What Is The Law of Contract

What Is The Law of Contract? And Explain Its Object, Scope And Essential Elements.Definition ofContractSection 2(h) of theIndianContract Act provides that, AnAgreementenforceable by law is a contract. Therefore in a contract there must be (1) anagreementand (2) theagreementmust be enforceable by law.

Anagreementcomes into existence whenever one or more persons promise to one or others, to do or not to do something, Every promise and every set of promises, forming the consideration for each other, is anagreement. Someagreementscannot be enforced thought he courts of law, e.g., an agreementto play cards or go to a cinema. Anagreement, which can be enforced through the courts of law, is calledcontract.

Object and ScopeTheLaw of Contractdeals withagreementswhich can be enforced through courts of law.

TheLaw of Contractis the most important part ofcommercial lawbecause every commercial transaction starts from anagreementbetween two or more persons.

According to Salmond acontractis an agreementcreating and defining obligations between the parties. According to Sir William Anson, Acontractis anagreementenforceable at law made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others.

The object of theLaw of Contractis to introduce definiteness in commercial and other transactions. How this is done can be illustrated by an example. X enters into acontractto deliver 10 tons of coal of Y on a certain date. Since such acontractis enforceable by the courts, Y can plan his activities on the basis of getting the coal on the fixed date. If thecontractis broken, Y will get damages from the court and will not suffer any loss.

Sir William Anson observes as follows: As the law relating to property had its origin in the attempt to ensure that what a man has lawfully acquired he shall retain, so thelaw of contractis intended to ensure that what a man has been led to expect shall come to pass; and that what has been promised to him shall be performed.

ApplicationTheIndianContractAct of 1872 (Act IX of 1872) lays down certain general rules regarding contracts. The Act is not exhaustive. There are other Acts relating to particular types of contracts e.g. the Negotiable Instruments Act, Transfer of Property Act, etc.

TheContractAct does not affect nay usage or custom of trade, or anyincidentof anycontractnot inconsistent with the provisions of the Act.

The Essential Elements of aContractAnagreementbecomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the Essential Elements of a Contract, are explained below.

1. Offer and Acceptance:There must be a lawful offer by one part and a lawful acceptance of the offer by the other and acceptance must conform to the rules laid down in theIndianContractAct regarding offer and acceptance.

2. Intentions to create Legal Relationship:There must be an intention (among parties) that the agreementshall result in or create legal relations. Anagreementto dine at a friends house is not anagreementintended to create legal relations and is not acontract. But anagreementto buy and sell goods or anagreementto marry, areagreementsintended to create some legal relationship and are therefore contracts, provided the other essential elements are present.

3. Lawful Consideration:Subject to certain exceptions, anagreementis legally enforceable only when each of the parties to it gives something and gets something. Anagreementto do something for nothing is usually not enforceable by law. The something given or obtained is called consideration. The consideration may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. Consideration may be past (something already done or not done). It may also be present or future. But only those considerations are valid which are lawful.

4. Capacity of Parties:The parties to anagreementmust be legally capable of entering into an agreement; otherwise it cannot be enforced by acourt of law. Want of capacity arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any of the parties to the agreementsuffers from any such disability, theagreementis not enforceable by law, except in some special cases.

5. Free Consent:In order to be enforceable, anagreementmust be based on the free consent of all the parties. There is absence of genuine consent if theagreementis induced by coercion, undue influence, mistake, misrepresentation, and fraud. A person guilty of coercion, undue influence etc. cannot enforce theagreement. The other party (the aggrieved party) can enforce it, subject to rules laid down in the Act.

6. Legality of the Object:The object for which theagreementhas been entered into must not be illegal or immortal or opposed to public policy.

7. Certainty:Theagreementmust not be vague. It must be possible to ascertain the meaning of theagreement, for otherwise it cannot be enforced.

8. Possibility of Performance:Theagreementmust be capable of being performed. A promise to do an impossible thing cannot be enforced.

9. VoidAgreements:Anagreementso made must not have been expressly declared to be void. UnderIndianContractAct there are five categories ofagreementswhich are expressly declared to be void They are:

1. Agreementin restraint to marriage.

2. Agreementin restraint of trade.

3. Agreementin restraint of proceedings.

4. Agreementshaving uncertain meaning.

5. Wageringagreement.

6. WritingRegistrationand Legal Formalities:An oralcontractis a perfectly goodcontract, except in those cases where writing and/orregistrationis required by some statute.In Indiawriting and/or registrationis required by some statute.In Indiawriting is required in cases of lease, gift, sale and mortgage of immovable property: negotiable instruments; memorandum and articles of associationof a company etc.Registrationis compulsory in cases of documents coming within the purview of Section 17 of theRegistrationAct, e.g., mortgage deeds covering immovable property. The terms of an oralcontractare sometimes difficult to prove. Therefore important agreementsare usually entered into writing even in cases where wiring is not compulsory.

Allagreementsare not contracts, but all contracts areagreements. Discuss the statement explaining essential elements of a validcontract.