Learning Objective:
Students will learn
a) the legal definition of contract
b) how contract is generally defined
b) the specific qualifications to which the general definition of contract is subjected to
The understanding of a subject is much better when you understand the legal concepts surrounding it. As no answer is completed without the definitions and the concepts of law around the subject, the understanding of the whole subject depends of the understanding of these legal concepts.
Learning Objective:
Students will learn
a) the legal definition of contract
b) how contract is generally defined
b) the specific qualifications to which the general definition of contract is subjected to
The understanding of a subject is much better when you understand the legal concepts surrounding it. As no answer is completed without the definitions and the concepts of law around the subject, the understanding of the whole subject depends of the understanding of these legal concepts.
Formation of Contracts: To form a contract the following steps are the basic steps those should be followed
Firstly a proposal has to be accepted to be a promise;
Secondly then the promise is to be considered to form an agreement;
Finally the agreement should have the enforceability of law to form a lawful contract
The Indian Contract Act, 1872[1] prescribes the law relating to contracts in India and is the key act regulating Indian contract law. The Act is based on the principles of English Common Law. It is applicable to all the states of India. It determines the circumstances in which promises made by the parties to a contract shall be legally binding. Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law.
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2. Meaning of contract: contract is a legal document that
best owes upon the party’s special rights (defined by
the contract itself) and also obligations that are
introduced, defined, and agreed upon by all the parties
of the contract.
3. Definition for Contract
The Indian Contract Act, 1872 defines the term
“Contract” under its section 2 (h) as
“An Agreement enforceable by law”.
This definition has two major elements
1.agreement and
2.enforceable by law.
4. Meaning of Agreement
In section 2 (e), the Act defines the term agreement as
“every promise and every set of promises, forming
the consideration for each other”.
5. The Act in its section 2(b) defines the term “promise” here as: “when the
person to whom the proposal is made signifies his assent thereto, the proposal
becomes an accepted proposal. A proposal when accepted, becomes a promise”.
In other words, an agreement is an accepted promise, accepted by all the parties
involved in the agreement or affected by it. This definition says that in order to
establish or draft a contract, we need to initiate some steps:
The definition requires a person to whom a certain proposal is made.
•The person (parties) in step one has to be in a position to fully understand all
the aspects of proposal.
•“signifies his assent thereto” – means that the person in point one accepts or agrees
with the proposal after having fully understood it.
•Once the “person” accepts the proposal, the status of the “proposal” changes to
“accepted proposal”.
•“accepted proposal” becomes a promise. Note that the proposal is not a promise.
For the proposal to become a promise, it has to be an accepted proposal.
6. Contract = Accepted Proposal (Agreement) +
Enforceable by law (defined within the law)
(Source: lawmantra)
7. Contract Agreement
A contract is an agreement that is
enforceable by law.
A promise or a number of promises that
are not contradicting and are accepted by
the parties involved is an agreement.
A contract is only legally enforceable.
An agreement must be socially
acceptable. It may or may not be
enforceable by the law.
A contract has to create some legal
obligation.
An agreement doesn’t create any legal
obligations.
All contracts are also agreements.
An agreement may or may not be a
contract.
8.
9.
10.
11.
12. On the basis of validity
• Valid Contract: An agreement which is enforceable by law, is
a valid contract.
• Void Contract: The contract which is no longer enforceable
in the court of law is a void one.
• Voidable Contract: A contract in which one of the parties to
the contract has a choice to avoid performing his/her part,
then it is termed as a voidable contract. When the consent of
the party is not free, the contract becomes voidable, at the
option of the aggrieved party.
• Illegal Contract: A contract which is forbidden by law is
termed as an illegal contract.
• Unenforceable Contract: The contract whose substance is
good, but due to some issues, it is not enforceable, is called an
unenforceable contract.
13. •Express Contract: When the terms of the contract are
expressed orally or in writing, it is known as an express
contract.
•Implied Contract: The contract which is constituted by
implication of law or action is an implied one.
•Quasi-Contract: These are not a real contract, but are
identical to a contract, which is formed out of some
circumstances.
14. On the basis of Performance
1. Executed Contract: When the contract is performed,
it is known as an executed contract.
2. Executory Contract: When the obligation in a
contract, is to be performed in future, it is described
as an executory contract.
1. Unilateral Contract
2. Bilateral Contract