CONTRACT• CONTRACT MAY BE DEFIND AS AN AGREEMENT WHICH CREATES RIGHTS AND OBLIGATIONS BETWEEN THE PARTIES. THESE RIGHTS AND OBLIGATIONS MUST BE OF SUCH A NATURE THAT THESE CAN BE CLAIMED IN THE COURT OF LAW.
MAJOR COMPONENTS1. AGREEMENT2. LEGAL OBLIGATION3. CONSENSUS AD IDEM
AGREEMENT• THE CONTRACT IS FORMED ONLY ON THE BASIS OF AGREEMENT. IT IS A COMBINED EFFECT OF OFFER AND ACCEPTANCE. AGREEMENT= OFFER+ACCEPTANCE ACCORDING TO SECTION 2(e) AGREEMNT IS A PROMISE OR A SET OF PROMISE FORMING CONSIDERATION FOR EACH OTHER
Types of agreementsIntention to create legal relations Intention to create legal relationsSocial and domestic Business or agreements commercial agreements(Presumption – parties do (Presumption – parties do intend not intend legal relations to create legal relations
Domestic agreements Courts will presume that agreements between friends and/or family members are not intended to be legally enforceable. CASE: Balfour v Balfour (1919) The presumption can be rebutted. CASE: Todd v Nicol  CASE: Roufos v Brewster (1971)
Balfour v Balfour (1919) 2 KB 571 Facts: Mr B promised to pay his wife £30 per month. Mr B had to return to Ceylon. Mrs B was to remain in England for medical reasons. The couple later separated. Mrs B claimed £30 per month pursuant to Mr B’s promise.
Balfour v Balfour Issue: Did this promise by a husband to his wife amount to a contract?
Balfour v Balfour Decision: An agreement to pay £30 per month existed. The parties had not intended it to be legally binding. There is a presumption that domestic arrangements are not intended to finish up in court.
Todd v Nicol  SASR 72 Facts: Mrs N resided in South Australia. She wrote to her sister-in-law and niece (the Todds), in Scotland, inviting them to come and live with her. She promised them free accommodation and that she would alter her will so that after she died, the house would become theirs. Mrs T quit her job and she and her daughter moved to Australia. Later an argument developed and Mrs N told the Todds to leave the house.
Todd v Nicol Issue: Did the Todds have a contractual right to stay? Did this family arrangement amount to a contract?
Simpkins v Pays  1 WLR 975 Facts: Three people lived together in a house and jointly took part in a competition organised by a newspaper. The entries were made in one name only. One entry won a prize and the defendant, in whose name the entry was submitted, refused to share it with the other two contributors claiming there was not intention to create legal relations.
Simpkins v Pays Issue: Was there an understanding between the parties that their agreement amounted to a contract?
Voluntary agreements• In cases of voluntary agreements, e.g. where a person volunteers their services, the parties do not normally intend to create legal relations.
Commercial agreements Courts will presume that agreements arrived at in a commercial context are intended to be legally enforceable.
What is a Contract ? • An Agreement • Enforceable by law • Made between atleast two parties • By which rights are acquired by one, & • Obligations are created on the part of another• And on failure, the other party has a remedy.
AGREEMENT & ENFORCEABILITY Every promise and Enforce by lawvery set of promises forming consideration for each other. “All agreements are not contracts, but all contracts are agreements”
What is a contract? Examples• I promise to bring chocolates to the whole class. Is there a contract?• I promise to give you Rs1000 if secure first position in the class. Is there a contract?• I promise to give you a new mobile if you agree not to eat Chinese food for one year. Is there a contract? 19
ESSENTIALS OF A VALID CONTRACT1. AGREEMENT2. CREATION OF LEGAL RELATIONSHIPCASE LAW- BAL FOUR Vs. BALFOUR(1919)
3. LAWFUL CONSIDERATION• AGREEMENT IS A MUTUAL EXCHANGE OF PROMISES BETWEEN PARTIES. EACH PARTY MAKING A PROMISE GETS SOMETHING IN RETURN OF HIS PROMISE. IT CONSTITUTES A CONSIDERATION FOR HIS PROMISE.
4. CONTRACTUAL CAPACITY1. HE MUST BE A MAJOR AGE AND NOT A MINOR2. HE MUST BE OF SOUND MIND AND NOT LUNATIC3. HE MUST NOT HAVE BEEN DECLARED DISQUALIFIED BY LAW.
5. FREE CONSENT OF THE PARTIES1. COERCION2. UNDUE INFLUENCE3. MISREPRESENTATION4. FRAUD5. MISTAKE
6. LAWFUL OBJECT OF AGREEMENT• THE OBJECT OF AN AGREEMENT MUST BE TO DO SOME ACT WHICH IS LEGAL. CONTRARY TO IT, AGREEMENTS MADE FOR DOING SOME THING ILLEGAL, IMMORAL OR AGINST PUBLIC POLICY, CANNOT BE ENFORCED IN THE COURT OF LAW.
