CONTR ACT-I (GENERAL PRINCIPLES OF CONTRACT)

UNIT I

BA LLB III SEM

FACULTY- MS. SADIA ZEB

 INTRODUCTION TO CONTRACT LAW

A modern industrial society is primarily built upon the fabric of ‘Contract’. The relational integration and determination
of mutual rights and obligations to a great extent, are dependent on ex contractum (out of contract) terms. There is
contract around, between employer and the employees, producers and distributors, vendors and the customers, carrier
and the buyer of services and the like. Even family relations also start with contract, marriage being either a contractual
relation or similar to it.

The very basic principle of market functioning in the early period of mercantilism and industrialisation was laid down
on the efficient functioning of contractual relation by relative assessment of rights and duties arising out of a contract.
In a modern state, government is also becoming a very important party in contractual relations.

 
It is, therefore, necessary to understand how and when parties enter into such a contract in order to examine their
mutual rights and obligations, and the time of origination of such rights and obligations. The Indian Contract Act,
1872 codifies the legal principles that govern ‘Contracts’. The Act basically identifies the ingredients of a legally
enforceable valid contract in addition to dealing with certain special type of contractual relationships like indemnity,
guarantee, bailment, pledge, quasi contracts, contingent contracts etc.
 MEANING OF CONTRACT

An understanding is made between two-person or more than two people when one party is prepared to offer
something, and another party acknowledges it with the rise to contemplations. Both parties must concur on the same
thing, and they are on the same page.

Let us take an example; A offers Rs.1,00,000/- for B’s plot of arrival, and B accepts it. There is an understanding
between A and B.

An agreement enforceable by law is called a contract. It is characterized beneath Section 2 (h) of the Indian
Contract Act, 1872.

Let us take an example; Varun promises his younger sibling Anuj to pay his obligations, and the agreement was in
writing as well as registered. Such is a valid agreement or contract and can be enforceable.
So, we can say that contract is an agreement between two or more parties to do or abstain from doing something.

According to Anson, “the law of contract is that branch of law which determine the circumstances in which a
promise shall be legally binding on the person making it.” So, if we examine the definition of contract, then we can
see the two important things for the formation of a contract. Firstly, there is an agreement and secondly the
enforceability of that agreement.

Contract= Agreement + Enforceability

For eg: There is an agreement between A and B that A will construct a house for B, and B will pay Rs.10 lakhs to A.
The agreement between A and B is a contract because it is enforceable by law.
 PURPOSE OR OBJECIVE OF CONTRACT LAW

Law of contract is the most important branch of mercantile law. It determines the circumstances under which
promises made by the contracting parties shall be legally binding on them. It specifies the remedies that are
available against a person who fails to perform the contract entered into by him, in a Court of law. It also defines
the conditions under which the remedies are available. The law of contract is essential to carry on trade or
commerce smoothly, because it introduces definiteness in the business transactions. It does not mean that it affects
only the business people. It affects the entire society. That is, it affects all of us in one way or the other. Every one
of us enters into a number of contracts from morning to night. When a person purchases a book, or goes to cinema,
or gives his car to the mechanic for repair etc., he enters into a contract.

 
The objective of the Contract Act is to ensure that the rights and obligations arising out of a contract are honoured and
that legal remedies are made available to an aggrieved party against the party failing to honour his part of agreement.
The Indian Contract Act makes it obligatory that this is done and compels the defaulters to honour their commitments.
According to Sir William Anson. “The objective of law is to maintain order because only in a state of order can a man
feel safe and secure.” Hence, the Contract Act is considered as the most important factor in legal environment.