“An agreement is regarded as a contract when it is enforceable by law- Explain & illustrate.”

INTRODUCTION:

The law of contract constitutes the foundation upon which the superstructure of modern business is built. It furnishes the basis for the other branches of mercentile Law. The rules concerning sale of goods , negotible instrument, insurance, carriage , financing of international business  etc.are all founded upon the general principles of law of contract. So it is essential to have a levle of understanding of the law of contract in an effort to study mercentile law. The law applicable to the contract which can be enforced by our Courts are found in “the contract Act ,1872” (hereinafter to as THE ACT).

If jurisdiction in the case is in personam or quasi in rem (over a person or property or a debt owed by a person). The court may not exercise that jurisdiction unless the defendant has “minimum contract” with the state in which court sits (the forum state ). Generally , the requrement of minimum contract means that the defendant has to have taken actions that were purposefully directed toward the forum state. Such action may include , among others , selling  goods in the state, being incorporated in the state , visiting the state or bringing property in the state . In order to exercise jurisdiction , such minimum contract are required by the dependant’s Fourteenth Amendment federal constitutional right to due process. Even of the defendant’s minimum contract with the forum state are found to exist, the court will not exercise jurisdiction if consideration of “fair play and substantial justice” would require making the defendant defend in the forum state so unreasonable as constitute a due process violation.

The contract Act ,1872

Background:

The contract Act ,1872 was promulgated by the then British colonial ruler under the name and style ‘The Indian Contract Act ,1872’ on 25th April 1872. It came into force on 1st September 1872 . After the independent of Bangladesh in 1971, this Act has been adopted to this newly emerge country under the name ‘The contract Act , (Act No IX of 1872)

1)http://en.wikipedia.org/wiki/Contract

2)http://www.banglapedia.org/httpdocs/HT/ 0344.HTM

3)http://defination.uslegal.com/m/minimum-contacts/

Promise and Acceptance:

“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.” –Sec. 2(b).

“The person making the proposal is called the ‘promisor’ and the person accepted the proposal is called the ‘promisee’.”-Sec. 2(c).

Examples of offer and  acceptance:

  1. I.            Specific Offer : X offers to sell his motor car to Y at the price of Rs. 5000. This is a proposal. X is the promisor or the offer or. Y is the offeree. If Y agrees to buy the car at the price stated, Y becomes the promise or the acceptor. There is a contract.
  2. II.            Specific Offer : P puts up a notice offering to pay a reward of Rs. 5 to any student who finds out and returns a book lost in the college. Q a student, reads the notice and them finds and brings the book to P. P’s notice is an offer and Q is the acceptor. There is a contract.
  3. III.            General Offer : A transport company runs tramway cars along the streets. This is an offer by the company to carry passengers at the scheduled fares. The offer is accepted when a passenger gets up on a tram with the intention of becoming a passenger.

Scheme of the Act.

The Act confines itself to the enforcement of civil obligations are covered by this Act.

There are two types of provision in the Act. These are stated below:

  1. i.            Sections 1 to 75 of the Act state general principles applicable to contracts. Rules relating to offer, acceptance, elements of a contract, void and voidable agreements, capacity of the parties to make contracts, discharge of contracts, remedies for breach of contracts etc. are the instances of such principles.
  2. ii.            The rest of the provisions of the Act provides rules for specific types of contracts. These include:

a)      Contracts of Indemnity and Guarantee (Sections 124-147).

b)      Contracts of Bailment and Pledge (Sections 148-181)

c)      Contracts of Agency (sections 182-238)

In 1930 Sections 76-123 relating to sale of goods were repealed and a separate Act called ‘the Sale of Goods Act, 1930’ was enacted.

Again, Sections 239-266 containing rules for partnership were also repealed in 1932 when ‘the Partnership Act, 1932 was passed. In this course emphasizes will be given on introducing the students with the general principles which form the basis of the law of contract enforced in Bangladesh. These principles can be found in Sections 1 to 75 of the Act. It thus may be apposite to commence with some elementary matters which will facilitate the understanding of the principles enunciated by the Act.

Acceptance:

“acceptance” is the assent given to a proposal and this has to flow from the person to whom the offer is made. Section 2 (B) defines in the following terms:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. “ The definition clearly requires that the assent of the acceptor should be signified. The assent may be signified or expressed by any act or omission by which the party accepting intends to communicate his assent. The acceptance has the effect of converting the proposal into promise.

Example:

Mr. Habib says to Mr. Kumar, “I want to sell my house at Dhaka and the price thereof is fixed at BDT 10,000/-“.

Mr. Kumar says to Mr. Habib“I want to buy your said house at the price you quoted”.

Promise:

The last part of Section 2 (b) of the Act defines a promise as follows:

A proposal, when accepted, becomes a promise.

