Law of Contract Assignment Answers

Q.1. What is a Contract? Explain its meaning and different kinds

with suitable examples.
Introduction Human society cannot function without promises and agreements. However, not every
promise is legally binding. For example, a father promising his child to buy an ice cream is not
enforceable in court. On the other hand, a businessman promising to deliver 100 bags of cement to
a contractor is enforceable. The law of contract ensures that promises intended to have legal
consequences are respected and enforced. The Indian Contract Act, 1872 is the primary law
governing contracts in India. Section 2(h) defines a contract as “an agreement enforceable by law.”
Thus, a contract is born when two parties make an agreement with the intention of creating legal
obligations. Meaning of Contract A contract is basically: Agreement (Offer + Acceptance) +
Enforceability by Law = Contract For instance, if A agrees to sell his house to B for ■50,00,000 and
B accepts, this is a valid contract because it is legally enforceable. But if A promises to take B to
dinner, it is not a contract because it lacks legal intention. Kinds of Contracts 1. On the basis of
Enforceability - Valid Contract: Contains all essential elements (Sec. 10). Example: Registered sale
deed of property. - Void Contract: Becomes unenforceable (Sec. 2(j)). Example: Contract with a
minor. - Voidable Contract: Enforceable at the option of one party (Sec. 2(i)). Example: Contract
obtained by coercion or undue influence. - Illegal Contract: Forbidden by law. Example: Contract for
smuggling or trafficking. - Unenforceable Contract: Legal in substance but cannot be enforced due
to technical defects. Example: Unstamped contract. 2. On the basis of Formation - Express
Contract: By words spoken or written. Example: Lease agreement. - Implied Contract: Inferred from
conduct. Example: Paying fare to a taxi driver. - Quasi Contract: Obligations imposed by law to
prevent unjust enrichment. Example: A pays B’s electricity bill by mistake; B must refund. 3. On the
basis of Performance - Executed Contract: Fully performed. Example: Cash purchase at a store. -
Executory Contract: Yet to be performed. Example: Agreement to supply goods next month. -
Unilateral Contract: Only one party has to perform. Example: Reward offers (Carlill v. Carbolic
Smoke Ball Co.). - Bilateral Contract: Mutual obligations exist. Example: Contract for sale of goods.
4. Special Types under Indian Contract Act - Contracts relating to Indemnity and Guarantee (Sec.
124–127). - Bailment and Pledge (Sec. 148–181). - Agency (Sec. 182–238). - Contingent and
Quasi contracts. Important Case Laws - Balfour v. Balfour (1919): Domestic agreements not
contracts. - Carlill v. Carbolic Smoke Ball Co. (1893): Advertisement with deposit was valid offer. -
Mohori Bibee v. Dharmodas Ghose (1903): Contract with a minor is void ab initio. Conclusion
Contracts are the backbone of commerce, industry, and even daily life. The classification into valid,
void, express, implied, unilateral, etc., makes it easier for law to address diverse relationships.
Without contracts, business and personal dealings would lack certainty and enforceability.

Q.2. What is a proposal and what are its main requirements? How
is a proposal different from an invitation to proposal?
Introduction The starting point of a contract is a proposal (or offer). Unless an offer is made and
accepted, no contract can exist. Section 2(a) of the Indian Contract Act defines “proposal.” Meaning
of Proposal “When one person signifies to another his willingness to do or abstain from doing
anything, with a view to obtaining the assent of that other, he is said to make a proposal.” Example:
A tells B, “I am ready to sell my bike for ■50,000.” This is a proposal. Essential Requirements of a
Valid Proposal 1. Intention to Create Legal Relationship: The proposer must intend legal
consequences. (Balfour v. Balfour – no legal intent in domestic promises). 2. Definiteness and
Certainty: Terms must be clear. A vague statement is not an offer. Example: “I will sell you a car”
(without details) is not valid. 3. Communication: Proposal must be communicated. (Lalman Shukla
v. Gauri Dutt – servant unaware of reward could not claim). 4. Capacity to Accept: The offer must
empower the other party to accept. 5. Can be General or Specific: General → to public (Carlill
 case). Specific → to a particular person. 6. Express or Implied: Express by words; implied by
conduct.

Basis Proposal (Offer) Invitation to Proposal

MeaningExpression of willingness to be legally bound on acceptance.
Preliminary communication to invite offers.
Legal Effect Creates legal obligation once accepted. Does not create obligation; only invitation.
Example ‘I will sell my car for ■5,00,000.’ Price list, shop display, catalogues.
Case Law Carlill v. Carbolic Smoke Ball Co. – valid offer.
Harvey v. Facey – quoting price is not an offer.

Conclusion A proposal is the foundation stone of a contract as it shows readiness to enter into legal
obligations. The distinction between proposal and invitation to proposal prevents confusion between
mere negotiations and binding contracts, thereby ensuring clarity in business transactions.

Q.3. What is consideration in a contract? Explain why it is

important and mention the exceptions to the rule of
consideration.
Introduction A promise without consideration is like a body without a soul. Consideration is the
essential element that validates promises under contract law. Meaning of Consideration Section
2(d) of the Indian Contract Act defines consideration as: “When, at the desire of the promisor, the
promisee or any other person has done or abstained from doing something, such act or abstinence
is called consideration.” Example: A agrees to sell his bike to B for ■40,000. A’s promise is the bike,
B’s promise is the money. This exchange is consideration. Types of Consideration - Past
consideration: Something already done. Example: A saves B’s son, B later promises to pay
■10,000. - Present consideration: Executed simultaneously. Example: Sale in a shop. - Future
consideration: To be performed later. Example: Contract for future supply of goods. Importance of
Consideration - Ensures reciprocity (quid pro quo). - Makes promise enforceable. - Prevents
enforcement of gratuitous promises. - Provides evidence of seriousness. Exceptions to Rule of
Consideration (Sec. 25) 1. Natural Love & Affection: Written and registered agreements between
close relatives. (Venkataswamy v. Rangaswamy). 2. Compensation for Voluntary Services:
Promise to pay for past voluntary service. Example: A finds B’s ring; B later promises reward. 3.
Promise to Pay Time-Barred Debt: Must be in writing and signed. 4. Completed Gifts: Valid without
consideration. 5. Agency: No consideration required (Sec. 185). 6. Contract under Seal (English
law): Promise under seal enforceable without consideration. 7. Third-Party Consideration:
Consideration may move from promisee or any other person (Chinnaya v. Ramaya). Important
Case Laws - Durga Prasad v. Baldeo: Voluntary acts without request are not valid consideration. -
Chinnaya v. Ramaya: Consideration can move from third party. - Thomas v. Thomas (1842):
Consideration must be real but need not be adequate. Conclusion Consideration is the backbone of
contract law. While the general rule is “no consideration, no contract,” the Act provides exceptions
to prevent injustice and promote fairness. Thus, consideration balances the law between strictness
and flexibility.