An agreement is regarded as a contract when it is enforceable by law. Explain and illustrate.
1. Introduction:
A contract is a legally enforceable agreement between two or more parties with mutual obligations. Another concept is a contract is an agreement made between two or more parties which the law is enforce. Sec 2 (h) defines a contract as an agreement enforceable by law. This definition is based pollock’s defination which is as follows: “Every agreement and Promise enforceable at law is a contract[1].
From my opinion the agreement can be formal, informal, written. Some contracts are required to be in writing in order to be enforced. An agreement between two or more parties which creates obligations to do or not do the specific things that are the subject of that agreement. Examples of a contract are a lease, a promissory note, or a rental agreement.
All agreement 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 expressly declared to be void[2].
The law of contract deals with agreements which can be enforced through courts of law. The law of contract is the most important part of commercial law because every commercial transaction starts from an agreement between two or more persons. We can say that the agreement always enforceable by law that is called contract[3].
2. Agreement and its enforceability:
If we analyses the definition of contract we find that a contract essentially consists of two elements and (2) its enforceability by law.
An agreement is defined as “every promise and every set of promises, forming consideration from each other.’[Sec 2 (e)]. A promise is defined thus: “When the person to whom the proposal is made signifies his assent thereto, the proposal said to be accepted. A proposal, when accepted, becomes a promise.” [Sec.2 (b)]. This, in other words, means that an agreement is an accepted proposal. In order, therefore, to form an agreement, there must be a proposal or offer by one party and its acceptance by the other[4]. To sum up.
(Agreement=offer + Acceptance)
This means that the parties to the agreement must have agreed about the subject-matter of the agreement in the same sense and at the same item. Unless there is consensus ad idem, there can be no contract[5].
There is no consensus ad idem, and consequently no contract. An agreement may be a social agreement or a legal agreement. If A invites B to a dinner and B accepts the invitation, it is a social agreement. A social agreement does not give rise to contractual obligations and is not enforceable in a court of law[6].
To conclude: Agreement + Enforceability at law[7].
3. Decide that an agreement has been reached:
In considering the standard which is adopted in deciding whether or not a contract has been concluded a useful starting-point, which is quoted in most of the reference works on the law of contract, is the judgment of Blackburn J in Smith v. Hughs (1871) LR 6 QB 597[8].
The establishes the important point that the test for the existence of an agreement is objective rather than subjective. A subjective test attempts to ascertain the actual intention of the contracting parties, whereas an objective test examines what the parties said did and not what they actually intended to say or do (see further 2.3)[9]. The commercial justification for the adaptation of an objective test is that great uncertainty would be caused if a person who appeared to have agreed to certain terms could escape liability by claiming that he had no ‘real’ intention to agree to them.
A plaintiff will not be able to succeed against a defendant, simply because he has suffered loss which has, in some fashion, been induced by the defendant. He must be able to show that the defendant’s conduct has given the plaintiff a course of action in law[10]. He must be able to show that a contract has been entered into, either with the defendant or his agent or, where a misrepresentation is alleged, with a third party. He must be able to show that a contract has been entered into; he can not succeed on an application of the law of contract[11].
4. Voidable contracts and void agreements:
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. An erroneous opinion as to the value of the think which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact[12].Voidable contracts generally are contracts which subsist unless and until avoided as contrasted with void contracts, which are a complete nullity ab initio.In the case of minors’ voidable contracts, only one party, the minor, may avoid them. The rules as to liability are that once the minor has avoided the contract, he avoids liabilities which accrue after that date, but remains bound to meet obligation which have already arisen[13].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. A party or a contract, whose consent was caused by fraud or representation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception-If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence[14].
The supreme court of India considered the principle of Foster v Mackinnon in Ningawwa v Byrappa Shiddappa Hirekurabar, and concluded on the facts that where a husband obtained the signature of his wife to a gift deed without making any misrepresentation as to its character, but subsequently included two more plots in the deed , the transaction was only voidable and not void[15].
5. The performance of contracts which must be performed:
The parties of contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law. Promises bind the representatives of the promisors in cases of the death of such promisors before performance, unless a contrary intention appears from the contract[16].
If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promise himself, such promise must be performed by the promisor . In other cases, the promisor or his representatives may employ a competent person to perform it[17].
When person or two or more person made a joint promise to two or more person they are jointly liable for the performance of the same and the right to claim performance rests as between him and them during their lifetime and if any of them died their representative must be brought on record to enable them to perform the contract[18].
When a promise accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor. Where a promisor has made an offer of performance to the promise, and the offer has not been accepted, the promisor is not responsible for non-performance, or does thereby loss his rights under the contract[19].
6. Legal Object and Legal Consideration:
When four dacoits enter into an agreement to share the loot equally and if two of them take more share than the other two, there is nothing that law can do, except arrest them for dacoit. Needless to say, the objects and considerations involved in the the agreement have to be legally valid. Section 24 declares that agreements are void if consideration and object are unlawful in part. If any part of a single consideration for one or more objects, or any one or any part of one of several considerations for a single object, is unlawful, the agreement is void[20].
Thus, if the unlawful part cannot be severed from the object or consideration, the whole agreement becomes void. However, if the unlawful part can be severed, the remaining part can still be enforced. For example, A enters into an agreement with B to get 1 Gram of Cocain with 1 Kg or Rice for 10 Rs for rice and 1000 Rs for Cocain, then a part of the object that is 1 gm of cocain and 1000Rs is severable from the agreement without affecting the lawful part. In this case, the agreement can be enforced partially. In another example, A man enters into an agreement with a married women to clean his house and live with him in adultery, which is unlawful, for a sum per month, the whole agreement is void because it is not possible to divide the sum properly between lawful and unlawful objects[21].
