Contracts are made to protect various obligations, but it restricts itself to the execution of civil obligations only.-Discuss
Introduction
The formal definition of a contract states contract as an arrangement or deal entered into willingly by two or more parties, each of whom intends to create one or more legal obligations between or among them. The components of a contract are “offer” and “acceptance” by “competent persons” having legal capacity who exchanges “consideration” to create “mutuality of obligation”.
As written by Mark F. Radcliffe and Diane Brinson of DLA Piper LLP (US), minors and the mentally incompetent lack the legal capacity to enter into contracts. Even agreements or a promise which are secured through fraud, duress or undue influence is not enforced by the courts. According to Michael D Bayles, for there to be a contract, substantial agreement has to exist and the factions must have freely intended to be legally bound. When it comes to explaining contracts, courts primarily try to carry out the intent of the parties. Abreach occurs when one party foils the intentions of the other party. A paper by Gerald Fridman suggests that the primary purpose of contract law is to enforce the agreement of the parties. The breaching party can then be held to pay compensation for consequences of the breach that was foreseeable at the time the contract was made. In short, throughout, the purpose of contract law is to maintain the intentions of the contractors, including the payment of damages in case of inability to commit as agreed.
Description
Under Common Law, the elements of a Contract are Offer, Acceptance, Intention to create legal relations, and Consideration.
An offer is an expression of acquiesce to contract on certain pre-specified terms or conditions. It must be made with the purpose that it will become binding upon approval. After approval, there will be no further negotiations or discussions required.To form a contract, there must be an acceptance of the offer.The acceptance will indicate that each of the terms of offer has been agreed upon. It is mandatory that the acceptance must be a ‘mirror image’ of the offer.The acceptance could be made either by words or by contract.Once the acceptance has been made by both parties, it has to be communicated. The common rule is that acceptance is not effective until it is communicated to the one who accepted the offer, more commonly known as offerror.It is sometimes articulated by saying that the acceptance cannot be made through silence.
Consideration is something of value which is exchanged between the two parties among who a contract has been made. The thing of value can be payment, goods, services, an act or a forbearance to act, even when one has the legal right to do so.
According to Bayles, at least three distinct purposes can be served by any law of contract: Prediction, Explanation and Justification. Fridman inherently attributed the function of prediction to lawyers to ascertain whether a ‘legally enforceable arrangement’ has been made.Explaining is the second function of contract law. Explanations are fairly used for the interpretation of the role of contracts and law of contracts in the society.Justification is the third function of the contract theory.According to Bayles, many other theorists believe that this approach corresponds to a common approach to ethical theory in which the aim is to formulate general principles that will account for and systematize strongly held moral beliefs, such as that torture, lying, and breaking promises are wrong.Another fundamental purpose of contract law is to protect and promote the expectations created by the two parties.
According to Rashmi Jajoria, Student of New Law College,B.V U. Pune, types of Contract on the basis of its Validity are :-
(i) Valid contract: A contract which has all the required elements of a contract is called a valid contract. A valid contract can be executed by law.
(ii). Void contract [Section 2(j)]: An agreement which is not enforceable by law is known as void. A void contract is a contract which refrains itself to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void.
(iii). Voidable contract [Section 2(i)]: A voidable contract is one which is legally enforceable at the will of one or more of the parties, but not at the will of other or others. However, the contract continues to be valuable and enforceable unless it is discarded by the afflicted party.
Civil obligations are obligations which give the creditors a right to enforce their performance under the court of law. A civil obligation is one which has a binding operation in law, ‘vinculum juris’, and it gives a right to oblige to enforce it in the court of law.[1]. In short, it is an agreement binding on the obligor.
The civil obligation can also be considered as a bond, which has a forfeit joined with itself, with a proviso adjunct for the payment of certain amount of money, performance of covenants or similar; it differs from a bill which is generally without a penalty or condition though it may be obligatory. It is also defined to be a deed whereby a man binds himself under a penalty to do a thing. The word obligation, in its most technical signification imports a sealed instrument. 10
As noted by Prof. Gruning of Loyola University, New Orleans, civil obligations, in relation to their origin, are of two kinds:
1. A civil obligation which has been created by the operation of law.
2. A civil obligation which arises from the acquiescence of the two parties who are legally bound by them which are more commonly called contracts or conventional obligations.
