Law of contract is perceived as a set of power conferring rules which enables an individual to enter in to an agreement. Discuss.


We enter into contracts day after day. Taking a seat in a bus amounts to entering into a contract. When you put a coin in the slot of a weighing machine,we  have entered into a contract. You go to a restaurant and take snacks, you have entered into a contract. In such cases, we do not even realise that we are making a contract. In the case of people engaged in trade, commerce and industry, they carry on business by entering into contracts. The 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. 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.


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. Contracts are governed by `law_article`general principals`law_article` and are usually derived from the common law However on the other hand, Professor Atiyah (1968) argues that, `law_article`there are no such things as a typical contract at all`law_article`. It was argues that `law_article`contracts`law_article` are a discrete, two-party, commercial, executor exchange, but notes that contracts can be found which depart from each feature of this classic model. Furthermore, Atiyah perceived the law of contract as a set of power-conferring rules that enable parties to enter into agreements of their own choice on their own agreed terms. The dominant ideology is that contractual parties should be as free as possible to make agreements on their own terms without the interference of the courts by way of statute and their agreements should be respected and upheld and enforced by the courts. However, Atiyah`s theory on the basis of the law of contract has been largely discredited. This is due to the fact that doctrines such as illegality cannot be ascribed to the will of the parties, nor can statutes such as the `law_article`Unfair Contract Terms Act`1977`law_article`(UCTA 1977).

Furthermore, a contractual agreement can only be derived through three key elements, competent parties, consideration and mutual assent. For a contract to be void, each side must have the capacity to enter into it. Most people and companies have sufficient legal competency. A drugged or mentally- impaired person has impaired capacity and chances are a court may not hold that person to the 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.

.Thus, a contract consists of two elements:

(i) an agreement; and

(ii) legal obligation, it should be enforceable at law.

However, there are some agreements which are not enforceable in a law court. Such agreements do not give rise to contractual obligations and not contracts.

 Law of Contracts

Law Of contract is an agreement, supported by law given the certainty A promise, enforceable by law, to perform or to refrain from performing some specified act. In a general sense, all civil obligations fall under tort or contract law. Torts are usually characterized as violations of duties that are imposed on all persons and that have been established entirely by law. In contracts, on the other hand, the parties determine, at least in part, what their obligations to one another will be. Special types of contracts are given separate articles, e.g., negotiable instrument, insurance, and deed. Any legally binding agreement voluntarily entered into by two or more parties that places an obligation on each party to do or not do something for one or more of the other parties and that gives each party the right to demand the performance of whatever is promised to them by the other parties. To be valid, all parties must be legally competent to enter a contract, neither the objective nor any of the obligations or promised performances may be illegal, mutuality of the agreement and of its obligations must exist, and there must be consideration. See also acceptance, offer, privities, tender, breach of contract, and bargain.

51 See, e.g., N.Y. GEN. OBLIG. LAW § 5-1501(1) (McKinney 2001) (requiring that power

of attorney contain cautionary language).

52 STANDING RULES OF THE SENATE, S. DOC. NO. 110-9, Rule III, at 3 (2007) (requirementsof oaths); id. Rule XIV(2), at 9 (three-reading requirement).



A meeting of the minds. An agreement is made when two people reach an understanding about a particular issue, including their obligations, duties and rights. While agreement is sometimes used to mean contract a legally binding oral or written agreement  it is actually a broader term, including understandings that might not rise to the level of a legally binding contract. A negotiated and usually legally enforceable understanding between two or more legally competent parties. Although a binding contract can (and often does) result from an agreement, an agreement typically documents the give-and-take of a negotiated settlement and a contract specifies the minimum acceptable standard of performance A mutual understanding between two or more legally competent individuals or entities about their rights and duties regarding their past or future performances and consideration. While an agreement usually leads to a contract, it could also be an executed sale, a gift or other transfer of property, or a promise without a legal obligation. The two elements of an agreement are:

(i) offer or a proposal; and

(ii) an acceptance of that offer or proposal.

All agreements are not studied under the Indian Contract

Act, as some of them are not contracts. Only those agreements which are enforceable at law are contracts. The Contract Act is the law of those agreements which create obligations, and in case of a breach of a promise by one party to the agreement, the other has a legal remedy

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Duty-Imposing or Power-Conferring Rules

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.

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 . Or in Randy Barnett’s words, to “make a contract a party must explicitly or implicitly manifest an intent to be legally bound.” 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,” or Patrick Atiyah’s arguments that contract law is designed to compensate for reliance-based harms and prevent unjust enrichment. 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.

