BUSINESS LAW

Contract An agreement enforceable at

law is called contract.
Agreement Every promise or set of
promises forming consideration for each
other is called agreement.
Types of agreement
i. Social agreement
ii. Legal agreement

Social agreement Agreements which

do not create legal obligation between
the parties are called social agreements.
In social agreements, parties to a
contract are not legally bound to perform
the contract
Legal Agreements Agreements which
create legal obligation between the
parties are called legal agreements. In
legal agreements, parties are legally
bound to perform the contract.

Promise When one person makes a proposal

and other person accept it, it becomes promise
OR
An accepted offer is called promise
Enforceable An agreement creating legal
relationship between the parties is enforceable.
If a contract does not create legal obligation
between the parties it is not enforceable by law.

An agreement enforceable at law is

contract

Contract An agreement enforceable at law is

called contract.
Essentials of a valid contract
1. Offer& Acceptance For a valid contract there
must be lawful offer and lawful acceptance.
Lawful means that the offer and acceptance must
fulfill the requirement of law
Example
A offers to sell her house to B for 10 lac, this is an
offer. Tania agrees to buys her house, there is an
acceptance.

2. Legal Obligation There must be legal

obligation / relation between the parties to make
a contract valid If parties do not intend ( ) to
create legal relationship, contract is not
enforceable at law.
Example A agrees to sell his house to B for 20.
Lac. It is a valid contract as it is creating legal
relationship between the parties.
3. Lawful consideration Consideration is the
price paid by the one party for the promise of
other party. Thus for a valid contract
consideration must be lawful
Example A agrees to sell his house to H for Rs
20 lac

4. Competent to contract For a valid contract

parties must be of sound mind, must attain the
age of majority and are not disqualified from
contracting by law
Example A, a person of unsound mind agrees to
sell his cycle to B for Rs 10. The is void as the
parties not competent to contract
5. Free consent For a valid contract the consent
of parties must be free. Consent is free when it is
not obtained by coercion, undue influence,
misrepresentation and fraud
Example A compels X to enter into an
agreement on gunpoint, it is a valid contract
because the consent of a party is not free

Lawful Object The object of agreement must not be illegal,

immoral ( ) opposed to public policy or to imply injury to any
person
Example A agrees to sell his cycle to B for rs 2000 if he beats C.
the agreement is void as its object is illegal
Writing & registration A contract may be oral ( ) or in writing
but it is preferable that the contract must be in writing because it
is easy to prove in court. If required by law certain agreements
must be in writing signed and attested by witness and registered
Example X verbally promise to sell his books to Y. it is a valid
contract as it does not required in writing A verbally promise to
sell his house to B. it is a void agreement because law requires it
in writing.
Certainty of terms
For a valid contract it is essential that the terms and conditions of
contract must be definite and clear. Agreements the meaning of
which is not clear are void
Example A promised to sell one of his books to B. It is void

Possibility of performance An
agreement to do an impossible act is
void. If the act is legally or physically
impossible to perform the agreement is
not enforceable by law
Example
X promised Y, that she will discover gold
by magic. It is a void agreement as it is
impossible to perform

Essentials of a valid
offer
The following are the essentials of a valid offer
1. Express or implied
2. Legal relation
3. Definite & clear
4. Specific & general
5. Communication with Offeree
6. Negative condition(Majid wrote to sajid to sell his watch
adding that if he did not reply within 2 days, the offer will
be considered accepted)
7. Conditions in offer
8. Cross offers

Agreement

valid

Void