“Law gives the power to make an agreement with any person, a class of persons and the whole world” Explain and illustrate


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-1872
  • An agreement enforceable by law is a contract. It signifies that in a contract there must be enforceable by law.


A contract is a legally enforceable agreement between two or more parties. The core of most contracts is a set of mutual promises (in legal terminology, “consideration”). The promises made by the parties define the rights and obligations of the parties.

Contracts are enforceable in the courts. If one party meets its contractual obligations and the other party doesn’t (“breaches the contract”), the nonbreaching party is entitled to receive relief through the courts.

Generally, the no breaching party’s remedy for breach of contract is money damages that will put the no breaching party in the position it would have enjoyed if the contract had been performed. Under special circumstances, a court will order the breaching party to perform its contractual obligations.


A deal done on a handshake – “You do X for me, and I’ll pay you Y” – is a contract, because it is a legally enforceable agreement involving an exchange of promises. Most contracts are enforceable whether they are oral or written. Nonetheless, you should always have written contracts for all your business relationships.

There are several reasons why written contracts are better than oral contracts:

The process of writing down the contract’s terms and signing the contract forces both parties to think about – and be precise about – the obligations they are undertaking. With an oral contract, it is too easy for both parties to say “yes” and then have second thoughts.


1. Adult/Major

2. Mentally, Physically capable

3. Not a defaulter banned by the bank.


A contract is formed when one party (the “offeror”) makes an offer which is accepted by the other party (the “offeree”). An offer – a proposal to form a contract – can be as simple as the words, “I’ll wash your car for you for $5.” An acceptance – the offeree’s assent to the terms of the offer – can be as simple as, “You’ve got a deal.” Sometimes acceptance can be shown by conduct rather than by words.


Consideration, in legal terminology, is what one party to a contract will get from the other party in return for performing contract obligations.

According to traditional legal doctrine, if one party makes a promise and the other party offers nothing in exchange for that promise, the promise is unenforceable. Such a promise is known as a “gratuitous promise.” Gratuitous promises are said to be “unenforceable for lack of consideration.”

Lack of consideration is rarely a problem for promises made in the context of business relationships. In most business contracts, there is consideration for both parties (“mutual consideration”, in legal terminology).


Many contracts include special types of provisions. We’ll discuss these common types of provisions in the next subsections.


The duties and obligations section of a contract is a detailed description of the duties and obligations of the parties and the deadlines for performance. If one party’s obligation is to create a multimedia work, software, or content for a multimedia work, detailed specifications should be stated.

  1. Representations and Warranties
  2. Termination Clauses
  3. Remedy Clauses
  4. 4.      Arbitration Clauses
  5. Merger Clauses

Where is Contract Law used today?

As was mentioned above on several occasions, contract law permeates our day-to-day lives, and often we are not aware of its presence. In the first instance it would be a useful exercise to list a few of the various instances of contract law coming into play when we may not expect it.

  • Public Transport
  • Employment
  • Any purchase of goods or services
  • Buying a house

Contract Law: Duty-Imposing or Power-Conferring

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.

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.

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. 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.

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.  Legislators use ritualized procedures to vote, judges use special words and writings to announce holdings, a will must be witnessed and delivered, a power of attorney must be in a proscribed form.  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 unethically expressed. 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. 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 “[n]either real nor apparent intention that a promise be legally binding is essential to the formation of a contract,” and 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, English 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.

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.

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.  I use the term “compound law” for laws that do not condition the legal consequences of an act on evidence of the actor’s legal purpose but are structured in a way that both ensures that a significant proportion of actors subject to them are likely to have such a purpose and recognizes and facilitates that purposive use.  As distinguished from power-conferring laws, the structure of compound laws suggests that they function both to impose duties and to create powers.


Contract Law as Compound Law

Compound laws so defined have four characteristic features, each of which contract law exhibits.  First, because compound laws do not include conditions of validity that sort for legal purpose, we can expect persons sometimes to commit legally relevant acts for reasons other than their legal consequences.  Contract law satisfies this condition because of the many reasons, independent of a desire to undertake a legal obligation, for entering into an agreement for consideration.  Second, it must be possible to tell a story about why the law would want to attach legal consequences to acts of that sort, a story that does not involve empowering persons purposively to effect legal change.  In the case of contract law, this will be a story about why we would want to hold parties legally liable for the nonperformance of exchange agreements regardless of whether they intended legal liability.  A brief tour through contract theory suggests many possible stories of this sort.  Third, while the law does not sort for legal purpose, the legal consequences must be such that a significant proportion of legal actors want to bring them about.  Even if the conditions of contractual validity do not require a legal purpose, it is obvious that many parties do enter into contracts expecting and wanting legal enforcement.


The compound picture does explain, however, why the duty-power distinction deserves a place at the center of contract theory.  Contractual relationships coincide with a constellation of similarly structured extralegal practices, such as agreement, exchange, cooperation, and promise.  With the decline of the seal, contracts are not marked out by formal or other conditions of validity that unequivocally sort for a legal purpose, rules that would clearly identify contract law as power conferring.  Yet there is no doubt that many parties expect and want legal enforcement and that the law is designed to facilitate such uses—characteristics that distinguish contract law from other, purely duty-imposing rules.  Together, these distinctive features render both pure power-conferring and pure duty-imposing theories of contract law inherently contestable.  They provide support for the idea that contract law partakes in characteristics of both and for the picture of contract law as a compound rule.

 According to the discussion I can say that the law gives you the power to make an agreement with any person, a class of persons and the whole world. So, easily someone make agreement with someone with out any tension because law gives him the chance and be tension free from future result.


  1. Gregory Klass is Associate Professor, Georgetown University Law Center: This Editorial is based on the following full-length Article:  Gregory Klass, Three Pictures of Contract: Duty, Power, and Compound Rules, 83 N.Y.U. L. REV. 1726 (2008).
  2. H.L.A. HART, THE CONCEPT OF LAW 81 (2d ed. 1994).
  3. Georgetown University Law Center
  1. Commercial law and Industrial law-Arun kumer Sen, Jitendra Kumar Mitra
  2. Lecture Sheet
  3. www.google.com