Unconvincing argument is that, with the fixing of the genetic program, this early form of embryonic life is already identical, in ethico-legal terms, to the born human being into which it might develop. This thesis ignores the fact that human beings are more than the sum of their genes and that there is more to their identity than the execution of their genetic program: for instance, although monozygotic twins are genetically identical, they do not possess the same personal identity[22].
7. Conclusion:
The issues discussed herein provide a general overview of contract law. While many questions regarding contract formation issues can be answered with the information provided on this website, other questions are much more complicated and require consultation with an experienced contract attorney. If you are engaged in a contract dispute and want to know what rights, obligations, and remedies you have, don’t hesitate to contact The Roth Law Group, LLC.
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 contracts. 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. 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 acceptance of the offer) by the other party.
In the cases, when the differences, arising during the conclusion of the contract, are passed for consideration to the court on the ground of Article 445 of the present Code or by an agreement between the parties, the terms of the contract, by which the parties have displayed differences, shall be defined in conformity with the court decision.
The elements mentioned above must all be present. If any one of them is unavailable, the agreement does not become a contract. An agreement which fulfills above requirement is enforceable by law that is called a contract.
Bibliography
- Mohammad Haidar Ali and Md.Ashraful alam in a text book on law of contract,Published by, Sheikh Mohammad Ali Hasan, National Law Book Company, First Edition: January 2010
- N.D.Kapor in a book on elements of mercantile, Educational publishers, Sultan Chand & Sons,Twenty-third Edition 1997.
- According to Salmond a contract is “an agreement creating and defining obligations between the parties “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 forbearance on the parts of the others or others.”
- Lord Templeman text book on Oligations Contract Law,Editor: vickneswaren Krishnan, Forst edition 1997and Reprinted 1999.
- Ewan McKendrick and Marise Cremona the book on contract law, Law series editor: Marise Cremona, Edition 1990.
- Blake v Concannon (1870) Ir R 4 CL 323.
- See seinberg v scala (Leeds) Ltd [1923] 2 Ch 452.
- The essence of an agreement is the meeting of the minds of the parties in full and final agreement; there must, in fact, be consensus ad idem. The expression “agreement” as defined in Sec.2 (e) is essentially and exclusively consensual in nature [ Sunnam Sattiah v. State, A.I.R (1980) A.P 16] before there can be an agreement between two parties, there must be consensus ad idem.
[1] According to Salmond a contract is “an agreement creating and definig obligations between the parties “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 forbearance on the parts of the others or others.”
[2] See,Mohammad Haidar Ali and Md.Ashraful alam in a text book on law of contract Page-(33-34)
[3] See,N.D.Kapor in a book on elements of mercantile law Page-2
[4] See,N.D.Kapor in a book on elements of mercantile law Page-2
[5] The essence of an agreement is the meeting of the minds of the parties in full and final agreement; there must, in fact, be consensus ad idem. The expression “agreement” as defined in Sec.2 (e) is essentially and exclusively consensual in nature [ Sunnam Sattiah v. State, A.I.R (1980) A.P 16] before there can be an agreement between two parties, there must be consensus ad idem.
[6] It is only those agreements which are enforceable in a court of law which are contracts
[7] Thus all contracts are agreements are not necessarily contracts.
[8] He said that, ‘If, Whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.
[9] The commercial justification for the adaptation of an objective test is that great uncertainty would be caused if a person who appeared to have agreed to certain terms could escape liability by claiming that he had no ‘real’ intention to agree to them.
[10] The plaintiff sought a declaration, holdings that no legally binding agreement had been entered into between the parties. The court of Appeal refused to grant such a declaration, holdings that the parties had enter into a contract at a rental value the mutual promises alone will suffice to conclude the contract.
[11] See Ewan McKendrick and Marise Cremona the book on contract law Page-(11-12)
[12] Currie v Misa: consideration is either an advantage to the promissory or a detriment incurred by the promise. A promise without consideration is a gratuitous undertaking and cannot create a legal obligation. The requirement of a lawful consideration in the law of obligations (section 987)
[13] See Lord Templeman text book on Obligations Contract Law Page-(157-158)
[14] A fraud or representation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.
[15] (1968) 2 797: AIR 1968 SC 956: (1968) 2 SCA 97; padanivelu v sadsiva padayachi, 2000 AIHC 2477 (Mad), illiterate lady akkeged that her thumb impression was obtained by telling her that the document was a mortgage deed and not a sale deed. Sale amount was also low, sale deed held void.
[16] HELD: By the above clause the vendors transferred the distribution rights as well as the dupe negative. When a person agrees to transfer a particular property to another he is bound to transfer that property whatever the way in which he becomes owner of I unless there be a provision to the contrary in the agreement for sale. S Sibtain Fazil Distributirs (1964) 16 DLR (SC) 198
[17] See,Mohammad Haidar Ali and Md.Ashraful alam in a text book on law of contract Page-127
[18] Admittedly defendant Nos.2 to 4 and 6. Pariners of firm, died during pendency of the suit and no step was taken for their substitution. Therefore, the suit must fail as it cannot proceed against dead persons. [Public Bank Ltd. Vs Sultana Oil Mills and Soap Factory and others 51 DLR 323]
[19] When promise accepts performance from third person he can not enforce it against promisor. 25 CLJ 316; 39 A 178 PC such acceptance of performance.
[20] http://hanumant.com/AgreementEnforceableByLaw.html
[21] Section 23 declares that any object or consideration is lawful, unless – it is forbidden by law, or is of the nature that if permitted, defeats the provisions of any law , or is fraudulent, or implies or involves injury to the person or property of another, or is determined by the court to be immoral or against public policy. Thus, an agreement to rent an apartment for prostitution or gambling is void.
[22] http://www.ethikrat.org/_english/publications/stem_cells/part_5.html