The law of contract confines itself to the enforcement of voluntarily created civil obligations-illustrate and explain.
Law is the command of the Sovereign. It means law has its sources in sovereign authority, law is accompanied by sanction and the command to be a law should compel a course of conduct. Law is a system of rules and guidelines which are enforced through social, institutions, to govern behavior, wherever possible.Contract comes from Latin “contructus” mean “to work on contract”. Contract law is based on the principle expressed in the Latin phrase “pacta sunt servanda”, which is usually translated “agreements to be kept“ but more literally means “pacts must be kept“. Contract agreeing on specific matters weather those are national or international aspect of agreements or not, in a broad sense, contract is in agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. Some contracts are required to be in writing in order to be enforced.Obligation, as it applies within civilian legal systems, means more specifically a legal bond between two or more persons, by which one person, the debtor, is held liable to another, the creditor, to perform a “prostration” consisting of “doing” or “not doing” something at the risk of legal sanction.(1)
A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. A contract can also be defined as a legally binding exchange of promises between two or more parties that the law will enforce. Contract is supposed to be voluntary.(2) But it does not always feel that way. The commitments we make in contract are materially and morally constrained. Philosophers presume contract is wholly voluntary by virtue of its formal features, without reference to social context.(3) Economists care about the markets in which contracts are made but they justify using contract law to govern those markets only by dismissing its internal language of voluntary obligation.(4) Because voluntariness is so central to the law and theory of contract, we must make better sense of it.(5)
(1) BAUDOUIN, J.-L., P.-G. JOBIN, and N. VÉZINA, “Les Obligations, 6th ed.,” (Cowansville: Éditions Yvon Blais. 2005) at 19
(2) St. Patrick Congregation, 816 N.W.2d 878, 907 (Wis. 2012) (“The underpinning of contract law is that competent parties are permitted to bind themselves to voluntary agreements.”);
(3) Hanoch Sheinman, Contractual Liability and Voluntary Undertakings, 20 OXFORD J. L. STUD. 205, 206 (2000) (“the will of the parties [is] the contractual factor, i.e., the factor that grounds contractual liability and sets it apart from other legal obligations”);
(4) Daniel Markovits, Making and Keeping Contracts, 92 VA. L. REV. 1325, 1333-34 (2006) (“it is famously difficult for utilitarian and economic approaches to agreements to account for the obligations of agreement-keeping”)
(5) Jody Kraus, Legal Theory and Contract Law: Groundwork for the Reconciliation of Autonomy and Efficiency, in LEGAL AND POLITICAL PHILOSOPHY 385, 395-410 (E. Villanueva ed., 2002)
Essential elements of a contract: An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the essential elements of a contract, are explained below.
a. Offer and acceptance: every contract must have a ‘lawful offer’ and a ‘lawful acceptance‘of the offer, thus resulting in an agreement.
b. Intention to create legal relations: an agreement contract must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations.
c. Lawful consideration: The third essential element of a valid contract is the presence of ‘consideration’.
d. Capacity of parties: The parties to an agreement must be competent to contract. But the question that arises now is that what parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject.
e. Free consent: Free consent of all the parties to an agreement is another essential element. ‘Consent’ means that the parties must have agreed upon the same thing in the same sense.
f. Lawful object: For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object.
g. Writing and registration: According to the Indian contract Act, a contract to be valid, must be in writing and registered.
h. Certainty: “Agreements, the meaning of which is not certain or capable of being made certain, are void.” In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain.
i. Possibility of performance: Yet another essential feature of a valid contract is that it must be capable of performance. “An agreement to do an act impossible in itself is void”.
j. Not expressly declared void: The agreement must not have been expressly declared to be void, specify certain types of agreements that have been expressly declared to be void.
Sources of contract law:
This law derived from previous decisions on cases of similar merits, known as Judge made law. Contract Law is based on Common Law. To be legally enforceable the agreement must comply with common Law requirements for a valid contract Statute Lawenacted by parliament and ensure that law will reflect the needs of the communityContract Law has been affected by statute law. All agreement are contract if there 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. (6)
Obligation of parties to contracts-The parties to a contract must enter perform, or offer to perform, their respective promises, unless such performances is dispensed with or excused under the provision or of any other law. (7) Promises bind the representative of the promises in case of the death of such promises before performance, unless a contrary intention appears from the contract.
