You………….

Buy groceries
Board a train
Hire a cab
Consult a doctor or solicitor
Give your any household gadget for repair
Ever realised!
In each of the above and numerous such situations
you enter into a contractual obligation.
 Contract 2(h) :-
•An agreement enforceable by Law is a contract.
Contract= Agreement + Legal enforceability
 Agreement 2(e) :-
•Every promise and set of promises forming the
consideration for each other.
•AGREEMENT = PROMISE + CONSIDERATION
A proposal (offer) when accepted becomes a
promise.
•Mutuality is the very base of an agreement.
•Legal obligation: To become a contract , an
agreement must be enforceable by law.
 CONTRACT ACT – SOME DEFINITIONS

Offer 2(a):-
•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.
• Offeror: the person who is making the offer
• Offeree: the person to whom the offer has
been made
 Acceptance 2(b):-
•When the person to whom the proposal is made,
signifies his assent there to, the proposal is said to be
accepted.
Promise 2(b) :-
•A Proposal when accepted becomes a promise.
•In simple words, when an offer is accepted it becomes
promise.
•Promise = offer + acceptance
 Promisor and Promisee 2(c):-
• When the proposal is accepted, the person
making the proposal is called as promisor and
The person accepting the proposal is called as
promisee.
Consideration 2(d):-
•Technical word meaning QUID-PRO-QUO i.e.
something in return.
 Contract Sec 10:
All agreements are contracts, If they are made
•By the free consent of parties
•competent to contract,
•For a lawful consideration and
•With a lawful object, and
•Are not hereby expressly declared to be void.
1. A contract, essentially , is an agreement.
2. An agreement is a set of two promises, one flowing
from the offeror and the other from the offeror’s
counterpart i.e. acceptor.
3. A promise is an accepted offer or proposal.
4. An offer is a promise of performance, which is,
however, contingent upon a return promise or an
act of forbearance being received in exchange of it.
Offer→ Acceptance→ Promise→ Agreement
→Contract
 Contract Distinguished From Agreement

Basis Contract Agreement

Elements Agreement+ Legal Promise+
enforceability consideration
Legal Mandatory May or may not be
relationship
Scope all contracts are All agreements
primarily agreements may not be
contracts
Legal Mandatory May or may not be
enforceability
• Agreement
• Intention to create legal relations
• Lawful consideration
• Capacity of parties
• Genuineness of consent
• Lawful object
• Certainty and Possibility of performance
• Agreements not expressly declared void
• Legal formalities
 Void agreement 2(g):-
•An agreement not enforceable by law is void.
Voidable contract 2(i):- An agreement is a voidable
contract,
•if it is enforceable by Law at the option of one or more
of the parties there to (i.e. the aggrieved party), and it
is not enforceable by Law at the option of the other or
others.
Void contract 2(j) :-
•A contract which ceases to be enforceable by Law
becomes void when it ceases to be enforceable.
 Difference Between Void and Voidable Contracts
Point of Void contract
differenc
e
Definition A contract, which ceases to
be enforceable by law,
becomes void when it
ceases to be enforceable
[Section 2 (j)].
Nature & A void contract is valid and
validity binding upon the parties
when entered into, but
subsequent to its formation,
it becomes unenforceable
due to certain reasons.
Voidable contract
A voidable contract is an
agreement which is
enforceable by law at the
option of one or more of the
parties thereto, but not at the
option of the other(s) [Section
2 (i)].
A voidable contract is rejected
at the option of the aggrieved
party. It remains a valid
contract until it is set aside or
rescinded by the party entitled
to do so.
Factors A valid contract may Coercion, undue influence,
responsible become void due to fraud, misrepresentation are
supervening impossibility; the main factors responsible
change of law; a for rendering a contract
contingent contract due voidable.
to emergence of an
uncertain event etc.

Enforceability It cannot be enforced by It may be enforced or set

either party. aside at the option of the
aggrieved party.
Rights of third A void contract confers Rights acquired under voidable
party no rights or legal contract by an innocent third
remedies to the third party are not wiped out by
party. such subsequent avoidance of
the contract.
Compensation In case of void contract In case of voidable contract,
question of the party rescinding the
compensation or contract can also claim
damages does not arise damages.
on the
non-performance of
such contract.
Effect of lapse Lapse of reasonable If a voidable contract is not
of time time does not render a rescinded by the aggrieved
void contract party within reasonable time it
enforceable. It always may become enforceable at
remains void i.e., the option of the other party
unenforceable. (i.e, who induced the
contract).
 VOID AGREEMENT Vs. VOID CONTRACT
Differentiating VOID AGREEMENT VOID CONTRACT
Features
Meaning Void agreement refers Void contract
to an agreement implies a valid
which as per law, is contract, that
unenforceable and has ceases to be
no legal enforceable by law,
consequences. becomes a void
contract, when it
lacks enforceability.
Void ab-initio It is void from the very It is valid at the
beginning. beginning but later
on becomes void.
Period of validity It is never valid. It is valid, till it does
not cease to be
 VOID AGREEMENT Vs. VOID CONTRACT
Prerequisite of When the agreement is
contract created, all the
prerequisite of the
contract are not
satisfied, thus making it
void.
Restitution In general, restitution is
not allowed, however,
the court may grant
restitution on equitable
grounds.
Causes Due to absence of one of
more essentials.
When the contract is
entered into, all the
prerequisite of the
contract are satisfied,
which due to certain
circumstances,
subsequently becomes
void.
Restitution is allowed
when the contract is
discovered as void.
Due to impossibility of
performance.
 Unenforceable contracts and illegal contacts

