Chapter 1.

Nature of Contract

DEFINITIONS
A contract is an agreement made between two or more parties which the law will enforce. Sec 2(h) defines a contract as an agreement enforceable by law. Pollock: Every agreement and promise enforceable at law is a contract. Salmond: A contract is an agreement creating and defining obligations between the parties.
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CONTRACT

AGREEMENT+ ENFORCEABILITY

AGREEMENT
AGREEMENT [SECTION 2(e)]: An agreement means, Every promise or every set of promises, forming consideration for each other. PROMISE *SECTION 2(b)+: When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Agreement= Offer + Acceptance

ENFORCEABILITY
Enforceability is the legal obligation which imposes upon a definite person or persons the necessity of doing or abstaining from doing something. An agreement which gives rise to a social obligation is not a contract. Agreement + Legal obligation Contract Agreement + Social obligation Contract
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EXAMPLES
A promises to sell his car to B for Rs. 10,000 received by him as the price of the car. This agreement gives rise to an obligation on the part of A to deliver the car to B. This agreement is a contract. A father promises to pay his son Rs. 1000 every month as pocket money. Later he refuses to pay. In this case the agreement is not a contract as social obligation is involved.
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 Consensus ad idem-Meeting of minds. i.e. 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. Obligation A legal tie which imposes upon a definite person(s) the necessity of doing or abstaining from doing a definite act(s).
An agreement must give rise to legal obligation or duty , in order to become a contract.
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 Jus in personam- a right against or in respect of a specific person. Jus in rem a right against or in respect of a thing.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

1) Offer and acceptance
1) Offer must be definite 2) Acceptance must be absolute,unconditional, according to prescribed mode and communicated to the offeror.

2) Intention to create legal relationship 3) Lawful consideration 4) Capacity of parties- Competency

1) Of the age of majority 2) Of sound mind 3) Not disqualified from contracting by any law
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5. Free and genuine consent 6. Lawful object

object should not be illegal, immoral or against public policy

7. Agreement not declared void 8. Certainty and possibility of performance should not be vague or indefinite. 9. Legal formalities
statutary formalities, written, registered and stamped.
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CLASSIFICATION OF CONTRACT
Contracts can be classified according to theiri. Validity ii. Formation iii. Performance

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CLASSIFICATION BASED ON VALIDITY

1. Voidable contract(Sec 2 i)1. Enforceable at the option of one party. 2. free consent missing, ex,.coersion, undue influence,misrepresentation or fraud. 3. ex. X prevents Y from fulfilling ys obligation. contract becomes voidable at the option of Mr. Y. 4. Mr. X promises to finish task within a time limit,but fails to do so.now contract becomes voidable at the option of Mr. Y. 2. Void Contract and Void agreement 1. Void agreement is not enforceable by law. void-ab-initio. i.e., void from the beginning 2. Void Contract-A contract which ceases to be enforceable by 12 law become void when it ceases to be enforceable .

3. Illegal Agreement which trangresses some rule of public policy or which is criminal or immoral in nature. All illegal agreements are void but not vice versa. Collateral transactions of illegal agreements are also void. But it is not the true in case of void agreements.

4. Unenforceable Contract- Due to some technical defects , lapses of time.

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CLASSIFICATION BASED ON FORMATION

Express contract- The terms of a contract are expressly agreed upon (either by spoken words or in writing) at the time of formation of the contract. Eg: A pays Rs. 20,000 to B with the purpose of buying Bs car. The terms of the agreement are written in a document signed by both of them.
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CLASSIFICATION BASED ON FORMATION

Implied contract- It is inferred from the acts or conduct of the parties.It is not a result of any express promise. No verbal means are used to express the acceptance of proposal of contract. Eg: There is an implied contract when Ai. Gets into a public bus ii. Take a cup of coffee in a restaurant iii. Obtains a ticket from automatic weighing machine
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CLASSIFICATION BASED ON FORMATION

Quasi contract- Its not a contract at all in strict sense.A Contract is intentionally entered into but the quasi contract is created by law. It rests on ground of equity that a person shall not be allowed to enrich himself unjustly at the expense of another. Eg: A supplier leaves goods at Cs shop by mistake. C treats the goods as his own. C is bound to pay for the goods. E-commerce contract.- two parties enter into contract via internet.
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CLASSIFICATION BASED ON PERFORMANCE

Executed contract- both parties have performed their respective obligations. Eg: A agrees to paint a picture for B for Rs. 1000. When A paints the picture and B pays the price, i.e., when both the parties have performed their obligations, the contract is said to be executed. Executory contract- Both the parties are yet to perform their obligations.
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CLASSIFICATION BASED ON PERFORMANCE

Contract is some times partly executory and partly executed. Unilateral Contract/Contract with executed consideration- One party has finished his obligation before entering into contract, the other party has to fulfill his obligation. Bilateral Contract/Contract with Executary consideration- same as executary contract.

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THANK YOU

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