A contract is a written or oral agreement between two parties which essentially revolves around their intention to create legal bindings-illustrate &explain
People enter into contracts all the time. In some cases, they may not even realise that they have entered into a contract. For example, when someone goes to a restaurant and orders food, without realisation, they have entered into a contract with the restaurant. People in trade and commerce do their business by making contracts. A contract is an exceedingly common tool to them. The law related to contracts is found in the Indian Contract Act, 1872.
The law of contract is different from the other sectors and branches of law in a very significant way. The parties making the contract can create their own rights, privileges, and duties, but the contract is limited to only these rights and duties; only what is specified in the contract. The law of contract does not protect or enforce any specific rights or duties. We can conclude that, in a way, the parties in a contract make the law for themselves. Therefore, as long as parties in the contract do not transgress any legal prohibition, they can make any rules they like related to the subject matter of their contract and the law will give effect to their contract.
Agreement and Contract
Section 2(h) defines a contract as an agreement enforceable by law. So in a contract there must not only be an agreement, but an agreement that is enforceable by law. A contract must be between two or more parties who voluntarily enter into this agreement enforced by law. Each of these parties creates one or more legal obligations between themselves.
In Section 2(e) agreement is defined as ‘every promise and every set of promises forming the consideration for each other’. A promise is a proposal which has been accepted. Section 2(b) says ‘a proposal, when accepted, becomes a promise’. So we can say that an accepted proposal is a promise. The person making the proposal is called the promisor and the person accepting the proposal is called the promisee. The willingness to make a proposal should be indicated and declared by the promisor. A proposal is said to be completed when the promisor has communicated with the other party. Therefore, the two elements of an agreement are: an offer or a proposal and an acceptance of that offer or proposal. All agreements, however, are not contracts. An agreement is just a proposal which has been accepted. It only becomes a contract when it is enforceable by law. In other words, an agreement that the law will enforce or put into effect is a contract. “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby declared to be void”.
Free consent is an important requirement of a contract. It means to agree to something without being forced. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misinterpretation, and mistake. When an agreement is not enforced by law, it is said to be void. Hence, we can say that all agreements are contracts when they are enforced by law and the parties in the contract are not being forced into it. However, there are some agreements which are considered illegal or void by the law. In such a case, even if the agreement has all the elements of a valid contract, the agreement will not be enforceable by law.
The Elements of Contract
An agreement must have a few essential elements to be considered as a contract. When all of these elements are present in a contract it can be enforceable by law. The elements are as follows:
Offer and Acceptance
There must be a clearly stated and lawful offer and a lawful acceptance. The offer will, however, lapse if the time for acceptance expires or if the offer is withdrawn before acceptance.
The intention to create a legal relationship
The Law of Contract deals with the legal relations that arise because of mutual expression of assent. The parties must intend to enter into a legally binding agreement. They must understand that they are entering a legal relationship and that the agreement can be enforced by law.
Consideration is what one party promises to give or do in return for something the other party will give or do. The exchange can be of money or anything else of value. It can also be a promise to do something or not to do something. The exchange does not have to be equal. Only the considerations which are lawful are regarded as valid. 
Types of Contract on the basis of its validity:
· Valid Contract: A valid contract is an agreement which is enforced by law and has all the essential elements of a contract.
· Void Contract: According to Section 2(j) a void contract is one which is not enforceable by law. A contract when originally entered into maybe valid, but becomes impossible to act on when the time comes becomes void when the act becomes impossible or unlawful. It may become impossible or unlawful because of reasons the promisor could not prevent or change.
· Voidable Contract: It is said in Section2 (i), “an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract”. For contracts where the consent is caused by coercion, undue influence, fraud, or misinterpretation is voidable at the option of the party whose consent was so caused.
· Illegal Contract: A contract which is forbidden by law is an illegal contract. If these agreements are permitted they will overpower the provisions of any law or is fraudulent. These contracts can imply injury to others or to the property of others. The court sees it as immortal or opposed to public policy. These agreements are punishable by law.
