BUSINESS REGULATORY FRAMEWORK: AGREEMENT, CONTRACT AND SECTION 10

Made By:-Dhrumil ShahFYBBA Div 1Roll No. 47BUSINESS REGULATORY FRAMEWORK: AGREEMENT, CONTRACT AND SECTION 10

AGREEMENTAccording to Section 2(e), an agreement is defined as every promise and every set of promises, forming consideration for each other.Agreements can be social agreements or legal agreements. If A invites B to a dinner and B accepts the invitation, it is a social agreement. Thus from the above example, a social agreement does not give rise to contractual obligations and is not enforceable in a court of law. If A gives 1 milk bag to B for a consideration of Rs. 22, then it is a legal agreement.Business Regulatory Framework

AGREEMENTSome examples for agreements are:A invites his friend B to come and stay with him for a week. B accepts the invitation but when he comes to A, A cannot accommodate him as his wife had died the day before. B cannot claim any compensation from A as the agreement is a social one.A father promises to pay his son Rs. 100 every month as pocket allowances. Later he refuses to pay. The son cannot recover as it is a domestic agreement and there is no intention on the part of the parties to create legal relations.Business Regulatory Framework

CONTRACTBusiness Regulatory FrameworkSection 2 (h) defines contract as an agreement enforceable by law.In laymans language a contract is an agreement made between two or more parties which is enforced by law.Contracts can be Void Contracts, Voidable Contracts or Void Ab Initio.Example: A agrees to hire B as an employee in his firm for 3 years after signing an agreement. A cannot refuse to keep him after the contract has been signed.

CONTRACTBusiness Regulatory FrameworkSome examples of contract are:A agrees to sell his car to B for Rs. 5,00,000 and both them have a written agreement for the same, then this is a contract.If A announces that he wants to sell his cell phone for Rs. 20,000 to a particular class and if B(of the same class) comes and agrees to purchase it for the same, then it is a contract.If A gives an advertisement in a daily to sell his plot of land for Rs. 10,00,000 and if B comes and says that he wants to purchase the land for Rs. 10,00,000, then it is a contract.

Consensus ad idemBusiness Regulatory FrameworkConsensus ad idem means that the parties to the agreement must have agreed about the subject-matter of the agreement in the same sense and at the same time.Unless there is consensus ad idem, there can be no contract.Example:A, who owns two cell phones named iPhone and Blackberry, is selling Blackberry to B. B thinks he is purchasing iPhone. There is no consensus ad idem and consequently no contract.

ObligationBusiness Regulatory FrameworkObligation is defined as a legal tie which imposes upon a definite person or persons the necessity of doing or abstaining from doing a definite act or acts.An agreement which gives rise to a social obligation is not a contract. It must give rise to a legal obligation in order to become a contract.Example:A agrees to sell his T.V. to B for Rs. 25,000. The agreement gives rise to an obligation on the part of A to deliver the T.V. to B and on the part of B to pay Rs. 25,000 to A. Thus it is a contract.

Provisions of Section 10Business Regulatory FrameworkAccording to Sec. 10, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void.The essential elements of a valid contract are as follows:1. Offer and Acceptance: There must be two parties to an agreement, i.e. one making the offer and other accepting it. The terms must be definite and the acceptance must be absolute and unconditional.

Provisions of Section 10Business Regulatory Framework2. Intention to create legal relationship: When the two parties enter into an agreement, their intention must be to create legal relationship between them.3. Lawful consideration: The agreement is legally enforceable only when both the parties give something and get something in return.4. Capacity of parties-competency: Every person is competent to contract if he (a) is of the age of majority, (b) is of sound mind and (c) is not disqualified from contracting by any law to which he is subject.

Provisions of Section 10Business Regulatory Framework5. Free and genuine consent: The consent of the parties is said to be free when they are of the same mind on all the material terms of the contract.6. Lawful object: The object of the agreement must not be (a) illegal, (b) immoral or (c) opposed to public policy.7. Agreement not declared void: The agreement must not have been expressly declared void by law in force in the country.8. Certainty and possibility of performance: The agreement must be certain and not vague. Agreement to do an act impossible in itself cannot be enforced.9. Legal formalities: Where there is a statutory requirement that a contract should be made in writing or in presence of some witnesses or registered, the same should be complied with.