What is a contract and its elements?

In the previous article,we had discussed the overview of Law of contracts. In this article,we shall continue with What is a contract and its elements.

What is a contract?

An agreement between the parties. A contract is not governed by law,only its elements are governed by the law of the land.

It is made by the parties,having freedom to contract. Apart from it parties also have equality of bargaining power.

Formation of a contract:

Proposal –> Acceptance –> Promise –> Agreement+Contract = Enforceability

For the formation of a contract few things are necessary:

  1. Offer
  2. Acceptance

Proposal+Acceptance results in a Promise.

  • The proposal need not to be expressed/implied/oral/written. The only requirement is that it should be definite,i.e. it should not be vague.
  • The proposal has to be in the knowledge of the person,to whom it is communicated.
  1. Consideration

Consideration need not to be adequate to the promise but it must be of some value in the eyes of the law,i.e. the consideration need not to be adequate it must be real.

  1. Intention to create legal relationship

In order to form a contract,two or more persons are required. (Deciding to reward oneself for something is not a contract!)

Contracts are made for accomplishing something or refraining to do something. For the contract to be formed it is to be communicated to the intended person and simultaneously an assent must be achieved from the other party.

Parties have freedom to contract but this freedom is not absolute.

For example: A asks B to murder C and offers him Rs.10 lakh for doing this. B does the same.

In this case,even though offer,acceptance and consideration are present,it not enforceable because,the object is unlawful.

Thus,for a contract to be enforceable it is pertinent for the object to be lawful.

Invitation to offer

It has three stages:

  1. Invitation to proposal
  2. Proposal
  3. Acceptance

In invitation to offer,one party signifies to another not his willingness but an information for tempting the other person with a view to obtain his proposal.

The objective of invitation to offer is to obtain proposal.

  • The phrase comes from latin maxim, invitatio ad offerendum (inviting to offer). (Read here:  Legal and latin maxims.)
  • A seller can reject the proposal for “any reason” in invitation to offer.
  • The distinction between proposal and invitation to proposal, is dependant upon the person making it.

Void agreement

Such an agreement is not enforceable or it does not fulfil the requirements of Section 10.

Some instances of a void contract are:

  • Illegal object. E.g. Prostitution,gambling etc.
  • Contract entered into by a person of unsound mind.
  • Impossible tasks.
  • Contracts based on wagering.
  • Contracts which put restrain on specific activities.

Voidable contract

It is when contract is valid but at the option of one party it can be declared to be void. Unlike void contracts,these contract are valid and not void since the beginning.

For example: Arun threatened Vimal with dire consequences to sell his land to him for Re. 1. In this instance it voidable at the option of Vimal,who can choose not to sell his land and avoid the contract by approaching the court of law.

 

 

 

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