The contract act propounds certain necessary elements whose compliance is necessary for the formation of the contract-explain & illustrate
Introduction
A person or a group of person and even and artificial person can mutually enter into an agreement of their own choice of terms and conditions which is eventually backed by the law of contract. Contracts come in different shapes and sizes. The content of contracts varies enormously and may include employment, marriage contracts, hire-purchase contracts, consumer credit contracts, and contracts for the sale of goods, contracts for the sale of land, mortgages and leasehold. Such contracts have all been the subject of distinct regulation and are dealt with in books on employment law, family law, consumer law, commercial law, land law and landlord and tenant law respectively. 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.
The basis of the law of contract
All agreements 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. So, an agreement is regarded as a contract when it is enforceable by law.
‘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 part of other or others.’
The basis of the law of contract is also a matter of considerable controversy. There are many competing theories which seek to explain the basis of the law of contract. The classical theory is the will theory. Closely associated with laissez-faire philosophy, this theory attributes contractual obligations to the will of the parties. 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 and enforced by the courts. The will theory maintains that the law of contract is based upon the ‘promise principle’, by which ‘persons may impose on themselves obligations where none existed before’. The source of the contractual obligation is the promise itself. The contract law respects individual autonomy and that they will theory is ‘a fair implication of liberal individualism’. The law of contract is an appropriate vehicle for engaging in the redistribution of wealth.
The Interrelationship of Contract and Trot
Contact can be defined as an agreement enforceable by law where A tort is a civil wrong, such as negligence or defamation. Let us take an example to illustrate the operation of the law of tort. Suppose Mr. X is driving his car negligently and knocks Mr. Y down .So, Mr X has committed the tort of negligence. Harm has wrongfully been inflicted upon Y and X must compensate Y. The aim of the award of compensation is not to fulfill my expectations.
When a Plaintiff is injured and seek compensation he may express his claim either as one in contract or in trot. Traditionally, contract lawyers and trot lawyers have taken little interest in the details of each other’s subjects but this aloofness can no longer be safely practiced. In a case plaintiff whose natural remedy lies in contract against one defendant has been successful in a trot action against a different defendant. In Junior Books v Veitchi Co Ltd. the plaintiffs enter into a contract with A to build a warehouse the defendants were nominated subcontracts for the flooring. It was alleged that the defendants had carelessly installed sub-standard flooring. If that were so, than the plaintiffs would normally have had an action in contract against a, and a in turn, would have had a contract action against the defendants. However the House of Lords held that on such facts the plaintiffs would have a trot action against the defendants even through there was no danger of physical injury or property damage to the plaintiffs.
The foundation of the law of contract lies in the mutual promises of the parties and, being founded upon such voluntary agreement, the law of contract can, in the vast majority of cases, be separated from the law of tort and the law of restitution.
Elements of Contracts:
Offer and acceptance:
Offer:
When a person signifies to anthers his willingness to do or abstains form doing anything, with a view to obtaining assert of that offer to such an act or abstinence, he is said to make a proposal/offer.[2]Offer can be made to a specific person or group of person called Specific Offer, and it can also be the world at large called General Offer. The teams related with this offer could be expressive or written even be implied.
Acceptance:
When the person to whom the proposal is made signifies his assent to the proposal is said to be accepted. An offer can be accepted only by the person or persons for who it is meant. Offer person cannot accept the offer. If can offer is made to a certain individual, only that individual can accept the offer. If an offer is made to a class of individuals, only any one of the class can accept the offer. Again when offer made to all persons or to all the people in that case any person can accept the offer.
For example, X sold his business to Y without disclosing the fact to his customers. Z sent an order for goods to X by name. Y received it and sent a letter of acceptance. Held, there was no contract between Y and Z because Z never made any offer to Y.
In other words, the proposer and the acceptor must agree upon the same thing and it, the same sense, unless that is done, where each of them is, so to speak, making an offer or cross offer, it is not a contract. The defendants wrote to the plaintiff offering to sell a certain quantity iron at certain price. That very day the plaintiff wrote to defendants offerings to buy the same quantity iron at the same price. The letter crosses in the post. The plaintiff contended that there was a conducted contract.
So, we can define that a proposal and its acceptance is the universally acknowledged process for the making of an agreement.
Consideration
‘When at the desire of the promisor, the promise or any other person has done or abstained from doing, 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.’ For example; Hossain agrees to sell his car for tk 5, 00,000 to Hasan, for Hossain’s promise, the consideration is tk 5, 00,000. For Hasan’s promise, consideration is the car only. In Currie v. Misa, consideration was termed as “A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” In Another Case Kedarnath v. Gori Mohamed[3] the defendant had agreed to subscribe Rs. 100 towards the construction of a Town Hall at Howrah. The Secretary, on the faith of the promise, called for plans and entrusted the work to contractors and undertook liability to pay them.
Held: The agreement was enforceable being one supported by consideration in the form of detriment to the secretary who had undertaken a liability to the contractors on the faith of the promise made by the defendant.
