What is Contract law?
Contracts are the commitments among people to do in exchange for something they
get. We can also interpret a contract as a guarantee between two businessmen
that they require a legal and verbal coalition. In the case of Contract law,
this comes into existence wherein despite exchanging money of any kind they come
into a contract where they make an exchange of something at the toll of others.
We should always keep in mind that "All agreements are not contracts but All
contracts are agreements." Agreements should satisfy all provisions of the
Indian Contract Act, 1872 then only they are known as contracts.
All agreements are not contract but All contracts are agreement
- Offer + Acceptance = Promise
- Promise + Consideration = Agreement
- Agreement + Enforceable = Contract
An Agreement can turn into an agreement just on the off chance that it is
legitimately enforceable by law or satisfies the conditions set down under
segment 10 of Indian Contract Act,1872. In this way, all agreements are
All Agreements are not Contracts in light of the fact that solitary arrangements
which satisfy the conditions set down under area 10 of Indian Contract Act,1872
become contracts. It isn't required that every one of the arrangements will
fulfill the conditions set down under area 10 of Indian Contract Act,1872.
Let's discuss this with examples
If an agreement has been entered into between Sally and Ramu for a pound of
lettuce in exchange for Salon services, Sally cannot retrace herself from
stylizing Ramu's stubble. If she does so Ramu can knock on the doors of a
court to get the agreement enforced. Before they had entered into this agreement
Sally had an option whether she wants to enter into this deal with Ramu or not,
but once there has been agreement on both sides the option has transformed into
Sally has no option but to stylize Ramu's beard or face the
legal consequences of not keeping her part of the deal. If a party refuses or
fails to carry out what he or she had pledged in a contract one can resort to a
legal remedy but no legal remedy could be taken in case of breaking an
agreement. This is the difference between mere agreements and contracts.
In agreements, one can only expect that the other person will follow what he/she
has agreed, whereas in a contract the person cannot only expect but also demand
what was agreed upon.
Essentials of valid contract under Indian Contract Act
Section 10 of the Indian contract Act has laid down the conditions for a
contract to be valid.
Followings are the conditions:
Offer and AcceptanceThe word offer(proposal) is defined under Section -2(a) of the Indian Contract
Act, 1872 whereas section 2(b) defines that when an offer is accepted it becomes
The three constituents should be fulfilled for a valid agreement-
An offer is made, consensus-ad-idem and acceptance
An offer and proposals in many instances are used correspondingly. Offer is the
foundation of any contract. When one person signifies to another his willingness
to do or to abstinence, from doing anything, to obtain the assent of that other
such act or abstinence, he is said to propose. We should also keep this in mind
a person making the offer is called the offeror and The person to whom the offer
is made is called the offeree.
Consensus-ad-idem signifies that the offeree should elucidate in which manner
the offer is made. He/she should be cleared with an exact sense of what it is
going to be.
An acceptance is made after offering an offer then the offeree has two options
just to accept or reject it. The offeree should only accept the order when they
are cleared with all statements written in the contract.
It prevails that all rules and regulations composed on time of offer made and at
time of acceptance should be the same.
Let's illustrate this with an example
Here's the crockery mart from where Mrs. Sharma orders a 12 cup of the set, 12
glasses, etc, and asks them to deliver. Then the mart manager offer a contract
to Mrs. Sharma that he will deliver all the products safely to her house but in
case there's any crack or a broken piece comes out then neither they will change
nor she can sue them because they bring the goods on order so, they don't have
any extra piece to exchange and that's why there is no guarantee in case of
customer delivering. Mrs. Sharma learned all the conditions which the shopkeeper
wrote on offer and then she accepted also.
And after a few days when she got her parcel and opened it, 3 mugs and 2 glasses
were broken. Now, she cannot sue the shopkeeper for sending those mugs and
Landmark case about this acceptance
Felthouse v. Bindley
For this situation, the applicant, Mr. Paul Felthouse needed to buy a horse from
his nephew, yet the value he offered to pay for the horse was not exactly that
his nephew was able to sell it for. The horse, in this manner, was as yet in his
ownership. The Uncle conveyed his proposal through a letter, saying,
On the off
chance that I hear not any more about him, I consider the horse mine at �30.15s" The nephew couldn't react to the letter since he was occupied with a
sale on his ranch. Even though he asked the salesperson, Mr. Bindley, not to
sell the horses, he incidentally did. Mr. Felthouse at that point sued the
litigant for a change of his property. The litigant contended that the horse was
not Mr. Felthouse's property, as there existed no agreement among him and his
nephew at the hour of the bartering because Mr. Felthouse's offer was not
acknowledged by his nephew and the nephew's quiet can't be viewed as an
Balfourgment of the offer.
It was held that Mr. Felthouse did not have the ownership of the horse at the
time of the auction, which is why he could not sue for conversion, as the offer
he made was not accepted.
Intent to make legal relationship: Let's illustrates this with an example
Here's a two-person name A (wholesaler) and B (Retailer). They came into an
agreement where A promised to give goods to B at the wholesale price but in case
A didn't do the same B can sue him.
On the other hand, if B invites A to his daughter's wedding and A promises that
he will show his presence there but then also if he doesn't go then B cannot sue
In the first illustration, A is liable but in second illustration A is not
liable because we can observe in case A they share a legal relationship that has
legal obligations and he is aware of its fallout. But in illustration 2 there is
no lawful connotation which shows that there is no legal relationship and that's
why A is not liable.
