Contracts
Contract: A contract is an agreement between two or more parties that is legally enforceable. It
involves promises or actions that each party agrees to perform.
Essentials of a Valid Contract:
● Offer and Acceptance: One party makes a clear offer to do something, and the other
party accepts this offer.
● Intention to Create Legal Relations: Both parties must intend for their agreement to be
legally binding, not just a casual promise.
● Lawful Consideration: There must be something of value exchanged between the
parties, such as money, services, or goods.
● Capacity of Parties: All parties involved must have the legal ability to enter into a
contract. This means they are not minors (under 18 years old), are of sound mind, and
are not otherwise restricted by law.
● Free Consent: The agreement must be made with free will, without being forced,
tricked, or influenced unfairly.
● Lawful Object: The purpose of the contract must be legal and not against public policy.
● Certainty and Possibility of Performance: The terms of the contract must be clear and
achievable. The duties must be possible to perform.
● Not Declared Void: The contract should not be of a type that the law automatically
considers invalid (void).
Offer and Acceptance
● Offer: A proposal by one party to another, indicating a willingness to enter into a contract
under specific terms. For example, if you say, "I will sell you my car for $5,000," that’s an
offer.
● Acceptance: The other party’s agreement to the offer's terms. For acceptance to be
valid, it must be communicated to the person who made the offer. Acceptance must be
unconditional.
● Communication of Offer and Acceptance: Both the offer and acceptance must be
communicated clearly. An offer can’t be accepted if the offeree doesn’t know about it.
● Revocation of Offer: The person making the offer can withdraw it anytime before it’s
accepted, but they must communicate the withdrawal to the other party.
● Counter-Offer: If the person receiving the offer changes any terms, it’s a counter-offer,
not an acceptance. This effectively rejects the original offer and proposes a new one.
Consideration:Something of value that is exchanged between the parties involved in a
contract. It can be money, goods, services, or a promise to do or not do something.
Types of Consideration:
● Past Consideration: Something given or done before the contract is made, usually not
valid as consideration in many legal systems.
● Present Consideration: Something given or done at the time the contract is made.
● Future Consideration: A promise to give or do something in the future
Legal Rules Regarding Consideration:
● It must be something real and valuable. For example, it cannot be a gift or something
that has no value.
● It must be lawful. The consideration cannot involve illegal activities.
● It must be given by the promisee or at the promisor’s request.
Capacity of Parties:Who Can Enter a Contract?
● Adults: Individuals who are 18 years or older.
● Mentally Sound Individuals: People who understand the nature and consequences of
their actions when making the contract.
● Not Disqualified by Law: Certain individuals, such as those who are bankrupt or have
been declared incompetent by a court, may not have the capacity to contract.
● Minors: Generally cannot enter contracts, but there are exceptions for necessities like
food, clothing, and shelter. Contracts with minors are typically voidable, meaning the
minor can choose to enforce or cancel the contract.
Free Consent
● Free Consent: All parties must agree to the terms of the contract voluntarily, without any
force, fraud, undue influence, or mistake.
● Coercion: Forcing someone to enter into a contract by threatening them or their loved
ones.
● Undue Influence: Taking advantage of a position of power over another person to get
them to agree to a contract. For example, a boss pressuring an employee.
● Fraud: Deliberately deceiving someone to get them to enter into a contract. For instance,
lying about the quality of a product.
● Misrepresentation: Giving false information unintentionally that persuades someone to
enter into a contract.
● Mistake: Both parties have an incorrect belief about a vital fact in the contract, which can
make the contract voidable.
Communication of Offer and Acceptance
● Communication of Proposal: A proposal is complete when it reaches the person to whom
it is made.
● Communication of Acceptance: Acceptance is complete when it is communicated to the
proposer. If acceptance is by post, it is complete when the letter is posted.
Lawful Object
Lawful Object: The contract’s purpose must be legal. For example, a contract to sell illegal drugs
is not valid. The objective of the agreement should not be to break the law or go against public
policy.
Revocation: An offer can be revoked at any time before it is accepted. This can be done by
directly informing the offeree or through a reliable third party.Acceptance can be revoked only if
the revocation reaches the proposer before the acceptance.
Tenders: A tender is generally an invitation to treat, meaning it invites offers rather than being
an offer itself. This allows the party inviting tenders to consider all bids without any obligation.
● Submission and Acceptance: When a party submits a tender, it is considered an offer.
The contract is formed only when the tender is accepted.
● Government Tenders: Government bodies often use tenders to procure goods and
services, ensuring transparency and fairness. Contractors can challenge unfair tender
processes through legal channels.
Contractual Terms
● Express Terms: Terms that are clearly stated in the contract, either orally or in writing.
● Implied Terms: Terms not explicitly stated but assumed to be included based on the
nature of the agreement, conduct of the parties, or laws.
● Conditions and Warranties: Conditions are fundamental terms that, if breached, allow the
aggrieved party to terminate the contract and seek damages. Warranties are less crucial
terms, and breach of these allows for claiming damages but not contract terminatio
Void and Voidable Contracts
● Void Contract: A contract that has no legal effect from the beginning. It is as if the
contract never existed. For example, a contract for an illegal activity is void.
● Voidable Contract: A contract that is valid and enforceable unless one party decides to
void it due to certain issues like coercion, fraud, or misrepresentation. The party has the
choice to either validate or cancel the contract.
Performance of ContractCarrying out the obligations as agreed in the contract.
Types of Performance:
● Actual Performance: When the parties fulfill their contractual obligations exactly as
agreed.
● Attempted Performance: When one party is ready and willing to perform their part but is
prevented by the other party.
● Discharge of Contract: Ending the contractual obligations. This can happen in
several ways:
● By Performance: When both parties fulfill their contractual duties.
● By Agreement: When both parties agree to end the contract.
● By Impossibility: When it becomes impossible to perform the contract due to unforeseen
events, like a natural disaster.
● By Breach: When one party fails to fulfill their obligations, the other party can end the
contract and seek remedies.
Breach of Contract:When a party fails to perform their obligations as stipulated in the
contract.
Remedies for Breach of Contract Legal solutions available when a contract is broken.
● Damages: Financial compensation for the loss caused by the breach. It can be
compensatory (to cover direct losses) or punitive (to punish wrongful conduct).
● Specific Performance: A court order requiring the breaching party to perform their
obligations as agreed in the contract. This is usually used when damages are not
sufficient.
● Injunction: A court order preventing a party from doing something that would breach the
contract.
Force Majeure and Frustration
● Force Majeure: A clause in a contract that frees parties from liability or obligation when
an extraordinary event or circumstance beyond their control prevents them from fulfilling
their contractual duties.
● Frustration: Legal doctrine applied when an unforeseen event fundamentally changes
the nature of the contract, making it impossible to perform. For example, a contract to
rent a hall for a specific event would be frustrated if the hall burns down.
Rescission: Canceling the contract and returning the parties to their pre-contract positions,
essentially undoing the contract.
