LEGAL APTITUDE - Law of Contract Part 01

 

LAW OF CONTRACT

     The law relating to contract constitute the most important branch of commercial law. This  is governed by the Indian contract Act 1872.

      The contract act defines contract as an agreement enforceable by law. All agreements are not enforceable by law and therefore all agreements are not contracts.

Essential Elements of a Contract as defined

1. Agreement - Offer and Acceptance
2. Legal purpose
3. Lawful Consideration
4. Capacity to contract
5. Consent to contract
6. Lawful object
7. Certainty
8. Possibility of Performance
9. Not expressly declared void
10. Legal formalities like Writing, Registration etc.

The agreement will create rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, though in some cases the court may order performance by the party in default.

Enforceability of Contracts

Void Contracts: A ‘void contract’ is one where the whole transaction is regarded as a nullity. It means that at no time has there been a contract between the parties. Any goods or money obtained under the agreement must be returned. Where items have been resold to a third party, they may be recovered by the original owner.

Voidable Contracts: A contract which is voidable operates in every respect as a valid contract unless and until one of the parties takes steps to avoid it. Anything obtained under the contract must be returned, in so far as this is possible. If goods have been resold before the contract was avoided, the original owner will not be able to reclaim them. 

Unenforceable Contracts: An unenforceable contract is a valid contract but it cannot be enforced in the courts if one of the parties refused to carry out its terms. Items received under the contract cannot generally be reclaimed. 

Agreement, Contract and Proposal

Agreement definition [SECTION 2(e)]

Agreement is defined as “every promise and every set of promises forming the consideration for each other”. And a promise is defined as an accepted proposal. 

WHAT AGREEMENTS ARE CONTRACTS  [SECTION 10]

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. 

AGREEMENT BECOMES A CONTRACT IF BELOW CONDITIONS ARE MET:

There is some consideration

• The parties are competent to contract
• Their consent is free
• Their object is lawful
• Proposal or Offer

PROPOSAL DEFINITION  [SECTION 2(A)]

When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. 

PROPOSAL TERMINOLOGY  [SECTION 2(C)]

The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”