It is a settled principle in English Law that “to create a contract there must be a common intention of the parties to inter into legal obligation.”
|SL. No||Overview||Page No|
|02||Essential Elements of a valid contract||10|
|02.A||Offer & Acceptance||10|
|02.B||Intention to create legal relations||11|
|02.D||Capacity of parties||11|
|02.G||Writing & registration||12|
|02.I||Possibility of performance||13|
|02.J||Not expressly declared void||13|
|03.B||Certainty & enforceability||15|
|03.C||Consideration & estoppels||16|
|04||Origin & Scope||19|
|06||Classification of term||20|
|06.A||Condition or warranty||20|
|06.B||In nominate term||21|
|07||Status as a term||21|
|09||Setting aside the contract||22|
|11||Cancelling the contract||24|
A contract is a legally enforceable agreement between two or more parties with mutual obligations. The remedy at law for breach of contract is “damages” or monetary compensation. In equity, the remedy can be specific performance of the contract or an injunction. Both remedies award the damaged party the “benefit of the bargain” or expectation damages, which are greater than mere reliance damages, as in promissory estoppels.
Generally a contract forms when one person makes an offer, and another person accepts it by communicating their assent or performing the offer’s terms. If the terms are certain, and the parties can be presumed from their behavior to have intended that the terms are binding, generally the agreement is enforceable. Some contracts, particularly for large transactions such as a sale of land, also require the formalities of signatures and witnesses and English law goes further than other European countries by requiring all parties bring something of value, known as “consideration“, to a bargain as a precondition to enforce it.
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lax moratoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth (such as Australia, Canada and India)
1. The Judicial Committee of the Privy Council decided cases on appeal from the Australian courts until 1985, from Canada until 1959, and from India until 1948
and the United States. While influential abroad, it is undergoing reform resulting from membership of the European Union and international organizations like Unidroit. Any agreement that is enforceable in court is a contract. Because a contract is a voluntary obligation, in contrast to paying compensation for a tort and restitution to reverse unjust enrichment, English law places a high value on ensuring people have truly consented to the deals that bind them in court.
Contract law concerns enforceable promises, and can be summed up in the Latin phrase pacta sunt servanda (agreements must be kept). In common law jurisdictions, three key elements to the creation of a contract are necessary: offer and acceptance, consideration and the intention to create legal relations. In Carlill v Carbolic Smoke Ball Company a medical firm advertised that its new wonder drug, the smoke ball, would cure people’s flu, and if it did not, the buyers would get £100. Many people sued for their £100 when the drug did not work. Fearing bankruptcy, Carbolic argued the advert was not to be taken as a serious, legally binding offer. It was an invitation to treat, mere puff, a gimmick. But the court of appeal held that to a reasonable man Carbolic had made a serious offer. People had given good consideration for it by going to the “distinct inconvenience” of using a faulty product. “Read the advertisement how you will, and twist it about as you will”, said Lord Justice Lindley, “here is a distinct promise expressed in language which is perfectly unmistakable”.
Treitel defines an offer as “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed”, the “offered”. An offer is a statement of the terms on which the offer is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offer.
2. Wehberg, Pacta Sunt Servanda, 775
4. G.H. Treitel, The Law of Contract, 10th edn, p.8.
The “expression” referred to in the definition may take different forms, such as a letter, newspaper, fax, email and even conduct, as long as it communicates the basis on which the offer is prepared to contract.
Whether two parties have an agreement or a valid offer is an issue which is determined by the court using the Objective test (Smith v. Hughes). Therefore the “intention” referred to in the definition is objectively judged by the courts. In the English case of Smith v. Hughes  the court emphasized that the important thing is not a party’s real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affects the contract.
For the Acceptance, the essential requirement is that the parties had each from a subjective perspective engaged in conduct manifesting their assent. Under this meeting of the minds theory of contract, a party could resist a claim of breach by proving that he had not intended to be bound by the agreement, only if it appeared subjectively that he had so intended. This is unsatisfactory, as one party has no way to know another’s undisclosed intentions. One party can only act upon what the other party reveals objectively to be his intent. Hence, an actual meeting of the minds is not required. Indeed, it has been argued that the “meeting of the minds” idea is entirely a modern error: 19th century judges spoke of “consensus ad idem” which modern teachers have wrongly translated as “meeting of minds” but actually means “agreement to the thing”.
