Law of Contract

Nature of Contract
The law of contract is the body of legal rules governing the
conclusion and consequences of contracts.
It defines the basis and requirements of contractual liability,
as well as the rights and duties of the parties.
Moreover, it regulates the breach of contract and provides
remedies for such breach. Finally, it governs the termination
of contractual obligations
Classification:
The most common classifications of contracts include:
a. Express and Implied contract:
Express contracts means terms of the agreement are in
writing. And it is a contractual term specifically stated to be
part of the contract. Implied contract means the duties and
obligation of both parties are not expressed but are implied
by their acts or conducts. Both indicate by their conduct
that they have a mutual agreement and need not express
the agreement in words
b. Void and Voidable contract:
The term "void contract" is an oxymoron--a contract held
to be void does not exist under law. In other words,
although two parties may have come to an agreement, it is
not recognized as a legal contract. Perhaps the simplest
example of a void contract is a contract formed in which
one party agrees to perform an illegal act. A contract that
is illegal in part may be void in that respect; however, it is
still a valid contract if the deletion of the illegal portion of
the contract does not defeat the purpose of the broader
agreement. Agreements, in which an essential feature of a
valid contract is lacking, are void contracts as well.

Voidable contracts are contracts that may be canceled by

one of the two parties involved. A contract may be
voidable for various reasons, but in most cases voidable
contract provides for one of the parties to withdraw from
the agreement without penalty.
c. Enforceable and unenforceable Contract:
A contract may be enforceable or unenforceable. An
enforceable contract is one for which a legal remedy is
offered in the event that the contract is not fulfilled. A
contract may be unenforceable when certain statutory
requirement have not been met
.
Essentials of a Contract:
The following conditions should be satisfied for a valid contract:
1) Offer and acceptance
2) Intention to create legal relationship
3) Lawful consideration
4) Parties competent to contract
5) Free and genuine consent
6) Lawful object
7) Agreement not declared void or illegal
8) Certainty of meaning
9) Possibility of performance
10) Necessary legal formalities

Offer: Section.2 (a)

An offer is defined as when one person signifies to another
his willingness to do or abstain from doing anything with a
view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal
An offer is a proposal by one party to another to enter a
legally binding agreement with him
Example:

 A offers to sell his watch to B. A is making to do something

(i.e.,) to sell his watch. It is a positive act on the part of
the proposer
Acceptance: Section 2(b)
A contract emerges from the acceptance of an offer.
Acceptance is an expression by the offeree of his willingness
to be bound by the terms of the offer
The Indian contract act, 1872 defines acceptance as when
the person to whom the proposal is said to be accepted.
Capacity of parties to contract:
A contract is an agreement enforceable by law
When a proposal is accepted, it becomes an agreement.
An offer and acceptance make an agreement
While forming or entering into an agreement, the parties
concerned must see that it is enforceable
Under section 10, All agreements are contracts if they are
made by the free consent of the parties competent to
contract for a lawful consideration and with a lawful object,
and are not here by expressly declared to be void.
From the above definition it is clear that an agreement must
satisfy the following conditions to become a contract:
There must be lawful consideration
The parties to it must have the capacity to enter into a
contract
The consent to the parties to it must be free and real
The object of it must be lawful
It should not have been declared void
Free consent:
Section 13 defines consent as, Two or more persons are
said to consent when they agree upon the same thing in the
same sense.
Section 14 defines Free consent as,
Coercion as defined in section15 or
Undue influence as defined in section 16 or

Fraud as defined in section 17 or

Misrepresentation as defined in section 18 or
Mistake subject to the provisions of sections 20,21 and
22
Consideration:
One of the essential elements for a valid contract is the
presence of lawful consideration in the agreement.
In other words, an agreement without consideration is null
and void
Such an agreement is not enforceable by law
According to section 25, an agreement made without
consideration is void
In simple terms consideration means Something in return
while making a promise the party making the promise must
get some benefit or gain

Legality of Object:
According to section 23, The consideration or object of an
agreement is lawful unless it is forbidden by law; or is of
such nature that, if permitted, it would defeat the provisions
of any law, or is fraudulent or involves or implies injury to
the person or property of another; or the court regards it as
immoral or opposed to public policy.
Agreement declared Void:
Under section 10 only such agreements which are not
declared to be void shall be contracts. In other words law
declares certain agreements as void. They are:
Agreements made by incompetent parties (section 11)
Agreements made under a mutual mistake of fact
(section 20)
Agreements, the consideration or object of which is
unlawful (section 23)
Agreements, the consideration or object of which is
partly unlawful (section 24)

 Agreements, made which without consideration (section

25)
Agreements in restraint of marriage (section 26)
Agreements in restraint of trade (section 27)
Agreements in restraint of legal proceedings (section
29)
Agreement by war of wager(section 30)
Agreements to do impossible act (section 6)
Performance of Contract:
Sec 38 says if a promisor has made an offer to perform as
per the contract and the promisee does not accept that, the
promisor is not responsible for non performance.
By whom the contract must be performed; Promisor himself,
Agent, Legal Rep., Third Person, Joint Promisors.
Devolution of joint liabilities (Sec 42 to 44) (When 2 or more
Promisors have made the promise, they are known as the
joint promisors) All of them must fulfill the promise jointly
(42),
If not, 43 comes into effect thereby; liability of joint
promisors is joint & several, a joint promisor may claim
contribution, sharing of loss arising from default of one (43
Para 1,2,3)
Discharge of Contract:
Discharge of contact means termination of the contractual
relationship between the parties. A contract may be
discharged by;
a) Performance
b) Agreement of Consent
c) Impossibility
d) Lapse of time
e) Operation of law
f) Breach of contract
Remedies for Breach of Contract:
A remedy is the means given by law for the enforcement of
right

 When a there is breach of contract, the injured party has one

or more of the following remedies;
a) Rescission of contract
b) Suit for damages
c) Suit upon quantum meruit
d) Suit for specific performance of the contract
e) Suit for injunction