“An agreement is regarded as a contract when it is enforceable by law”

“An agreement is regarded as a contract when it is enforceable by law”-

INTRODUCTION:

Law means, as it is, is the command of the Sovereign. According to Holland [1]², Law is, “a rule of external human action enforced by the sovereign political authority”. Salmond “Law is the body of principles recognized and applied by the state in the administration of Justice”[2]. Contracts and agreements are related in so many significant ways. Contracts mean agreeing on specific matters weather those are national or international aspects of agreements or not. Contract Act 1872, section 2 (h) defines a contract as “an agreement enforceable in law”. Thus there are two essential elements in a contract viz (i) an agreement, and that must be (ii) enforceable in law. Section 2 (c) of contract Act 1872 defines agreements as “every promise and every set of promises forming the consideration for each other”. 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. Woodrow Wilson[3]” law is that portion of the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the government”. [4] Anson observes as follows: “The object of law is order, and the result of order is that men are enabled to look ahead with some sort of security as to the future. Although human action cannot be reduced to the uniformities of nature, men have yet endeavored to reproduce by law something approaching to this uniformity”.

A contract is an agreement enforceable by law:

When 2 or more people make a contract they are in agreement to give each other something for something e.g. I pay you $1.oo for that hierarchy. If you give me the tree and I do not give you the money we agreed upon that is a breach of contract. By law a judge is going to make me give you the money if there is proof of contract. A contract can be written on a napkin. There must be some kind of writing. In some cases witness

Can serve as proof. Anticipate this helps. I don’t think so it is important to have something written when you are in contract. Some times signed contracts are also not enforceable if we dint have legal intention at the time of signing contract.

Contract:

Section 2(h) of the Indian Contract Act provides that,[5] “An Agreement Enforceable by law is a contract”. An agreement comes into existence whenever one or more persons promise to one or others, to do or not to something,” Every promise and every set of promises, forming the consideration for each other, is an agreement-Sec: 2(e). Some agreements cannot be enforced through the courts of law, e.g. an agreement to play cards or go to a cinema. An agreement, which can be enforced through the courts of law, is called a contract. According to Salmond[6] a contract is “an agreement creating and defining obligations between the parties.”

Contracts are not enforceable by law, rather by the principles that are enforced by the courts. If a contract exists (which is always a question posed by the court), and there is a breach of contract, the courts will apply precedent and principles from the previous cases to determine the matter. There is to an extent a concept of common law meaning court made law that regulates this area, but there is no law as such that regulates the law of contract. No law of parliament is

Generally used in this kind of law. According to Sir William Anson [7] observes as follows: ‘The object of Law is Order, and the result of order is that men are enabled to look ahead with some sort of security as to the future. Although human action cannot be reduced to the uniformities of nature, men have yet endeavored to reproduce by Law something approaching to this uniformity”.

‘Every promise and every set of promises, forming the consideration for each other, is an agreement[8] – sec: 2(e)

The purpose of an Agreement is to:

a. Provide a detailed outline of the responsibilities of the parties involved. These responsibilities are referred to as “obligations”.

b. Grant permission to perform work on or across right-of-way belonging to others; provide for temporary or permanent street closures; obtain approval for any required changes of grade; etc.

c. Transfer jurisdiction or abandon a section of roadway from one agency to another.

d. Determine long-term responsibility for a facility such as maintenance of a traffic control signal or landscaping.

e. Provide additional support to ODOT permits or other documents.

f. Establish specific criteria for local land use and access management decisions affecting an ODOT transportation facility.

g. Coordinate with local agencies and provide guidance on federally funded non-highway projects.

h. Address funding and cost responsibilities for planning; project development; right-of-way acquisition; construction; maintenance; etc.

On the other hand contract is a legally binding agreement. In order for a contract to be created, one of the parties must make an offer to the other party and the other party must accept this offer. Furthermore, the circumstances in which the offer and the acceptance were made must indicate that the parties intended to enter to enter into a legal relationship. A final requirement, which distinguishes contracts for gifts, is that the two contracting parties must both give some benefit (known as consideration) to the

Other. There are then four requirements of a contract. There must be an offer, an acceptance of that offer, an intention to create legal relations and consideration given by both parties.

From the above discussion, the successive stages from a proposal to a contract would stand as under:

Stage 1 PROPOSAL

When accepted

Stage 2        PROMISE

Forming consideration for each other

Stage 3 AGREEMENT

When enforceable in law

Stage 4 CONTRACT

Be all agreements are contracts If not what agreements can be termed as contracts:

To become a contract an agreement must be enforceable by law. Sec. 10 of the Indian Contract Act lays down the condition of enforceability. An agreement becomes enforceable only when it is coupled with obligation. An obligation is the legal bond, which binds the parties to a contract. The obligations springing from agreements should be legal obligations and not moral, social or religious obligations.