5. (1871) LR 6 QB 597
6. R. Austen-Baker, “Gilmore and the Strange Case of the Failure of Contract to Die After All” (2000) 18 Journal of Contract Law 1.
The requirement of an objective perspective is important in cases where a party claims that an offer was not accepted and seeks to take advantage of the performance of the other party. Here, we can apply the test of whether a reasonable bystander (a “fly on the wall”) would have perceived that the party has impliedly accepted the offer by conduct.
Consideration is the concept of legal value in connection with contracts. It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. Under the notion of “pre-existing duties,” if either the promisor or the promise already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense.
In common law it is a prerequisite that both parties offer some consideration before a contract can be thought of as binding. However, even if a court decides there is no contract, there might be a possible recovery under Quantum meruit (sometimes referred to as a Quasi-contract) or promissory estoppels.
If A signs a contract to buy a car from B for $5,000, A’s consideration is the $5,000, and B‘s consideration is the car. Additionally, if A signs a contract with B such that A will paint B‘s house for $500, A‘s consideration is the service of painting B‘s house, and B‘s consideration is $500 paid to A. Further, if A signs a contract with B such that A will not repaint his own house in any other color than white, and B will pay A $500 per year to keep this deal up, there is also consideration.
Although A did not promise to affirmatively do anything, A did promise not to do something that he was allowed to do, and so A did pass consideration. A’s consideration to B is the forbearance in painting his own house in a color other than white, and B’s consideration to A is $500 per year.
Conversely, if A signs a contract to buy a car from B for $0, B‘s consideration is still the car, but A is giving no consideration, and so there is no valid contract. However, if B still gives the title to the car to A, then B cannot take the car back, since, while it may not be a valid contract, it is a valid gift. There are a number of common issues as to whether consideration exists in a contract.
02. Essential Elements of a Valid Contract:
A contract has been defined in section 2(h) as “an agreement enforceable by law.” To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration. As the details of these essentials form the subject matter of our subsequent chapters, we propose to discuss them in brief here.
The essential elements of a valid contract are as follows.
02.A Offer and acceptance:
There must a ‘lawful offer’ and a ‘lawful acceptance’ of the offer, thus resulting in an agreement. The adjective ‘lawful’ implies that the offer and acceptance must satisfy the requirements of the contract act in relation there too.
02.B Intention to create legal relations:
There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend’s house in not an agreement intended to create legal relations and therefore is not a contract. Agreements between husband and wife also lack the intention to create legal relationship and thus do not result in contracts.
02.C Lawful consideration:
The third essential element of a valid contract is the presence of ‘consideration’. Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the price for the promise and is called ‘consideration’ subject to certain exceptions; gratuitous promises are not enforceable at law.
The ‘consideration’ may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are ‘lawful’. The consideration is ‘lawful’. unless it is forbidden by law; or is of such a nature that, if permitted it would defeat The provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (sec.23).
02.D Capacity of parties:
The parties to an agreement must be competent to contract. But the question that arises now is that what parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject (sec.11). If any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness etc. The agreement is not enforceable at law, except in some special cases e.g., in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (sec 68).
02.E Free consent:
Free consent of all the parties to an agreement is another essential element. This concept has two aspects. (1) consent should be made and (2) it should be free of any pressure or misunderstanding. ‘Consent’ means that the parties must have agreed upon the same thing in the same sense (sec. 13). There is absence of ‘free consent,’ if the agreement is induced by (i) coercion, (ii) undue influence, (iii) fraud, (iv) miss-representation, or (v) mistake (sec. 14). If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence etc. The other party (i.e., the aggrieved party) can either reject the contract or accept it, subject to the rules laid down in the act. If the agreement is induced by mutual mistake which is material to the agreement, it would be void (sec. 20)
02.F Lawful object:
For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot recover the rent through a court of law or a contract for committing a murder is a void contract and unenforceable by law.