Contractual promises too arise against background duties owed by citizens or residents of a political economy toward one another, as well as specialized duties that often precede contract. An employer may enter into a new contract of employment with an individual because the employer previously promised a promotion.(8) An employer may agree to hire one person rather than another because it is duty-bound to hire more people like the employee in question given the past or present composition of her workforce.(9) She may be compelled to hire the person on background terms identical to those offered other employees because there is a norm of equality with respect to those terms.(10)
(6) Stevens, D. and Neyers, J.W., “What’s Wrong with Restitution?” (1999) 37 Alberta L Rev 221.
(7) Rutherford v. City of Cleveland, 179 FED. APPX. 366 (6th Cir. 2006)
(8) Johnson v. Kreiser’s, Inc,. 433 N.W.2d 225 (S.D.1988) (implied contract where employer promised promotion to employee). Employers probably enter employment contracts in light of past promises even where those promises are unenforceable.
(9) See Rutherford v. City of Cleveland, 179 FED. APPX. 366 (6th Cir. 2006)
(10) Wooley v. Hoffman-La Roche, Inc., 99 N.J. 284, 304 (1985)
A person may agree to sell a service or good because of an obligation (legal or otherwise) not to discriminate (on race, disability, market position, pre-existing condition, geographic location), or she may contract on particular terms though he/she would prefer others in order to avoid exploiting her prospective partner.(11)
Contract as promise
Contractual promises may be unusual compared to most other promises to the extent they sometimes allow the promisor to perform either by delivering a good or service or through compensation.(12)But in the end, willfully assuming an obligation to another private person by communicating the intention to do so just is what we call promise. Whatever the substance of contractual obligations, their voluntary character normally derives from the same normative power invoked in promising generally.
Compulsory promises are real promises
The idea of a compulsory promise sounds paradoxical. But we should not confuse a promise that is morally necessary with a promise that is literally compelled. So many promises are morally necessary that removing all such promises from the concept of promise would shrink the practice beyond the point of recognition. Compulsory promises are not only technically voluntary; they are also experienced that way. Our experience of them is important to how we conceptualize them and their normative significance. By assuring and inviting reliance, we invite our promisee and others to view us as persons who are not only subject to moral duties but we recognize them as binding on ourselves and intend to fulfill them. Because there are so many ways in which we can and do fall short of what duty requires of us – in part because the reality of duty is always mediated by uncertainty in our judgments about it – the duties that pre-shadow compulsory promises do not deprive the latter of their voluntary character altogether.
(11) Aditi Bagchi, Managing Moral Risk: the Case of Contract, 112 COLUM. L. REV. 1878, 1906-16 (2011).
(12) Daniel Markovits & Alan Schwartz, The Expectation Remedy and the Promissory Basis of Contract, 45 SUFFOLK U. L. REV. 799 (2012)
Hierarchies in promise
The compulsory promises are properly regarded as voluntary, one might instead object to the hierarchy of promise described here on the grounds that compulsory promises are no less voluntary than promises to do. After all, rather than representing a lesser case of voluntary choice, actions taken to comply with moral reasons may be the ultimate expression of freedom.(13) But while actionsundertaken just to comply with morally binding reasons may be the pinnacle of free action, obligationsundertaken in order to comply with existing duties do not similarly represent a triumph of will over physical inclination – at least compared to promises to perform acts one is not already duty-bound to perform. Remember that in mapping the scale of voluntariness, at issue is the relativevoluntariness of Promises made to comply with moral reasons may be more voluntary than promises made to pursue worldly ends because motivation by moral reason reveals more about a moral agent than do worldly motivations. But precisely because agency is valuable where it allows an agent to make a moral imprint on her environment, the exercise of a normative power is a valuable expression of autonomy because it allows us a role in shaping our normative relations with others. Promising makes it possible for relational commitments to reflect our underlying values and plans.
