The time period contract is described below area 2(h) of the Indian Contract Act, 1872 as“a settlement enforceable with the aid of law’.
The contract consists of two crucial elements:
(i) an agreement, and
(ii) its enforceability by way of law.
(i) Agreement The time period ‘agreement’ given in Section 2(e) of the Act is described as“every promise and each set of promises, forming the consideration for every other’.
To have perception into the definition of agreement, we want to recognize promise. Section two (b) defines a promise as
“when the character to whom the concept is made signifies his assent thereto, the thought is stated to be accepted. A proposal when accepted, will become a promise”
The following factors emerge from the above definition :
1. when the individual to whom the notion is made.
2. signifies his assent on that inspiration which is made to him three the thought will become commonly accepted notion turns into the promise dual consideration. Agreement = Offer/Proposal + Acceptance (ii) Enforceability via regulation An settlement to grow to be a contract should provide upward jostle to a prison obligation. which capacity a duly enforceable through the law. Thus from the above definitions, it can be concluded that Contract = Accepted proposal/Agreement + Enforceability with the aid of regulation
On elaborating the above two concepts, it is apparent that a contract contains a settlement which is a promise or a set of reciprocal promises, that a promise is the acceptance of a suggestion giving upward push to a binding contract. Further, area 2(h) requires a settlement to be necessary of being enforceable through regulation before it is referred to as ‘contract: Where events have made a binding contract, they created rights and tasks between themselves.
Example: A has the same opinion as B to promote vehicles for %2 lacs to B. Here A is below a responsibility to supply auto to B and B has the proper to get hold of the vehicle on the price of %2 lacs and additionally B is underneath a duty to pay rupees 2 lacs to A and A has a proper to acquire %2 lacs. So Law of Contract offers solely such prison duties which have resulted from agreements. Such obligation has to be contractual in nature. However, some duties are outdoor the purview of the regulation of contract.
Example: An duty to hold spouse and children, an order of the court docket of regulation, etc. These are reputation tasks and so out of the scope of the Contract Act.
Essential of a valid contract
In phrases of Section 10 of the Act, “all agreements are contracts if they are made by means of the free consent of the events able to contract, for a lawful consideration and with a lawful object and are now not expressly declared to be void".Since area 10 is now not entire and exhaustive, so there are sure other sections that additionally consists of requirements for a settlement to be enforceable. Thus, in order to create a legitimate contract, the following factors must be present:
1. Two Parties: One can't contract with himself. A contract includes at least two parties one celebration making the provide and the different celebration accepting it. A contract may also be made by way of herbal people and by way of other people having felony existence e.g. companies, universities etc. It is critical to keep in mind that the identification of the parties is ascertainable.
Example: To represent a contract of sale, there should be two parties seller and buyer. The vendor and consumer have to be two distinctive persons, due to the fact an individual can't purchase his personal goods. In-State of Gujarat vs. Ramanlal S & Co. when on the dissolution of a partnership, the property of the company have been divided amongst the partners, the income tax officer desired to tax this transaction. It was once held that it was once now not a sale. The companions being a joint proprietor of this property can't be each purchaser and seller.
Parties have to intend to create felony obligations: There has to be an intention on the section of the events to create a criminal relationship between them. Social or home kind of agreements are no longer enforceable in the courtroom of regulation and for this reason they do no longer end result in contracts.
Example: A husband agreed to pay to his spouse sure quantity as protection each month whilst he used to be abroad. Husband failed to pay the promised amount. The wife sued him for the healing of the amount. Here in this case spouse should now not get better as it was once a social settlement and the events did now not intend to create any prison relations. (Balfour v. Balfour).
Other Formalities to be complied with in sure cases: In case of sure contracts, the contracts should be in writing, e.g. Contract of Insurance is no longer legitimate barring as a written contract. Further, in the case of certain contracts, registration of contract underneath the legal guidelines which is in pressure at the time, is fundamental for it to be valid, e.g. in the case of immovable property.
The certainty of meaning: The settlement needs to be sure and no longer indistinct or indefinite.