• A contract can be unenforceable by law due to

some technical errors in the documentation
such as – wrong name of the parties, wrong
stamp paper, unclear/missing signature, terms
and conditions are not mentioned clearly.
• A contract become illegal when it is made for
an unlawful purpose. Either the purpose or
the consideration is not permissible by law.
• Both will be void agreement.
 Executed contracts and executory contracts

• A contract in which both the parties have already performed

their obligations and there is nothing left to perform is called
as executed contract. E.g. purchased grocery and payment
made, purchased vegetables and payment made.
• A contract in which both the parties or any of the party are
still performing their obligations is called executory contract.
Such as- admission fee paid in july but education will be
provided till December, a 5 year loan took from bank today
but the repayment will be made in next 5 years.
 Expressed contracts and implied contracts

• A contract where the terms and conditions are

expressed in verbal or written form if express
contract.
• A contract where the terms and conditions are
not expressed but implied with the action of
either of the parties is implied contract. Such
as purchase of train ticket, bus ticket, food
token, etc.
 Unilateral contracts and bilateral contracts

• A contract in which only party has performed

its obligations is unilateral contract. The other
party will be performing their obligations at
some future date.
• A contract in which both the parties have to
perform their obligations at some future date
is bilateral contract.
 Quasi contracts

• A contract where there is no previous

agreement between the parties but due to
some specific situations the parties have to
perform their obligations towards each other.
Such as finder of lost goods, supply of
necessities to minor/unsound mind person
etc.
An offer is a medium through which a person
expresses his intention to enter into a contractual
obligation against a promise or an act of
forbearance.
When one person signifies to another person his
willingness to do or to abstain from doing
anything, with a view to obtaining the assent of
that other to such an act of abstinence, he is said
to have made a proposal. Section 2(a)
Offer Vs Invitation to Treat/Offer
Offer Vs Invitation to Treat/Offer
Offer Vs Invitation to Treat/Offer
 Kinds of Offer

1. Express Offer: When an offer is made by

words spoken or written it is called an express
offer.
2. Implied Offer: When an offer is implied by
conduct of parties or circumstances of the case
it is called an implied offer.
3. General Offer: When an offer is made to the
public at large it is called general offer. This offer
may be accepted by anyone. For example, an
offer to give reward to anybody who finds the
lost mobile is a general offer.
4. Specific Offer: Specific offer is an offer, which
is made to a specific or an ascertained person. In
this case, the person to whom the offer is made
is only liable to accept the offer.
 5. Counter Offer: Counter offer by the offeree
terminates the original offer. When in place of
accepting the terms of an offer as they are, the
offeree accepts the same subject to certain
condition or qualification, then a counter offer is
said to be made.
•A made an offer to B. instead of accepting the
offer made by A, B made another offer to A.
6. Cross Offer: Where two parties make
identical offer to each other, in ignorance of
each others offer, this offer is termed as cross
offer. In this case, there is no contract because
out of the two parties no one can be called for
acceptance.
7. Standing Offer: When an offer is allowed to
remain open for acceptance over a period of
time, it is called standing, open or continuing
offer. Tenders are the example of standing offer.
 Differentiating
Sl No Cross Offer Counter Offer
Features
01 Knowledge of Offer Both the parties are not Both the parties are
aware of the offers made aware of offers made by
by each other each other
02 Similarity of Offer Normally both the offers Both the offers are
are similar different
03 Existence Both the offers remain in Original offer dies once
existence for acceptance the counter offer is
by the other party made
04 Offer Status No new offer is created Counter offer amounts
to new offer
05 Acceptance Both the offers await the The counter alone
acceptance by the other requires the acceptance
party
 An acceptance is a manifestation of assent to the
terms of the offer.
When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted. A proposal, when accepted,
becomes a promise. Section 2(b)
Acceptance to an offer is a lighted match to the
train of gunpowder.
Thus, an offer becomes irrevocable upon its
acceptance.
• Must be made by the offeree
• Must be unconditional
• Must be communicated to the offeror
• May be in any form, oral or written
• Must be in the mode prescribed by the offeror
• Must be given within a reasonable time, if no
time limit is set
• Must be given while the offer is in force
 Consideration
• Consideration 2(d):-
• When at the desire of the promisor,
• the promisee 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 something
• such act or abstinence or promise is called a consideration for the
promise.
• Technical word meaning QUID-PRO-QUO i.e. something in return.
• Both the parties are giving something to each other and getting
something from each other.
 LEGAL RULES FOR CONSIDERATION

1. Consideration must move at the desire of the promisor:

2. Consideration may move from the promisee or any other
party:
3. Consideration may be Past, Present, or Future:
4. Consideration need not be adequate but should be sufficient:
5. Consideration must be real and not illusory:
6. Consideration must be something which the promisor is not
already bound to do:
7. Consideration must be lawful:
CONTRACTS WHICH ARE VALID WITHOUT
CONSIDERATION/EXCEPTIONS TO CONSIDERATION

1. Agreement made on account of natural love and affection [Sec.

25(1)]:
2. Agreement to compensate for past voluntary service:
3. Agreement to pay a time-barred debt:
4. Completed gift:
5. Contract of agency:
6. Remission by the promisee, of performance of the promise:
7. Contribution to charity:
8. Bailment (gratuitous):
9. Guarantee:
10. Contracts with seal:
 Stranger to contract and stranger
to consideration
• A stranger to a contract is one who is not a party to the
contract.
• A stranger to a consideration is one who is not a party to the
contract but receives the benefit/consideration through
either party.
Privity of Contract
The doctrine of Privity implies that, in general, a person who
is not privy to a contract, that is a third party, can neither sue
nor be sued on the contract. The rule prevents the burden of
a contract being imposed on a third party. Therefore, a
stranger to the consideration must be distinguished from a
stranger to a contract.