2. LEGAL MEANING
• CONTRACT: "A PROMISE OR SET OF PROMISES WHICH THE LAW WILL ENFORCE'-THE
RIGHTS AND OBLIGATIONS ARE CREATED BY THE ACTS OF AGREEMENT BETWEEN THE
PARTIES TO THE CONTRACTUAL AGREEMENT"
• ACCORDING TO SECTION 2(H) OF INDIAN CONTRACT ACT, 1872 CONTRACT IS DEFINED AS
"AN AGREEMENT ENFORCED BY LAW"
• EXAMPLE : A PERSON (WHO IS OVER THE AGE OF 18 AND OF SOUND MIND) SIGNED A
CONTRACT WITH THE APPLIANCE STORE TO BUY A REFRIGERATOR. THE PERSON PAYS FOR
THE REFRIGERATOR AND THE APPLIANCE STORE PRESENTS THE REFRIGERATOR FOR THE
HOME OWNER TO TAKE HOME.
3. ESSENTIAL ELEMENTS OF CONTRACTS
• AGREEMENT
• ENFORCEABLE BY LAW
• PROMISES + CONSIDERATION
• PROPOSAL
• ACCEPTANCE
• INTENTION TO CREATE LEGAL RELATIONSHIP
4. CONTD..
• LAWFUL CONSIDERATION &LAWFUL OBJECTS
• FREE CONSENT
• AGREEMENT NOT DECLARED NOT VOID OR ILLEGAL
• CERTAINTY OF MEANING
• POSSIBILITY OF PERFORMANCE OF AN AGREEMENT
• NECESSARY LEGAL FORMALITIES
• CAPACITY TO CONTRACT
5. AGREEMENT
• ACCORDING TO SECTION 2(E) OF INDIAN CONTRACT ACT, 1872 AGREEMENT IS
DEFINED AS "EVERY PROMISES OR SET OF PROMISES FORMING CONSIDERATION
FOR EACH OTHER IS AN AGREEMENT"
• AGREEMENT=OFFER + ACCEPTANCE
PROMISE
• A PROPOSAL WHEN ACCEPTED BECOMES A PROMISE.
PROPOSAL
• ACCORDING TO SECTION 2(A) OF INDIAN CONTRACT ACT, 1872 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.
6. ACCEPTANCE
• ACCORDING TO SECTION 2 (B): “WHEN THE PERSON TO WHOM THE OFFER IS
MADE SIGNIFIES HIS ASSENT THERETO, THE OFFER IS SAID TO BE ACCEPTED”.
INTENTION TO CREATE LEGAL RELATIONSHIP
• THERE MUST BE AN INTENTION AMONG THE PARTIES TO CREATE LEGAL
OBLIGATION.
• IF THE INTENTION OF THE PARTIES IS NOT TO CREATE LEGAL OBLIGATION, THEN
IT WILL ONLY REMAIN AN AGREEMENT AND CANNOT BE A VALID CONTRACT.
• LAWFUL CONSIDERATION
• CONSIDERATION IS THE PRICE FOR WHICH THE PROMISE OF OTHER IS BOUGHT
AND A PROMISE GIVEN FOR A LAWFUL VALUE IS ENFORCEABLE.
• FOR THE VALIDITY OF A CONTRACT IT IS NECESSARY THAT THE CONSIDERATION
MUST BE LEGAL.
• CONTRACTS BASED ON ILLEGAL CONSIDERATION ARE CONSIDERED VOID.
7. • LAWFUL OBJECT
• AN AGREEMENT CAN BE ENFORCEABLE BY LAW ONLY WHEN ITS OBJECTIVE IS
LAWFUL.
• IF THE AGREEMENT IS HAVING UNLAWFUL OBJECT, THEN NO LEGAL CONTRACT
ARISES BETWEEN THE PARTIES
• FREE CONSENT
• CONSENT MUST BE GENUINE
• “TWO OR MORE PERSONS ARE SAID TO CONSENT WHEN THEY AGREE UPON THE
SAME THING IN THE SAME SENSE.”
• FREE OF FRAUD, MISREPRESENTATION, MISTAKE, PRESSURE
8. • AGREEMENT NOT DECLARED NOT VOID OR ILLEGAL
• THE AGREEMENT THOUGH SATISFYING ALL THE CONDITIONS FOR A VALID
CONTRACT MUST NOT HAVE BEEN EXPRESSLY DECLARED VOID BY ANY LAW IN
FORCE IN THE COUNTRY.
• AGREEMENTS MENTIONED IN SECTION 24 TO 30 OF THE ACT HAVE BEEN
EXPRESSLY DECLARED TO BE VOID.
• FOR EXAMPLE AGREEMENTS IN RESTRAINT OF TRADE, MARRIAGE, LEGAL
PROCEEDINGS ETC.
• CERTAINITY OF MEANING
• THE AGREEMENT MUST BE DEFINITE/CERTAIN/UNAMBIGIOUS
• IT SHOULD NOT BE VAGUE/INDFINITE
• FOR EXAMPLE AAGREES TO SELL B 100TONES OF OIL
9. POSSIBILITY OF PERFORMANCE
• CONDITION FOR A CONTRACT SHOULD BE CAPABLE FOR PERFORMANCE .
• IF THE ACT IS IMPOSSIBLE IN ITSELF, PHYSICALLY OR LEGALLY, IF CANNOT BE
ENFORCED AT LAW.
• FOR EXAMPLE: A AGREES TO B TO DISCOVER TREASURE BY MAGIC THIS
AGREEMENT CANNOT BE ENFORCED
• LEGAL FORMALITIES
• IF PARTICULARS CONTRACT TYPE REQUIRES BY LAW TO BE IN WRITING AND
REGISTERED THEN IT SHOULD COMPLETE WITH ALL FOMALITIES LIKE WRITING,
ATTESTATION, REGISTRATION ETC
• OTHERWISE AGREEMENT IS UNENFORCEABLE
10. • CAPACITY TO CONTRACT
• THE ABILITY TO ENTER INTO CONTRACT
• IF EITHER OF THE PARTIES DOES NOT HAVE THE ABILITY TO CONTRACT, THE
CONTRACT IS NOT VALID.
• ACCORDING TO THE FOLLOWING PERSONS ARE INCOMPETENT TO
CONTRACT. (A) MINOR: A PERSON LESS THAN AGE OF 18 IS MINOR.
(B) UNSOUND MIND PERSON: ANY PERSON WHO IS UNABLE TO UNDERSTAND
THE TERM AND CONDITION OF CONTRACT AT THE TIME OF ITS FORMATION IS
UNSOUND MIND.
(C) PERSONS DISQUALIFIED BY LAW TO WHICH THEY ARE SUBJECT.
