Q. Define contract? State the essential elements of a valid contract?
Or “An agreement enforced
by law is a contract”- Discuss? Or “All agreements are not contracts, but all contracts are
agreement”-Explain?
Definition of Contract:
The term ‘contract’ is derived from the Latin word ‘Contractum’ which means ‘drawn together’. A
contract is an agreement made between two or more which the law will enforce. Sec 2(h) defines
contract as an agreement enforceable by law.
Pollock defines a contract as “Every agreement and promise enforceable by law is a contract”.
Sir William Anson defines a contract as “a legally binding agreement made between two or more
persons by which rights are acquired by one or more to acts or forbearances on the part of others.
Salmond defines a contract as “An agreement creating and defining obligations between the
parties”.
If we observe the above definitions, we find that a contract consists of two elements. I) An
agreement and II) Its enforceability by law.
Consensus ad idem: Meeting of mind of the parties regarding same subject matter at the same time.
Example: A, who oens two horses named Rajhans & Hansraj, is selling horse Rajhans to B. B thinks
he is purchasing horse Hansraj. There is no consensus ad idem and consequently no Contract.
Essential Elements of a valid contract:
The following are the essential elements of a valid contract.
1. Offer and Acceptance: In order to create a valid contract, there must be a “lawful offer” by one
party and “lawful acceptance” of the same by the other party.
2. Intension to create legal relationship: There must be an intension among the parties to create a
legal relationship. In case of social or domestic agreements, the usual presumption is that the
parties do not intend to create legal relationship. But in commercial or in business agreement
the usual presumption is that the parties intend to create legal relationship unless otherwise
agreed upon. Case law: Balfour vs Balfour
3. Lawful consideration: Consideration means something in return. The consideration must be
lawful. The agreement is legally enforceable anly when botgh the parties give something and get
something in return. It may be past, present or future. But it must be real and lawful.
4. Capacity of Parties: The Parties who enter into an agreement should be legally competent to do
so. A Person is said to be legally competent to contract if has attained the age of majority, is of
sound mind and is not disqualified from contracting by any law.
5. Free Consent: The consent of the parties to the agreement must be free and genuine. A
Consent is said to be free when it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake. If the consent of the parties is not free, then no valid contract
comes into existence.
6. Lawful Object: The object of an agreement must be lawful. It must not be illegal or immoral or
opposed to public policy and must not be forbidden by law.
7. Agreement not declared void: The agreement must not have been expressly declared void by
law in force in the country.
8. Certainty and possibility of performance: The agreement must be capable of being performed.
A promise to do an impossible thing cannot be enforced.
9. Legal Formalities: In the interest of the parties that the contract should be in writing.
Conclusion: All the elements mentioned above must be present in order to make a valid contract. If
any one of them is absent, the agreement does not become a contract. So, all agreements are not
contracts but all contracts are agreements.
Q. Write about classification of contracts?
Contracts may be classified on the basis of their a) Validity b) Formation c) Enforceability
a) On the basis of Validity 1) Voidable Contract 2) Void Agreement 3) Void Contract 4) Illegal
Agreement
1) Voidable contract: According to sec 2(I) of the Indian contract Act 1872, an agreement which is
enforceable by law at the option of one or more of the parties, but not at the option of the others is
a voidable contract.
2) Void agreement: According to sec2 (G) of the Indian contract Act 1872, an agreement not
enforceable by law is said to be void.
3) Void contract: A void contract is a contract which was valid when entered into, but which
subsequently become void due to impossibility of performance, change of law or some other
reasons.
4) Illegal agreement: A contract which is either prohibited by law or otherwise against the public
policy or the object of which is unlawful is an illegal agreement.
b) On the basis of Formation: 1) Express Contract 2) Implied Contract
1) Express Contract: Express contract is one which is made by words either spoken or written.
Where the proposal and acceptance is made in words, it is an express contract.
2) Implied Contract: An implied contract is one which is made otherwise than by words spoken or
written. It is resulted from the conduct of a person or the circumstances of a particular case.
c) On the basis of Performance 1) Executed Contract 2) Executory Contract
1) Executed contract: It is a contract where the parties to the contract have fulfilled their
respective obligations under the contract.
2) Executory contract: It is a contract where both the parties to the contract have still to perform
their respective obligations.
