IE 2209

Industrial Law & Safety Management

Chapter 1: Nature and Kinds of Contracts

1
Contract Act

Contract Act 1872 (Act no, lX of 1872) governs

the law of contracts in Bangladesh. The act
came into force in Bangladesh on 1st
September, 1872.

The Indian Contract Act of 1872 is the

foundation of law of contract introduced by
British Law was adopted in Bangladesh
without change.
 Contract Act
⮚ Branch of laws which determines circumstances in which promises
made by parties to a contract shall be legally binding on them.
⮚ It deals with
– General Principles of the Law of Contract
– Some special contracts only
⮚ The act is not exhaustive: Does not deal with contracts relating to
partnership, sale of goods, negotiable instruments etc.

⮚ Nature of the Law: Does not lay down the rights and duties law will
enforce, but consists of limiting principles subject to which the parties
may create rights and duties for themselves, which the law will
uphold.
Meaning of Contract
Definition
A contract is an agreement to do or not to do an act. It is a legally
binding agreement which is enforceable at law. According to Section
2(h), “An agreement enforced by law is Contract”
Salmond Defines Contract As
“A contract is an agreement creating and defining obligations between
the parties”
Legal Relationship
The parties must have intended their agreement to have legal
consequences. The law will not concern itself with purely domestic or social
agreements. Example: Social & Family
Sudden Test: 1

Which phenomenon are under legal relationship?

⮚ Inviting friends for social function
⮚ Tour plan
⮚ Selling goods
⮚ Taking house on rent
⮚ Asking mom to clean bedroom
 Contract & Agreement
Contract = Agreement + Enforceability at Law
Every promise and every set of promises,
forming consideration for each other is an
agreement.

Agreement = Offer + Acceptance +

Consideration
Contract is an agreement between two or
more parties which is supported by
consideration and enforceable by law.
“All contracts are agreement, but all agreements are not contract”
Classification of Contracts
⮚ Classification By Validity
1. Valid Contract: A contract enforceable by law is a valid contract.
2. Void Contract: A contract which is lawful in nature but due to
some conditions it ceases to be enforceable by law is known as void
contract e.g.- impossibility, illegality, repudiation etc.
3. Void Agreement: An agreement which is not enforceable by law
is known as void agreement. e.g.- minor, ab-initio.
4. Voidable Contract: A contract which is enforceable by law at the
option of an aggrieved party is a voidable contract, e.g.- fraud, threat,
due date.
5. Unenforceable Contract: A contract which is enforceable by law
and is a valid contract but can not be enforced due to some technical
issue i.e. missing of stamp on paper or written form etc.
Difference between void and voidable
contract
• A voidable contract, unlike a void contract, is a valid
contract which may be either affirmed or rejected
at the option of one of the parties. At most, one
party to the contract is bound. The unbound party
may repudiate (reject) the contract, at which time
the contract becomes void.
Classification of Contracts
⮚ Classification by mode of creation
1. Express Contract: A contract in a written or spoken form where
both offer and acceptance are in words spoken or written is an
express contract. Example- Car sell etc.
2. Implied Contract : A contract in which the parties enter by a
conduct or any act. In simple words a contract made other than
words is an implied contract. Example -Service like GP.
3. Quasi Contract : A contract which is imposed by the law, i.e.
either of the party has no intension of making any contract. E.g.
“finder of lost goods has an obligation to return the goods to its
rightful owner”.
Classification of Contracts
⮚ Classification by Extent of Execution

1. Executed Contract : A contract in which both the parties have

performed their obligations and there is nothing else to do. E.g. –
unilateral contract, buying-selling etc.

2. Executory Contract : A contract in which some future act is to be

done by one of the party or both. E.g.- Bilateral contract, EMI system
etc.
Example 1:
Sarah and John entered into a contract for the sale of
John's vintage car. Sarah agreed to purchase the car
for $10,000, and John agreed to deliver the car to
Sarah's address by a specified date. However, before
the transaction could take place, the car was involved
in a severe accident, rendering it completely
destroyed. Considering this scenario, which type of
contract best describes the agreement between Sarah
and John?
Example 2:
Mike verbally agreed to lend his friend Tom $5,000 to
help him start a small business. However, they forgot
to formalize the agreement in writing. Despite their
clear intention, they failed to document the terms of
the loan. In this scenario, how would you classify the
contract between Mike and Tom?
Essential Elements of a Valid Contract
An agreement becomes enforceable by law when it fulfills certain
conditions. These conditions are the essential elements of
contract which are as follows:
1. 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.
2. Intention to create legal relations: There must be an
intention among the parties that the agreement shall result
in or create relations.
3. Lawful Consideration: An agreement to do something for
nothing not enforceable by law. Something in return, must
be real and Lawful
Essential Elements of a Valid Contract
4. Lawful Object: The object should not be illegal or immoral or
proposed to public policy.
5. Capacity of parties: Parties must be:
▪ Of age of majority
▪ Of sound mind
▪ Not disqualified from contracting by any law subject to
6. Agreement not declared void: Must not have been expressly
declared void by any law in force in the country
Essential Elements of a Valid Contract
7. Free and Genuine Consent:
▪ Parties must agree on subject matter in the same sense and at
the same time.
▪ Consent should not be induced by coercion, undue influence,
misrepresentation, fraud or mistake.
8 & 9. Certainty and Possibility of performance
▪ Agreement must not be vague or impossible to perform,
Example: Magic is not possible, Uncertainty in oil.
10. Writing and registration: Contract preferably written, must be
registered or stamped as per requirements.
Sudden Test: 2

Which of the following is not 1 of the 10 elements

of a valid contract?
a) Lawful object b) Writing & Registration
c) Repudiation d) Genuine agreement