(Contract, Essential Elements, & Types)
Definition of contract
Section 2 (h) of the Contract Act-1872 provides that
An agreement enforceable by law is a contract.
Therefore in a contract there must be(i) an agreement and
(ii) the agreement must be enforceable by law.
The Essential Elements
of a Contract
1. Plurality of Member: A contract must have at
least two parties.
2. Offer & Acceptance: There must be a lawful
offer by one party & a lawful acceptance of the
offer by other party or parties.
3. Intention to Create Legal Relationship: There
must be an intention among the parties that the
agreement shall result in or create legal relations.
The Essential Elements
of a Contract
4. Lawful Consideration: An agreement to do
something for nothing is usually not enforceable
by law. The something given or obtained is called
consideration.
5. Capacity of parties: The parties to an agreement
must be legally capable of entering into an
agreement; otherwise it cannot be enforced by a
court of law. Want of capacity arises from minority,
lunacy, idiocy, drunkenness, & other similar
factors.
The Essential
Elements
of
a
Contract
6. Free Consent: In order to be enforceable, an
agreement must be based on the free consent of all the
parties.
7. Legality of the Object: The object for which the
agreement has been entered into must not be illegal, or
immoral or opposed to public policy.
8. Certainty: The agreement must not be vague. It must
be possible to ascertain the meaning of the agreement,
for otherwise it cannot be enforced.
The Essential
Elements
ofTheaagreement
Contract
9. Possibility of performance:
must be capable
of being performed. A promise to do an impossible thing
cannot be enforced.
10. Writing, Registration, & Legal Formalities: An oral
contract is a perfectly good contract, except in those cases
where writing and/or registration is required by some statue.
The terms of an oral contract are sometimes difficult to prove.
Therefore, important agreements are usually entered into in
writing even in cases where writing is not compulsory.
The Essential
Elements
of a Contract
An agreement which fulfils all the essential elements is
enforceable by law & is called a contract. From this we
can say that, all agreements are not contracts, but all
contracts are agreement.
The Process of Forming a
contract
Promisor
Proposal
+
Acceptance
=
Promise
Promisee
Promise + Consideration = Agreement
Agreement + Enforceability = Contract
Types of Contract
Contract can be classified into four board divisions,
namely,
1. The method of formation of a contract,
2. The time of its performance,
3. Its parties, and
4. Its legality or validity.
Types of Contract
on the basis of
I. Express contract: Express contract is one which is
formation
expressed in words spoken or written.
For example; X offer to sell his motor car to Y at the
price of tk. 100000 and Y agrees to buy the car at the
price stated. This is an express contract.
Types of Contract
on
the basis of
ii. Implied contract: The conditions of an implied
contract is to be understood from the acts, the
formation
conduct of the parties and/or the course of dealing
between them.
For example, A transport company runs tramway
cars along the streets. This is an offer by the
company to carry passengers at the scheduled
fares. The offer is accepted when a passenger gets
up on a tram with the intention of becoming a
passenger. This is an implied contract.
Types of Contract
on the basis of time of
performance
I. Executed contract: There are contracts where the parties
perform their obligations immediately, i.e., as soon as the
contract is formed.
ii. Executory contract: In this contract the obligations of
the parties are to be performed at a later time.
Types of Contract
on the basis of parties of the
contract
I. Bilateral Contract: There must be at least two parties to
the contract. Therefore all contracts are bilateral or
multilateral.
ii. Unilateral Contract: In certain contracts one party has to
fulfill his obligations whereas the other party has already
performed his obligations. Such contract is called
unilateral contract.
Types of Contract
on the basis of Legality or
Validity
I. Void Agreement: An agreement not enforceable by
law is said to be void.Section 2(g). A void
agreement has no legal effect.
For example, an agreement made by minor;
agreements without consideration; certain agreements
against public policy; etc. are void ab initio, i.e., void
from the beginning.
Types of Contract
on the basis of Legality or
Validity
ii.
Voidable Agreement: A voidable agreement
is one
which can be avoided. An agreement which is enforceable by
law at the option of one or more of the parties thereto, but not
at the option of the other or others, is a voidable contract.
iii. Unenforceable Agreement: Unenforceable agreement
means an agreement which cannot be enforced in a court of
law because of some technical defects. For example, want of
registration, or nonpayment of the requisite stamp duty.
Types of Contract
on the basis of Legality or
Validity
iv. Illegal Agreement: An illegal agreement is one which is
against the law in-force in a country. For example, an
agreement to commit murder.
v. Valid Contract: An agreement which satisfies all the
essential elements of a contract, & which is enforceable
through the courts is called valid contract.
