1. Definitions
• When one person signifies to another his willingness to do
or to 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 PROPOSAL or OFFER
• A proposal, when accepted, becomes a PROMISE of the
offerer
• When a person to whom the proposal is made, signifies his
assent thereto, the PROPOSAL is said to be ACCEPTED
• The person making the proposal is called the
"PROMISOR", and the person accepting the proposal is
called "PROMISEE”
2. Definitions
• When, at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise is
called a CONSIDERATION for the promise;
• Every promise and every set of promises, forming the
consideration for each other, is an AGREEMENT;
• Promises which form the consideration or part of the
consideration for each other are called RECIPROCAL
PROMISES
3. Definitions
• When, at the desire of the promisor, the promisee or
any other person has done or abstained from doing,
or does or abstains from doing, or promises to do
or to abstain from doing, something, such act or
abstinence or promise is called a CONSIDERATION
for the promise;
• Every promise and every set of promises, forming
the consideration for each other, is an
AGREEMENT;
PAST
Consideration FUTURE
Consideration
PRESENT
Consideration
4. Definitions
• An agreement enforceable by law is a
CONTRACT
• Therefore CONTRACT = Agreement +
Enforceability by Law.
• AGREEMENT = Offer + Acceptance +
Enforceability by Law
5. Classifications of Contracts - An agreement becomes a
contract when all the essential elements of a contract are present. In such case such agreement
becomes a contract. If any of the essential elements are missing then such contact is voidable, void,
illegal or unenforceable
• BASED ON THE VALIDITY:
.
• VOIDABLE CONTRACT: 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”.
• VOID AGREEMENT: An agreement not enforceable by law is said to be void.” A void agreement does
not create any legal right or obligation. Such agreement is void-ab-initio from the beginning itself.
• VOID CONTRACT: A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable.” In this case when the contract was entered into, may be valid and binding on the
parties as per law, but subsequently it has become void. E.g., in the case of import contract, the
agreement is enforceable, but if subsequently war brakes out then the agreement becomes void
contract.
• ILLEGAL AGREEMENTS: an illegal agreement is one, which transgresses (against) some basic rule of
Public Policy or is of criminal in nature or is immoral. ALL ILLEGAL AGREEMENT IS VOID, BUT ALL
VOID AGREEMENTS ARE NOT ILLEGAL. An illegal agreement is not only void between the immediate
parties but has its further effect that even the collateral transactions to it become tinted with illegality. A
collateral transaction is one, which is subsidiary, incidental or auxiliary to the principal contract.
• UNENFORCEABLE CONTRACT: An unenforceable contract is one which cannot be enforced in a
court of law because of some technical defect such as absence of consideration or absence of contract
in writing. The parties to the contract may fulfill their obligations but in the event of breach of contract the
other party cannot enforce it.
E.g., agreement with minor or an agreement without
consideration is void-ab-initio
Ex: Mr. B borrows Rs.5,000 from Mr. A and enters into a
contract with an alien to import prohibited goods. Mr. A
knows of the purposes of agreement. The transaction
between Mr. B and Mr. A is collateral to the main
agreement. It is illegal since the main agreement is illegal.
6. Classifications of Contracts
• BASED ON FORMATION:
• Express contracts: If the terms of the contract are expressly agreed
upon (whether by words spoken or written) at the time of formation of
contract.
• Implied contracts: in this case the contract comes into existence by
the acts or conducts of the parties -E.g., Getting into a Public bus.
• Quasi contract: strictly speaking quasi contracts are not contracts. A
contract is one, which is entering into with the consent of the parties to
the contract. A quasi contract is one, which is created by law. It is
based on the principle that “a person shall not be allowed to enrich
himself unjustly at the expense of another.”
Case Law: a fire broke out in S’s firm. He called upon the
upton fire brigade to put out the fire which the latter did. Mr. S
firm did not come under the free service zone although he
believes to be so. Held, he was liable to pay for the service
rendered, since the services was rendered on the implied
promise to pay (Upton Rural District Council vs. Powell)
Example –Trader leaves the goods at Mr. A ‘s house by
mistake. Mr. A treats the goods as his own. Mr. A is
bound to pay for the goods.
7. Classifications of Contracts
• BASED ON PERFORMANCE:
• Executed Contract: A contract in which both the parties to the
contract have completely performed their share of obligation and
nothing remains to be done by either of the parties
• Executory Contract: A contract in which both the parties or any one
party to the contract has to still perform their share of obligation
– Unilateral Contract – where any one party to the contract has to still
perform their share of obligation
– Bilateral Contract - where any both the parties to the contract has to still
perform their share of obligation
Example –Mr. A entered into a contract with the porter
for lifting his 5 bags. Porter agreed and lifts all the 5
bags for Rs. 100. So here the porter has lifted the bags
and Mr. A has paid him.
Example –Mr. A entered into a contract with the porter
for lifting his 5 bags. Porter agreed to lift all the 5 bags
for Rs. 100. So here the porter has not lifted the bags
and Mr. A has not paid him.
