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Introduction to Contract Law: Essential Elements and Principles, Study notes of Law

ad idem. This means that the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time.

Typology: Study notes

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LawofContract
Introduction:Thelawofcontractisthechildof
commerce.Itisnotonlythemerchantortraderbutevery
personwholivesintheorganisedsociety,consciouslyor
unconsciouslyentersintocontractsfromsunriseto
sunset.Whenapersonbuysacomputerorhiresataxi,or
takesacreditcardfrom abankorgivesloantoanother,or
hedoesbookingforDJformarriageparty,heentersinto
andperformscontractsthoughhemaybeunawareofthis
fact.
Theessentialpartofthecontractisthatpromisesare
protectedandenforced.Generally,legallyenforceable
promisesarecontracts.
Thelawofcontractismainlyconcernedwiththree
questions:
(1)Isthereanagreement?
(2)Canthepartiestosuchagreementenforceitinacourt
oflaw?
(3)Howtheycanenforceit?
Thelawofcontractdoesnotlaydownrightsandduties
whichthelawenforce,itconsistsratherofanumberof
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LawofContract

Introduction:Thelawofcontractisthechildof

commerce.Itisnotonlythemerchantortraderbutevery personwholivesintheorganisedsociety,consciouslyor unconsciouslyentersintocontractsfrom sunriseto sunset.Whenapersonbuysacomputerorhiresataxi,or takesacreditcardfrom abankorgivesloantoanother,or hedoesbookingforDJformarriageparty,heentersinto andperformscontractsthoughhemaybeunawareofthis fact. Theessentialpartofthecontractisthatpromisesare protectedandenforced.Generally,legallyenforceable promisesarecontracts. Thelawofcontractismainlyconcernedwiththree questions: ( 1 )Isthereanagreement? ( 2 )Canthepartiestosuchagreementenforceitinacourt oflaw? ( 3 )Howtheycanenforceit? Thelawofcontractdoesnotlaydownrightsandduties whichthelawenforce,itconsistsratherofanumberof

limitingprinciples,subjecttowhichthelawwilluphold.A personisonlyentitledtoenforcehiscontractualrightina reasonablewayandthecourtwillnotsupportanattempt toenforcethem inanunreasonableway. FORMATIONOFCONTRACT: Whenonepersonmakesanofferandtheotheraccepts thesame,therearisesanagreementwhenthisagreement isenforceablebylawitbecomesacontract. Theessenceofacontractismeetingofthewillsofthe parties.Theremustbeconsensusadidem.Thecontracting partiesmustagreetothesamethinginthesame sense.Theremustbemeetingofthemindofthe parties.Themeetingofmindsshouldbe objective,i.e.manifestationofmutualassent.Thereis mutualandfinalassentforanagreementtobebinding betweentheparties ContractDefined: Ansondefinescontractasanagreementenforceableat lawmadebetweentwoormorepersons,bywhichrights areacquiredbyoneormoretoactsorforbearanceson thepartofotherorothers. Salmondsdefinitionof'contract'states- 'Acontractisanagreementcreatinganddefining

proposalismadesignifieshisassentthereto,the proposalissaidtobeaccepted.Aproposalwhen acceptedbecomesapromise".Anagreementinvolves proposalorofferbyonepartyandacceptanceofthesame bytheotherparty.Itrequiresexistenceoftwoormore personsthatispluralityofpersons. Areadingofclause(a),(b),(c),(e),and(h)ofsection 2 of theactshowsthatacontractisanagreementisa promise,apromiseisformedbyanacceptanceofa proposalandtheremustbeapromisorwhomakesthe proposalandapromiseewhoacceptsit.The'proposal' appearstobesynonymoustotheword'offerasused inEnglishlawlnEnglishlaw,onewhomakestheproposal isgenerallycalledthe'offeror'andthepersontowhom the proposalismadeiscalledthe'offeree'. Thusanagreementistheoutcomeoftwoconsenting mindsthatisconsensusadidem; Thus,Agreement=offer(orproposal)+acceptanceof offer AgreementsEnforceablebyLaw: WhatagreementsareenforceablebyLaw?Section 10 of thelndianContractAct, 1872 laysdowntheconditionsfor theenforceablility.Itprovidesthatallagreementsare

