A contract is a legally enforceable promise or undertaking that something will or will not occur illustrate &explain in reference to Contract law

A contract is a legally enforceable promise or undertaking that something will or will not occur illustrate & explain in reference to Contract law

Introduction

An agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just plain understood. Some contracts are required to be in writing in order to be enforced.

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be “damages” or compensation of money. In equity, the remedy can be specific performance of the contract or an injunction. Both of these remedies award the party at loss the “benefit of the bargain” or expectation damages, which are greater than mere reliance damages, as in promissory estoppel. The parties may be natural persons or juristic persons. A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract. Although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.

WHAT IS A CONTRACT?

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be “damages” or compensation of money. In equity, the remedy can be specific performance of the contract or an injunction. Both of these remedies award the party at loss the “benefit of the bargain” or expectation damages, which are greater than mere reliance damages, as in promissory estoppels. The parties may be natural persons or juristic persons. A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract, although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.

Classification/Types of Contracts

1. from the point of view of enforceability

· Valid contracts

· Voidable contracts

· Void contracts or agreements

· Illegal agreements

· Unenforceable Agreements (Certain contracts must be in writing)

2. According to Mode of Formation

· Express contract

· Implied contract

· Quasi-contracts

3. According to Performance

· Executed

· Executory

· Uni-lateral

· Bi-lateral

Essential elements of a valid contract

An agreement becomes 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 the Contract Act regarding offer and acceptance.
  2. Intentions to create Legal Relationship: There must be an intention (among parties) that the agreement shall result in or create legal relations. An agreement to dine at a friend’s house is not an agreement intended to create legal relations and is not a contract. But an agreement to buy and sell goods or an agreement to marry, are agreements intended to create some legal relationship and are therefore contracts, provided the other essential elements are present.
  3. Lawful Consideration: Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. An agreement to 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 an agreement must be legally capable of entering into an agreement; otherwise it cannot be enforced by a court of law. Want of capacity arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any of the parties to the agreement suffers from any such disability, the agreement is not enforceable by law, except in some special cases.
  5. Free Consent: In order to be enforceable, an agreement must be based on the free consent of all the parties. There is absence of genuine consent if the agreement is induced by coercion, undue influence, mistake, misrepresentation, and fraud. A person guilty of coercion, undue influence etc. cannot enforce the agreement. 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 the agreement has been entered into must not be illegal or immortal or opposed to public policy.
  7. Certainty: The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced.
  8. Possibility of Performance: The agreement must be capable of being performed. A promise to do an impossible thing cannot be enforced.
  9. Void Agreements:An agreement so made must not have been expressly declared to be void. Under Contract Act there are five categories of agreements which are expressly declared to be void They are:
  1. Agreement in restraint to marriage.
  2. Agreement in restraint of trade.
  3. Agreement in restraint of proceedings.
  4. Agreements having uncertain meaning.
  5. Wagering agreement.
  6. Writing Registration and Legal Formalities: An oral contract is a perfectly good contract, except in those cases where writing and/or registration is required by some statute. In Bangladesh writing and/or registration is required by some statute. In Bangladesh writing is required in cases of lease, gift, sale and mortgage of immovable property: negotiable instruments; memorandum and articles of association of a company etc. Registration is compulsory in cases of documents coming within the purview of the Registration Act, e.g., mortgage deeds covering immovable property. The terms of an oral contract are sometimes difficult to prove. Therefore important agreements are usually entered into writing even in cases where wiring is not compulsory.

What is Agreements?

As already mentioned, to constitute a contract there must be an agreement. An agreement is composed of two elements—offer and acceptance. The party making the offer is known as the offeror, the party to whom the offer is made is known as the offeree. Thus, there are essentially to be two parties to an agreement. They both must be thinking of the same thing in the same sense. In other words, there must be consensus-ad-idem.

Thus, where ‘A’ who owns 2 cars x and y wishes to sell car ‘x’ for TK. 30,000. ‘B’, an acquaintance of ‘A’ does not know that ‘A’ owns car ‘x’ also. He thinks that ‘A’ owns only car ‘y’ and is offering to sell the same for the stated price. He gives his acceptance to buy the same. There is no contract because the contracting parties have not agreed on the same thing at the same time, ‘A’ offering to sell his car ‘x’ and ‘B’ agreeing to buy car ‘y’. There is no consensus-ad-idem.

Rules regarding offer:-

1. An offer may be express or may be implied from the circumstances;

An offer may be made in two ways:- Firstly an offer may be by words spoken or written and secondly by conduct.

2. An offer may be made to a definite person or class of people or it can be to the world at large. That means an offer may be made by any individuals or any class of people in world.

3. Legal relationship: In an offer there must be legal relationship.

4. Certainty: An offer must be certain, that is; it has specific terms.

5. Intention of a mere statement is not offer: When a person intention is to sell a product or giving an advertisement for selling product or services that is not an offer.

