Essential elements of a valid contract and contract breach
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Form / Lawful Consideration
Reality of consent
Legality of object
Intention to create Legal relations
Capacity of parties
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An agreement made between two or more
parties, giving rise to legal rights and
obligations that the law will enforce.
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Terms: express / Implied
There must be a „lawful offer‟ and a „lawful
acceptance‟ of the offer, thus resulting in
an agreement. The adjective „lawful‟ implies
that the offer and acceptance must satisfy
the requirements of the contract act.
As per sec.2(a) “when one person signifies
to another his willingness to do or 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
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An offer may be express or implied.
An offer must contemplate to give rise to legal
consequences and be capable of creating legal
The term of the offer must be certain and not
loose or vague.
An invitation to offer is not an offer.
If no time is fixed by the offeror within which the
offer is to be accepted ,the offer does not remain
open for an indefinite period.
The offer must be communicated to the offeree
before it can be accepted.
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An offer may be either by words or conduct.
Offer expressed by words, spoken or written
is called an „‟express offer‟‟.
Offer inferred from the conduct of a person
or circumstances of the case is called
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If the offer does not intend to give rise to
legal consequences, it is not a valid offer in
the eye of law
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When a person to whom the offer has been made
signifies his assent thereto, the offer is said to be
accepted. The acceptance of an offer may be
express or implied.
It is express when the acceptance has been
signified either in writing or by words of mouth or
by performance of required act of the offeree.
E.g “X” loses his dog and announces a reward of Rs
1000 to anyone who brings his dog back. “Y” need
not convey his acceptance to offer, which is a
general one. If he finds the dog and gives it to A,
he is entitled to the reward as he accepted the offer
by doing the required act.
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Acceptance is implied when it is said to be
gathered from the surrounding circumstances
or the conduct of the parties.
E.g A‟s scooter goes out of order and he is
stranded in the middle of a lonely road. B,
mechanic who observes this starts correcting
the fault. A allows B to do the same. From the
nature of the circumstances a has given his
acceptance to the offer of B.
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There must be an intention among the parties that
the agreement should be attached by legal
consequences and create legal obligations.
Agreements of a social or domestic nature do not
contemplate legal relations, and as such they do
not give rise to a contract.
E.g An agreement to dine at a friend‟s house is not
an agreement intended to create legal relations and
therefore, is not a contract.
Business agreement does not amount to a
contract if the parties have declared that
agreement is not to create legal obligation.
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E.g XYZ company entered into an
agreement with “R” company by means of
which former was appointed as the agent of
the latter. But one of the clause is as
follows: “This arrangement is not entered
into as a formal or legal agreement, and
shall not be subject to legal jurisdiction in
the law courts”. So, it shows that there was
no intention to create legal relations.
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It is the third essential element of a valid
“Consideration is the price paid by one party
for the promise of the other. An agreement is
legally enforceable only when each of the
parties to it gives something and gets
The something given or obtained is the price
for the promise and is called “consideration”.
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On the basis of Enforceability
On the basis of Extent of execution
On the basis of Mode of Creation
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Valid Contract: It is an agreement enforceable
Voidable Contract: An agreement which is
enforceable by law at the option of one or
more of the parties but not at the option of
other or others, is a voidable contract.
It becomes voidable when the consent of one
of the parties to the contract is obtained by
undue influence, misinterpretation or fraud
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Executed Contract: A contract is said to be
executed when both the parties to a contract
have ,completely performed their share of
obligation and nothing remains to be done by
either party under the contract.
Executory Contract: It is the one in which
both the obligations are outstanding one on
either party to the contract, either wholly or
in part, at the time of the formation of the
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Express Contract: Where both the offer and
acceptance constituting an agreement
enforceable by law are made in words spoken
or written ,it is an express contract.
Implied Contract: Where both the offer and
acceptance constituting an agreement
enforceable at law are made otherwise than in
words i.e. by acts and conducts of the parties,
it is called an implied contract.
