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A contract is an agreement between two or more parties to do, not do, or promise something. Contracts can come in many forms ² they can be oral or written, implied or express, and legally enforceable or not.
According to section 2(h) of the Indian Contract Act,1872 " An agreement enforceable by law is a contract." A contract therefore, is an agreement the object of which is to create a legal obligation i.e., a duty enforceable by law.
An agreement is defined as ³ every promise and every set of promises, forming consideration for each other.´ A proposal when accepted becomes a promise.
Agreement= Offer + Acceptance
Enforceability is the ³legal obligation´ which imposes upon a definite person or persons the necessity of doing or abstaining from doing something. An agreement which gives rise to a social obligation is not a contract. Agreement + Legal obligation Contract Agreement + Social obligation Contract
A promises to sell his car to B for Rs. 10,000 received by him as the price of the car. This agreement gives rise to an obligation on the part of A to deliver the car to B. This agreement is a contract. A father promises to pay his son Rs. 1000 every month as pocket money. Later he refuses to pay. In this case the agreement is not a contract as social obligation is involved.
Different sections of the Indian Contract Act lay down the essential elements of the contract. They are as under: 1) Proposal and acceptance 2) Consideration - lawful consideration with a lawful object:As a general rule, agreement without consideration is void. The promise for a promise in return is consideration.
EG: If A signs a contract with B such that A will paint B's house for $500, A's consideration is the service of painting B's house, and B's consideration is $500 paid to A.
3) 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, and who is of sound mind, and is not disqualified from contacting by any law to which he is subject. 4) Free Consent: Parties to a contract must give their consent. The parties must be ad idem, for example both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. Mere consent is not enough. Consent of parties must be free, for example it must not have been obtained (1) coercion, (2) undue influence, (3)fraud, (4) misrepresentation, or (5) mistake.
5) An agreement must not be expressly declared to be void : A void agreement is not enforceable by law (Sec 2(g)). It has no legal sanctity. It does not give rise to any rights and obligations. Various agreements are expressly declared void under the Act. 6) Writing and registration: Oral contract is a valid contact. However the contract must be in writing and registered. 7) Legal relationship: Agreements which create legal relations or are capable of creating legal relations are contracts. for example, an invitation to a dinner does not create any legal relation and therefore is not a contract.
8) Certainty: The terms of a contract should be clear. In other words, the contract must not be vague. Contracts which are vague cannot be enforced. 9) Possibility of performance: Contracts based on impossibility of performance are not valid. The contracts must be capable of being performed. 10) Enforceable by Law: A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. It is enforceable by law it is contract otherwise it is an agreement.