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.” 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.

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.

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.  One way to try to rescue a power-conferring picture of contract is to argue that the consideration requirement is a validity condition of this sort.  Thus Lon Fuller’s suggestion that consideration is a “natural formality,” separating out for legal enforcement agreements in which “a legal transaction was intended.” But this is hardly the only, or the most obvious, interpretation of the consideration rule.  Fuller himself observed that exchange also marks agreements “of sufficient importance to our social and economic order to justify the expenditure of the time and energy necessary” for enforcement.  Other explanations of consideration include the special moral qualities of exchange relationships, doubts about judicial competence to assess when to enforce gratuitous promises, and the argument that the rule is a historical anomaly, a myth created by Holmes and Williston that does not accurately describe how contract law functions.  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.  The core thought is that it is possible for a law to anticipate and enable its purposive use without conditioning the legal effect of a person’s actions on evidence of her legal purpose.  I suggest reserving the term “power-conferring” for laws that include validity conditions that sort for legal purpose, such as those discussed in the previous paragraphs.

Spondeo.” See W.W. BUCKLAND, A MANUAL OF ROMAN PRIVATE LAW 262–65 (2d ed.

1939) (describing Roman rule). Peter Tiersma explains the stipulatio along these lines

(though he maintains that the use of formality is additionally explained by Roman law’s status-based conception of contractual obligations):

What the ritualistic language does, therefore, is to set this dialogue apart from the ordinary, where any words with the meaning ‘promise’ would suffice. This guarantees that the parties unambiguously realize that they are engaging in something special—a binding transaction. It is virtually impossible that someone could go through this ritual without intending to bind himself. Peter Meijes Tiersma, Rites of Passage: Legal Ritual in Roman Law and Anthropological

Analogues, 9 J. LEGAL HIST. 3, 17–18 (1988). For fascinating compendia of different types of legal ceremonies, see Bernard J. Hibbitts, “Coming to Our Senses’’.


The clearest indication that a law is concerned with the purpose with which it is satisfied is that it conditions its satisfaction on indicia of the actor’s legal purpose. Validity conditions that sort for legal purpose both express a legal expectation that the law will be used instrumentally and further enable such uses. Using the rules of contract law as an example, I distinguish four types of such validity conditions :legal formalities; required nonconventional legal speech acts; legal intent

tests; and nonlinguistic proxies for legal purpose. I argue both that the presence of such validity conditions indicates that the law’s sole function is to create a legal power and that the evidence that contract law includes them is equivocal at best. Legal consequences approximate to their non-legal and obvious consequences, as in making a contract. It also explains why most legal powers are exercised by acts with only negligible non-normative consequences, like signing, so that there are few reasons for or against doing them apart from their legal or other normative consequences.


SPEECH ACTS 120–34 (1979), and P.F. Strawson, Intention and Convention in Speech Acts,

73 PHIL. REV. 439, 441 (1964).

49 Raz, supra note 15, at 81. Fuller described the same dynamic: “[F]orm offers a legal

framework into which the party may fit his actions, or, to change the figure, it offers channels

for the legally effective expression of intention.” Fuller, supra note 1, at 801. “Form

has an obvious relationship to the principle of private autonomy. Where men make laws



At last law of contract is imposes to freely exercise the power. A person can easily make an agreement by power conferring rules. Through power conferring rules an individual can achieve the freedom to use the power. Element of contact. Element of agreement ,law gives the right to freely exercise the power and make agreements that any one wants.

 A  judge’s final decision on a question of law which has been raised in a trial or a court hearing, particularly those issues which are vital to reaching a statement. These may be presented orally by the judge in open court, but are often contained in a written judgment in support of his/her judgment such as an award of damages or denial of a petition. In most cases either party is entitled to written conclusions of law if requested. a law’s only function is to give persons the ability to effect legal change, we should expect it to include validity conditions that sort for legal purposes. Basically it is known as power conferring rules for that any one can include with an agreement and freely use the power.



  •  Thomson J. Harron, Business law. Allyn and Bacon, Inc.1981.
  • Muhammad Akramul Haque, Law of Contract. First edition Law Lyceum, Dhaka, Bangladesh.
  • Avter Sing, Company Law.14th Edition Eastern Book Company, Lucknow.2004.
  • Mulla, Indian Contract Act. 11th Edition N.M. Tripathi Private Limited, Bombay.2004.


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