Thus it can be said that all contracts are agreements but all agreements need not be contracts. The agreements that create legal obligations only are contracts. The validity of an enforceable agreement depends upon whether the agreement satisfies the essential requirements laid down in the Act. Section 10 lays down that ‘ all agreements are contracts if they are made by the free consent of the parties competent to contract for a lawful object and are not hereby expressly declared to be void’.

Section 10 provides that all agreements are contracts, if they are made by the free consent of the parties, competent to contract, for a lawful consideration, and with a lawful object, and are not expressly declared by law to be void.

The following are the essentials:

a) Agreement: To constitute a contract, there must be an agreement between two or more than two parties. No one can enter into a contract with himself. An agreement is composed of two elements – offer or proposal by one party and acceptance thereof by the other party. The party making the offer (or proposal) is known as the offered or proposes; the party to whom the offer is made is known as the offered. When the offered gives his assent to the offer, then he is known as the acceptor. At the time of entering into an agreement, parties must be thinking of the same thing in the same sense. In other words they must have what is known as consensus ad idem.

b) Offer and Acceptance: There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. The adjective “lawful” implies that the offer and acceptance must conform to the riles laid down in the Indian contract act regarding offer and acceptance.

c) Free consent: The consent of the parties to the agreement must be free and genuine. That is, the parties should agree upon the same thing in the same sense and their consent should be free from all sorts of pressure. The consent will not be free if it is obtained by misrepresentation, fraud, undue influence, coercion or mistake.

d) Contractual capacity: The parties to agreement must be competent to contract, that is the parties entering into an agreement must have legal competence. In other words they must have attained the age of majority, should be of sound mind and should not be disqualified under the law of the land. The flaw in the capacity of parties to contract may be due to minority, lunacy, idiocy, drunkenness or status. If a party suffers from any of these flaws, then it may not be a valid one.

e) Lawful consideration: The contract must be supported by consideration on both sides. Consideration means something in return for something. It is the price of the promise that is, each party to the contract must give or promise something, and receive something or a promise in return. However this consideration need not be in terms of money. In case the promise is not supported by consideration, the promise will be nudism partum (a bare promise) and would not be enforceable by law. Moreover the consideration should be lawful and adequate. However, there are certain exceptions to this rule.

f) Lawful object: The object of the agreement must be lawful and not one, of which the law disapproves. That is, it should not be forbidden by law, should not be fraud ant, should not cause injury to the person or the property of another, should not be immoral or against public policy.

g) Not expressly declared void: The statue should not declare an agreement void. The Act itself has declared certain types of agreements as void. E.g. agreements in restraint of marriage, trade, legal proceedings. In such cases, the aggrieved party can’t seek any relief from the court of law.

h) Possibility of performance: The agreement should be capable of being performed. e.g., Mr. A agrees with Mr. B to discover treasure by magic. Mr. B can’t seek redressed of the grievance if Mr. A fails to perform the promise.

i) Certainty of terms: The terms of the agreement should be certain. E.g., Mr. A agrees to sell 100 tons of oil. The agreement is vague as it does not mention the types of oil agreed to be sold.

j) Intention to create legal obligation: Though section 10 is silent about this, under English law this happens to be an important agreement. Therefore, Indian courts also recognize this ingredient. An agreement creating social obligation can’t be enforced.

k) Legal formalities: Indian Contract Act deals with a simple contract supported by consideration. Agreements made in India may be oral or written. However, Section 10 states that where the statute states that the contract should be in writing and should be witnessed or should be registered, the same must be observed. Otherwise, the agreement can’t be enforced e.g. under Indian Companies Act, the Memorandum of Association and articles of Association must be registered. From this it follows that,[9] every contract is an agreement but all agreements are not contracts every contract is an agreement but all agreements are not contracts.

Australian government/department of innovation[10], Industry, science, and Research Jetty owner made a contract which allowed a ship owner to moor his ship at the jetty.

Procedure of making or the terms of a contract:

A contract is made up of terms. All of the promises which the contract contains, whether they were made expressly or impliedly, will be terms.

Terms can find their ways into contracts in one of two ways, they can be expressed in speeches writing or they can be implied. Express terms are actually agreed by the parties in words, implied terms are implied either by the court (on the grounds of the pressured intention of the parties) or by a statute.

