0Nature Of Contract:
Indian Contract Act, 1872 came into effect on 1st September 1872. It extends to the whole of India except the states of Jammu and Kashmir.
The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties of the contracting parties. Indian Contract Act deals with the enforcement of these rights and duties upon the parties.
Definition, Meaning And Nature Of Contract:
The term “Contract” has been defined under Section 2(h) of Indian Contract Act, 1872. As per this, “an agreement enforceable by law is a contract”.
Thus to constitute a contract, firstly there must be an ‘agreement’ and secondly such an agreement must be ‘enforceable of law’.
Section 2(e) of Indian Contract Act, 1872 defines the term agreement as, “every promise or every set of promises forming the consideration for each other is an agreement”. It may be noted that for an agreement to be enforceable, it must be coupled with an obligation to do or abstain from doing a particular act.
Therefore, in the broadest sense, a contract is an exchange of promises by two or more persons, resulting in an obligation to do or abstain from doing a particular act, which obligation is recognised and enforced by law.
It may be noted that those agreements in which there is no intention to create legal relations are not contracts. For instances, agreements relating to socials matters are not contracts. Thus, all agreements are not contracts. But all contracts are agreements.
To Conclude “Agreement Is A Wider Concept Whereas Contract Is A Narrower Concept”
Essential Elements Of A Valid Contract:
Section 10 of the Indian Contract Act, 1872 provides the following:
“All agreement are contracts, if they are made by free consent of parties competent to contract, for a lawful consideration and with lawful objects, and are not hereby expressly declared to be void.”
Thus, the essential elements of a valid contract are:
- An offer or proposal by one party and an acceptance of that offer by another party resulting is an agreement.
- Free consent of the parties is present.
- The parties to contract are legally capable of contracting The agreement is supported by consideration.
- The consideration and object of the contract is legal.
On The Basis Of Enforceability:
- Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by.
- Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party.
- Void contract [Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become.
- Void agreement [Section 2 (g)]: An agreement not enforceable by law is said to be void. Such agreement does not confer any right to any of the parties to it. The agreement, in such a case, is the void ability (from the very beginning). Such an agreement does not result in a contract.
- Illegal agreement: An agreement is illegal if it is forbidden by law; or if of such nature that, if permitted, would defeat the provisions of nay law or is fraudulent; or involves or implies injury to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void ab initio. All illegal agreements are void agreements but all void agreements are not illegal.