02.G Writing and registration:
According to the Indian contract Act, “ a contract to be valid, must be in writing and registered”. For example, it requires that an agreement to pay a time barred debt must be in writing and an agreement to make a gift for natural love and affection must be in writing and registered to make the agreement enforceable by law which must be observed.
Section 29 of the contract Act provides that ” Agreements, the meaning of which is not certain or capable of being made certain, are void.” In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced. For example, A, agrees to sell B “a hundred ton of oil” there is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainly.
02.I Possibility of performance:
Yet another essential feature of a valid contract is that it must be capable of performance. Section 56 lays down that “An agreement to do an act impossible in itself is void”. If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law. For example, A agrees with B, to discover treasure by magic. The agreement is not enforceable.
02.J Not expressly declared void:
The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.
In its essence a contract is an agreement which the law recognizes as giving rise to enforceable obligations. As opposed to tort and unjust enrichment, contract is typically viewed as the part of the law of obligations which deals with voluntary undertakings, and accordingly gives a high priority to ensuring that only bargains to which people have given their true consent will be enforced by the courts. While it is not always clear when people have truly agreed in a subjective sense, English law takes the view that when one person objectively manifests their consent to a bargain, they will be bound. However, not all agreements, even if they are relatively certain in subject matter, are considered enforceable. There is a rebuttable presumption that people do not wish to later have legal enforcement of agreements made socially or domestically.
The general rule is that contracts require no prescribed form, such as being in writing, except where statute requires it, usually for large deals like the sale of land. In addition and in contrast to civil law systems, English common law carried a general requirement that all parties, in order to have standing to enforce an agreement, must have brought something of value, or “consideration” to the bargain. This old rule is full of exceptions, particularly where people wished to vary their agreements, through case law and the equitable doctrine of promissory estoppels.
Moreover statutory reform in the Contracts (Rights of Third Parties) Act 1999 allows third parties to enforce the benefit of an agreement that they had not necessarily paid for so long as the original parties to a contract consented to them being able to do so.
7. See G Treitel, The Law of Contract (2003) 1, ‘A contract is an agreement giving rise to obligations which are enforced or recognised by law.’ J Beatson, Anson’s Law of Contract (OUP 2002) 73, ‘English law does not regard a bare promise or agreement as legally enforceable but recognises only two kinds of contract, the contract made by deed, and the simple contract. A contract made by deed derives its validity neither from the fact of the agreement nor because it is an exchange but solely from the form in which it is expressed. A simple contract as a general rule need not be made in any special form, but requires the presence of consideration which… broadly means that something must be given in exchange for a promise.’ American Law Institute, Restatement (2d) of Contracts, ‘A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises as a duty.
8. See Smith v Hughes (1871) LR 6 QB 597, per Blackburn J. See also, Williams v. Walker-Thomas Furniture Co., 350 F 2d 445 (CA DC 1965) per Wright J using the phrase “objective manifestation of consent”.
9. eg Law of Property (Miscellaneous Provisions) Act 1989 s 2(1)
The formal approach of English courts is that agreement exists when an offer is mirrored by an unequivocal acceptance of the terms on offer. Whether an offer has been made, or it has been accepted, is an issue courts determine by asking what a reasonable person would have thought was intended. Offers are distinguished from “invitations to treat” which cannot be simply accepted by the other party. Traditionally, English law has viewed the display of goods in a shop, even with a price tag, as an invitation to treat, so that when a customer takes the product to the till it is she who is making the offer, and the shopkeeper may refuse to sell. Similarly, and as a very general rule, an advertisement, the invitation to make a bid at an auction with a reserve price, or the invitation to submit a tender bid are not considered offers.
03.B Certainty and enforceability:
While agreement is the basis for all contracts, not all agreements are enforceable. A preliminary question is whether the contract is reasonably certain in its essential terms, or essentially negation, such as price, subject matter and the identity of the parties.
10. See Fisher v Bell  1 QB 394 and Pharmaceutical Society v Boots Cash Chemists  EWCA Civ 6, both of which appeared to turn more on whether a criminal statute should create liability for a shopkeeper, at a time when a literal approach to interpretation of legislation was followed.
