“Discuss the Power Conferring rules to Enter into Contract”
Introduction:
A contract is an agreement between two parties which is enforceable by law. An agreement is made when a person signifies his willingness to do or to abstain from doing anything with a view of obtaining the assent of the other party. Such act or abstinence is said to make a proposal. The person making the proposal is called the promissory and the person accepting the proposal is called the promise. Every promise and every set of promise forming consideration for each other is known as agreement. Promises which form the consideration or part of the consideration for each other are called reciprocal promises. An agreement not enforceable by law is called void agreement.
Anson, a famous jurist thus defines a contact as “An agreement enforceable by law made between two or more persons by whom rights are acquired by one or more to act or forbearance on the part of the other or others”.
Law relating to contracts is to be found in the Indian Contract Act, 1872.
The law of contracts differs from other branches of law in a very important respect. It does not lay down so many precise rights and duties which the law will protect and enforce; it contains rather a number of limiting principles, subject to which the parties may create
Rights and duties for themselves, and the law will uphold those rights and duties. Thus, we can say that the parties to a contract, in a sense make the law for themselves. So long as they do not transgress some legal prohibition, they can frame any rules they like in regard to the subject matter of their contract and the law will give effect to their contract.
Definition of law:
In general, a rule of being or of conduct, established by an authority able to enforce its will; a controlling regulation; the mode or order according to which an agent or a power acts.
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people.
Definition of Contract:
Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law. Section 2(e) defines agreement as “every promise and every set of promises forming consideration for each other.” Section 2(b) defines promise in these words: “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.”
From the above definition of promise, it is obvious that an agreement is an accepted proposal. The two elements of an agreement are:
(i) offer or a proposal; and
(ii) an acceptance of that offer or proposal
Definition of law of contract:
Body of law that governs oral and written agreements associated with exchange of goods and services, money, and properties. It includes topics such as the nature of contractual obligations, limitation of actions, freedom of contract, private of contract, termination of contract, and covers also agency relationships, commercial paper, and contracts of employment.
Definition of agreement:
An agreement is made when a person signifies his willingness to do or to abstain from doing anything with a view of obtaining the assent of the other party.The agreement results from the acceptence of a legal propasal.
Law of Contract perceived as a set of Power conferring rules
In contract law, the contracting parties have the power to create their own rules of conduct.
Thus, contract law gives power to individuals and firms to make contracts; contracts themselves are usually collections of primary rules.
More precisely, primary rules are rules that govern conduct, and secondary rules are rules that do not. Thus, the distinction between primary and secondary rules is just a bit different than the difference between duty-imposing and power-conferring rules: duty-imposing rules impose duties, whereas power-conferring rules confer power. This leaves open the possibility that some rules can regulate other rules, but do so by imposing duties. For example, a secondary rule might impose a duty to legislate in a certain way or a prohibition on certain kinds of rule creation.
H.L.A. Hart, following others before him, draws our attention to the difference between duty-imposing and power-conferring rules. Duty-imposing rules require persons “to do or abstain from certain actions, whether they wish to or not.”The law of theft, for example, instructs persons not to steal, no matter what their personal preferences are. Power-conferring rules “provide that human beings may by doing or saying certain things introduce new [duties], extinguish or modify old ones, or in various ways determine their incidence or control their operations.””Thus constitutions provide procedures whereby legislatures can act to create new laws or extinguish old ones when a majority of their members so desire.
Some theories of contract law characterize it as a private power-conferring rule, others as a duty-imposing one.
Hart suggests contract is a legal power:
Legal rules defining the ways in which valid contracts or wills or marriages are made . . . provide individuals with facilities for realizing their wishes, by conferring legal powers upon them to create, by certain specified procedures and subject to certain conditions, structures of rights and duties within the coercive framework of the law.
- H.L.A. HART, THE CONCEPT OF LAW 81 (2d ed. 1994).
- Id.
