Contract

A contract is a legally binding agreement between two or more parties. It is an agreement that
creates obligations which are enforceable by law.
Characteristics of a Contract
1. Agreement
2. Legal Obligations
3. Lawful consideration and object
4. Free consent
5. Capacity
6. Certainty
7. Possibility of performance
8. Not declared void

During Mughal rule – Governed by Mohammedan law of contract

 Aqd – Conjunction
 I jab – proposal
 Qabul – Acceptance
Hindu law – Minor, intoxicated person, old man, or handicapped cannot enter into a contrat
Narata smriti – 1-8 is infant, 8-16 is boyhood, after 16 competent enough to enter into a
contract
At the time of British rule (English law) – if 2 religions = law of defendant

Indian contract act 1872 – (An Agreement enforceable by law)

TWO ELEMENTS OF CONTRACT
Contract = agreement + Enforceability by law
1. Agreement
2. Enforceability - Enforceability in law means that a law, rule, or contract can be made
to be obeyed or accepted, or that people can be made to follow it

Agreement
An Agreement is a promise or a commitment or set of reciprocal promises or commitments.
An Agreement involves an offer or proposal by one person and acceptance of such offer or
proposal by another person. If the agreement is capable of being enforced by law, then it is a
contract.

 Proposal when accepted becomes promise

 LEGAL RULES OF A VALID OFFER

1. It may be expresses or implied
2. It must create legal relation
3. It must be definite and clear
4. It is different from invitation to offer
5. It may be specific or general
6. It must be communicated to the offeree
7. It should not contain negative conditions
 8. It maybe subjects to any terms and conditions
9. It must not contain cross offer

Offer/proposal
Offer-An expression of willingness of offeror to an offreee to do or to abstain from doing
anything, with a view to obtain the assent of an offeree and to enter him into a contract.

 Classification of offer
1. Express offer – An offer which is made by word spoken or written is called express offer
2. Implied offer – An offer which is made by the conduct of a person is called implied offer
3. General offer - It is an offer made to public at large with or without any time limit.
4. Special/specific offer - an offer is made to a particular and specified person
5. Cross offer – When two parties make similar offers to each other in ignorance of each other’s such
offers are called cross offers
6. Counteroffer - Upon receipt of an offer from an offeror, if the offeree instead of accepting it
straightway, imposes conditions which have the effect of modifying or varying the offer, he is said to
have made a counter offer.
7. Standing or continuing or open offer - An offer which is made to public at large and if it is kept open
for public acceptance for a certain period of time, it is known as standing or continuing or open offer.
Tenders that are invited for supply of materials and goods are classic examples of standing offer.

What is invitation to offer?

An offer and invitation to offer are not one and the same. An offer is definite. It is an intention towards a
contract. An invitation to offer is an act precedent to making an offer. It is done with intent to generally
to induce and negotiate. An invitation to offer gives rise to an offer after due negotiation and it cannot be
per se accepted. In an invitation to offer there is no expression of willingness by the offeror to be bound
by his
offer. It is only a proposal of certain terms on which he is willing to negotiate. It is not capable
of being accepted as it is.

 Essential Elements of a Valid Offer

1. Clear and Definite: The offer must be clear and unambiguous. Example: "I offer to sell my car for Rs.
50,000."
2. Communicated: The offer must be communicated to the offeree. Example: A sends a letter to B
offering to sell his bike.
 3. Intent to Create Legal Relations: There must be an intention to create legal obligations. Example: A
offers to sell his house to B with the intent to legally bind.
4. Capable of Creating Legal Relations: The offer must lead to a contract if accepted. Example: An
offer to sell goods must be lawful and possible.
5. Not a Mere Invitation to Offer: An invitation to negotiate is not an offer. Example: Display of goods
in a shop is an invitation, not an offer

 Communication of Offer
The offer is a proposal made by one party (the offeror) to another party (the offeree) expressing a willingness to
enter into a contract under certain terms. For the offer to be effective, it must be communicated to the offeree.
Communication can be made orally, in writing, or through conduct, but it must be clear and definite enough to
indicate the offeror's intention to be bound by the proposed terms. Once the offer is communicated, it remains
open until it is either accepted, rejected, or revoked.

Acceptance
Legal Rules regarding a valid acceptance
1. Acceptance can be given only by the person to whom offer is made
2. Acceptance must be absolute and unqualified
3. The acceptance must be communicated
4. Acceptance must be in the prescribed mode
5. Within a reasonable Time
6. Mere silence is not accepted
7. Acceptance by conduct/implied acceptance

Communication of Offer and Acceptance

Communication of offer: An offer is an expression of willingness to enter into a contract on
certain terms, made with the intention that it shall become binding as soon as it is accepted by
the person to whom it is addressed. Offers can be communicated orally, in writing, or through
conduct. The communication must be clear, unambiguous, and directed to a specific person
or group. Section 4 of the Indian Contract Act states that the communication of an offer is
complete when it comes to the knowledge of the person to whom it is made.

