By Dr.

SEEMA GOEL

What is contract ?
Section 2(h) of the Act defines the term contract as

An agreement enforceable by law.

The definition has two components1. The existence of an agreement and 2. Its enforceability by law WHAT IS AGREEMENT? An agreement is defined as every promise or set of promises forming consideration for each other.

What is promise?
When the person to whom the proposal is made

signifies his assent thereto, the proposal is said to be accepted. Thus agreement=offer+acceptance ENFORCEABILITY AT LAW An agreement becomes enforceable when it give rises to legal obligation.

Case laws
X agrees to sell his motorcycle to Y for Rs. 15000. The agreement gives rise to legal obligation on the part of X to deliver the vehicle to Y and on the part of Y to pay Rs. 15000 to X. Failure of X to deliver the vehicle or Y to make the payment entitles the aggrieved to sue against the offender. 2. X invites Y for dinner in a restaurant. Y having accepted the invitation , goes to the restaurant on the stipulated date and time . X is not present there. Y has no remedy against X.
1.

ESSENTIALS OF VALID CONTRACT

OFFER AND ACCEPTANCE
LAWFUL CONSIDERATION CONTRACTUAL CAPACITY

LAWFUL OBJECTS
POSSIBILITY OF PERFORMANCE CERTAINTY OF TERMS NOT EXPRESSLY DECLARED VOID FREE CONSENT

EXPLAINATIONS
There are two parties to a contract . Offeror and

offeree. A agrees to sell his book to B for Rs.100,Bs promise to pay Rs 100 is the consideration for As promise to sell his books and As promise to sell the books is the consideration for Bs promise to pay Rs.100. The parties who enter into contract must be competent. a. Is of the age of majority. b. who is of sound mind . c. is not disqualified from contracting by any law.

The object of the agreement must be lawful. A lawful

object is that which is neither fraudulent , forbidden by law, immoral nor opposed to any public policy. The performance of an agreement must be possible . An agreement to do an impossible act is not valid . eg. Finding a treasure by magic. The meaning of agreement must be certain . An agreement whose meaning is is not certain is not valid. The consent of the parties must be genuine. Consent is said to be not free when it is vitiated by coercion , undue influence , fraud , misrepresentation or mistake.

Classification of contract
formation Validity Performance

Express contract Implied contract Quasi contract

Valid contract Void contract Voidable contract Illegal contract Unforceable contract

Executory contracts Unilateral contracts Bilateral contracts Executed contracts

Explanation- formation
An express contract is one that is explicitly set forth in

words, either spoken or written. In an implied contract, the terms are not made clear but the acts, conduct or dealing of parties lend themselves to form a contract. There are certain transactions which cannot be strictly called contracts but create peculiar obligations. Law recognizes this obligation as a contract though there is no explicit agreement between giver and receiver of benefit.

Validity
A contract which satisfies all the legal requirements

laid down in Sec. 10 of the Act is known as a valid contract. A contract which was valid when it was first entered into but subsequently becomes unenforceable due to impossibility of performance, change of law or other reasons is called void contract. A voidable contract is the one that can be set aside at the option of one of the parties to the contract. The terms illegal and contract cannot go together. What is illegal cannot be enforced.

continuation
An unenforceable contract is valid but for certain

technical reasons it becomes necessarily illegal.

Performance
An executed contract is one which is wholly

performed. E.g. A agrees to paint the picture for B FOR Rs. 100. When A paints the picture and B pays Rs. 100 the contract is executed. Parties to an executory contract have not performed their respective obligations. Here one party has already performed his part of obligations at the time of or before forming the contract. Only other party has to fulfill his obligation. Here both the parties to the contract have to fulfill their obligations.

Sec.2(1) defines when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal. The person who makes the proposal is called the promiser or offerer and the person to whom the proposal is made is called the promisee or offeree.

KINDS OF OFFERKinds of offer

How an offer is made

To whom an offer is made

Express offer

Implied offer

General offer

Specific offer

ESSENTIALS OF VALID OFFEROFFER SHOULD BE IN SUCH A WAY THAT IT SHOULD CREATE LEGAL RELATIONSHIP BETWEEN THE PARTIES
Offer must be certain definite and not vague

Case-TAYLOR AND PORTINGTON-A agreed to take Bs house on rent for three years at the rent of 85 pounds per annum provided the house was put to thorough repair and the drawing rooms were decorated according to present style
Offer must be communicated to offeree

ESSENTIALS OF VALID OFFER It should be in such a way that it should create legal relationship

between the parties. Offer must be certain ,definite and not vague Offer must be communicated to offeree Offer must be made with a view to obtaining the assent of the other party An offer may be conditional The offer should not contain any term the non compliance of which may be treated as acceptance An invitation to offer is not an offer Statement of price is not an offer The terms of offer cannot be changed once the offer is communicated

ACCEPTANCE An agreement comes in to picture only when the offeree

duly accepts the offer. Acceptance means the approval of the offeree with an expression to stick to the terms of offer. Acceptance assumes a very important position and it is often remarked Acceptance to an offer is what a lighted matchstick is to a train of gun powder, it produces something which cannot be recalled

Essentials of valid acceptance It should be absolute and unconditional

Acceptance must be communicated to the offeror Acceptance must be made with in reasonable time

It should be given in a prescribed mode

The acceptor must be aware of the proposal at the time

of the offer Acceptance must be given before the offer lapses or before the offer is revoked Acceptance cannot be implied from silence.

CONSIDERATION
Consideration is one of the essentials of a valid

contract.Sec 25 of Indian contract Act opens with the declaration that- an agreement made without consideration is void. In simple words consideration may be understood as some value given in exchange for promise. Thus, consideration is the price of a promise, a return or quid pro quo something of value received by the promisor as inducement of the promise.

Definition of consideration
when at the desire of the promisor, the promisee or any other person has done or abstained from doing,or does or abstains from doing or promises to do or abstains from doing something such an act or abstinence or promise is called consideration for the promise.

legal requirements regarding consideration

consideration must move at the desire of the promisor. consideration may move from the promisee or any other person. consideration need not be adequate-consideration need not be adequate or equivalent to promise. What is important is that an agreement must be supported by consideration.

continuation
Executed and executary considerationconsideration which consists in the performance of an act is said to be executed; when it consist in a promise it is said to be executory. e.g.. A pays Rs. 5000 toB and B promises to deliver to him a certain quantity of wheat with in month. in this case A pays the amount where as B merely makes a promise. therefore , the consideration paid by A IS EXECUTED, WHERE AS THE CONSIDERATION PROMISED BY B is executory.

CONTINUATION
consideration may be past, present or future past consideration-X renders some service toY in Jan. In march Y promises to compensate X for the

services rendered. the consideration of X is a past consideration. present consideration it moves simultaneously with promise. X recieves Rs. 200 in return