11. Partridge v Crittenden  1 WLR 1204
12. Sale of Goods Act 1979 s 57(2)
Generally the courts Endeavour to “make the agreement work“, so in Hillas & Co Ltd v Arcos Ltd, the House of Lords held that an option to buy softwood of “fair specification” was sufficiently certain to be enforced, when read in the context of previous agreements between the parties.
However the courts do not wish to “make contracts for people”, and so in Scammell and Nephew Ltd v Ouston, a clause stipulating the price of buying a new van as “on hire purchase terms” for two years was held unenforceable because there was no objective standard by which the court could know what price was intended or what a reasonable price might be. Similarly, in Baird Textile Holdings Ltd v M&S plc the Court of Appeal held that because the price and quantity to buy would be uncertain, in part, no term could be implied for M&S to give reasonable notice before terminating its purchasing agreement.
03.C Consideration and estoppels:
Consideration is an additional requirement in English law before a contract is enforceable. A person wishing to enforce an agreement must show that they have brought something to the bargain which has “something of value in the eyes of the law”, either by conferring a benefit on another person or incurring a detriment at their request. In practice this means not simple gratitude or love, not things already done in the past, and not promising to perform a pre-existing duty unless performance takes place for a third party.
13. Hillas & Co Ltd v Arcos Ltd 
14.  1 AC 251
16.  EWCA Civ 274
17. See Thomas v Thomas (1842) 2 QB 851, 859, and Currie v Misa  LR 10 Ex 153, Lush LJ, “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
Metaphorically speaking consideration is “the price for which the promise is bought”. It is contentious in the sense that it gives rise to a level of complexity that legal systems which do not take their heritage from English law simply do not have. In reality the doctrine of consideration operates in a very small scope, and creates few difficulties in commercial practice.
The common law of privacy of contract is a sub-rule of consideration because it restricts who can enforce an agreement to those who have brought consideration to the bargain. In an early case, Tweddle v Atkinson, it was held that a because a son had not given any consideration for his father in law’s promise to his father to pay the son £200, he could not enforce the promise. Given the principle that standing to enforce an obligation should reflect whoever has a legitimate interest in its performance, a 1996 report by the Law Commission entitled Privities of Contract: Contracts for the Benefit of Third Parties, recommended that while courts should be left free to develop the common law, some of the more glaring injustices should be removed.
This led to the Contracts (Rights of Third Parties) Act 1999. Under section 1, a third party may enforce an agreement if it purports to confer a benefit on the third party, either individually or a member as a class, and there is no expressed stipulation that the person was not intended to be able to enforce it. In this respect there is a strong burden on the party claiming enforcement was not intended by a third party. A third party has the same remedies available as a person privy to an agreement, and can enforce both positive benefits, and limits on liability, such as an exclusion clause.
21. See AT von Mehren, ‘Civil law analogues to consideration: an exercise in comparative analysis’ (1959) 72(4) Harvard Law Review 1009
22. (1996) Report No 242, 5.10. See A Burrows, ‘The Contracts (Rights of Third Parties) Act 1999 and its implications for commercial contracts’  LMCLQ 540, but also, heaping criticism on the reforms, R Stevens, ‘The Contracts (Rights of Third Parties) Act 1999’ (2004) 120 LQR 292
23. CRTPA 1999 ss 1(1)(a), 1(1)(b) and 1(2) respectively.
24. See Nisshin Shipping Co Ltd v Cleaves & Co Ltd  1 Lloyd’s Rep 38, 
25. CRTPA 1999 ss 1(5) and 1(6)
The rights of a third party can then only be terminated or withdrawn without her consent if it is reasonably foreseeable that she would rely upon them.
In the case of Watteau v Fenwick, Lord Coleridge CJ on the Queen’s Bench concurred with an opinion by Wills J that a third party could hold personally liable a principal who he did know about when he sold cigars to an agent that was acting outside of its authority. Wills J held that “the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority.” This decision is heavily criticized and doubted, though not entirely overruled in the UK. It is sometimes referred to as “usual authority” (though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with “implied actual authority”). It has been explained as a form of apparent authority, or “inherent agency power”.