· Unenforceable Contract: Unenforceable contract is a valid contract that cannot be fully enforced due to technical defect.
Why contracts are enforced?
Law and economics
One important answer to this question focuses on the economic benefits of enforcing bargains. From this viewpoint, economic efficiency and economic incentives are the main social goods that come from contract law. Economists evaluate legal rules in terms of efficiency. Given a set of individual preferences, the economist asks for legal rules that will help society achieve an efficient allocation of its resources in terms of those preferences. In doing so, the economist posits that economic units are rational and that therefore they will respond to legal rules by taking into account the legal consequences of their decisions.
Contract as promise
Charles Fried maintains that the purpose of contract law is to enforce promises. This theory is developed in Friend’s book, Contract as Promise. The goal of contract law is not economic efficiency, but rather assuring that people behave morally and honour their obligations; ensuring that people keep their promises. Law should compel people to keep their promises. Friend’s theory is controversial because not all promises are necessarily moral. Therefore not all promises should be enforced.
Formalism is the view that rules are legally binding because of their status as rules, not because of any substantive justification for the rule. Formalism typically has three functions: channelling, evidentiary, and precautionary purposes. For example, seals are used to make a promise automatically enforceable in absence of bargain, detriment or benefit.
(1) Channelling: to ensure that certain promises will be enforceable. This gives people certainty of what will happen.
(2) Evidentiary: to provide evidence that the promise was indeed made.
(3) Precautionary: to make people think twice before making such a promise.
The point of contract law is to grant a person or party the power to modify, within limits, their legal obligations to one another. Legal obligation is the necessity to do what is imposed by law. It can be considered the same as duty. In a more technical sense, obligation is a tie that makes people do something or pay for something willingly and agreeably to the laws and customs of the country in which the obligation is made. The term obligation also indicates the instrument or writing by which the contract is witnessed. Civil obligation is said to be a bond which contains a penalty. Obligation is when one party is compelled to do something and a failure to do that will result in some kind of punishment or penalty.
There are two kinds of obligations which are imperfect obligation and perfect obligation. Imperfect obligations are those which are looked at as ethical or moral obligations such as charity. These obligations are not between man and man. It can be considered to be between man and God.
Breach of Contract
Typically, the parties in a contract work according to the terms and conditions of the contract. However, there are cases where one party fails to perform their part. This leads to a loss for the other party. The failure to perform the obligations may lead to a breach of the contract. This is referred to as repudiation. According to section 39, “Any intimation whether by words or by conduct that the party declines to continue with the contract is repudiation, if the result is likely to deprive the innocent party of substantial the benefit of the contract.”
Repudiation can occur when either party refuses or fails to perform their part. The breach of contract can be either actual, which means the party is unable to fulfil his duty on due date, or it can be anticipatory, which means the party does an act before the time of performance which implies that he will not fulfil his contractual promise.
Remedies and damages the parties are entitled to as a consequence
When a breach of contract occurs, one or more of the parties involved can have the contract enforced on their terms or they may try to recover for any financial loss incurred. When one party breaches a contract, the other party is entitled to relief under the law. The main remedies to the breach of contract are damages, specific performance, cancellation, and restitution. The remedy of damages can be a financial payment of some sort from the breaching party to the non breaching party. Specific performance is the court ordered duty of the performance. The non-breaching party can cancel the contract and sue the breaching party on the basis that it had already given the breaching party some benefit.
A contract is a written or oral agreement between two parties which essentially revolves around their intention to create legal bindings. The word voluntarily means that the parties must have willingly contracted to obligations or terms of the contract. These terms may be both expressly and sometimes impliedly created, by virtue of statutes. Hence, it sometimes may not be all that voluntary. But if all the elements of a contract exist, then it will be enforced. A contract only deals with the terms and conditions mentioned in the legal agreement that is made. Anything beyond that is not enforceable by law. To end with, the failure to perform the obligations may lead to a breach of the contract and there are penalties or punishments that the parties will have to face as a consequence. However, the common law does not perform specific performance for breach of contract nor punish deliberate breach because sometimes it is economically efficient for breach to be broken.
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