2. Contents
Objects of Law of Contract
The Indian Contract Act,1872
Definition of Contract
Essential Elements of a Valid Contract
Classification of Contracts
Classification of Contracts in English Law
3. Object of Law of Contract
Definiteness in business transactions.
To ensure realisation of reasonable expectation of the parties who
enter into a contract.
Of particular importance to people engaged in trade, commerce and
industry as bulk of their business transactions are based on
contracts.
4. The Indian Contract Act,1872
Branch of law which determines circumstances in which promises made
by parties to a contract shall be legally binding on them.
It deals with
General Principles of the Law of Contract (Sec 1-75)
Some special contracts only (Sec124-238)
The Act is not exhaustive : Does not deal with contracts relating to
partnership, sale of goods, negotiable instruments, insurance etc.
Nature of the Law: Does not lay down the rights and duties law will
enforce, but consists of limiting principles subject to which the parties
may create rights and duties for themselves, which the law will uphold.
5. Is not the whole law of agreements nor whole law of
obligations: Excludes from its purview all obligations not contractual in
nature and agreements which are social in nature
Creates jus in personam as distinguished from jus in rem:
Example:
A owes a certain sum of money to B. B has a right to recover it from A. This right
can be exercised only by B and by none else against A. This right of B is a jus in
personam.
Right against or in respect of a
thing
Available against the world at
large
Right against or in respect of a
specific person
Available only against
particular
persons
7. Essential Elements of a Valid Contract
SN
o
Element Description
1 Offer and
Acceptance
There must be offeror and acceptor.
Offer: Definite
Acceptance: Absolute, unconditional, communicated in
the mode prescribed
2 Intention to
create legal
relationship
Social agreements do not create legal relations,
therefore not contracts,
Example: Balfour Vs. Balfour
3 Lawful
Consideration
Consideration: Something in return, must be real and
lawful
4 Capacity of
Parties
Parties must be:
Of age of majority
Of sound mind
Not disqualified from contracting by any law subject
to
8. SN
o
Element Description
5 Free and
Genuine
Consent
Parties must agree on subject matter in the same
sense and at the same time.
Consent should not be induced by coercion, undue
influence, misrepresentation, fraud or mistake.
6 Lawful Object Object must not be:
Illegal
Immoral
Opposed to public policy
7 Agreement not
declared void
Must not have been expressly declared void by any
law in force in the country
8 Certainty and
Possibility of
performance
Agreement must not be vague or impossible to
perform
9 Legal formalities Contract preferably written, must be registered or
stamped as per requirements.
10. Classification - Quick Study
Type of
Contract
Description
Voidable A contract enforceable by law at the option of one or more of
the parties to the contract, but not at option of other or
others .
Void A contract which ceases to be enforceable by law.
Illegal One which transgresses public policy, is illegal or criminal.
Unenforceable One that cannot be enforced because of a technical defect or
lapse of time.
Express A contract in which the terms are stated in words.
Implied One inferred from the circumstances or from conduct of
parties.
Quasi Obligation created by law, regardless of any agreement.
E-Commerce One which is entered into via the internet.
Executed Contract wholly performed by both parties.
Executory Contract where promises by both parties are yet to be
11. Classification of Contracts-English Law
Formal
Contracts of
Record
Simple
Contracts under Seal
A judgement of a Court
or a
Recognisance( due to
the Crown) based on
authority, not
agreement.
Based on its form, does
not require
consideration, signed,
sealed and delivered by
the parties.
All contracts which are
not made under seal,
requiring consideration.
Contracts
12. End of Chapter 1
Nature of Contract
The Indian Contract Act,1872
