Freedom of contract and sanctity of contract are the dominant ideologies. Parties should be as free as possible to make agreements on their own terms without the interference of the Courts or Parliament and their agreements should be respected, upheld an

1.0 Introduction

The term ‘Contract’ is derived from the Latin word ‘contractum’. The law of contract is governed by the Contract Act-1872. According to sec-2(h) of the Act. An agreement enforceable by law is a contract. It signifies that in a contract there must be an agreement and it must be enforceable by Law. According to Salmond[1] and Fedrick Pollock[2] definitions we find that, a contract essentially consists of two elements; one is an Agreement[3] another is Legal obligation (Enforceable by Law)[4]. Thus it is clear from the definition that a ‘promise’ is an agreement. According to section-2 (b)’ When the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted. A proposal, when accepted, becomes a promise’. Thus an agreement is a wider term than the contract. ‘All contracts are agreement but all agreement is not contract. ‘Agreements of moral, religious or social nature are not contracts because they are not likely to create a duty enforceable by law.

2.0 Contract

According to Section -10 of the contract Act, All the agreements are contract if they are made by the free consent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

 2.1 Offer and Acceptance

There must be a lawful offer and a lawful acceptance of the offer, thus resulting in an agreement. The adjective Lawful implies that the offer and acceptance must be satisfying the requirements of the contract. A proposal and its acceptance is the universally acknowledged process for the making an agreement. According to section-2(a) of the contract Act-1872 ‘When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other to such act or abstinence he is said to make a proposal.’ There are three Essential[5] of a proposal or offer.

2.1.1 Rules Regarding a Valid Offer

  1. An offer may be express or implied
  2. An offer must contemplate to give rise to legal consequence and be capable of creating legal relation.
  3. The term of the offer must be certain.
  4. An invitation to offer is not an offer.
  5. An offer may be ‘specific or general’.
  6. An offer must be communicate to the offeree.
  7. An offer may be made subject to any terms and condition

According to section-6 of the Contract Act a proposal may be revoked if any of the following is occurred; (i) By notice of revocation (ii) By lapse of time (iii) By the failure to fulfill the condition precedent (iv) By the death or insanity of the proposer provided that the fact has come to the knowledge of the acceptor before acceptance.

According to section-2 (b) of the Contract Act-1872 ‘When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.’ Thus acceptance is the manifestation by the offeree of his assent to the terms of the offer.

2.1.2 Rules Regarding a Valid Acceptance

  1. Acceptance must be given only by the person to whom the offer is made.
  2. Acceptance must be absolute and unqualified.
  3. Acceptance must be expressed in some usual and reasonable manner.
  4. Accepted must be communicated by the acceptor
  5. Acceptance must be given by a reasonable time before the offer laps.
  6. Acceptance must succeed the offer.
  7. Rejected offers can be accepted only if renewed.

According to section-4(a) of the Contract Act-1872 ‘The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor.

2.2 Intention to Create Legal Relation

There must be an intention among the parties that the agreement should be attached by some legal consequences and create legal obligation[6]. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not contemplate legal relations, and they do not give rise to a contract.

2.3 Consideration

The term consideration may be defined as the price paid by one party for the promise of the other party. An agreement is legally enforceable only when each of the parties is to give something and get something. This something given or obtained is the price for the promise and is called consideration. Only those considerations are valid which are lawful. Subject to certain expectation an agreement without consideration is void. Consideration is one of the essential elements of a valid contract. Section-2(d) of the Contract Act defines consideration as, when at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing; something, such Act or abstinence or promise is called a consideration for the promise. i.e; promises not file a suit against B, if B pays him tk 1000 by a fixed date. The forbearance of A is the consideration for B’s payment. As well as determining whether consideration is valid on the grounds of being executed or executor, the court will also seek that such rules of consideration;

  1. Desire of the promisor is essential, the act done or loss suffered by the promise must have been done or suffered at the desire of the promisor.
  2. Consideration must be real, need not be adequate.
  3. Consideration must be value in the eye of law
  4. A contribution of charity is without consideration. It is not real consideration.

