Every agreement is the result of a proposal from one side and its acceptance by the other. An agreement is only regarded as a contract when it is enforceable by law in accordance to Bangladeshi Contract Act 1872-Discuss
Introduction
For an agreement to be a contract an agreement has to be a promise and a promise is an accepted proposal. Therefore, every agreement is the result of a proposal from one side and its acceptance by the other. However, an agreement is only regarded as a contract when it is enforceable by law in accordance to Bangladeshi Contract Act 1872. To be enforceable, the agreement must be accompanied by some other factor…. The question now to be discussed is what this other factor is. What fact or facts must accompany an agreement to make it enforceable at law? Why should contracts be enforced?
Definitions
Samuel Williston said an agreement is an expression by two or more persons of assent in regard to some present or future performance by one or more of them.
Treitel said ‘A contract is an agreement giving rise to obligations which are enforced or recognized by law. The factor which distinguishes contractual from other legal obligations is that they are based on the agreement of the contracting parties. Whereas Pollock defines contract as ‘A promise or set of promises which the law will enforce.’ And according to Anson ‘The law of contract may be provisionally described as that branch of the law which determines the circumstances in which a promise shall be legally binding on the person making it.’
According to the Louisiana civil code of 1870, A civil obligation is a legal tie, which gives the party, with whom it is contracted, the right of enforcing its performance by law.
From the above definitions, we found that a contract essentially consists of two elements: (1) An agreement and (2) civil obligation i.e. a duty enforceable by law.
Essential elements of a contract to be valid:
1. Agreement.
2. Intention to create legal relationship.
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreements not declared void or illegal.
8. Certainty of meaning.
9. Possibility of performance.
10. Necessary Legal Formalities.
These essential elements are explained briefly.
1. Agreement
As mentioned earlier, to form a contract there must be an agreement. An agreement is composed of two elements—offer and acceptance. An offer is a promise i.e. by its terms, conditional upon an act, forbearance, or return promise being given in exchange for the promise or its performance. An agreement must have at least two parties involved and both the parties must agree about the subject matter of the agreement in the same sense and at the same time.
2. Intention to create legal relationship
There must be an intention among the parties in the agreement to create a legal relationship.
3. Free and genuine consent
Free consent of all the parties to an agreement is another essential element. A contract is not valid if the agreement is induced by (i) fraud, (ii) undue influence, (iii) duress, (iv) misrepresentation or (v) mistake (sec. 14).
i. Fraud: Fraud prevents mutual agreement to a contract because one party intentionally deceives another as to the nature and the consequences of a contract. A contract that is based on fraud is void or voidable, because fraud prevents a meeting of the minds of the parties. If the fraud is in the factum, (i.e., during the execution of the contract) so that the party would not have signed the document if he or she understood its nature, then the contract is void.
ii. Undue Influence: Undue influence is unlawful control exercised by one person over another in order to surrogate the first person’s will for that of the other. It generally occurs in two types of situations. In the first, a person takes advantage of the psychological weakness of another, in order to influence that person to agree to a contract to which, under normal circumstances, he or she would not otherwise consent. The second situation entails undue influence based on a fiduciary relationship that exists between the parties. This occurs where one party occupies a position of trust and confidence in relation to the other, as in familial or professional-client relationships.
iii. Duress: Duress is a wrongful act or threat by one party that compels another party to perform some act, such as the signing of a contract, which he or she would not have done voluntarily. As a result, there is no true meeting of minds of the parties and, therefore, there is no legally enforceable contract. Blackmail, threats of physical violence, or threats to institute legal proceedings in an abusive manner can constitute duress. The consensus of most jurisdictions is that the threat to commence legal proceedings, which otherwise might be justifiable, becomes wrongful when done with the corrupt intent to coerce a transaction that bears no relation to the subject of such proceedings and is grossly unjust to the victim.