Terms implied by the                                                        Terms implied by statue

Courts

Offer (proposes express terms)

+

Acceptance

Figure: The ways in which terms arise

According to a research of ‘University of Western Sydney’ these[11] four elements or ingredients make an agreement legally banded. Such as an offer to do something which clearly

states and defines its intentions. Generally, the greater the value of the contract, the longer the life of. The offer must be clearly understood and its acceptance must be definite. Where acceptance is given with conditions, the acceptance is not complete until the conditions are fulfilled.

A lincolnshire tenant farmer was given notice to quit the farm.  The farmer said that the contract contained an implied term that he should be paid an allowance of seeds and labour

Acceptance can be given in the following ways:

  • Verbally
  • In writing
  • By action which clearly indicates acceptance

When an Agreement is Enforceable

An agreement is only enforceable if fulfils the following requisites:

(a)   it must be entered into by  competent persons

(b)   the consent of the parties are free

(c)   the consideration must be lawful

(d)   It has not been declared void by the provisions of the Act.

Enforceable Contracts-s. 2 (h) Not-enforceable. Void agreement-s.2

(g)

Enforceable by one party only.

voidable contracts-s.2 (i)

Requisites Invalidating Causes Voidable in Inception. Voidable subsequent default
(a)   Competent person Ss. 11 & 12 1.Consideration or object unlawful s.23 as being

(i) forbidden by law

(ii) defeating the provisions of any law

(iii) fraudulent

(iv) Injurious to person or property of another .

(v) immoral or opposed to public policy

2. Without consideration-s.25

(i) unless by writing registered, between near relations out of natural love and affection, or

9ii0 to compensate a person for something voluntarily done for the promise or which the promise was bound to do, or

(iii) In writing to pay a time barred debt.

3. in restraint of the marriage of a person not a minor-s.26

4.in restraint of legal proceedings.s.28 (saving references to Arbitration)

5. By way of wager –s .29

6. Of uncertain meaning-s.30

7. To do an act which is impossible or become impossible s.35, 36&56?

8. Mistake of both parties as to essential matter to fact s.20.

9. Mistake of both parties as to foreign law-s.21.

(a)   Consent caused by fraud, sis 14,15,&19

(b)   Consent caused by coercion Ss.14,15,&19

(c)   Consent caused by misrepresentation Ss. 14,18,&19

(d)   Consent caused by undue influences. Ss.14,16&19 A

Where offer of performance is not accepted S.38

(b)   When one party prevents performance of reciprocal promise –S.53

(c)   When a party fails to perform at the time fixed if time is the essence of the contract-s. 55.

Conclusion:

We can say that agreement is regarded as a contract when it is enforceable by law because a contract is an agreement enforceable at law. Thus all contracts are agreements but all agreements are not necessarily contracts. A contract is an agreements creating and starting responsibility between the parties. According to section 2 b of the contract act an agreement enforceable by law is contract. So it is clear the contract consist of three elements:

–          An agreement

–          Contract

–          The agreement should be enforceable by law.

The law requires a contract to be supported by consideration, if it is to be enforceable unless it is covered by the expectations mentioned in section 25 of the Act. We also say that an agreement is an accepted proposal. So we can that the formation of an agreement is the first part of the making contract. In order to be a contract, the agreement must be enforceable at law. So that’s why “An agreement is regarded as a contract when it is enforceable by law.

Bibliography

  1. 1. (http://www.ocba.sa.gov.au/businessadvice/customers/contracts.html#What_is_a_contract
  2. 2. http://www.britishlaw.org.uk/org_contract.html
  3. 3. Slide show provide in Class lecture
  4. 4. http://www.ocba.sa.gov.au/businessadvice/customers/contracts.html#What_is_a_contract
  5. 5. http://www.articlesbase.com/ethics-articles/common-law-contract-enforcement-requirements-privity-587313.html
  6. 6. http://hubpages.com/hub/Essentials-of-a-valid-Contract
  7. 7. http://www.articlesbase.com/ethics-articles/common-law-contract-enforcement-requirements-privity-587313.html
  8. 8. ICAB Study manual on Business Law, Professional Examination (PE),Published in February,2005
  9. 9. CatherineNickerson,”Enlish as alingua franca in international business contexts” in english for Specific purpose, volume 24, issue 4,2005, pages 367-380

10. http://www.lectlaw .com/def/c 123 htm.org.uk/org_contract.html

11. http://www.lwikipedia .org/wig.

