MEANING OF CONTRACT

 According to Section 2(h) of the Indian Contract Act, 1872. "An agreement en-
forceable by law is a contract."
 In other words, an agreement which can he enforced in a coon of law is known as a
contract.
 On analysing this definition of contract, It appears that a contract must have the
following two elements.
(a) An agreement. and
(b) Enforceability of an agreement.
 In the form of an equation, it can be shown as under: Contract = An Agreement +
Enforceability of an agreement

Now the question arises, 'What is an Agreement?' and What is Enforceability of an

agreement?

What is an Agreement

 According to Section 2(e) of the Indian Contract Act, 1872.

"Every promise and every set of promises forming the consideration for each
other is an agreement."

Now the question arises, 'what is promise?'

 According to Section 2(b) of the Indian Contract Act, 1872,

"A proposal when accepted, becomes a promise."

Example: X otters to sell his car for Rs 1,00,000 to Y. Y accepts this offer This offer after
acceptance becomes promise and this promise is treated as an agreement between X and Y.

 In other words, an agreement consists of an offer by one party and its acceptance by
the other.
 In the form of an equation, it can be shown as under.
Agreement = Offer (or Proposal) + Acceptance of Offer (or Proposal)

What is an Enforceability of Agreement

 An agreement is said to be enforceable by law if it creates some legal obligation.

 In other words, the parties to an agreement must he bound to perform their prom-ises
and in case of default by either of them, must intend to sue.
 E.g. in case of social or domestic agreements, the usual presumption it that the
parties do not intend to create legal relations.

Example: X invites his friend Y to a dinner and Y accepts the invitation. If Y fails to turn up
for dinner, X cannot go to the court to claim his loss.
  Similarly, in case of domestic arrangements, parties to agreement do not intend to sue
each other so as to make such agreements unenforceable by law,
 e.g. in Balfour v. Balfour (1919) 2 K.B. 571,
A promise by the husband to pay his wife £. 30 every month was held unenforceable
as the parties never intended it to be attended by legal obligations.
 In commercial or business agreements the usual presumption is that the parties intend
to create legal relations.

Example: X offers to sell his car to Y for As 1,00,000. Y accepts this offer. Such an agree-
ment between X and Y is a contract because it creates legal obligation the court n. In this
agreement if X refuses to sell or Y refuses to buy, the other party can file a suit in the court of
law for the breach of the contract.

Thus, in the form of a graphic representation, the contract can be expressed as under:

Contract

Agreement Enforceability of
Agreement

Offer (or Acceptance of Offer

Proposal) + (or Proposal)

Legal obligation arising out of an agreement

"The law of contracts is not the whole law of agreements."

The law of contracts is the law of only those agreements which create legal obligations (i.e.
an obligation which is enforceable by law).

An obligation is the duty to do or not to do certain act. In other words, the law of contract is
concerned with only those agreements where the parties have the intention to create legal
obligations (i.e. the parties are bound to do or not to do certain act).

In business or commercial agreements, the usual presumption is that the parties intend to
create legal obligations.

Example X offers to sell his car to Y for As 1,00,000. Y accepts this offer. In this agreement
if there is default by either party, an action for breach of contract can be enforced through a
court of law provided all the essential elements of a valid contract are present in this
agreement.

The law of contract is not the law of those agreements which do not create legal obligations.
In other words, the law of contract is not concerned with those agree-ments where the parties
do not have the intention to create legal obligations.

In social, domestic, moral or religious agreements, the usual presumption is that the parties
do not intend to create legal obligations.

Example X invites Y to dinner Y accepts the invitation but fails to turn up. Here X cannot
sue Y for damages because the parties to this agreement to not intend to create legal
obligations.

Thus the whole position may be summarised as under:

Whether the law of contract covers

S.No. Type of agreement
such agreements
Agreements where the parties intend to
Yes
1. create legal obligations, e.g. business
agreements
Agreements where the parties do not
No
2. intend to create any legal obligation, e.g.
social agreements

Thus, the law of contracts is not the whole law of agreement

"The law of contracts is not whole law of obligations."

The law of contracts is the law of only those obligations which arise out of agreements. The
law of contracts is not concerned with those obligations which do not arise out of agreements.

