The law of contract confines itself to enforcement of voluntarily created civil obligations. Discuss
What is law of contract?
A contracting is a binding agreement between two or more parties which helps to regulate operation or any deal. Now, the question is what is an agreement? It is negotiated and usually legally enforceable understanding between two parties. It is important part of global system and necessity for the global growth and stability. Without contract trade and commerce cannot take place successfully. Not only trade and commerce, it is required for each and every operation or activities to set rules and regulation in any kind of deal between parties. As human beings involve changeable state of mind, it fulfills this lacking by providing mechanism through which individuals can predict, control and stabilize the future up to a certain degree. It protects individuals from false situations. Contract law allows individuals to achieve reciprocal responsibilities and commitments and diminish or eliminate risk or uncertainty from life in case of trade or any operation and so from life and establish reasonable expectation for future action. At first the different areas related to our topic must be discussed.
To transform an agreement to a contract, the following has to happen
* Agreement between the parties.
* Creation or formation of specific responsibilities between the parties.
* Enforceability by law.
Features of contract law:
(a) “Agreement to be kept” or “pacts must be kept”
(b) Contract based on specific factors – national, international or broad sense.
(c) Contracts required to be in specific writing order and enforced specifically. Example of contract – lease, promissory note or rental agreement.
Sources of contract law:
Contract law is based on common law. To make it legally enforceable common law requirements and statue law must be compatible and the contract law must reflect the needs of community contract law.
The two main elements of contact law are agreement and legal obligations, for example duty enforceable by law.
Important elements of valid contract law:
(a) Offer of acceptance – Must involve law full offer and law full acceptance.
(b) Intention to create legal relation – the parties must assume or tend to believe that the agreement should be backed by legal consequences.
(c) Law full consideration – presence of consideration
(d) Capacity of parties – the parties involved in the contract must be suitable for the contract. In other words, the law must be compatible for them.
(e) Free consent – parties must agree on the same deal or equivalent deal on the same sense.
(f) Writing and registration – A valid contract must be in writing and registered according to Indian contract act.
(g) Possibility of performance – valid contract must have the ability to perform and control performance.
(h) Not expressly declared void – All agreements are not declared to be void but only certain types are.
Types of contract:
(a) Valid contract: when an agreement is enforced by law, it is referred as legal and thus valid contract. It includes all important elements of contract.
(b) Void contract: when a contract is not enforced by law, we talk about void contract and thus the elements of legal contract are missing here. At the beginning it might take place based on the terms of both parties but later it might change.
(c) Voidable contract: it is enforced by law but based on interest of parties involved, not based on interest of others.
(d) Illegal contract: a contract is referred as illegal when it is against the law. For instance, if the contract involves any illegal activity, like harm to others, it is an illegal contract.
(e) Unenforceable contract: when the contract involve completely legal activities but cannot be enforced by law due to technical defects, we talk about unenforceable law.
What is civil obligation?
Civil obligation or civil law is involved with individual legal status. It is concerned with law and justice and involves justice court. When any legal activity caused by individual involved with military law, constitutional law (law governing the political and law making process) and international law, we talk about civil law. Civil law is unique, compared to other types of law for example- criminal law. Here the victim gets compensated and the culprit pays. In case of civil law, law follows a set of legal principles and codes. If the judge needs to make to any decision, the set of principles and codes must be followed to reach any decision. For instance, Spain, Germany, France follow civil law system.
Civil obligations can be divided into three categories. One is imperfect civil obligation that is accountable to god only and the second one is perfect civil obligation or called personal engagement which allow the parties or provide right to demand performance according to the agreement and the third and last one is natural or moral civil obligation which can not be enforced by any action, for instance when the action is barred by the act of limitation.
The relation between Law of contract and voluntarily created civil obligations:
Everything functioning around us involves law of contract. For instance, if a person wants to buy furniture for his house that involves a law of contract with the furniture shop; if a big company for example Wall mart want to take over another big company like Tazreen garments in Bangladesh, that definitely involves contract of law. So the point is everything starting from small concerns to big concerns, involves contract of law. The purpose of the contract law is to protect human beings by making these agreements legally enforceable. The voluntarily created civil obligations would be irrelevant and dysfunctional without law of contract.
The law of contract confines itself. How?