12. Economics: Principles in action upper saddle River. new Jersey 07458: Pearson Prentic Hall-2003.pp.523

13. 1sbb o-13-063085-3

14. International Principle: Trans-lex.ory

15. Commercial Law and Industrial Law, Business Law – Arun Kumar Shen and Jitendra Kumar Mitra, by World press.

16. http://www.articlesbase.com/law-articles/the-need-for-intention-to-create-legal-relations-in-contract-law-381745.html

17. Huns wehberg. pacta sunt Servanda, The Americah.journal of International law. vol.53. no.4 9oct, 1959, p.775); trans-lex.org Principle of sancitity of contracts.

[1]²  Holland, Jurisprudence. Law is, “a rule of external human action enforced by the sovereign political authority”. From this definition it follows that there are three essential characteristics of law. (1) Law is a rule relating to the actions of human beings. (2) Law attempts to regulate the external actions of human beings. (3) Law is enforced by the state –Commercial law and Industrial law (Business law). Arun Kumar sen and Jitendra Kumar Mitra By World Press. Chapter Introduction, Para two, Page 1.

2 Salmond “Law is the body of principles recognized and applied by the state in the administration of justice.’ from Business law – Commercial law and Industrial law (Business law). Arun Kumar sen and Jitendra Kumar Mitra By World Press. Chapter Introduction,   Para three,  Page 1.

3 Woodrow Wilson defines Law as follows: ““law is that portion of the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the government. This definition is practically the same as that of Holland. (Balore vs. Balfour;  Deep vs. Mohd ) To offer a friend  a meal is not to invite litigation. Contracts in the words of Lord Stowell “must not be sports of an idle hour” (Dalrymple V Dalrymple)- (Business law). Arun Kumar sen and Jitendra Kumar Mitra By World Press. Chapter Introduction,   Para four,  Page 1.

[4] Anson, Rules regarding human conduct are necessary for peaceful living as well as for progress and development. Anson observes as follows: “The object of law is order, and the result of order is that men are enabled to look ahead with some sort of security as to the future. Although human action cannot be reduced to the uniformities of nature, men have yet endeavored to reproduce by law something approaching to this uniformity”. –from Business Law , Sen and Mitra, Page -2, Para- 2.

[5] Section 2(h) of the Indian Contract Act provides that,[5] “An Agreement Enforceable by law is a contract”. Therefore in a contract there must be (1) an agreement and (2) the agreement must be enforceable by law. From Business Law Written by Sen and Mitra , Chapter-The essential Elements of Contract. Page-13, Para-3.

[6] According  to Salmond a contract is “an agreement creating and defining obligations between the parties.” from Business law written by Sen & Mitra.

[7]According to Sir William Anson, “A contract is an agreement enforceable 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.”  Business Law ,ICAB manual & Business law Sen Mitra.

[8] Every promise and every set of promises, forming the consideration for each other, is an agreement[8] – sec:2(e).An agreement, which can be enforced through the courts of law, is called a contract.-Coolum,(3)page – 13,Book name Business law – Sen & Mitra

http://www.oregon.gov/ODOT/HWY/PDU/docs/pdf/What_is_an_Agreement_02-06-2006.pdf?ga=t

Ewan Macintyre/ Essentials of business law/ second edition/

Site: www.mylawchamber.co.uk/maccintyreessentials

[9] Every contract is an agreement but all agreements are not contracts. Every contract gives rise to certain legal obligations or duties on the part of the contracting parties. The legal obligations are enforced by the courts. The Indian contract Act contains rules regarding each of the elements mentioned above. The institute of Chartered Accounts Of Bangladesh (ICAB ) study Manual on Business law, Professional Examination (PE)-1  ,Page-2.

[10] Australian government/Department of innovation, Industry, science and research/

According to a case of Moorcock [1889] (Court of appeal), A jetty owner made a contract which allowed a ship owner to moor his ship at the jetty. Both parties knew that the ship would be grounded at low tide. When the ship did touch the ground it was damaged because there was a ridge of rock beneath the mud. The ship owner asked the court to imply a term that the jetty owner had taken reasonable care to ensure that the jetty was a state place to unload a ship

http://lawiki.org/lawwiki/The_Moorcock_(1889)

http://www.innovation.gov.au/SmallBusiness/Pages/default.aspx

[11] Research of ‘University of Western Sydney’ four elements  or ingredients make an agreement legally banded. Such as an offer to do something which clearly states and defines its intentions.  Generally, the greater the value of the contract, the longer the life of. This offer includes:  .

  • Tender submissions
  • Formal quotations
  • Proposals to lease

http://lawiki.org/lawwiki/The_Moorcock_(1889)

  • Advertisements which include price details
  • Tender submissions
  • Formal quotations
  • Proposals to lease

http://lawiki.org/lawwiki/The_Moorcock_(1889)