“There is a fundamental divide among theories of contract law between those that Picture contract as a power and those that picture it as a duty” Discuss.


There is a fundamental divide among theories of contract law between those that Picture contract as a power and those that picture it as a duty. On the power conferring picture, contracting is a sort of legislative act in which persons determine what law will apply to their transaction. On the duty-imposing picture, contract law Places duties on persons entering into agreements for consideration, whether they Want them or not. Until now, very little attention has been paid to the problem of How to tell whether a given rule is power conferring or duty imposing—a question that should lie at the center of contract theory. This Article argues that legal powers have two characteristic features. First, there is an expectation that actors will satisfy the rules with the purpose of achieving the associated legal consequences. Second, the legal rules are designed to facilitate such Uses. A law might exhibit these features in either of two ways, which define two Types of legal powers. Many laws that create legal powers employ conditions of Legal validity, such as legal formalities, designed to guarantee the actor’s legal purpose. His presence of such validity conditions is strong evidence that the law’s sole function is to create a legal power, and I suggest reserving the term “power conferring” for such laws. Other laws anticipate and enable their purposive use without conditioning an act’s legal consequences on the actor’s legal purpose. The structure of such laws suggests that they function both to create powers and to impose duties. I coin the term “compound rule” for laws that satisfy this description and argue that the contract law we have is a compound rule. The dual function of compound rules provides empirical support for pluralist justifications of contract law. An example of such a theory can be found in Joseph Raz’s comments on the relationship between contract law and voluntary obligations.

 Definition of Law

Law as it is the command of the Sovereign, It means:

  1.          I.           Law has its in sovereign authority,
  2.        II.           Law is accompanied by sanctions,
  3.     III.           The command to be a law should compel a course of conduct. Being a command the law must flow from a determinate person or group of persons with a threat of displeasure if it is not obeyed.

Sovereignty is, however, only a part of the state. So, in ultimate sense , law emanates from the state. Thus the term law is used to denote rules of conduct emanated from and enforced by the state. People living in an organized society have to follow certain common rules, otherwise peaceful living is impossible. It is the function of the state to enforce these rules.

  • Salmond

‘’Law is the body of principles recognized and applied by the state in the administration of justice.’’

  • Woodrow Wilson

Law is that portion of the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the government.

The objective of law is to bring order in the society with a view to enable its members to progress and develop with some sort of security regarding the future.

  Definition of Contract

  • According to Salmond ‘a contract is an agreement creating and defining obligations between the parties.
  • According to Frederick Pollock ‘Every agreement and promise enforceable at law is a contract.

From the above definitions we find that, a contract essentially consists of two elements:

  1. An agreement
  2. Legal obligation i.e. a duty enforceable by law


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


Contracts may be divided into two broad classes:

  • 1. Contracts by deed
    • A deed is a formal legal document signed, witnessed and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract.
  • 2. Simple contracts
    • Contracts which are not deeds are known as simple contracts. They are informal contracts and may be made in any way – in writing, orally or they may be implied from conduct.

Another way of classifying contracts is according to whether they are “bilateral” or “unilateral”.

  • 1. Bilateral contracts
    • A bilateral contract is one where a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable. Thus in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods.
  • 2. Unilateral contracts

A unilateral contract is one where one party promises to do something in return for an act of the other party, as opposed to a promise, eg, where X promises a reward to anyone who will find his lost wallet. The essence of the unilateral contract is that only one party, X, is bound to do anything. No one is bound to search for the lost wallet, but if Y, having seen the offer, recovers the wallet and returns it, he/she is entitled to the reward.

 Essentials of a Contract

  • According to sec-10 of the Contract Act, All Agreements are contracts if they are made by the free consent 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.

Thus the essentials elements are:

  1.                                   i.           Offer and Acceptance
  2.                                  ii.           Intention to create legal relation
  3.                                 iii.           Lawful consideration
  4.                                 iv.           Lawful Object
  5.                                  v.           Capacity to contract
  6.                                 vi.           Free consent
  7.                               vii.           Certainty
  8.                              viii.           Possibility of Performance
  9.                                ix.           Written and Registered
  • Offer and Acceptance: There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. The adjective lawful implies that the offer and acceptance must conform to the rules laid.

Example: Someone offer to me to buy a pen in the amount of tk.80. If I accept this, it will be a contract because here offer and acceptance is occurs.

  • Intention to Create Legal Relationship: There must be an intention that the agreement shall result in or create legal relation.

Example:  An agreement to dine at a friend’s house is not an agreement intended to create legal relations and is not a contract.