Capacity of Contract
“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”. A person is capable of entering into contracts under the conditions mention below:
1. If he has attained the age of majority according to the law of his country.
2. If he is of sound mind i.e. if he is not lunatic or an iditot or suffering from disability of similar nature.
3. If he is not disqualified from entering into contract according to the law of his country.
A contract with or by a minor is void and a minor, therefore, cannot, bind himself by a contract. A minor is not competent to contract. In English Law, a minor’scontract, subject to certain exceptions, is only voidable at the option of the minor.In 1903 the Privy Council in the leading case of Mohiri Bibi v. Dharmodas Ghose
Held: That in India minor’s contracts are absolutely void and not merely voidable. The facts of the case were:
Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed mortgage of property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. The Privy Council had to ascertain the validity of the mortgage.
Free Consent
It is essential to the creation of a contract that both parties agree to the same thing in the same sense. When two or more persons agree upon the same thing in the same sense, they are said to consent. Consent is said to be free when it is not caused by—
(a) Coercion
(b) Undue influence
(c) Fraud
(d) Misrepresentation
(e) Mistake
For Example, A agrees to sell his Fiat Car 1983 model for Rs. 80,000. B agrees to buy the same. There is a valid contract since A and B has consented to the same subject matter.
In Foster v. Mackinnon, the defendant had purported to endorse a bill of exchange which he was told was a guarantee. The Court held that his signature, not being intended as an endorsement of a bill of exchange, there was no consent and consequently no agreement entered into by him, and therefore he was not liable on the Bill.
Legality of the object:
An agreement will not be enforceable if its object or the consideration is unlawful.[4] The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy. In case Srinivas v. Raja Ram Mohan[5], A loan granted to the guardian of a minor to enable him to celebrate the minor’s marriage in contravention of the Child Marriage Restraint Act is illegal and cannot be recovered. In another case; Velu Payaychi v. Siva Sooriam, A partnership entered into for the purpose of doing business in arrack on a license granted only to one of the partners, is void absentio whether the partnership was entered into before the license was granted or afterwards as it involved a transfer of license, which is forbidden and penalized by the Akbari Act and the rules there under.
Certainty of meaning
The meaning of the agreement must be certain or capable of being made certain otherwise the agreement will not be enforceable at law. For instance, A agrees to sell 10 meters of cloth. There is nothing whatever to show what type of cloth was intended. The agreement is not enforceable for want of certainty of meaning. If, on the other hand, the special description of the cloth is expressly stated, say Terry cot (80: 20), the agreement would be enforceable as there is no uncertainly as to its meaning.
However, in case Punit Beriwala v. Suva Sanyal an agreement to agree is not a concluded contract.
Agreements Declared Void
An agreement so made must not have been expressly declared to be void, under the following situation.
· Agreements for stifling prosecution.
· Contracts in the nature champerty and maintenance.
· Agreements in restraint of parental rights.
· Agreement in restraint of marriage.
· Marriage brokerage or borage contracts.
.
The law of contract is perceived as a set of power-conferring rules:
· Law of contract gives the right to the both parties to enter into a contact of their own choice of terms and condition which law will protect and enforce.
· Law of contract sometimes gives power-conferring rules one side, when one side gives much consideration than other side.
· If contracts don’t have “free consent” of all the parties, Law of contract gives power-conferring the parties can refuse to perform it or abide by the contract.
· A consideration may not come from the both end, it may come from only one side only is called this right gives law of contract.
· Law of contract gives power-conferring rules which enable individuals to enter into agreements without consideration, if these situations happened such as natural love & affection, voluntary compensation, time-barred debt, agency, completed gift.
Conclusion
Law of contract varies from other forms of law. Law of contract gives the right to the both parties to enter into a contact of their own choice of terms and condition which law will protect and enforce. In order to call a contract as a valid one the contract must fulfill some contractual elements such as; there must be a lawful consideration and the object of that contract should be legal. At the same time their must present the free consent of both parties to create a legal relationship among them. Although there are some exceptions in these contract. For example; a consideration may not come from the both end, it may come from only one side only, yet it will be called as a valid contract. Again that consideration may not be adequate, yet it can be a valid contract as well. Moreover, an absent of acceptance could be a valid contract; if a cross offer occurred from both end.
References:
Pathak, S.H. (2003) The Indian Contract Act: (11th edition) India: N.M. Tripathi Private LTd Press.
Singh Avtar.(2008) Law of Contract and Specific Relief: ( 9th edition) India: Eastern Book Company press.
Sen K.A. (2011) Commercial Law: (25th edition) Kolkata: the world press private limited.
Law of Contract: elements of contract, available at http://www.insitelawmagazine.com/charticles.htm accessed on 6th February 2012.
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When should contract law supply a liability rule or term?: framing a principle of unification for contracts: http://law.case.edu/faculty/kostritsky_juliet/articles/finalArizona.pdf, accessed on 9th February 2012.
Beale, H.(1980) Remedies for Breach of Contract, London : Sweet & Maxwell.
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Katz, W. A. ‘Remedies for Breach of Contract Under the CISG’ (2005) International Review of Law and Economics, 25. 378–396
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[1] Junior Books v Veitchi Co Ltd (1983)I AC 520, [1982]3 All ER 201.
[2] Sec.2 (a), Indian Contract Act
[3] Kedarnath v. Gori Mohamed (1886) 14 Cal. 64.
[4] Section 23 Indian Contract Act
[5] Srinivas v. Raja Ram Mohan (1951) 2 M.L.J. 264