Legal Aspects of Business

Assignment
Submitted by - PG20211028 Sagar Yadav

“Mr. A” invited “Mr. B”, his business partner for his sister's
marriage. “B” accepted the invitation. “A” reserves a table
in a costly hotel where the marriage takes place. Due to
some reason “B” could not attend the function. What
type of contract is this. Is this a valid contract?
Justify your answer.
The Indian Contract Act, 1872 prescribes the law relating to contracts in India and
is the key act regulating Indian contract law. The Act is based on the principles
of English Common Law. It is applicable to all the states of India. It determines the
circumstances in which promises made by the parties to a contract shall be legally
binding.

Under Section 2(h), the Indian Contract Act defines a contract as an agreement
which is enforceable by law.

Contract, in the simplest definition, a promise enforceable by law. The promise

may be to do something or to refrain from doing something. The making of a
contract requires the mutual assent of two or more persons, one of them ordinarily
making an offer and another accepting. If one of the parties fails to keep the promise,
the other is entitled to legal redress. The law of contracts considers such questions as
whether a contract exists, what the meaning of it is, whether a contract has been
broken, and what compensation is due the injured party.

Valid Contract - A valid contract is an agreement, which is binding and

enforceable. In a valid contract, all the parties are legally bound to perform the
contract. The Indian Contract Act, 1872 defines and lists the essentials of a valid
contract through interpretation through various judgments of the Indian judiciary. All
formal business relationships must ensure professionalism to function better. A
significant way of protecting your business and eliminating legal liability is to
embrace valid contracts.
These contracts consist of the roles, responsibilities, and expectations of all the
parties involved in the business. For a contract to be valid, all its elements must be in
place.

Substantive Elements of a Contract

 Offer
 Acceptance
 Consideration
 Capacity
 Legality

Offer - When one person signifies to another his willingness to do or to 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.

Acceptance – When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. Once the offer is extended, it is in the hands of the offeree
to either accept or reject the proposal/offer.

Consideration – 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 to abstain
from doing, such act or abstinence or promise is called a consideration for the promise.
Something of value must be exchanged in order to have a valid legal agreement as any
agreement without consideration is void.

Capacity to Contract – Capacity simply means competence or ability of the parties to

come into a contract. A capable person is the one who is allowed/qualified to enter into a
contract.

Legality – As section 2(h) defines contract as – ‘ An agreement enforceable by law’, the

legality becomes the most important element of a contract. One cannot enforce a contract
which is unlawful. Also, every agreement of which the object and consideration is unlawful is
void.
Given situation:

Mr. A” invited “Mr. B”, his business partner for his sister's marriage. “B”
accepted the invitation. “A” reserves a table in a costly hotel where the
marriage takes place. Due to some reason “B” could not attend the function.

This is a Social Contract and there is no consideration.

The social contract is an implicit agreement among self-interested, rational agents.

This seems to imply we have no duties to beings who are not able to participate
(even implicitly) in the contract. The state of nature was one in which there were no
enforceable criteria of right and wrong.

Conclusion

We can conclude that this is not a valid contract as it is not enforceable by law because it is
a social contract not a legal contract and also there is no consideration present in this
contract.