Consideration:

One of the core elements to make an agreement enforceable by law is ‘consideration’. If a promise is not followed by ‘consideration’ to be provided by the promise or any other person at the desire of the promise or, the promise cannot be enforced and such a transaction cannot give rise to any contractual relationship between the promisor and promise.

Contract:

The concept of ‘contract’ is the basis of the law of contract as embodied in the Act. It defines ‘contract’ as under:

“An agreement enforceable by law is a contract.”

Thus, to arrive at a contract there must be–

  1. An agreement, and
  2. The agreement shall be enforceable by law.

An agreement to become a contract must give rise to a legal obligation i.e., a duty enforceable by law. If an agreement is incapable of creating a duty enforceable by law, it is not a contract. Thus an agreement is a wider term then a contract. “All contracts are agreements but all agreement is not contracts.” Agreements of moral, religious or social nature e. g., a promise to lunch together at a friend’s house or to take a walk together are not contracts because they are not likely to create a duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences.

The process of forming a contract under the scheme of the Act is shown in the following flow charts:

Promisor Proposal + Acceptance = Promise Promisee
Promise + Cosideration = Agreement
Agreement + Enforceability = Contract

Offer and Acceptance:

Offer and Acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. An offer is an indication by one person to another of their willingness to contract on certain terms without further negotiations. A contrct is then formed if there is express or implied agreement. A contract is said to come into existence when acceptance of an offer has been communicated to the offeror by the offeree.

The “intention” referred to in the definition is objectively judged by the courts. The English case of Smith v. Hughes (1871) LR 6 QB 597 emphasises that the important thing is not a party’s real intentions but how a reasonable person would view the sityation. 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 country to the principle of certainty and clarity in commercial contract and the topic of mistake and how it offect the contract.

Summary of important issues for contract:

Written contracts:

If the contract has been formally written and signed by the parties, there is an assumption that all the terms of the agreement are contained in the written document regardless of what may have been verbally agreed.

Contracts can be a combination of written and verbal agreements when the wrotten agreement itself covers very few terms.

When a contract is signed, it is assumed that all the terms have been read and agreed to.

If unsigned, a written contract must:

v     Be presented to and understood by all parties to be valid.

v     Be recognised by all parties as a contract, that is, it must look like a contract and not simply a receipt or docket.

Verbal agreements:

  • Verbal agreements rely on the good faith of all the parties and can be difficult to prove.
  • Conversely, in some situations, insisting on a detailed written agreement may be country productive if
    • The value of the transaction is not particularly high.
    • The presentation of a substantial document, possibly with many provisions, may raise more questions and uncertainty in the minds of the parties than it resolves, ending in the transaction not proceeding. If you are confident of the good faith of the party, a less intimidating form of written arrangement may be the best course of action.
  • Do not automatically think that because it is not in writing, it can never be proved. Verbal agreements can be supported by:
    • The conduct of the other party both before and after the agreement.
    • Specific actions of the other party.
    • Past dealings with the other party.

Conclusions of the Contract:

  1. The contract shall be regarded as concluded, if an agreement has been achieved between the parties on all its essential terms, in the form proper for the similar kind of contract. As essential shall be recognized the terms, dealing with the object of the contract, the terms, defined as essential or indispensable for the given kind of contracts in the law or in the other legal acts, and also all the terms, about which, by the statement of one of the parties, an accord shall be reached.
  1. The contract shall be concluded by way of forwarding the offer (the proposal to conclude the contract) by one of the parties and of its acceptance (the accptance of the offer) by the other party.
  1. The contract, subject to be the state registration, shall be regarded as concluded from the moment of its registration, unless otherwise stipulated by the law.

1)      The contract may be concluded in any form, stipulated for making the deals, unless the law stipulates a definite form for the given kind of contracts. If the parties have agreed to conclude the contract in a definite form, it shall be regarded as concluded after the agreed foem has been rendered to it, even if the law does not require such form for the given kind of contracts.

2)      The contract in written form shall be concluded by compiling one document, signed by the parties, and also by way of exchanging the documents by mail, telegrap, teleype, telephone, by the electronic or any other type of the means of communication, which makes it possible to establish for certain that the document comes from the party by the contract.

Bibliography:

1)      Business Law: The Ethical, Global, and E-Commerce Environment (Book) by Jane Mallor, A. James Barnes, L. Thomas, Bowers, Arlen Langvardt in Books.

2)      Modern Land Law (Paperback).

3)      Mark P. Thompson (Author).

4)      Be the first to review this item.

5)      Sen Mitra, (2006) Commercial Law including company Law And Industrial Law.

Website:

http://www. Lawyersnjurists.com

http://www.en.wikipedia.org/wiki/Contract

http://www.guernseybar.com/content.asp

http://www.legalmatch.com/law-lawlibrary/article/land-contract-lawyers.html

http://www.americanlegalreview.com/land-contract/index.html

http://www.thestudentroom.co.uk

http://www.wikipedia.org/wiki/contract

http://www.definitions.uslegal.com