A promise without consideration is a gratuitous undertaking and cannot create a legal obligation. Exceptions of the rule, where a contract is enforceable even through there is no consideration. That means No Consideration No Contract[7]. The parties to the agreement must agree for a Lawful Object[8]. An essential ingredient of a valid is that the contracting parties must be Competent to Contract. Section-11 lay’s down that ‘ every person is competent to contract who is of the Age of Majority[9] according to the law to which he is subject and who is of Sound Mind[10] and is not disqualified from contracting by any law to which he is subject’. Thus this section provides that, a person is entitled to enter into a contract; who has attain majority as per law, Who is of sound mind, Who is not disqualified from contracting according to the law of his country. The agreement between two parties must be unambiguous. So that its meaning can be ascertained. A vague agreement cannot be enforced by law.

2.4 Free Consent

Consent[11] involves identity of mind. If the contracting parties do not agree upon a fact, there will be no contract. Free Consent[12] has been defined in Section-14 of the Contract Act. In order to prove that the consent is not free the complainant must prove that if he had known the truth or had not been forced to agree, he would not have entered into the contract. But when is caused by ‘bilateral mistake’ as to matter of fact essential to the agreement, the agreement is void. Consent is said to be free, when it is not caused by-

  • Coercion
  • Undue Influence
  • Misrepresentation
  • Fraud
  • Mistake

2.4.1 Coercion

According to Section-15 of the Contract Act Coercion is the committing or threting to commit, any act forbidden by the Penal Code[13] or the unlawful detaining or the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.’ The Act of coercion may come from any person irrespective of other party to the agreement. The act of coercion has to be done with the intention of compelling a person to enter into an agreement. The act of coercion may be directed at any person and not necessarily at the other party to the agreement.

2.4.2 Undue Influence

Under Section-16(1) of the Act defines the term undue influence. According to this Act, a contract is said to be include by undue influence where; the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other, and he uses the position to obtain an unfair advantage over the other. A person I deemed to be in a position to dominate the will of the other is classified by sub Section-2 of Section-16, ‘where he hold a Real or Apparent Authority[14]; he stands in a Fiduciary Relation[15] to the other; he makes a contract with a person whose Mental Capacity[16] is temporarily or permanently affected by reason of age, illness or mental of bodily distress.

2.4.3 Misrepresentation

A representation when wrongly made, either innocently or intentionally, is termed as misrepresentation. When one party includes or instigates another party to enter into contract by giving him a false statement or assertion about some fact relating to the contract at the time of the contract, such act is called misrepresentation. Under Section-18 of the Contract Act Misrepresentation is classified into such groups. Thus groups are unwarranted assertion[17], Breach of Duty[18] and Innocent Mistake[19].

2.4.4 Fraud

In simple words the term’ fraud’ includes all acts committed by a person with an intention to deceive another person. Deceiving means persuading a man to belief a false thing as true. Under the Section-17 of the Act define fraud as per the section fraud includes the mentioned acts. False statement[20], Active concealment[21], Promise made without any intention of Performing[22] and Deception[23].

2.4.5 Mistake

A wrongful believe about something is known as mistake. Mistake may be (i) Mistake of Law, (ii) Mistake of fact. Mistake on a point of law does not affect the contract. Mistake on a point of law in force in a foreign country is to be treated as a mistake of fact. An agreement induced by a mistake of fact is void provided the following conditions[24] are fulfilled.

Under Section -56 of the contract Act says an agreement to do an impossible in it self is void. So it is necessary that agreement shall have to be performed. And in case of property or any physical assets a contract or an agreement must be written and registered.

3.0 Breach of Contract

If a party commits breach of contract then the contract will be terminated. Breach being an end to the obligations created by a contract on the part of each of the parties. Breach of contract may be two types one is Anticipatory breach and another is Actual breach. An Anticipatory breach of contract is a breach of contract occurring before the time fixed for performance has arrived. Actual breach occurs when a party.