26. CRTPA 1999 s 2
27.  1 QB 346
28. eg GHL Fridman, ‘The Demise of Watteau v Fenwick: Sign-O-Lite Ltd v Metropolitan Life Insurance Co’ (1991) 70 Canadian Bar Review 329
04. Origin and scope:
Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda, which is usually translated “agreements to be kept” but more literally means “pacts must be kept”. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations, along with tort, unjust enrichment, and restitution.
As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological, and anthropological terms (see “Contractual theory” below). In American English, the term extends beyond the legal meaning to encompass a broader category of agreements.This article mainly concerns the common law. Such jurisdictions usually retain a high degree of freedom of contract, with parties largely at liberty to set their own terms. This is in contrast to the civil law, which typically applies certain overarching principles to disputes arising out of contract, as in the French Civil Code.
.05. Contractual terms:
A contractual term is “any provision forming part of a contract”. Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal weight as they are peripheral to the objectives of the contract.
As discussed in Tina L. Stark’s Negotiating and Drafting Contract Boilerplate, when lawyers refer to a “boilerplate” provision, they are referring to any standardized, “one size fits all” contract provision. But lawyers also use the term in a narrower context to refer to certain provisions that appear at the end of the contract. Typically, these provisions tell the parties how to govern their relationship and administer the contract.
06. Classification of term:
06.A Condition or Warranty:
Conditions are terms which go to the very root of a contract. Breach of these terms repudiates the contract, allowing the other party to discharge the contract. A warranty is not so imperative so the contract will subsist after a warranty breach. Breach of either will give rise to damages. It is an objective matter of fact whether a term goes to the root of a contract. By way of illustration, an actress’ obligation to perform the opening night of a theatrical production is a condition, whereas a singer’s obligation to perform during the first three days of rehearsal is a warranty.
31. Martin, E [ed] & Law, J [ed], Oxford Dictionary of Law, ed6 (2006, London:OUP).
32. Poussard v. Spiers and Pond (1876) 1 QBD 410
33. Bettini v. Gye (1876) 1 QBD 183
06.B In nominate term:
Lord Diplock, in Hong Kong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd, created the concept of an in nominate term, breach of which may or not go to the root of the contract depending upon the nature of the breach. Breach of these terms, as with all terms, will give rise to damages. Whether or not it repudiates the contract depends upon whether legal benefit of the contract has been removed from the innocent party. Megaw LJ, in 1970, preferred the legal certainty of using the classic categories of condition or warranty. This was interpreted by the House of Lords as merely restricting its application in Reardon Smith Line Ltd. v Hansen-Tangen.
07. Status as a term:
Status as a term is important as a party can only take legal action for the non fulfillment of a term as opposed to representations or mere puffery. Legally speaking, only statements that amount to a term create contractual obligations. There are various factors that a court may take into account in determining the nature of a statement. In particular, the importance apparently placed on the statement by the parties at the time the contract is made is likely to be significant.
In Bannerman v. White it was held a term of a contract for sale and purchase of hops that they had not been treated with sculpture, since the buyer made very explicit his unwillingness to accept hops so treated, saying that he had no use for them.
34.  1 All ER 474
35. Maredelanto Compania Naviera SA v Bergbau-Handel GmbH. The Mihalis Angelos  3 All ER 125.
36.  3 All ER 570
37. (1861) 10 CBNS 844
08. Implied terms:
A term may either be express or implied. An express term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision of the contract.
09. Setting aside the contract:
There can be four different ways in which contracts can be set aside. A contract may be deemed ‘void‘, ‘voidable‘, ‘unenforceable ‘or ‘ineffective’. Void implies that a contract never came into existence. Void ability implies that one or both parties may declare a contract ineffective at their wish. Unenforceability implies that neither party may have recourse to a court for a remedy. Ineffectiveness implies that the contract terminates by order of a court where a public body has failed to satisfy public procurement law. To rescind is to set aside or unmake a contract.
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation.