- Id. at 27-28; see also id. at 96, 250
On this picture, the point of contract law is to grant persons the power to modify, within limits, their legal obligations to one another. As Ernest Weinrib puts it, the “contract effects a voluntarily assumed change in the pre-existing legal relationship between the contracting parties .”<href=”#fn-619-4″>4.Or in Randy Barnett’s words, to “make a contract . . . a party must explicitly or implicitly manifest an intent to be legally bound.” <href=”#fn-619-5″>5 According to the alternative, duty-imposing picture, contract law is concerned with extralegal wrongs such as breaking a promise, causing reliance harms, or unjustly enriching oneself at the expense of another. Consider, for example, Charles Fried’s claim that “since a contract is first of all a promise, the contract must be kept because a promise must be kept, <href=”#fn-619-6″>6”or Patrick Atiyah’s arguments that contract law is designed to compensate for reliance-based harms and prevent unjust enrichment<href=”#fn-619-7″>7 . While Fried and Atiyah make very different claims about the point of contract law, they agree that it is meant to impose duties on persons who enter into agreements for consideration.
This variety among contract theories is remarkable. It is usually easy to tell whether a law is duty imposing or power conferring. While there are many possible points of disagreement with respect to, for example, the criminal law or Article I of the U.S. Constitution, no one doubts that the point of the one is to impose duties and the other to confer powers. Why such deep disagreement in the case of contract law?
The answer requires a more general account of the difference between power-conferring and duty-imposing rules and of how we identify a given law as of one or the other type. The function of a duty-imposing law is to give persons subject to it a new reason to act in accordance with the rule—in Hart’s words, “whether they wish to or not.<href=”#fn-619-8″>8 ” The function of a power-conferring law, by contrast, is to enable persons to determine, within bounds, what the law is or requires. As Joseph Raz puts it, power-conferring laws attach legal consequences to certain acts because “it is desirable to enable people to affect norms and their application in such a way if they desire to do so for this purpose.” These different functions impose different design requirements on duty-imposing and on power-conferring rules.
5.4.Randy E. Barnett, The Sound of Silence: Default Rules and Contractual Consent, 78 VA. L. REV. 821, 861 (1992).
5.CHARLES FRIED, CONTRCT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION 17 (1981
7.P.S. Atiyah, Contracts, Promises and the Law of Obligations, 94 LAW Q. REV. 193 (1978).
8.HART, supra note 1, at 81. 9.JOSEPH RAZ, PRACTICAL REASON AND NORMS 102 (Princeton Univ. Press 1990) (1975)
Consider power-conferring rules. A rule can give legal actors the ability to effect normative change, when they wish, only if it is structured such that those actors commonly satisfy the rule’s requirements because they want the resulting change. More precisely, the distinctive function of laws that create powers entails two features that together distinguish them from laws that impose duties. First, a law that creates powers must be designed in a way that underwrites an expectation of its purposive use—an expectation that persons will satisfy the law for the sake of the legal consequences. Second, that expectation must be the law’s reason for attaching those legal consequences to acts of that type. Evidence of this second feature can be found in rules that facilitate or enable the law’s purposive use. To identify whether any given law is power creating, we can look to see whether it exhibits these characteristic features.
Evidence that power-conferring laws anticipate and facilitate their purposive use can often be found in rules that condition an act’s legal consequences on evidence of the actor’s legal purpose. Many power-conferring laws require for their exercise the performance of conventional legal speech acts or legal formalities. Such conventional speech acts function, among other things, to ensure that the legal actor who performs them expects and intends the relevant legal consequences. Other power-conferring laws require other sorts of evidence of legal purpose. Thus the effectiveness of a deed depends on an expression of the right legal intention, “which is found upon examination of the whole instrument to be plainly though untechnically expressed.<href=”#fn-619-10″>10 Along similar lines, the Office of Legal Counsel has opined that the effectiveness of a presidential order does not depend on “the form or caption of the written document” but on the substance of what is said.<href=”#fn-619-11″>11 Here a requirement that the actor perform an act with the right meaning—that she express the right illocutionary intent—ensures, inter alia, that she intends the legal consequences of her act.