One of the fundamental principles of contract law is that parties to a contract must have an intention to be legally bound. (14) There is a presumption that social, domestic or family agreements are not legally binding as individuals make promises to each other on a regular basis that they would not intend to have legal effect. If parties who are in a familial relationship are contracting in a business context or if a husband and wife enter into an agreement in circumstances in which they are no longer living in harmony. Similarly, if the words used in the contract indicate a legal intention, the presumption that may otherwise have arisen may be rebutted.
(13) Immanuel Kant, GROUNDING FOR THE METAPHYSICS OF MORALS vi-viii (James W. Ellington trans., 1993) (1785). See also Henry E. Allison, KANT’S THEORY OF FREEDOM 239-42 (1990)
(14) Frank, J., “Influence of Civil Law in Common Law” (1956) Pennsylvania Law Review 1.
A further presumption revolves around the idea that in commercial agreements, it is thought that such intention exists. It is clear that the parties may rebut but it is difficult to prove to the courts that a commercial agreement was not intended to have legal effect. There is a presumption for commercial agreements that parties intend to be legally bound. On the other hand, many kinds of domestic and social agreements are unenforceable on the basis of public policy, for instance between children and parents. The presumption is that domestic and social agreements are not intended to have legal force. (15)
Family, Social and Domestic Agreements: Presumption held that such family, social and domestic agreements held not binding. It is held that close relatives do not usually intend on various arrangements which they make to create legal relations and that they prefer to rely on “family ties of mutual trust and affection” (16)
Commercial Agreements: In commercial agreements the presumption is that parties did intend to be legally bound. In commercial agreements it is rare to conclude that parties did not intend their agreement to be attended by legal consequences. For commercial arrangements, the opposite assumption applies. In commercial dealings it is extremely difficult to evade the obligations of an agreement by claiming that it was never intended to be legally binding. To create this effect, the wording of the agreement must be very clear. (17)
Honour clauses: The “Honour clauses” declares that an agreement is not to be legally binding, with the result that the agreement is “binding in honour only”. They might be used where the parties are prepared to rely on non-legal sanctions. (18)
Promotional Puff: The extravagant, non-specific language of the advertiser may fail to satisfy the criteria of a representation of fact. Such language may also fail as the basis itself of contractual obligation for the reason that this was not intended.
Letter of Comfort: Letters of comfort must contain statements of a promissory nature if they are to evidence an intention to create legal relations.
(15) Lester, A., “The Overseas Trade in the American Bill of Rights” (1988) 88 Colum L Rev 537–541.
(16) Hermida, J., Legal Basis for a National Space Legislation (Dordrecht, Boston, and London: Kluwer
Academic Publishers, 2004), p 35.
(17)Steenhoff, G.,”Teaching Comparative Law, Comparative Law Teaching” (2002) 6 EJCL.
A fundamental principle of Contract law is that the contracting parties must actively intend to enter into an arrangement that creates legal obligations. For common-sense reasons, domestic arrangements are assumed not to create a contract, while commercial arrangements are assumed to create one, unless clearly specified. The law of contract restricts itself to voluntarily created civil obligation. It is not even the whole law of civil obligation. Civil obligations created by the tort or trust law are outside the field of contract because they are not necessary voluntary choices.
“The law of contract confines itself to the enforcement of voluntarily created civil obligations”. This intention may be found to be expressed or implied through an analysis of the subject matter of the contract, or the conduct of the parties. The parties must have intended to create a legal relationship, Intend that their agreement should be attended by legal consequences.
Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations, along with tort, unjust enrichment, and restitution. As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological, and anthropological terms.
1. Contract Law Homepage: Dr Robert N Moles.
2. Hanoch Sheinman, Contractual Liability and Voluntary Undertakings, 20 OXFORD J. L. STUD. 205, 206 (2000)
3. The American Journal of International Law: Hans Wehberg.
4. Aditi Bagchi, Managing Moral Risk: the Case of Contract. L. REV. 1878, 1906-16 (2011).
5. Mohammad Haider Ali, A textbook on law of contract by, 1st Edition.
6. Principle of Sanctity of contracts: byTrans-Lex.org.
7. Business Law: CIMA.