  • Lawful Consideration: Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something. An agreement to do something for nothing is usually not enforceable by law. The something given or obtained is called consideration.

Example: Someone offer me to buy a pen. It will not be a contract, because here there is no lawful consideration.

  • Capacity of Parties. The parties to an agreement must be legally capable of entering into an agreement; otherwise it cannot be enforced by a court of law. Want of capacity arises from minority, lunacy, idiocy, darkness, and similar other factors.


  • Free Consent: In order to be enforceable, an agreement must be based on the free consent of all the parties. There is absence of genuine consent if the agreement is induced by coercion.


  • Legality of the object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy.


  • Certainty: The agreement must not be vague; it must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced.

Example: I think that I will sale my car. It will not be a valid offer, because there have no clearly expressed in written or oral from.

  • Possibility of performance: The agreement must be capable of being performed. A promise to do an impossible thing cannot be enforced.


  • Void Agreement: An agreement so made must not have been expressly declared to be void.


  • Agreement in restraint to marriage.
  • Agreement in restraint of trade.
  • Agreement having uncertain meaning.
  • Wagering agreement.

Law as Power Conferring Rules:

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.

A legal formality is a type of act, such as the utterance of special words or the production of a document in a certain form, that has no extralegal significance. In the idiom of speech-act theory, its meaning is purely conventional, determined entirely by the legal rules that define the act’s legal consequences.48 Raz observes that: Conditioning legal consequences on the performance of a conventional, legal speech act enables the purposive use of the law by ensuring that the actor meant to achieve those consequences.50 First, the act itself is so unusual that there is no other reason to perform it. This is why it is important that the act have “only negligible no normative

Consequences.” Second, because the act is purely conventional, it can be designed to put the actor on notice of its legal effect.51 This is a function of “ceremonial acts.” I will return in Part IV.B to Raz’s further category of “ordinary actions whose legal consequences approximate their nonlegal” ones. Formal conditions of validity are familiar features of public power-conferring laws. The Standing Rules of the U.S. Senate, for example, describe the oath senators must take to enter office; stipulate

that at the beginning of every daily session, the question be asked, “Shall the Journal stand approved to date?”; state that every bill must

Receive three readings prior to passage; and require that, during a vote, the names of senators be called alphabetically and that “each Senator shall, without debate, declare his assent or dissent to the question.” These and other formal requirements function, inter alia, to ensure that legislation does not happen inadvertently, that legislators

legislate only when it is their purpose to do so. There was a time when at least some of what we would today call contract law included such formal validity conditions. Thus the old writ of covenant conditioned legal enforcement of certain agreements on a sealed writing.53 For the reasons described above, one would expect the act of affixing a seal normally to be done in order to make the agreement legally enforceable. Placing an imprinted wax on the face of a written agreement, or writing on it the words “locus sigilli” or the letters “L.S.,” are unusual enough acts that it is difficult to imagine them being done for any other purpose. And the ceremonial

quality of the original act of affixing and impressing the wax would have put persons on notice of the act’s legal consequences.54 Formal validity conditions of this sort work to ensure that the

legal consequences apply if and only if it is the legal actor’s purpose to achieve them. Thus the seal requirement reflects not only an expectation that parties often want contractual liability but also a requirement that they manifest such a purpose. Formal conditions of legal validity

underwrite an expectation of legal purpose by sorting for it. The fact that a law includes validity conditions of this type is.


 The analysis in the last section is not meant to endorse everything Raz has to say about contract law. I have doubts about the intelligibility of his claim that the law holds parties to their agreements in part to support or protect the social practice of undertaking and performing

voluntary obligations.177 But the goal of this Article has not been to produce a general theory of contract law. Rather, the aim has been to distinguish two common pictures of contract law’s function, to analyze the empirical basis of each, and to suggest a third, underappreciated

possibility. The two common pictures are contract as power and contract as duty. The third depicts contract law as a compound rule, both duty and power. Regardless of whether the above analysis definitively establishes the correctness of one or another picture (I am obviously attached to the compound picture), it at least explains why the duty-power distinction deserves a place at the center of contract theory. First, the legal relationship coincides with a constellation of similarly structured extralegal practices—such as agreement, exchange, cooperation, and promise—which suggests the duty-imposing picture. Second, 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. Third, while it is uncertain whether contract law sorts for a contractual purpose, there is no doubt that many parties expect and want contractual liability 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 also provide support for the idea that contract law partakes in characteristics of both, such that it is best described as a compound rule.


  1. Lecture Sheet.
  2. Web result of contract.
  3. Web search from contract as power conferring rules.