According to the Arts 1156-1304 of the Civil Codes, the four most important elements of an obligation are:
Passive subject- a person or organization that is bind to the implementation of the duty
Active subject- a person or organization that is entitled to the implementation of the duty
Object or Prostration- the execution required to be performed by the passive subject
A juridical or legal tie- that which are legally binds the parties to the obligation. The tie in the obligation can easily be determined by the knowledge of the source of the obligation.
Civil obligations can be divided into several categories: express and implied, pure and conditional, primitive and secondary, principal and accessory, absolute and alternative, determinate and indeterminate, divisible and indivisible, single and penal, and joint and several. They are also purely personal, purely real, and both real and mixed at the same time.
The law of contract is – or at least strives to be – an arena where the obligations we have are those we choose to impose upon ourselves, as contrasted with tort law, criminal law, and the like, where duties are imposed upon us separate from any choice we have made.[2] The law of contract has many areas of implementation, and it has the purpose of securing and making all kinds of obligations, which are imperfect obligations, natural obligations, and civil obligations, but it has restricted itself to the execution of voluntarily created civil obligations. The law of contract is not able to take care of the whole range of agreements; many agreements remain outside the purview because they do not fulfill the requirement of a contract. In many cases it have been seen that many agreements, when they are breached cannot be mitigated under the prevailing contract laws, then it had to be solved by judges interference. This incompetence of contract laws prevents it from securing all kinds of agreements or obligations; as a result it confines itself to the implementation of civil obligations. The most important motivation and justification which underlies the contract law is the will, consent, autonomy and promise. It has been clarified that Contract laws are set of rules that help traders plan and execute their transactions and future performances more smoothly. Most of the agreements that take place come in the form of agreements which are legally enforceable. However, throughout the history of the law of contract, in many cases where the transactions could not take place, the role of contract law was either absent or muted. But it should be noted that in most certain cases, the contracts would still be performed even if there were no legal sanction for breach. The law of contract contributes to both the welfare of the individual parties in an agreement and also to the nation as a whole by promoting and securing high amounts of private exchange. If legal encumbrances to voluntary obligations are kept to a minimum, the law plays a economy-supporting role by endowing a general structure within which private individuals and firms can rationally allocate resources.
Conclusion
The society around us is in function because of the exchange in the marketplace at every level. Contract law makes this possible. These exchanges that take place in the marketplace always depend upon voluntarily created arrangements between individuals or other “legal persons”. These voluntary arrangements could never be in function without law of contract.
Contract law was created and nourished to make these agreements “legally enforceable”, which normally means that this law allows one of the parties in a contract to get compensation, whether in money or in kind, from the other party if it can be proved that the latter stands in breach.
These voluntarily created obligations would instantly become dysfunctional, irrelevant and unworkable without these laws of contract.
However, the limitation that surrounds the laws of contract averts it from securing and upholding every various obligations created between interested parties. Instead, laws of contract constrains itself to the execution of voluntarily created civil obligations.
Reference
· Fried, C. ‘The Convergence of Contract and Promise’, 120 HARV. L. REV. FORUM 1, 3 (2007)
· Wu, S.Y. & Roe, B. ‘Contract Enforcement, Social Efficiency, and Distribution: Some Experimental Evidence’ (May, 2007), American Journal of Agricultural Economics available at www.jstor.org
· Sulkunen, P. ‘Re-Inventing the Social Contract’, (Sep., 2007), Acta Sociologica, Vol. 50 available at www.jstor.org
· Benson, P. ‘The Theory Of Contract Law: NEW ESSAYS’, (Cambridge, 2001).
[1] http://www.lectlaw.com/def2/o001.htm
[2] (Gregory Klass, Three Pictures of Contract: Duty, Power, and Compound Rule, 83 N.Y.U. L. REV. 1726, 1738-43 (2008). )