6. Offer must be communicated to the offeree : When a offer given that must be communicated to the offeree.

7. An offer may be conditional: In an offer there can be some condition terms that is an offer can be conditional.

Termination of offer:-

An offer is terminated in any of the following circumstances;

· If it has expired by the lapse of time,

· If the offeror has revoked it,

· If the offeree has rejected it,

· If the offeree dies or

· If the offeror dies,

How does an offer come to an end?

An offer comes to an end by revocation which may happen in various ways briefly explained below:

a. By notice. This is by sending a revocation message before acceptance is complete as against the offeror.

b. By lapse of time. This is if time was prescribed as an essential aspect of the contract. If time was not of essence, then reasonable time lapse will give it expiry.

c. By the failure of the acceptor to fulfill a condition precedent to acceptance e.g. be a Kenyan.

d. By death of the propossor if it comes to the knowledge of the acceptor before acceptance or before the offer is revoked.

d. By insanity of the propossor and if this comes to the knowledge of the acceptor before the offer is revoked or before acceptance is complete.

e. By counter offer: This is accepting the offer but suggesting an otherwise or new condition.

f. By not accepting the offer in the mode prescribed e.g. If it was to be communicated by telegram but instead the acceptor chooses to communicate his acceptance by ordinary mail. It remains at the option of the propossor to welcome the acceptance otherwise he may revoke it by sending message to that effect in reasonable time.

Rules regarding Acceptance:-

1. Must be an absolute and unqualified acceptance of all the terms of the offer-

2. Condition Acceptance

3. Contracts subject to condition-(The agreement may contain such a term as ‘subject to the purchaser’s solicitors approving the title’)

4. Clarification:

5. The acceptance must be expressed in same usual or reasonable manner:

6. The mode of acceptance:

7. Time of acceptance:

8. When acceptance is complete:

Communication of acceptance:-

1. The general rules is that acceptance must be communicated to the offer or and is not effective until this has been done.

2. Goods which are sent or services which are rendered to a person who did not request them are not ‘accepted’ merely because he does not return them to the sender.

3. Acceptance must be unqualified agreement to the terms of the offer.

4. It is possible to respond to an offer without accepting or rejecting it by a request for information or by acceptance ‘subject to contract’

5. Acceptance ‘subject to contract’ is neither acceptance nor rejection by counter offer.

Remedies / Consequence For Breach Of Contract:

Breach of contracts failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work

1. Right to claim compensation and damages: When a contract is broken, the party that suffers breach is entitled to receive from the other party who has broken the contract compensation for any loss or damages. These may be of two categories below:

– Damages which naturally arise in usual cause of things from such breach.

– Damages anticipated for the breach of contract.

Such compensation should not be given for any remote or indirect loss or damage.

2. Right of rescission: This is the yielding or giving of any secret profit or benefit enjoyed by a person in breach of his duty of trust e.g. Agents, Directors, and Trustees etc. Any benefit accruing to such persons by virtue of their positions in equity belongs to the other party and must be given up.

3. Quantum Merut: This is when one party performed his work as per the contract and then the contract repudiates e.g. by impossibility or illegality. He thereby becomes entitled to remuneration portion or work he has performed.

4. Specific performance: Usually damages are granted by way or monetary compensation. When this, however, is not possible, the court may compel the actual performance.

5. Injunction order: Since contract of personal nature cannot be enforced by special performance due to impossibility of effective supervision by the court, injunctive orders are therefore made where breach is strictly forbidden. The promisee is by this order, compelled and has no alternative but to abide by the contractual obligations.

6. Restitution: This literally means restoration. When a contract becomes void, the party who received benefits at the expense of the other ought to restore them.

7. Cancellation or rectification: When through fraud or mutual mistake of parties, title to property has passed registration records may be revisited at the order of a court of law for the purposes of reversing, correcting, rectifying or canceling such records in the register of titles. Either party may also apply for such rectification of the register.

How law of contract given the power to individuals:-

From the discussion we see that to be a valid contract there should be some terms and condition that must be followed by the parties of contract. If anybody violate these terms and condition that it should not be a valid contract.

The law of contract must be followed by two parties to make as a valid contract, so by this process law of contract given the power to individuals.

Conclusion

The most important feature of a contract is that one party makes an offer for an arrangement that another accepts. This can be called a concurrence of wills or consensus ad idem (meeting of the minds) of two or more parties. The concept is somewhat contested. The obvious objection is that a court cannot read minds and the existence or otherwise of agreement is judged objectively, with only limited room for questioning subjective intention: see Smith v. Hughes. Richard Austen-Baker has suggested that the perpetuation of the idea of ‘meeting of minds’ may come from a misunderstanding of the Latin term ‘consensus ad idem’, which actually means ‘agreement to the [same] thing’. There must be evidence that the parties had each, from an objective perspective, engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement. An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to form a contract.

Reference

www.google.com

Mc Kendrick e – Contract law

www.wikipedia.com

Lecture Sheet

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