Contract law contains no such rules. With the decline of the seal, there are no longer any purely formal conditions of contractual validity. In fact, as a result of the rules that govern implied-in-fact contracts, acceptance by performance, battles of the forms, the use of course of performance evidence, and the like, parties need not even express their agreement in so many words. Nor do courts commonly look for other evidence of the parties’ legal purpose. The Second Restatement of Contracts provides that “either real or apparent intention that a promise be legally binding is essential to the formation of a contract,” 12and the comments imagine a contract being formed despite both parties’ mistaken belief that their agreement is not legally enforceable. And while the black-letter rule in England states that “[a]n agreement, though supported by consideration, is not binding as a contract if it was made without any intention of creating legal relations,”13English courts adopt in most cases so strong a presumption of such intent that Atiyah concludes it is “more realistic to say that no positive intention to enter into legal relations needs to be shown, and that ‘a deliberate promise seriously made is enforced irrespective of the promisor’s views regarding his legal liability.’14
All of this is to say that if contract law is a power-conferring law, it is an odd one. Most power-conferring laws employ rules that clearly condition the legal consequences of an action on the actor’s legal purpose. Such laws wear their power-conferring function on their sleeve: Validity conditions that sort for legal purpose anticipate and enable the law’s purposive use. In fact, validity conditions that sort for legal purpose are strong evidence that the law’s only function is to establish a legal power. If a law serves no purpose but to allow persons to effect legal change when they wish, it is not merely senseless but also counterproductive to apply it to acts not done for the sake of their legal consequences. To allow a person’s actions to effect a legal change she neither expects nor wants is not to grant her control over the law but to take it away. Consequently, where a law is meant only to give persons the ability to effect legal change, we should expect it to include validity conditions that sort for legal purpose. By the same token, the presence of conditions of legal validity that sort for legal purpose indicates that this is the law’s sole function.
The consideration requirement provides, at best, equivocal support for an interpretation of contract law on the model of most power-conferring laws. More generally, it is simply not obvious that the conditions of contractual validity are designed to sort for legal purpose.
There is, however, another way to understand contract as a legal power, one that suggests an important difference between contract law and most power-conferring laws, and which expands our understanding of normative powers in general
9.Waller v. Brown, 149 S.E. 687, 688 (N.C. 1929).
10.Legal Effectiveness of a Presidential
Directive, as Compared to an Executive Order, Op. Off. Legal Counsel (Jan. 29, 2000), http://www.usdoj.gov/olc/predirective.htm.
12.RESTATEMENT (SECOND) OF CONTRACTS § 21 & cmt. b, illus. 2 (1981).
13.GUENTER TREITEL, THE LAW OF CONTRACT 149 (10th ed. 1999).
14.P.S. ATIYAH, AN INTRODUCTION TO THE LAW OF CONTRACT 153 (5th ed. 1995) (quoting 1 SAMUEL WILLISTON, A TREATISE ON THE LAW OF CONTRACTS 39 (3d ed. 1957)).
Conclusion:
A contract is an agreement between two or more persons (individuals, businesses, organizations or government agencies) to do, or to refrain from doing, a particular thing in exchange for something in value. Contracts generally can be written, using formal or informal terms, or entirely verbal. The function of a power-conferring law, by contrast, is to enable persons to determine, within bounds, what the law is or requires. Most power-conferring laws employ rules that clearly condition the legal consequences of an action on the actor’s legal purpose. Such laws wear their power-conferring function on their sleeve: Validity conditions that sort for legal purpose anticipate and enable the law’s purposive use. In fact, validity conditions that sort for legal purpose are strong evidence that the law’s only function is to establish a legal power. If a law serves no purpose but to allow persons to effect legal change when they wish, it is not merely senseless but also counterproductive to apply it to acts not done for the sake of their legal consequences. To allow a person’s actions to effect a legal change she neither expects nor wants is not to grant her control over the law but to take it away. Consequently, where a law is meant only to give persons the ability to effect legal change, we should expect it to include validity conditions that sort for legal purpose. By the same token, the presence of conditions of legal validity that sort for legal purpose indicates that this is the law’s sole function.