7. AGREEMENTS NOT DECLARED EXPRESSLY VOID• THERE ARE CERTAIN AGREEMNTS WHICH HAVE BEEN EXPRESSLY DECLARED VOID BY THE LAW. THUS AN AGREEMENT MADE BY PARTIES SHOULD NOT FALL IN THIS CATEGORY.
Examples• Agreement in restraint of marriage• Agreement in restraint of trade• Agreement in restraint of legal proceedings• Wagering agreements
8. CERTAINTY IN THE MEANING OF AGREEMENT• AGREEMENT MADE BY THE PARTIES MUST BE CERTAIN OR CAPABLE OF BEING MADE CERTAIN IN ITS MEANING. AGREEMENT WITH UNCERTAIN MEANING WILL BRING UNCERTAINTY IN THE RIGHTS AND OBLIGATIONS CREATED BY IT AND THESE RIGHTS AND OBLIGATIONS CANNOT BE ENFORCED IN THE COURT OF LAW.
9. Possibility of performance• An agreement to do impossible act is void
10. OTHER LEGAL FORMALITIES• AGREEMENT TO BE ENFORCED, NEEDS TO SATISFY OTHER CONDITIONS OF BEING IN WRITING , REGISTERED AND DULY STAMPED.
ON THE BASIS OF FORMATION1. EXPRESS CONTRACT- EXPRESS CONTRACTS RESULTS FROM EXPRESS AGREEMENTS AND EXPRESS AGREEMENT IS FORMED BY MAKING OFFER AND GIVING ACCEPTANCE IN THE WORDS SPOKEN OR WRITING.
2. IMPLIED CONTRACT• IN THIS TYPE OF CONTRACT ONE OF THE PARTY CONDUCT HIMSELF OR DOES SOME ACT WHICH IS BEING ACCEPTED BY OTHER PARTY EITHER BY HIS CONDUCT OR COURSE OF HIS DEALINGS OR CIRCUMASTANCES.
3. QUASI CONTRACTS• THESE CONTACTS ARE BASED ON THE PRINCIPLE OF JUSTICE AND EQUITY. IN SPITE OF NOT HAVING CONTRACT BETWEEN PARTIES , THE RIGHTS AND OBLIGATIONS ARE CREATED BY OPERATION OF LAW RATHER THAN OFFER AND ACCEPTANCE.
4. E-Commerce Contract• Entered into between the parties via internet
ON THE BASIS OF PERFORMANCE1. EXECUTED CONTACT- ON THE COMPLETE DISCHARGE OF THE OBLIGATIONS BY THE PARTIES , THE CONTRACT IS SAID TO HAVE BEEN EXECUTED.2. EXECUTORY CONTRACT- THE CONTRACT HAS NOT BEEN YET PERFORMED.(i) Unilateral(ii) Bilateral
ON THE BASIS OF VALIDITY1. VALID CONTRACT- CONTRACT IS SAID TO BE VALID IF IT SATISFIES ALL CONDITIONS REQUIRED FOR ITS ENFORCEABILITY.2. VOID CONTRACT- A CONTACT WHICH CEASES TO BE ENFORCEABLE BY LAW BECOMES VOID3. VOID AGREEMENT- AGREEMENT WHICH IS NOT ENFORCEABLE BY LAW IS VOID AGREEMENT.IN OTHER WORDS IF IT LACKS ANY ONE OF THE ESSENTIAL S OF VALID CONTRACT IT IS CALLED VOID.
4. VOIDABLE CONTRACT-AN AGREEMENT WHICH IS ENFORCEABLE BY LAW AT THE OPTION OF ONE OR MORE PARTIES , BUT NOT AT THE OPTION OF OTHER OR OTHERS IS A VOIDABLE CONTRACT.5. ILLEGAL CONTRACT- IF THE OBJECT IS ILLEGAL THE CONTRACT IS SAID TO BE ILLEGAL.6. UNENFORCEABLE CONTRACT-IF DUE TO SOME TECHNICAL REASONS THE CONTRACT MAY NOT BE ALLOWED TO BE ENFORCED IN THE COURT.IT IS UNENFORCEABLE CONTRACT.
EXAMPLES• 1. X polished Y’s shoes without being asked by Y to do so. Y does not make any attempt to stop X from polishing the shoes. Is Y bound to make payment to X?• 2. X agrees to pay Rs 100000 to Y if Y does not marry throughout his life. Y promises not to marry at all but later on refuses to pay Rs 100000. Advise
• 3. X threatens to kill Y if he does not sell his house to X for Rs 100000. Y agrees. X borrows Rs 100000 from Z who is also aware of the purpose of the loan. What is the nature of the agreement between X and Y , X and Z• 4. X agrees to pay Y Rs 100000 if Y kills Z. To pay Y, X borrows Rs 100000 from W who is also aware of the purpose of the loan. Y kill Z but X refuses to pay. X also refuses to repay the loan to W. Advise Y and W.