Communication of acceptance: The Act prescribes in general terms two modes of

communication namely, (a) by any act and (b) by omission. Communication by act would
include any expression of words whether written or oral. Written words will include letters,
telegrams, faxes, emails and even advertisements. Oral words will include telephone
messages. Communication can also be by ‘omission’ to do any or something. Such omission
is conveyed by a conduct or by forbearance on the part of one person to convey his
willingness or assent. However, silence would not be treated as communication by
‘omission’.

Revocation of Offer and Acceptance

The revocation of an offer or acceptance is the act of terminating or cancelling a proposal or

acceptance. The Contract Act of 1872 states that an offer can be revoked before the offeree
accepts it, but not after:
Offeror
The offeror can revoke an offer by communicating the revocation to the offeree. If the offeror
doesn't communicate the revocation, the offer remains valid. Other ways an offer can be
revoked include:
 The lapse of time specified in the proposal for acceptance
 The failure of the offeree to fulfill a condition precedent to acceptance
 The death or insanity of the offeror
Offeree
 The offeree can revoke their acceptance before the communication of acceptance
reaches the offeror

Essentials of a valid contract

1. A valid contract must include the following six essential elements
2. Offer
3. Acceptance
4. Consideration
5. Capacity
6. Legality
7. Awareness

TYPES OF CONTRACTS
On the basis of Formation
1. Express contract - express contract is an agreement where the terms are clearly stated and
agreed upon by the parties involved, either orally or in writing.
2. Implied Contract - An implied contract is a legally binding agreement that's created by the
actions, circumstances, or conduct of the parties involved, rather than being explicitly stated.
3. Quasi Contract: A quasi contract is a contract that is created by the court when no such
official contract exists between the parties, and there is a dispute with regard to payment for
goods or services provided. Courts create quasi contracts to prevent a party from being
unjustly enriched, or from benefitting from the situation when he does not deserve to do so. A
quasi-contract is created when a judge imposes an obligation on one party to compensate
another, even if there isn't an actual contract. This can happen when one party accepts goods
or services that they didn't request, creating an expectation of payment.
 On the basis of Execution:

Executed contract - An executed contract is a legally binding agreement that has been signed and
approved by all parties involved, and all parties have fulfilled their obligations. It's the final
product of the contract negotiation and agreement process

Executory Contract - An executory contract is a legally binding agreement between two or more
parties where one or more parties have yet to fully fulfill their obligations. It's an ongoing
agreement where the terms and conditions are to be carried out over a set period of time

On the basis of Validity:

Valid Contract - A valid contract is a legally binding agreement between two or more parties that
is enforceable by law. It must meet certain requirements, including, Intention, Capacity, Certainty,
Offer and acceptance, Consideration, Legality, Awareness, Performance.

Void Contracts - A void contract is a contract that is not legally enforceable from the moment it
is created. This means that neither party can sue the other for violating the contract, and neither
party can perform their obligations under the contract.

Voidable Contracts - A voidable contract is a valid contract that one or more parties can legally
cancel or amend for certain reasons. A voidable contract is different from a void contract, which is
not legally enforceable and cannot be enforced by either party.

Illegal Contracts - An illegal contract is an agreement that is against the law or goes against
accepted moral standards. Courts will not enforce illegal contracts, and the parties involved may
face legal consequences.

Unenforceable Contracts - An unenforceable contract is a contract that a court will not enforce,
even though it is valid. This can happen for a number of reasons, including: Illegal purpose ,Lack
of capacity, Dubious benefit, Extreme physical hazard

Consideration

consideration as ‘when at the desire of the promisor, the promise or any other person has done or
abstained from doing or does or abstains from doing or promises to do or abstain from doing
something, such an act or abstinence or promise is called consideration for the promise’. consideration
could be not necessarily a gain or advantage to the promisor but it can even be a loss or detriment to
the promisee.

Consideration is doing or not doing something, which the promisor desires to be done or not done.
Legal requirement of consideration.
 Consideration must move at the desire of the promisor:
 Consideration can flow either from the promisee or any other person
 Executed and Executory consideration
 Consideration may be past, present or future and
 Consideration should be real though not adequate
 Performance of what one is legally bound to perform
 Consideration must be real and not illusory
 Consideration must not be unlawful, immoral, or opposed to public policy.
 CONTINGENT AND QUASI CONTRACTS

 CONTINGENT CONTRACT - These contracts are based on the occurrence of an uncertain

event, such as an insurance contract. The promisor is only obligated to fulfill their contractual
obligations if the event occurs. For example, if Peter promises to pay John Rs 50,000 if he
marries Julia, the contract is contingent on Julia getting married. If Julia dies in a car accident,
the contract is void because the event is no longer possible.

Essentials of Contingent Contract

 The performance of the contingent contract would depend upon the happening or non
happening of some events or conditions
 The event referred to as the collateral to the contract
 The contingent event should not be a mere will of the promisor
 The event must be uncertain

Rules related to contingent event

Quasi Contract