4.0 Conclusion

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 contract. 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. In the contract there should be a mutual consent between the parties otherwise the contract will not be a valid contract. Also it should be a lawful contract or the contract must not be contradictory with the state or region law. If the contract is not lawful then it will void the contract. The contract can be in any form, formal or casual, written or oral but must be regular and with a set of certain regular activities. Therefore, we can easily conclude with the statement that, a contract is a legal relationship between two or more people or parties who accept or reject or denied from doing any contract.


  1. Business law Titomas J.harron
  2. Commercial law/Labor and Industrial Law. M.Ahammed
  3. Business Law: The Ethical, Global, and E-Commerce Environment (Book) by Jane Mallor, A. James Barnes, L. Thomas, Bowers, Arlen Langvardt in Books.
  4. The indian contract act, 1872. 2000-2011.
  5. Course material of class lecture.
  6. Major, W. T. (1993) Law of Contract. The M& E Handbook Series.
  7. Mcgregor Harvey (1993) Contract Code. Sweet & Maxwell
  8. Poole, Jill. (1999) Case Book on Contract. Blackstone.

[1] Salmond a contract is “an agreement creating and defining obligations between the parties”.

[2] Fedrick Pollock‘Every agreement and promise enforceable at Law is a contract’.

[3] As per section-2(e)’ Every promise and every set of promises, forming the consideration for each other, is an agreement’

[4] An agreement become a contract must give rise to legal obligation. If an agreement is incapable of creating a duty enforceable by law, it is not a contract.

[5] a. It must be an expression of the willingness to do or to abstain from doing something;

b. The expression of willingness to do or to abstain from doing something must be to another person. There can be no proposal by a person to himself;

[6] An agreement to dine at a friend house is not an agreement intended to create legal relations and is not a contract.

[7] Nature love and affection, Voluntary Compensation, Time barred Debt, Agency, Completed gift.

[8] The object for which the agreement has been created must not be Fraudulent, Illegal, Immoral, Oppose to public policy. If the object is unlawful the agreement is void

[9] Section-3 of the majority Act says that ‘a person who is under the age of 18 is a minor’. According to every person who has completed the age of 18 becomes a major.

[10] Section-12 of the Contract Act a person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understand it and of forming a rational judgment as to its effect upon its interest.

[11] Section-13 of the contract Act. ‘Two or more parties or persons are said to consent when they agree upon the same thing in the same sense.’

[12] Sec-14 Consent is said to be free, when it is not caused by- coercion; undue influence; misrepresentation; fraud and mistake.

[13] The Penal Code is concerned with defining the nature of an offence and if proved in a duly constituted court of law, the punishment that it entails.

[14] A person in authority is definitely able to dominate the will of the person over whom the authority is held. The authority may be real or apparent. The apparent authority would include cases in which a person has no real authority but is able to approach to the other with a color of authority.

[15] Fiduciary relation implies a relationship based on absolute trust and confidence presents a very good opportunity to the person in whom confidence is held to the person to exploit it to his own use.

[16] A person is said to be in distress when his mental capacity is temporarily or permanently affected. It may be due to extreme old age or mental or bodily distress.

[17] If a person makes am explicit statement of fact not warranted by his information (without any reasonable ground) under an honest belief also its truth, though it is not true, there is misrepresentation.

[18] This clause coves those cases where a statement when made was true but subsequently before it was acted upon, it became false to the knowledge of the person making it. In such a case, the person making the statement comes under an obligation to disclose the changes to the other party; otherwise he will be guilty of misrepresentation.

[19] If one of the parties includes the other, though innocently, to commit a mistake as to the quality or nature of the thing bargained, there is misrepresentation.

[20] It means a false statement intentionally made is fraud. A statement is true is essential to constitute fraud.

[21] It means a fact concealed by a person who has the knowledge or belief about fact. Active concealment of a material fact is taken as such as a fraud. Mere silence is not fraud.

[22] If a man entering into a contract has no intention to perform his promise there is fraud on his part.

[23] The fertility of man’s invention in devising new schemes of fraud is so great that it would be difficult, if not impossible, to confine fraud within the limits of any exhaustive definition.

[24] Both the parties of the agreement are mistaken, and the mistake is as to a fact, essential to the agreement.