Example: A consents to promote to B a hundred heaps of oil. There is nothing positive in order to exhibit what variety of oil was once supposed for. According to Section 10 of the Indian Contract Act, 1872, the following are the necessary factors of a Valid Contract:
Offer and Acceptance or an agreement: An settlement is the first vital factor of a legitimate contract. According to Section 2(e) of the Indian Contract Act, 1872, “Every promise and each set of promises, forming consideration for every other is an agreement” and in accordance to Section 2(b) “A notion when accepted, turns into a promise”. A settlement is an effect of providing and acceptance.
Free Consent: Two or greater men and women are stated to consent when they agree upon the identical issue in the identical sense. This can additionally be understood as identification of minds in grasp the phrases viz consensus advert idem. Further, such consent should be free. Consent would be viewed as free consent if it is no longer induced by way of coercion, undue influence, fraud or, misrepresentation, or mistake. When consent to a settlement is precipitated via coercion, undue influence, fraud, or misrepresentation, the settlement is a contract voidable at the alternative of the birthday party whose consent was once so caused. When consent is vitiated through mistake, the contract turns void.
Example: A threatened to shoot B if he (B) does not lend him rupees 2000 and B agreed to it. Here the settlement is entered into below coercion and as a result voidable at the alternative of B.(Students may additionally observe that the phrases coercion, undue influence, fraud, misrepresentation, mistake are explained in the coming units)
The potential of the parties: Capacity to contract skill the prison capability of a man or woman to enter into a valid contract. Section eleven of the Indian Contract Act specifies that each character is ready to contract who
(a) Is of the age of majority in accordance with the regulation to which he Is situation and
(b) is of sound thinking and
(c) is now not in any other case disqualified from contracting by way of any regulation to which he is subject. A character in a position to contract has to fulfill all the above three qualifications.
Qualification (a) refers to the age of the contracting character i.e. the man or woman coming into a contract has to be of 18 years of age. Persons under 18 years of age are viewed as minor, therefore, incompetent to contract.
Qualification (b) requires a character to be of sound thought i.e. he must be in his senses so that he knows the implications of the contract at the time of getting into a contract. A lunatic, an idiot, a drunken man or woman, or below the have an effect on of some intoxicant is now not supposed to be an individual of sound mind.
Qualification (c) requires that a character getting into a contract have to no longer be disqualified by way of his status, in coming into such contracts. Such folks are an alien enemy, overseas sovereigns, convicts, etc. They are disqualified except they fulfill sure formalities required with the aid of the law. Contracts entered via men and women now not in a position to contract are no longer valid.
Consideration: It is referred to as quid seasoned quo’ i.e. ‘something in return’ A treasured consideration in the feel of regulation may additionally consist both in some right, interest, profit, or advantage accruing to one party, or some forbearance, detriment, loss or duty given, suffered or undertaken through the other.
Example: A has the same opinion to promote his books to B for percent 100, B’s promise to pay F one hundred is the consideration for A's promise to promote his books and A's promise to promote the books is the consideration for B's promise to pay = a hundred.
Lawful Consideration and Object: The consideration and object of the settlement should be lawful.
Section 23 states that consideration or object is now not lawful if it is prohibited with the aid of law, or it is such as would defeat the provisions of law if it is fraudulent or includes damage to the character or property of any other or court docket regards it as immoral or adverse to public policy.
Example:‘A’ guarantees to drop prosecution instituted towards ‘B’ for theft and ‘B’ guarantees to fix the cost of the matters taken. The settlement is void, as its object is unlawful.
Not expressly declared to be void: The settlement entered into ought to now not be which the regulation pronounces to be both unlawful or void. An unlawful settlement is a settlement expressly or impliedly prohibited through law. A void settlement is one barring any prison effects.
Example: Threat to commit homicide or making/publishing defamatory statements or getting into agreements that are adversarial to public coverage is unlawful in nature. Similarly, any settlement in restraint of trade, marriage, felony proceedings, etc. is a basic example of void agreements.