oLaw means a „set of rules‟. It may be defined
as the rules of conduct recognized and
enforced by the state to control and regulate
the conduct of people, to protect their
property and contractual rights with a view to
securing justice, peaceful living and social
oMeaning of contract-According to section
2(h) of the Indian Contract Act,1872, “An
agreement enforceable by law is a contract.”
oContract = Agreement +Enforceability by law
oThere are two essential elements of
o1 Agreement: Section2(e) as, Every
promise and set of promises forming
consideration for each other.
oA promise is defined as section 2(b) A
proposal when accepted become a
oAgreement =Offer+ acceptance
o2.Enforceable at law. An agreement to become a
contract must give rise to legal obligation.
oExample: X offers to sell his car to Y for Rs.
100000. Y accepts this offer. Such an agreement
between X and Y is a contract because it creates
o Mukesh invites Vijay to a dinner at his house Vijay
accept the invitation. It is purely social agreement.
If Vijay fails to arrive at dinner or Mukesh has to go
out and is not available at place at the dinner time
due to some important work either of the parties
can not sue other for not fulfilling the promise the
reason being there was no intention between
parties to create any legal obligation.
Other kind of obligation which do not constitute a contract are domestic
agreement, made with no intention to create legal relationship.
Leading case on this point is Balfour v.Balfour (1919)
Mr. Balfour was employed in Ceylon .Mrs. Balfour owing to ill health
had to stay in England and could not accompany him to ceylon. Mr.
Balfour promised her to send her 30 ponds every month while he was
abroad. But Mr.Balfour failed to pay that amount. So Mrs. Belfour filed a
suit against Mr. Balfour for recovering the said amount.
The court held that it was mere domestic agreement and that the
promise made by the husband in this case was not intended to be a
Definition - Law of Contract
“Every agreement and promise enforceable by
Law is a Contract”.
“An agreement which create and define
obligations between the parties is Law of
“A contract is an agreement enforceable at law
made between two or more persons by
whom rights are acquired by one or more
to acts or absent on the part of the other
ESSENTIAL ELEMENTS OF A VALID
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.
The adjective lawful means offer and its
acceptance must confirm to the rules laid
down in the Indian Contract Act regarding
valid offer and acceptance and its
2.Intention to create legal relationship: If
there is no intention to create legal
relationship then there will be no contract.
Example: ABC Ltd agreed with S that when
existing contract expires, it would favorably
consider an application of S for renewal of
his contract. Held the agreement was not
intended to bind the company to renew its
contract with S and imposed no obligation
on it to renew it.
Consideration is the price for which promise
of other one is bought. The law enforces
only those promises which are made for the
In the absence of consideration a promise is
purely gratuitous creates no legal obligation.
Consideration may take any form of goods
4.Capacity to party :The parties to an
agreement must be competent to contract. If
either of the parties does not have the
capacity to contract, the contract is not valid.
The following persons according to law are
incompetent to contract.
b) persons of unsound mind
c) Persons disqualified by law
5.Free Consent: Consent means the parties must
have agreed upon the same thing in the same sense
According to section 14 Consent is said to be free
when it is not caused by
2) Undue influence.
An agreement should be made by free consent of the
6.Lawful Object :
The object of an agreement must be
lawful The object is said to be
oIt is forbidden by law .
oIt is of such nature that if permitted it
would defeat the provision of any law
oIt is fraudulent
oIt involves an injury to the person or
property of any other
oThe court regards it as immoral or
opposed to public policy
7. Certainty of meaning :According to Section29
Agreement the meaning of which is not certain
are void .The terms of the contract must be
precise and certain. It cannot be left vague. A
contract may be void on the ground of
8. Possibility of performance :
oIf the act is impossible in itself ,physically or
legally it can not be enforced at law .
oNot declared to be void or illegal. Agreements
mentioned in Section 24 to 30 of the act have
been expressly declared to be void for example
agreement in restraint of trade and marriage
, legal proceeding etc. 13Ruby sharma
9.Legal Formalities: The agreement must
comply with the necessary formalities as to
writing, registration, stamping etc. if any
required in order to make it enforceable by
Classification of contracts
On the basis of
On the basis of
On the basis of
On the basis of Creation
oExpress Contract: it is one which is made
by words spoken or written.
oImplied Contract: It is one which is made
otherwise than by words spoken or
written. It is inferred from the conduct of a
person or the circumstances of the
On the basis of Execution
oExecuted Contract: It is a contract where
both the parties to the contract have
fulfilled their respective obligations under
oExecutory Contract: It is a contract where
both the parties to the contract have still to
perform their respective obligations.
oPartly executed and partly Executory
contract: Where one party has fulfilled his
obligation and the other party has still to
perform his obligation.
On the basis of Enforceability
o1)Valid contracts: An agreement enforceable
at law is valid contract.
o2)Void Contracts: An agreement when entered
was legally enforceable but which has
become void due to supervening impossibility
For example a contract between the citizen of
Pakistan and India is a valid contract during
peace but if war breaks out between the two
countries the agreement will become void
oVoid Agreement : According to Section 2(g) An
agreement which is not enforceable by law by either of
the parties is void .It is void ab initio. For example an
agreement with minor and without consideration.
oVoidable Contracts - An agreement made 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. When the consent of a
party to a contract is not free, the contract is voidable
at his option. [Sec. 2(i)].
oUnenforceable Contracts - An unenforceable
contract is one which cannot be enforced in a Court of
law because of some technical defect such as
absence of writing or where the remedy has been
barred by lapse of time.
oIllegal Agreements - An illegal agreement is one
which transgresses some rule of basic public policy or
which is criminal in nature or which is immoral.