Handout 3 Contract Act 1872

Quaid-e-Azam Law College Session 09/10

SECTION 10: WHAT AGREEMENTS ARE CONTRACTS?

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in Pakistan, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. ESSENTIAL ELEMENTS For a binding contract to be formed there must be:

An offer which is accepted and for which valid consideration is given; An intention to create a legal relationship; and Certainty of terms.

Special rules and principles may apply to contracts that concern specific subject matter, such as employment contracts, the sale of land, and the sale of goods. THE OFFER

Must be communicated. Can be revoked at any time prior to acceptance. Must be distinguished from an invitation to treat/offer which is where a party communicates that it is prepared to enter negotiations with a view to forming a contract.

THE ACCEPTANCE

The acceptance: Must be communicated.

Handout 3 Contract Act 1872

Quaid-e-Azam Law College Session 09/10

Must be of the offer made, otherwise it could be a counteroffer. If posted, occurs on the date posted, if by phone, fax, or email, it occurs when received.

CONSIDERATION

Must be valuable. Something must be supplied in return for the promise made by the offeror, e.g. money.

Must not be unlawful or gratuitous. Must not be something already done or suffered (past consideration). INTENTION TO CREATE LEGAL RELATIONSHIP

The parties must intend to be bound by the contract. However, performance of the contract may be conditional on other matters occurring.

CERTAINTY There must be certainty as to the

parties, subject matter, And price.

ENFORCEABILITY A contract may not be enforceable because of some following issues, such as: Capacity of Parities

Lack of capacity of one of the parties (e.g. one of the

parties is a child/insane or Disqualified by Law). Free Consent

Agreement executed under Coercion, undue influence, Fraud, Misrepresentation and mistake.

Object of the Agreement

Where a contract is illegal or immoral. Agreement expressly declared void under Contract Act

Handout 3 Contract Act 1872

Quaid-e-Azam Law College Session 09/10

Agreement in restraint of trade void Agreements in restraint of trade Agreements in restraint of legal proceedings void Agreements void for uncertainty
Agreement by way of wager void