contracts and agreements

7/25/2019 Contracts and Agreements

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CONTRACTS

& AGREEMENTS


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DEFINITIONSCONTRACT- In the words of Pollock, every agreement and promisesenforceable by law is contract. Section 2(h) of the Indian Contract Act,

!"# states that an agreement enforceable by law is contract. $hisdefinition gives %s two ingredients&an agreement and enforceable by

law.

'.g. - An agreement to b%y certain specific goods at an agreed price lets

say (( bags at $) *+( per bag is a contract beco it gives rise to a d%ty

enforceable by law and in case of defa%lt on the part of either party an

action for breach of contract co%ld be enforced.

AGREEMENTAn agreement means a promise and a reciprocal set of promises forming

consideration for each other&Section 2(e). All contracts areagreeents !"t all agreeents are not contracts.

CONTRACT # Agreeent $ En%orcea!le !la'


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ROMISE-As per ection #b/ of the Contract Act, a proposal whenaccepted becomes a promise.

ROOSA-ection #a/ states that when one person signifies anotherperson his willingness to do or abstain from doing anything with a view toobtaining the assent of that other to s%ch an act or abstinence, he is said to

make a proposal. A Proposal is also known as an offer. o,

Characteristics O% An Agreeent0

l"ralit O%ersons

Consens"s*a+*i+e


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ROMISOR ROMISEE

ARTIES TO AN AGREEMENT-A CONTRACT

Promisor:A person making the proposal offer/ is known as a promisor.

2e is also known as an offeror. 3e can also recognie him as aproposor.

Promisee:A person accepting the proposal offer/ is known as apromisee. 2e is also known as an offeree. 3e can also recognie him as

an acceptor.


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ESSENTIA EEMENTS OF AID CONTRACTS/SECTION 012345

Offer and acceptanceIntention to create legal RelationsLawful considerationCapacity of parties

Free consentLawful objectWriting and RegistrationCertainty

Possibility Of PerformanceNot Epressly declared !oid


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T6ES OF CONTRACTS

4n the 5asis of the 6odeof 7ormation

4n the 5asis ofPerformance

4n the 5asis of 8alidity o'nforceability

'9press contract '9ec%ted contract 8alid contract

Implied contract '9ec%tory contract 8oid contract

:%asi-contract ;nilateral contract 8oidable contract

5ilateral contract Illegal agreement

;nenforceable contract


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4n the basis of formation0

. Express contract0 3here the terms of the contract are e9pressly agreed%pon in words written or spoken/ at the time of formation, the contract is

said to be e9press contract.

ExampleA says to 5 3ill yo% p%rchase my bike for #(,(((


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+. Quasi contract0 A >%asi contract is created by law. $h%s, >%asi contractsare strictly not contracts as there is no intention of parties to enter into a

contract. It is legal obligation which is imposed on a party who is re>%ired to

perform it. A >%asi contract is based on the principle that a person shall notbe allowed to enrich himself at the e9pense of another.

For e7a8le, s%ppose that vacationing physician ?ane @oe is driving downthe highway and finds ?oe 5loggs lying %nconscio%s on the side of the road.

@oe renders medical aid that saves 5loggss life. Altho%gh the inB%red,

%nconscio%s 5loggs did not solicit the medical aid and was not aware that theaid had been rendered, he received a val%able benefit, and the re>%irements

for a >%asi contract were f%lfilled. In s%ch a sit%ation, the law will impose a

>%asi contract.


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On the !asis o% 8er%orance9

. Executed contract0 An e9ec%ted contract is one in which both theparties have performed their respective obligation.

ExampleA sells his car to 5 for lakh. A delivered the car and 5 paid the price. $his

is an e9ec%ted contract.

#. Executory contract0 An e9ec%tory contract is one where one or both theparties to the contract have still to perform their obligations in f%t%re.

$h%s, a contract which is partially performed or wholly %nperformed istermed as e9ec%tory contract.

ExampleA sells his car to 5 for lakh. If A is still to deliver the car and 5 is yet to

pay the price, it is an e9ec%tory contract.


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+. Unilateral contract0 A %nilateral contract is one in which only one partyhas to perform his obligation at the time of the formation of the contract,

the other party having f%lfilled his obligation at the time of the contract or

before the contract comes into e9istence.

ExampleAlap promises to pay ((( to anyone who finds his lost cellphone. 5ansi

finds and ret%rns it to Alap. 7rom the time 5ansi fo%nd the cell phone, the

contract came into e9istence. ow Alap has to perform his promise, i.e.,

the payment of (((.

*. Bilateral contract0 A bilateral contract is one in which the obligation onboth the parties to the contract is o%tstanding at the time of the formation

of the contract. 5ilateral contracts are also known as contracts with

e9ec%tory consideration.

ExampleA promises to sell his car to 5 for lakh and agrees to deliver the car on

the receipt of the payment by the end of the week. $he contract is bilateral

as both the parties have e9changed a promise to be performed within a

stip%lated time.


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On the !asis o% :ali+it9

. Valid contract0 An agreement which has all the essential elements of acontract is called a valid contract. A valid contract can be enforced by law.

#. Void contract[Section 2(g)]9 A void contract is a contract which ceasesto be enforceable by law. A contract when originally entered into may be

valid and binding on the parties. It may s%bse>%ently become void. D $here

are many B%dgments which have stated that where any crime has been

converted into a Eo%rce of ProfitE or if any act to be done %nder any

contract is opposed to EP%blic PolicyE %nder any contract&than that contractitself cannot be enforced %nder the law-

Feasons0

%pervening Impossibility marriage/

%bse>%ent Illegality wheat-pvt trading/

Fep%diation of a voidable contract lack of free consent/

;ncertain 7%t%re event c dies/


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+. Voidale contract;Section 2(i)

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 contractcontinues to be good and enforceable unless it is repudiated by the

aggrieved party. "ac# o$ $ree consent

*. Illegal contract0 A contract is illegal if it is forbidden by lawG or is of s%chnat%re that, if permitted, wo%ld defeat the provisions of any law or is

fra%d%lentG or involves or implies inB%ry to a person or property of another,

or co%rt regards it as immoral or opposed to p%blic policy. $hese agreements

are p%nishable by law. $hese are void-ab-initio.

HAll illegal agreements are void agreements b%t all void agreements are not

illegal.

J. Unen$orceale contract0 3here a contract is good in s%bstance b%tbeca%se of some technical defect cannot be enforced by law is called

%nenforceable contract. $hese contracts are neither void nor voidable. =illo% e7change !ecoe "nen%orcea!le a%ter three ears


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DISTING>IS? =ET@EEN OID AND IEGAAGREEMENT

Matter oi+ Agreeent Illegal Agreeent

3hat 8oid agreement isnot prohibited bylaw.

It is prohibited bylaw.

'ffect oncollateraltransaction

Any agreementwhich is collateralto the voidagreement isenforceable.

Any agreement ortransaction whichis collateral toillegal agreementis not

enforceable.

P%nishment It is notp%nishable.

It is p%nishable.

8oid ab initio 6ay not void ab

initio.

Always void ab

initio.

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