence, fraud, misrepresentation or mistake.
If consent of either party is not free, the agreement cannot
become a contract (Section 14_
A contract is said to be induced by "under influence" where the relations
subsisting between the parties are such that one of the parties is in a
position to dominate the will of the other and uses that position to obtain an
unfair advantage over the other.
Free consent

A compels B to enter into a contract at gunpoint. It

is not a valid contract as the consent of B is not
free.
Not expressly declared void :
For a valid contract, the agreement must not be one of those
which have been expressly declared to be void by the law
Under Section 24-30 certain agreements have been
declared void, for example, agreement in restraint of
marriage and of wager, etc .
Every agreement, by which any party thereto is restricted
absolutely from enforcing his rights under or in respect of
any contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may thus
enforce his rights, is void to the extent.
Agreements, the meaning of which is not certain, or capable
of being made certain, are void.
Not expressly declared void :

A promises to close his business on the promise of B

to pay him Rs.200,000/- is void agreement because it
is in restraint of trade.

A promises to pay Rs.20,000/- to B if Pakistan wins

the World Cup Final. The agreement is void being
wagering agreement.
Objects should be lawful:
It is necessary that agreement should be made for
lawful object.
The object or consideration of an agreement is lawful,
unless it is forbidden by law; or is of such nature that,
if permitted it would defeat the provisions of any law.
The object of agreement must not be fraudulent,
illegal, immoral, oppose to public policy, imply injury to
the person or property of another.
Every agreement with unlawful object or consideration
is illegal and void (Section 23)
Objects should be lawful:

A promises to pay B Rs.20,000/- if B beats C. The

agreement is illegal as its object is unlawful.
A hires a house to use for gambling. The object of
agreement is unlawful, so the agreement is illegal and
void.
Possibility of Performance:

For a valid contract, it must be performed. An

agreement to do an impossible act is void.
If the act is illegal or physically impossible to
be performed, the agreement cannot be
enforced by law (Section 56)
Contracts to perform something impossible like
breaking the moon or stars in return of huge
amounts are void.
Possibility of Performance:
A agrees with B to discover a treasure by
magic. Such agreement is not enforceable.
A agrees with B to put life into B’s dead cat.
The agreement is void as it is impossible to
perform it.
Writing and Registration:

A valid contract may be oral or in writing.

It is preferable that be in writing because it is easy to

prove in court.

If required by law, that particular contract must be in

writing, signed, attested by witnesses and registered.

Sale and Mortgage of land should be in writing and be

registered.
Writing and Registration:

X verbally promises to sell his book to Y for Rs.200/-. It

is a valid contract because law does not require it to be
in writing.

A verbally promises to sell his house to B. It is not valid

contract because the law requires it to be in writing.
Certainty of Terms:

According to Section 29, “Agreements, meaning of which

is not certain or capable of making certain are void”

The terms of an agreement must be clear, complete and

certain. If the terms are uncertain, the agreement is
void.
Certainty of Terms:

A promises to sell 20 books to B without specifying their

titles. The agreement is void because the terms are not
clear.

O agree to purchase a van from S. The price was to be

paid over two years. It was held that there was no
contract as the terms were not certain about the rate of
interest and mode of payment (Scammel VS Ouston)