For example, obligation to maintain wife and children, obligation arising from judgment of
courts, obligations arising from torts or civil wrong.
Thus the whole position may be summarised as under:

Whether the law of contract covers

S.No. Type of obligation
such obligations
Obligations which arise out of Yes
1.
agreements
Obligations which do not arise out of No
2.
agreements

Thus, the law of contracts is not the whole law of obligations.

Distinction between an Agreement and a Contract

An agreement differs from a contract in the following respects:

Basis of
An agreement A contract
distinction
1. What Offer and its acceptance Agreement and its enforcea-bility
constitute? constitute an agreement constitute a contract
2. Creation of An agreement may or may not A contract necessarily creates a legal
legal obligation create a legal obligation obligation.
Every agreement need not All contracts are necessarily
3. One in other necessarily be a contract agreements
Agreement is not concluded or a Contract is concluded and binding on
4. Binding binding contract the concerned parties

Balfour vs Balfour
Case summary (1919) is a snippet to understand the theory of legal relationships easily.
Balfour vs Balfour case gave birth to the theory of legal relationship, which is essential
to forming a contract. The creation of legal relations is important, without which a
contract cannot be formed.

FACTS OF BALFOUR v. BALFOUR CASE:

 Mr. Balfour and his wife went to England for vacation. During their vacation, his wife
became ill and needed medical attention for the same.
 They made an agreement that Mrs. Balfour would remain in England and that Mr.
Balfour would go back to Ceylon and would pay £30 to her every month until he
returned.
 The particular agreement was made when their relationship was fine. Later, their
relationship got sour and her husband stopped sending her money.
 Mrs. Balfour sought to enforce this agreement. Later, they both got separated and
were divorced.
 The wife sued Mr. Balfour that he had promised to pay her money but failed to do so.
 Initially, at the first instance of the case, Justice Sargant had held that, the claims
made by Mrs. Balfour are valid and Mr. Balfour should be entitled to pay her the
maintenance which he promised to pay
 In other words, Mr. Balfour was under responsibility to support and pay his wife, and
there is a firm agreement between the two for which
 Finally, Mr. Balfour appealed in the court of appeal.

ISSUES IN BALFOUR vs. BALFOUR CASE:

1. Was there an intention by Mr. Balfour to be legally bonded?
2. Is the contract between the wife and husband valid?

CONTENTIONS: (base of debate)

Plaintiff’s contention (Plaintiff is a person who starts a legal action against somebody in
a court of law. In this case Mr. Balfour is Plaintiff )
 The appellant argued it was a domestic agreement and not a legal agreement. Mr.
Balfour never intended to make a legal relationship and a legal agreement between
the two.
Defendant’s contention (Defendant is a person who is accused of a crime in a court of
law. In this case Mrs. Balfour is Defendant)
 The defendant argued that the wife is deemed to get £30 as the husband entered a
domestic contract by offering his wife to pay £30, to which his wife agreed and
stayed back in England.

RATIO DECIDENDI:
The judges present to hear this case were Justice Atkins, Justice Warrington, and Justice
Duke. Lord Justice Atkins held that contract law is not for personal relationships and family.
There was no intention to create a legal relationship, thus there can be no legally binding
contract. Atkins added if courts were to allow wives when the contract is broken between the
two, then courts would be engaged with frivolous cases. The rest two justices agreed with
Lord Justice Atkins.

DECISION IN BALFOR CASE:

The appeal made by Mr. Balfour succeeded and the court ruled that there was no legal
relationship or any legal contract between the wife and husband. If the parties intend to create
a legal relationship can be decided by examining the circumstances under which the contract
was made and executed. Therefore, Mr. Balfour was not legally bound to pay money to Mrs.
Balfour.

CONCLUSION OF BALFOUR v BALFOUR CASE:

Studying and understanding the Balfour vs Balfour case cleared that social agreements made
between members of the family or other personal relationships will not be enforced in a court
of law. It also emphasized the importance of creating legal relationships for a contract to be
enforced. The Balfour law gave a new perspective on contract validation.

 https://lawplanet.in/balfour-vs-balfour-case-summary-1919/
 https://www.legalserviceindia.com/legal/article-4531-balfour-vs-balfour-case-
analysis-1919-2kb-571.html
 https://www.uni-trier.de/fileadmin/fb5/FFA/KURSUNTERLAGEN/Anglo-
Amerikanisches_Recht/Contract_Law/Siry_WS_2015_16/
contract_p1_balfour_v_balfour.pdf