“An agreement is regarded as a contract when it is enforceable by law”-
In our regular day to day life we make several comments and statements. We say several things to people whom we talk to. Most of these are not with any intention to create any legal obligation. For example, if we say to someone that we will go to lunch with him, it is not a legal obligation. But some, which are related to business or civil matters, are understood to be in a serious mood and have a potential to be legally enforceable. For example, when we hire an Auto-rickshaw for going from point A to point B, we are legally bound to pay and the driver is legally bound to take us from A to B. The Contract Act 1872 defines these activities in precise terms in Section 2.
Proposal: When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that order to such act or abstinence, he is said to make a proposal[1]. [Section 2 (a) Contract Act] (GOVERNMENT OF THE PEOPLE’S REPUBLIC OF BANGLADESH 1985) The following essential elements are necessary for a valid proposal:
(a) Proposal must be communicated
(b) It must be made with a view to obtaining the assent of the person whom it made.
(c) It must be certain and definite.
Acceptance: When the person to who them the proposal is made signifies his assent thereto the proposal is said to be accepted. [2][Section 2 (b) Contract Act]
The following essential elements are necessary for a acceptance:
(i) Communication: Acceptance must be communicated
(ii) To a person having right: Communication of acceptance must be made only to the person having such right.
(iii) Acceptor having knowledge of proposal: Acceptor must have knowledge of the proposal.
(iv) Acceptance absolute: acceptance must be absolute and unconditional.
(v) Acceptance within reasonable time: Acceptance must be made within reasonable time and in a definite manner.
(vi) Acceptance before lapse of proposal: Acceptance must be made before lapse of proposal.
Promise: A proposal when accepted becomes a promise. [Section 2 (b), Contract Act].The person making the proposal is called the promisor and the person accepting the proposal is called promise.
Consideration: When at the desire of the promisor, the promise or any other person has done or abstained from doing or does or abstain from doing something, such act or abstinence is called consideration for the promise. [Section 2 (d) of the Contract Act]
Essential of the consideration:
(i) At the desire of the promisor
(ii) Promise or any other person
(iii) Has done or abstain from doing
(iv) Or does or abstain from doing
(v) Or promise to do or abstain from doing something
(vi) Such act or abstinence or promise is called consideration for the promise.
Difference between Bangladesh and English Law regarding consideration
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Agreement: Agreements are legal and binding documents that define the obligations of all parties involved in a project, service e.tc. Throughout the planning, design, and construction phases of a project, the possibility of entering into an agreement or agreements always exists. Every effort should be made to identify cooperative features as early as possible in the project development stage.
Every promise and every set of promises, forming the consideration for each other is an agreement: [Section 2 (e) of the Contract Act]
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.
i. Allow ODOT and local agencies to share resources through maintenance agreements.
Contract: An agreement enforceable by law is contract. 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.
So, from the above verdict the elements of a contract is as follows
Offer
+
Acceptance
+
Intentions to create legal relations = CONTRACT
+
Consideration given by both parties
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 speechor 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 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. These offer includes –
- Advertisements which include price details
- Tender submissions
- Formal quotations
- Proposals to lease
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.
Acceptance can be given in the following ways:
- Verbally
- In writing
- By action which clearly indicates acceptance
The parties to the agreement must understand that the agreement can be enforced by law. However, for a contract to be binding, it does not have to expressly state that you understand and intend legal consequences to follow. For example, given that your intention will be presumed, it must be made absolutely clear if you do not intend your agreement to be a binding agreement.
In a business arrangement, the promise must involve an exchange of something of value (the ‘consideration‘). This is usually the payment, or promised payment of money but can be anything of value.
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
[3]Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
[4]Communication when complete
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,–
as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,-
as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it;
as against the person to whom it is made, when it comes to his knowledge.
[5]Revocation of proposals and acceptances
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
A proposal is revoked –
(1) by the communication of notice of revocation by the proposer to the other party; (2) by the laps of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
What is a sound mind for the purposes of contracting
A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
“Consent” defined-
Two or more persons are said to consent when they agree upon the same thing in the same sense.
“Free consent” defined-
Consent is said to be free when it is not caused by –
(1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16, or
(3) Fraud, as defined in section 17, or
(4) Misrepresentation, as defined in section 18, or
(5) Mistake, subject to the provisions of sections 20, 21, and 22.
Consent is said to be so caused when it would not have been given but for existence of such coercion, undue influence[6], fraud, misrepresentation or mistake.