The contract act does not consider all the factors involved in an agreement. Instead it chooses to relate to specific areas so it confines itself to enforcement of voluntarily created civil obligations. Contract law limits itself and does not consider all the factors in agreement because there are many agreements which do not include or satisfy the requirements of contract. To understand how the law of contract confines itself to enforcement of voluntarily created civil obligations void agreement and Indian Contract Act, 1872 must be discussed.
Void agreement: void agreement is the agreement that cannot be enforced by law. It is assumed that the contract actually does not exist. So here in this case, law can not help any party, especially the disappointed party as it is considered as partially or fully illegal activity, hence protective law is not concerned here. Drug dealing is a good example of void contract. As drugs are illegal, contract of law can not help any of the parties. Void contracts can be of two types – void – ab – initio, void due to the impossibility of its performance.
Void-ab-initio: the contract that is void from the beginning of the operation. Example – drug dealing is completely illegal from the beginning.
Void due to the impossibility of its performance: when any goal of an activity or operation is impossible to achieve due to any activity caused by other parties, not the parties involved in the contract or agreement, we say that the contract is void due to the impossibility of its performance. For example if the demand for a certain product falls and hence the manufacturer and supplier suffer for this situation, it can be referred to void contract due the impossibility of its performance.
Void agreements according to the provisions of Indian Contract Act, 1872:
Section 20 – when both the parties in a contract or agreement make mistake at the same time, the contract t is considered to be void. For instance – two parties go for trade of horses but it is found that the horses died in the mean time of bargaining. As none of the parties were aware of this situation or activity, the contract can be referred as void.
Section 21 – From a different point of view, this situation of death of horses is not fully considered as void because it was due to one of the party’s mistake. Hence law is critical.
Section 23 & 24 – Contracts with unlawful consideration and objects are considered as void. It involves any object or consideration that is against the law as the object or activity might be harmful for any individual or society. Example – drugs. If any part of the consideration factors or objects is illegal, then the contract is void.
Section 25 – any contract or agreement made without consideration of related factors is void. But the scenario might be different, that is not void, if – the activity is related to love or affection factors and is written and registered under the law, the contract won’t be considered as void. Example – marriage. Secondly if, a person promise to compensate another person who had helped him in some way, or thirdly if it is a agreement or promise to pay for any time barred debt.
Section 26 – Agreement in restraint of marriage is void. This law is enforced to exercise over freedom of marriage. For example – it limits the situations like marriage without willingness of one party or marrying for temporary time.
Section 27 – agreement or contract in restraint of trade is void. Any agreement, by which a person is restrained from working on a lawful profession, or trade or any kind of business, considered as void. But there are two types of exception in this case – Partnership Act and Sale of goodwill.
Section 28 – Agreement in restraint of legal proceeding is considered as void. An agreement which intend to eliminate application of law is considered as void under section 28. But it has two kinds of exceptions – one is when a party is restricted for usual legal proceedings and secondly when there is a time limit for enforcement of contract law.
Section 29 – when the terms in any agreement are uncertain or have a chance to be uncertain later, considered as void. But when a part of the agreement is uncertain and the rest is certain, it will be considered as binding.
Section 30 – an agreement by way of wager or gambler is considered as void. Any gambling activity is not backed by law; instead it is backed by promise. Any loss suffered from gambling activity except horse race or crossword competition or lottery, can not be protected by law.
Section 36 – when any agreement is made on the chance of happening something impossible, we consider it as void. For example –if a person agrees to pay B 1000 Rs if two straight lines should enclose a space. This case should be considered as void.
Section 56 – any agreement to do any activity that is impossible to perform or unlawful or become uncertain or impossible after the contract is made is considered as void.
Law controls a wide range of human activities like trade, property rights, general human rights, judgments and many more. Without law there would be nothing called protection or safety. According to the research of limitation of contract law to enforcement of voluntarily created civil obligations we can say that the law of contract has two limitations. The first one is that the law of contract limits itself to the promise that law will be applied or enforced in the case due to its other relevant factors and secondly it confines itself to promises of regulating future behavior. Hence, it can be concluded that law of contract is critical. Even if it is applicable to all legal activities, it has some limitations due to specified and logical reasons. Hence, as it has some limitations, the facts relating to the limitations must be considered to enable valid contract and disable void contract, as in void contract law cannot be enforced.
elements of valid contract law