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The cases grouped under this type of contract
have little or no affinity with contract.
Such a contract does not arise by virtue of any
agreement, express or implied between the
parties but the law infers or recognizes a
contract under certain special circumstances.
For e.g A, a tradesman left his goods at B‟s
place by mistake and B treated A‟s goods as his
own unknowingly or knowingly. Here B is bound
to repay A‟s goods.
A quasi contract is based upon the equitable
principle that a person shall not be allowed to
retain unjust benefit at the expense of other.
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Illegal contract - An agreement forbidden by law.
Unenforceable contract - It is valid but due to some
technical defect the contract becomes void. In case
defects are removed the contract is
enforceable.(lack of registration, lack of signature
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DISCHARGE BY PERFORMANCE
DISCHARGE BY AGREEMENT OR CONSENT
DISCHARGE BY IMPOSSIBILITY OF
DISCHARGE BY LAPSE OF TIME
DISCHARGE BY OPERATION OF LAW
DISHARGE BY BREACH OF CONTRACT
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When both parties perform their promises & there is
nothing remaining to perform.
But if one party only performs his promise, he alone is
discharged. Such a party gets a right of action against the
other party who is guilty of breach.
When the promisor offers to perform his obligation ,but
promisee refuses to accept the performance. It is also
known as “tender”.
The tender is not performance but is only an offer to
perform under the contract.
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NOVATION (Sec 62): New contract substituted for old
contract with the same or different parties
RESCISSION (Sec 62) : When some or all terms of a
contract are cancelled
ALTERATION (Sec 62):When one or more terms of a
contract is/are altered by the mutual consent of the parties
to the contract
REMISSION (Sec 63) :Acceptance of a lesser fulfillment of
the promise made.
WAIVER :Mutual abandonment of the right by the parties
MERGER :When an inferior right accruing to a party to
contract merges into a superior right accruing to the same
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Impossibility at the time of contract: An agreement to
do an act impossible in itself is void.
So, there is no question of discharge of contract which is
entered into to perform something that is obviously
impossible. E.g finding treasure by magic.
Subsequent Impossibility: A contract to do an act which,
after the contract is made, becomes impossible or some
event which promisor could not prevent, unlawful, becomes
void when the act becomes impossible or unlawful.
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Destruction of the subject matter: Where the subject
matter of a contract is destroyed without the fault of promisor
or promisee, the contract becomes void by impossibility of
performance. e.g a music hall been taken on rent but on the day
of function its destroyed .
By Death or Disablement of party: The contract is discharged on
the illness or physical disability or death of the promisor where
the performance was to be executed by promisor himself.
Change of Law: A change in law may render the contract illegal
and in such cases the contract is discharged.
Outbreak of war: Contracts made before the outbreak of war
are discharged but can be revived after the end of war.
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THE LIMITATION ACT 1963, CLEARLY
STATES THAT A CONTRACT SHOULD BE
PERFORMED WITHIN A SPECIFIED
TIME CALLED PERIOD OF LIMITATION
IF IT IS NOT PERFORMED AND IF THE
PROMISEE TAKES NO ACTION WITHIN
THE LIMITATION TIME, THEN HE IS
DEPRIVED OF HIS REMEDY AT LAW
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DEATH: Death of a promisor results in termination of the
contract in cases involving personal skill or ability.
MERGER: When a new contract is entered into by same parties
and an inferior right contract merges into a superior right
INSOLVENCY: When an order of discharge is passed by an
insolvency court, a contract is discharged by the insolvency of
one of the parties, exonerating the insolvent.
UNAUTHORISED ALTERATION OF THE TERMS OF A WRITTEN
AGREEMENT: Where any of the parties alters any of the terms
of the contract without seeking the consent of the other party
to it, the contract is discharged.
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ACTUAL BREACH :
At the time of performance
During the performance
It occurs before the time
fixed for the performance
By the act of promisor
By renunciation of
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