In the United States, in order to obtain damages for breach of contract or to obtain specific performance or other equitable relief, the aggrieved injured party may file a civil (non-criminal) lawsuit in state court (unless there is diversity of citizenship giving rise to federal jurisdiction). If the contract contains a valid arbitration clause, the aggrieved party must submit an arbitration claim in accordance with the procedures set forth in the clause.
10. Other contract:
Online contracts, which are easily made, are usually valid on a smaller scale for a period of one to three months, while on a larger scale can last about five years. As with all things legal, especially in regards to the ever-evolving Internet, general rules like length of validity have many exceptions. All cases are evaluated on their own merits, and those merits are defined by the facts presented in each instance. It is up to the owner of the site to do what it can to guarantee enforceability of its contracts. Though 90% of people sign online contracts before reading the content E-signature laws have made the electronic contract and signature as legally valid as a paper contract. It has been estimated that roughly one hundred and ten electronic contracts are signed every second.
11. Cancelling the contract:
“If a man fails to fulfill an agreed contract – unless he had contracted to do something forbidden by law or decree, or gave his consent under some iniquitous pressure, or was involuntarily prevented from fulfilling his contract because of some unlooked-for accident – an action for such an unfulfilled agreement should be brought in the tribal courts, if the parties have not previously been able to reconcile their differences before arbitrators.
Because contracts concern voluntary obligations, the courts employ a number of protections to ensure only people who give informed and true consent are legally bound. Before 1875, the common law courts only allowed escape from an agreement and damages if someone was induced to enter an agreement by fraud or was put under physical duress, or suffered from a lack of legal capacity. The courts of equity, however, were significantly more generous because they allowed “rescission” (i.e. cancellation) of a contract if a person was the victim of any misrepresentation, even an innocent one, and any “undue influence”, beyond influence by physical threats. In these situations the victim of the misrepresentation or unconscionable behavior has the option to avoid the contract.
If avoided, the parties are both entitled to have returned whatever property they had already conveyed, so nobody remains unjustly enriched (though this terminology was not used till the 20th century). As the 20th century unfolded, the courts and statute expanded on the range of circumstances in which a person could claim damages for negligent misrepresentation, on top of fraud.
As concern over the use of unfair terms grew, there were calls to recognize a positive duty on contracting parties to disclose material facts as part of a broader duty of “good faith“ and some judges attempted to follow the American Uniform Commercial Code by fashioning a broader doctrine of “unconscionable” bargains, procured through inequality of bargaining power.
This development was, however, stopped by the House of Lords, so that problems of unfair contract terms continued to be dealt with through targeted legislation.
Contract is the body of legal theory that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract law is to enforce promises. This theory is developed in Fried’s book, Contract as Promise. Other approaches to contract theory are found in the writings of legal realists and critical legal studies theorists.
More generally, writers have propounded Marxist and feminist interpretations of contract. Attempts at overarching understandings of the purpose and nature of contract as a phenomenon have been made, notably ‘relational contract theory’ originally developed by U.S. contracts scholars Ian Roderick Macneil and Stewart Macaulay, building at least in part on the contract theory work of U.S. Another dimension of the theoretical debate in contract is its place within, and relationship to a wider law of obligations. Obligations have traditionally been divided into contracts, which are voluntarily undertaken and owed to a specific person or persons, and obligations in tort which are based on the wrongful infliction of harm to certain protected interests, primarily imposed by the law, and typically owed to a wider class of persons.
Recently it has been accepted that there is a third category, restitutionary obligations, based on the unjust enrichment of the defendant at the plaintiff’s expense. Contractual liability, reflecting the constitutive function of contract, is generally for failing to make things better liability in tort is generally for action making things worse, and liability in restitution is for unjustly taking or retaining the benefit of the plaintiff’s money or work. The common law describes the circumstances under which the law will recognize the existence of rights, privilege or power arising out of a promise.
40. Beatson, Anson’s Law of Contract (1998) 27th ed. OUP, p.21
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by Ewoud Hondius, Hans Christoph Grigoleit – Cambridge University
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16. Anson’s Law of Contract
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