contractsiftheyaremadebythefreeconsentofthe parties,competenttocontractforalawfulconsideration andwithalawfulobject,andarenotherebyexpressly declaredtobevoid.Ifweanalysethisprovision,wefind thatthefollowingaretheessentialconditions,whichmust besatisfiedforanagreementtobecomeacontract: (a)Thepartiesmustbecompetenttocontract; (b)Theremustbefreeconsentoftheparties; (c)Itmustbeforalawfulconsiderationandlawful object;and (d)theagreementmustnotbeexpesslydeclaredtobe void. Thetwopartiesenterintoobligationstoeachother,i.e.,one partyundertakestodoortoabstainfrom doingsome definiteactoractsinreturnforsomespecificconductor actonthepartoftheotherparty.Theobligationmustbe suchasisenforceablebylaw.Inotherwords,itshouldnot bemerelyamoral,socialorreligiousobligation. Theseobligationsdonotform agreementsbecausethey donotcreateanylegalduties.Itmeansthattheparties mustintendthatifoneofthem failstoperform his promise,onewouldbeanswerableinlawforthatfailure. Obligation:

makeavalidcontract. 1 )OfferandAcceptance:Inthefirstinstance,theparties oughttohavetheintentiontocreatealegalobligation betweenthem throughtheform ofofferandacceptance. Theyshouldhaveintentiontoimposedutyonthe promisortofulfillthepromiseandbestowarightonthe promiseetoclaim itsfulfillment.Itmustnotbemerelya moralonebutitmustbelegal. 2 )LawfulConsideration:Thesecondaspecttolookforis thepresenceof"lawfulconsideration"whichisan essentialelementofavalidcontract.Considerationisa technicalwordmeaningtherebyquidproquo,thatis, somethinginreturn.Itmustresultinbenefittooneparty anddetrimenttotheotherpartyoradetrimenttoboth. Example:AagreestosellhisbookstoBforRs 100 ,B's promisetopayRs 100 istheconsiderationforA'spromise tosellhisbooksandA'spromisetosellthebooksisthe considerationforB'spromisetopayRs 100. Ifthetwoessentialelementsarethere,wecansaythat thereisacontract,whichprima-faciewillholdgood,orat leastwecansaythatthereisanexistenceofcontract, althoughsomemorenecessaryelementsofvaliditymay bewanting.

3 )CapacitytoContract:Thepartiestoacontractmust havecapacity(legalability)tomakeavalidcontract.In everycaseofcontract,theremustbeassentoftheparties. Theassentpresupposesafree,fair,andseriousexercise ofthereasoningfaculty.If,therefore,eitheroftheparties toanagreementisdeprivedoftheuseofhis understandingorifheweredeemedbylawnottohave attainedit,therecanbenosuchagreement,whichshall bindhim.Section 11 oftheIndianContractActspecifies thateverypersoniscompetenttocontractprovided. a)isoftheageofmajorityaccordingtothelawtowhich heissubject; b)whoisofsoundmind;and c)isnotdisqualifiedfrom contractingbyanylawtowhich heissubject. Inotherwords(I)aminor,(ii)apersonofunsoundmind(a personofunsoundmindcanenterintoacontractduring hislucidintervals)and(iii)apersondisqualifiedfrom contractingbyanylawtowhichheissubject,forexample, analienenemy,foreignsovereignsandaccredited representativesofaforeignstate,insolventsandconvicts arenotcompetenttocontract. 4 )FreeConsent:Theconsentofthepartiesmustbe

performance.Section 56 laysdownthat"Anagreementto doanactimpossibleinitselfisvoid."Iftheactis impossibleinitself,physicallyorlegally,theagreement cannotbeenforcedatlaw. Example:AagreeswithBtodiscovertreasureby magic.Theagreementisnotenforceable. 7 ).Certainty:Section 29 ofthecontractactprovidesthat" Agreements,themeaningofwhichisnotorcapableof beingmadecertain,arevoid."Inordertogiverisetoavalid contractthetermsoftheagreementmustnotbevagueor uncertain.Itmustbepossibletoascertainthemeaningof theagreement,forotherwise,itcannotbeenforced. Example:A,agreestosellB"ahundredtonsofoil"There isnothingwhatevertoshowwhatkindofoilwas intended.Theagreementisvoidforuncertainty. 8 ).Writingandregistration:AccordingtotheIndian ContractAct,acontractmaybeoralorinwriting.But 8 n certainspecialcasesitlaysdownthattheagreement,to bevalid,mustbeinwritingor/andregistered. 9 ).Notexpresslydeclaredvoid:Theagreementmustnot havebeenexpresslydeclaredtobevoidundertheAct. References: 1 .BusinessLaw,M.C.Kuchhal,VikasPublishingHouse

Ltd,Noida( 2014 ). 2 .Businesslaws,R.K.Bangia,AllahabadLawAgency,( 2007 ). 3 .ContractandSpecificReliefAct,Dr.AvtarSingh,Eastern LawCompanyNoida. 4 .BusinessRegulatoryFramework,B.N.Agarwal,Navyug SahityaSadan,Lohamandi,Agra.