A contract that is induced by duress is either void or voidable. If the duress consists of one party taking the other’s hand as a mechanical instrument by which to sign his or her name to a contract, then the contract is void ab initio for lack of any intent on the victim’s part to perform the act. The result is the same if the victim is compelled to sign a contract at gunpoint without any knowledge of its contents. These are highly unusual situations. In most cases involving duress, the contract is voidable, and the person who was subjected to the duress may ask the court to declare the contract unenforceable. The consequence of establishing duress is often that the contract is voidable at the election of the wronged party.
iv. Mistake: mistakes that go to the very basis of agreement, only those mistakes will cause the contract to be non-binding on the parties to it. Factors must be relevant to the successful plea of mistake. Therefore, it is wise to seek legal advice about whether or not the court would hold the contract binding on these grounds.
4. Parties competent to contract
The parties to an agreement must be competent to contract. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject (sec.11). If any of the parties to the agreement suffers from minority (young people), lunacy, idiocy, drunkenness etc then the contract is unenforceable except in certain exceptional circumstances.
i. Minority (young people): The term young person is defined as a person under the age of 18 or 21, depending on the particular jurisdiction. A contract made by a young person is voidable but is valid and enforceable until or unless he or she disaffirms it. He or she may avoid the legal duty to perform the terms of the contract without any liability for breach of contract. The exact capacity to bind them and be bound by contract is limited but also unclear, because no Act of parliament covers this area of law.
ii. Lunacy: people who have mental impairment are sometimes vulnerable to be bound by contracts that they do not fully understand. A person who has been declared incompetent in a court proceeding lacks the legal capacity to enter into a contract with another. Such a person is unable to consent to the contract, as the court has determined that he or she does not understand the obligations and effects of the contract. A contract made by such a person is void and without any legal effect. Neither party may be legally compelled to perform or comply with the terms of the contract. If there has been no adjudication of insanity, a contract made by a mentally incapacitated individual is voidable by him or her.
iii. Drunkenness: A contract made by an intoxicated or drunk person is voidable. When a person is drunk at the time of entering into a contract with another and afterward becomes sober and either promises to perform the contract or fails to disaffirm it within a reasonable time after becoming sober, then that person has confirmed his or her voidable contract and is legally bound to perform.
5. Lawful consideration
Consideration has been defined as the price paid by one party for the promise of the other.[3] In an agreement consideration must be supported by both the parties. The ‘consideration’ may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are ‘lawful’. The consideration is ‘lawful’. unless 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 is immoral; or is opposed to public policy (sec.23)
6. Lawful object
For the formation of a valid contract, the object of an agreement must be approved by law. The object cannot be fraudulent or illegal or immoral or opposed to public policy.
7. Agreements not declared illegal or void
The agreement must not have been expressly declared to be void under the Act. If so, then even if the agreement possesses all the elements of a valid agreement, the agreement will not be enforceable at law.
8. Certainty of meaning
Section 29 of the contract Act provides that “Agreements, the meaning of which is not certain or capable of being made certain, are void.” So, a valid contract cannot have terms of agreement which are vague and uncertain. There cannot be uncertainty in meaning to agreement to be enforceable.
9. Possibility of performance
A valid contract must be capable of performing. Section 56 lays down that “An agreement to do an act impossible in itself is void”. If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law.
10. Necessary legal formalities
According to the Bangladeshi contract Act, a contract to be valid, must be in writing, registered and attestation. If these legal formalities are not carried out, then the contract is not enforceable at law.
Under these elements of the contract a person can easily enter into an agreement and also breach can breach of contract.
Conclusion:
In a world of perfect competition, a contract should be perfect. A perfect contract is “a promise that if enforceable, is ideally suited to achieving the ends of the promisor and the promisee” (Cooter & Ulen 1988). The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. So, to ensure enforceability of a contract, the contract should be a valid contract.
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9. The law of contract of Bangladesh. July 25, 2010 http://thebacheloroflaws.blogspot.com/2010/07/law-of-contact-of-bangladesh.html
[1] The law of contracts http://chestofbooks.com/business/law/Law-Of-Contracts-3/Sec-2-Agreement.html#.USaD0R39vP8#ixzz2LZGZCrO
[2] http://www.newagepublishers.com/samplechapter/001048.pdf
[3] the bachelor of laws/l.l.b in bangladesh