Definition of Contract
Section 2(h) of the Indian Contract Act defines the term contract as
follows:
“ An agreement which is enforceable at law is contract”
Therefore a contract essentially consists of two elements
(1) An agreement (II) enforceability at law.
So all agreement which can be enforced at law, are contracts.
Contract=agreement+ enforceability at law.
For eg, A invites B to a dinner and B accepts the invitation . It is only a
social agreement and not enforceable in a court of law, so it is not a
contract.
A agrees to sell his house to B for Rs 500000 .This is a contract.
Various elements which make a
contract.
When one signifies to another his willingness to do or to abstain from doing
something with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal (sec 2(a))
A proposal when accepted becomes a promise (Sec 2(b))
An agreement is promise or a set of promises forming consideration to each
other (sec 2 (e))
Contract is an agreement enforceable at law.
Eg
A proposal is made by X to sell one bag of rice to y. y also accepts that
proposal and promises to purchase rice from X for a particular amount. Now
the proposal made by X becomes a promise when it is accepted by [Link] y,
in turn promises to purchase the said one bag of rice from X for valuable
consideration of rs 100 it becomes an agreement. This agreement creates a
legal obligation on the part of x to sell rice to Y. If X fails or refuses to supply
rice, Y can claim damages from X through a court of law.
Promisor & Promisee
According to section 2(c) of the Contract Act, the person making the proposal
is c alled the “ Promisor”
The person accepting the proposal is called the Promisee
From the above eg, X who makes the proposal is the promisor and Y who
accepts the proposal is the promise.
Thus in every contract there will be two parties namely promisor and
promisee,.
Rights in rem means a right against or in respect of a thing( refer to those
rights associated with conveyance or enjoyment of property)
Rights in personam means a right against or in respect of a [Link] law of
contract deals with rights in [Link] contractual relationship is limited
to the parties of the contract alone.
Elements of a Contract
The essential elements of a contract are contained in the definition of
contract given in Sec.10 of the contract Act.
According to Sec 10 “ All agreements are contracts if they are made by free
consent of parties competent to contract for a lawful consideration and with
a lawful object and are not herby expressly declared to be void.
Thus the essential elements of a contract are
1. Agreement:
There must be an agreement between the parties of a [Link]
agreement involves a valid offer by one party and a valid acceptance by the
other party.
Therefore an agreement = offer + acceptance
Eg When A sends a proposal to B to purchase his house B accepts this proposal .
aaSo this results into an agreement
So a lawful proposal (or offer) and a lawful acceptance complete an agreement.
A contract requires agreement.
Consensus ad idem(identity of mind)
The parties to a contract must agree upon the subject matter of the
contract in the same manner and in the same sense. In other words , there
must be identity of minds among the parties regarding the subject matter of
the contract (sec13)
Eg A has two houses one at TVM and another at kochi. A expresses his
willingness to sell one of his houses to B. A had in his mind the house at kochi
for sale at the time of placing his proposal. B accepted the proposal while
accepting the proposal the house at TVM was in his mind . So there is no
consensus ad idem. Ie there had been no identity of minds about the subject
matter. The contract thus formed is not valid.
Capacity of the parties
There must be atleast two parties to every contract. These parties must have
legal capacity to enter into a to contract. Every person who is a major and
possesses sound mind is competent o enter into a contract. A minor (who has
not completed the age of 18) is incapable of entering into a contract. Persons
of unsound mind (like druken , idiot, lunatic persons) are also not competent
to contract. The law may also disqualify certain persons from entering into
contract.(Sec11)
For example: A, a minor, borrows Rs. 5,000 from B and executes a promissory note in
B’s favour. After attaining majority A executes a fresh promissory note in favour of B
for this amount. B cannot sue on this promissory note as the agreement is void for lack
ofconsideration.
Free Consent
The contracting parties must give their consent freely. It must not be given due to
coercion, undue influence, fraud, misrepresentation or mistake. The absence of free
consent would affect the legal enforceability of a contract.
[Link]
Consideration is the most important element in a contract. Consideration
means something in return. In every contract each agreement must be
supported by consideration, when one party agrees to give something ( or
to give up something ) he must be benefitted by the other party. This
concept of benefit is called consideration.
For eg A offers to all his house to B for Rs 10,00,000. B accepts the
proposal. Here the consideration for the sale of his house is Rs 10,00,000
and the consideration for B's payment of 10,00,000 is the house.
A contract without consideration is not a contract at all. An agreement made
of an unlawful consideration is void.
[Link] Object
The object of an agreement must be lawful. It must not be illegal or
opposed to public policy. When the object of a contract is not lawful, the
contract isvoid.(sec 23)
For eg Raju promises to pay Amal Rs 20000 for murdering [Link] the
object of the contract is to commit murder. It is unlawful therefore the
contract becomes void.
[Link] declared to be void
The agreement might not have been expressly declared void by any law in
force in the country, In such cases the agreement s cannot be enforced.
For eg. A agrees to supply liquor to B, subsequently prohibition act comes into
force. Thus all agreements to supply liquor becomes.
Void,[Link] B cannot enforce the agreement which is made
before the act comes into force. The agreement has already becomes void
from the date of the prohibition order came into effect.
