Detailed Notes on Law of Contracts
1. All Contracts Are Agreements, But All Agreements Are Not Contracts
Explanation:
- Agreement: An agreement is the foundation of a contract. It is formed when one party makes an
offer and the other accepts it.
- Contract: A contract is an agreement enforceable by law, as defined in Section 2(h) of the Indian
Contract Act, 1872.
For an agreement to become a contract, it must satisfy certain conditions of enforceability.
Key Elements of a Contract:
1. Offer and Acceptance
2. Legal Obligation
3. Free Consent
4. Lawful Consideration
5. Capacity of Parties
6. Lawful Object
7. Certainty and Possibility of Performance
Examples:
- Agreement Without Consideration: If A promises to give a gift to B, it is an agreement, but not a
contract as there is no consideration.
- Illegal Agreements: Agreements to commit crimes or fraud are not enforceable, thus not contracts.
Relevant Case Laws:
1. Balfour v. Balfour (1919): Agreements between spouses related to domestic arrangements are
not contracts as they lack legal intention.
2. Carlill v. Carbolic Smoke Ball Co. (1893): An advertisement offering a reward formed a contract
when terms were fulfilled.
3. Harvey v. Facey (1893): Demonstrated the difference between an offer and an invitation to offer.
2. History of Contract Laws in India
Evolution of Contract Law:
- Pre-British Era: Contracts were governed by personal laws (Hindu and Muslim laws), focusing on
customary practices.
- British Influence: Introduction of English legal principles during British rule led to the codification of
laws.
- Indian Contract Act, 1872: Enacted to unify and standardize contract law across the country.
Case Law:
- Mohori Bibee v. Dharmodas Ghose (1903): Established the principle that agreements with minors
are void.
3. Contractual Capacity of Parties
Definition:
The legal ability of parties to enter into a contract. Under the Indian Contract Act, the following
parties are considered competent:
1. Age of Majority
2. Sound Mind
3. Not Disqualified by Law
Case Law:
- Nash v. Inman (1908): A tailor's contract with a minor for luxurious clothing was held
unenforceable.
4. Quasi-Contracts
Meaning:
Quasi-contracts are obligations imposed by law to prevent unjust enrichment, even though there is
no actual contract between the parties.
Examples:
1. Supply of Necessaries (Section 68): If necessaries are supplied to a person incapable of
contracting, the supplier is entitled to reimbursement.
2. Payment by Mistake (Section 72): Money paid under a mistake must be returned.
Case Law:
- State of West Bengal v. B.K. Mondal & Sons (1962): A quasi-contract was recognized for payment
made under an implied obligation.
5. Coercion
Definition:
Section 15 defines coercion as "committing or threatening to commit any act forbidden by the Indian
Penal Code, or the unlawful detaining of property, to compel a person to enter into an agreement."
Case Law:
- Chikkam Ammiraju v. Chikkam Seshamma (1917): Threat to commit suicide was held as coercion
under the Act.