Landmark case on intention to make the legal relationship
Balfour v. Balfour:
The construct of intention to form legal relationships was
understood within the case of Balfour v. Balfour. During this case, the suspect
United Nations agency was utilized on a government job in Ceylon, visited
England along with his married person. For health reasons the married person was
unable to accompany the husband to Ceylon. The husband secured to pay �300/
month as maintenance to the married person for the time she lived apart. The
husband did not pay the amount and was eventually sued by his married person.
In the c, as it was commanded that the husband wasn't prone to pay as there was
no intention to form a legal relationship between the parties.
Admissible object and Authorized or ConsiderationIn the case of a valid contract legal consideration is very much essential. The
word 'consideration' means to get something in return for something.
Consideration is also something that a person gets an extra privilege, it can be
in any kind of money, or according to contract. If there would be no
consideration then the contract will be quashed and void.
Section 2 (d) of the Contract Act 1872 defines a contract as:
When at the
desire of the promissory, the promise or any other person has done or abstained
from doing or does or abstains from doing or promise to do or abstain from
doing. Something such an act or abstinence or promise is called a consideration
for the promise.��
Let's discuss this with an illustration:
There's a man named Shiva who comes into consideration where he borrowed Rs.
500000 from Ashish and said he will pay back this money in the coming time to
the owner of the Maruti Suzuki showroom when Ashish will buy a Car. This is a
valid consideration between Shiva and Ashish.
In the above illustration, we can observe that all the essentials of
consideration are justified and fulfilled.:
Landmark case on Consideration
- This consideration is legal.
- All the statements are clear.
- This can be in the past, present, or future.
- Money borrowed by Ashish but payback to the owner. Thus, this can move from one
party to another.
Durga Prasad v. Baldeo:
In the case it was held that it is essential that the
consideration must have been given at the desire of the promisor, rather than
merely voluntarily or at the instance of some third party.
Potential to Make a Contract All the provisions are given in Section 14- of the Indian Contract Act, 1872
should be fulfilled before coming into a contract.
There are some conditions where a person cannot make a contract which is as
Hence, if a person is drunk, unsound solvent, or minor, they will not be capable
of making any contract. Their contract will be considered invalid.
- A person should attain adulthood.
- Minor cannot make the contract.
- He/she should be of sound mind.
- A drunk person is not allowed to make a contract.
- The person shouldn't be insolvent.
Let's discuss more with an illustration
Let's say a girl named Riya (12years old) for whom the contract is made that
her father said to make a contract with a person named Ayush that he will sell
his property to him and in return whatever money he would have to get spent on
This is a valid contract. One can say that the minor cannot come into a contract
but in this situation, the contract was not made by Riya, it is for Riya that's
why it's not void.
A person named Aakash went to a club party last night, where he drank a lot of
alcohol. Then he came into a contract with their owner that he would pay Rs.
100000 to their club in return they have to make him as their partner. In this
situation, the contract is invalid because a drunk person isn't in a state of
mind where he can decide or choose anything correct.
Mohori Bibee v. Dharmodas Ghose:
In this case, it was held that an agreement
by a minor is void.
Potentials for the existence of a contractA contract is valid in cases where possible statements take place. Not the
situation where there are chances but not sure.
Let's discuss more with illustrations
The two people named Aman and Sanjeev both came into a contract that Aman will
sell his motorcycle to him but not decided at which amount. So in this
condition, the contract is Invalid.
The person named Kamal comes into a contract that if Rajesh brings stars from
the sky to the earth then this contract is not justified. Because bringing stars
to the earth is an impossible task.
Hence, the Contracts are valid in a situation only when they can be fulfilled.
Landmark case regarding the frustration of contract
Krell v. Henry:
For this situation, the respondent consented to lease a level
of the offended party to watch the crowning ordinance of King Edward VII from
its overhang. The offended party had guaranteed that the view from the level's
gallery will be fulfilling since the parade will be totally apparent from the
room. The gatherings related through letters and concurred on a cost of �75 for
two days. No place in their composed correspondence did the gatherings notice
the crowning ritual function.
The crowning ritual didn't happen when the level
was reserved for, as the thoughtful became sick. The litigant wouldn't pay the
entire amount of cash that the gatherings had settled upon, consequently. It was
held that it may very well be caused by the conditions encompassing the
agreement and what the inferred reason behind the agreement was. Because of the
crossing out of the parade, the motivation behind booking the level was
Proper courtesiesAccording to the Indian Contract Act, 1872 the contract can be in both oral and
written form. But as advisable the contract should be in written form to avoid
any future crisis. If the contract is in written form then the person is bound
to do a certain task but there is a risk in the case of an oral contract.
Written contracts encompass the signature of both the parties which can be used
in court for making the right decision. Otherwise, oral contracts are also
Let's discuss this with an illustration
An owner of Maruti Showroom entered into an oral agreement with Aman that he
will sell him a car at a 20% discount than that contract is also valid. And in
some situations, if they both signed a contract where he wrote the same then
that is also a valid agreement.
These are the most fundamental and rudimentary standards of an agreement, which
are to be satisfied, anyway there might be different conditions which might be
set somewhere near an extraordinary law, or for explicit sorts of agreement. Eg.
an agreement managing IPR needs to maintain rules set somewhere around the laws
- Essential elements of a Valid Contract - Indian Contract Act,1872 | Law column
- Essentials of a valid contract under Indian Contract Act 1872
- Essentials of a Valid Contract under The Indian Contract Act (legalbites.in)
- Importance of Consideration in Contract (legalservicesindia.com)
Shrivastav (Students of Lloyd Law college Gr. Noida, UP)
Chandani (Students of Lloyd Law college Gr. Noida, UP)
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