“Coercion” defined “Coercion” is the committing, or threatening to commit, any act forbidden by the *[7][Penal Code] or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
“Undue influence” defined-
(1) A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another-
(a) Where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to the other; or
(b) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the Provisions of section 111 of the Evidence Act, 1872]
“Fraud” defined-
“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party there to or his agent, or to induce him to enter into the contract :-
(1) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) The active concealment of a fact by one having knowledge or belief of the fact;
(3) A promise made without any intention of performing it;
(4) Any other act fitted to deceive;
(5) Any such act or omission as the law specially declares to be fraudulent.
“Misrepresentation” defined-
“Misrepresentation” means and includes-
(1) The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, misleading another to his prejudice or the prejudice of any one claiming under him ;
(3) Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.
Voidability of agreements without free consent-
When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
Agreement void where both parties are under mistake as to matter of fact-
Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Effect of mistakes as to law-
A contract is not voidable because it was caused by a mistake as to any law in force in Bangladesh; but a mistake as to a law not in force in [8]Bangladesh has the same effect as a mistake of fact.
Contract caused by mistake of one party as to matter of fact-
A contract is not voidable merely because it was caused by one of the parties to being under a mistake as to a matter of fact.
What considerations and objects are lawful and what not-
The consideration or object of an agreement is lawful, unless-
Agreement without consideration void, unless it is in writing and registered, or is a promise to Compensate for something done, or is a promise to pay a debt barred by limitation law-
An agreement made without consideration is void, unless –
(1) it is expressed in writing and registered under the law for the time being in force for the registration of [9][documents], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do, or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might enforced payment but for the law for the limitation of suits.
* 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 the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
Agreement in restraint of marriage void-
Every agreement in restrain of the marriage of any person, other than a minor, is void.
Agreement in restraint of trade void-
Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Agreement in restraint of legal proceedings void-
Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.
Agreements void uncertainty-
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
Agreements by way of wager void-
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be own on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which wager is made.
Promisor not bound to perform, unless reciprocal promisee ready and willing to perform
When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
Promisee may dispense with or remit performance of promise
Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.
Remedies in case of Breach of Contract
Compensation for loss or damage caused by breach of contract
When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Specific performance of the contract
It means the actual carrying out of the contract by the party. In some cases the court may order one party, at the suit of another to carry out the agreement. This is called the remedy of specific performance.
Injunction
It is negative remedy. It is an order of the court restraining or prohibiting a person from doing any particular act. In some cases of breach of contract the court may grant an injunction, restraining the party in breach from committing the intending breach of contract.
Bibliography
GOVERNMENT OF THE PEOPLE’S REPUBLIC OF BANGLADESH. MINISTRY OF LAW AND LAND REFORMS LAW AND PARLIMENTARY AFFAIRS DIVISIOIN. TEJGOAN, DHAKA: DEPUTY CONTROLLER BANGLADESH FORMS AND PUBLICATION OFFICE, DHAKA, 1985.
THE LAW OF CONTRACT ACT BY AVTAAR SINGH, India, 8th edition, 2002
THE LAW OF CONTRACT BY McKENDRICK, UK, 7th edition, 2007
THE LAW OF CONTRACT BY BARRISTER HALIM
THE CONTRACT LAW BY CHESHIRE & FYFOOT
Law of Contract. Dhaka: Md. Nurar Rahman, July, 2008.
The indian contract act, 1872. 2000-2011. <http://www.netlawman.co.in/acts/indian-contract-act.php>.
VakilNo1.com. 2000-2011. <http://www.vakilno1.com/bareacts/indiancontractact/indiancontractact.html>.
Board of Investment Bangladesh. 2011. <http://www.businesslaws.boi.gov.bd/index.php?option=com_content&view=article&id=52&Itemid=64&lang=en>.
[1] Section 2 (a) The Contract Act, 1872
[2] Section 2 (b) The Contract Act, 1872
[3], Section 3 The Contract Act, 1872
[4] Section 4 The Contract Act, 1872
[5] Section 5 The Contract Act, 1872
[6] The Words “undue influence” were repeated by the Indian Contract Act Amendment Act, 1899 (VI of 1899), s, 3
[7] The words within square brackets were submitted for the words “Pakistan Penal code” by the Bangladesh Laws (Revision and declaration) Act, 1973 (Act VIII of 1973), Second Schedule, (with effect from 26-3-71)
[8] The word “Bangladesh” was submitted for the word “Pakistan”, ibid
[9] The word within the square brackets was submitted for the word “assurance” by the Amending Act, 1891 (XII of 1891)