CONTRACT – I

(SEMESTER - I ‘A’)

Mrs. Amrita Singh

UNIT-I
 Contracts are the basis of many of our
daily activities. They provide the means
for individuals and businesses to sell
and otherwise transfer property,
services, and other rights Without
enforceable contracts, commerce would
collapse.
 “To consummate a contract there must be
mutuality as well as a meeting of the minds of
parties.” ‘Mutuality’ means equality of rights
between the parties. Either party should have
equal right to enforce the contract. For
example, where one of the parties to a contract
is a minor, there is no mutuality. Further, in a
contract there is a consensus ad idem i.e.
‘meeting of minds’. “A contract, like a tort, is
not unilateral.” In a tort, a wrong is committed
by one person against the other.
The Common Law of Contracts
The Uniform Commercial
Code
The Restatement of the Law of
Contracts
 A contract is an agreement that is
enforceable by a court of law or
equity.
 If one party fails to perform as
promised, the other party can use the
court system to enforce the contract
and recover damages or other
remedy.
 According to Anson: “A contract is a legally
binding agreement between two or more
persons by which rights are acquired by
one or more to acts or forbearances on
the part of other or others.”
 Acc. to Salmond: “It is an agreement
creating and defining obligations between
the parties.”
 Acc. to Pollock, “ Every agreement and
promise enforceable at law is contract.”
Offeror – The party who makes
an offer to enter into a contract.
Offeree – The party to whom an
offer to enter into a contract is
made.
 Note: Every contract is an agreement, but every
agreement is not a contract (i.e. legally binding
agreement). An agreement becomes a contract
when the following conditions are satisfied (Sec.
10):
1. There is some consideration for it. [Sec.2 (d)
& 25]
2. The parties are competent to contract. [Sec.
11 & 12)
3. Their consent is free. (Sec. 13-22)
4. Their object is lawful. (Sec. 23-30)
5. The agreement must not be expressly
declared to be void. (Sec. 23)
7. The terms of the agreement must not be
vague or uncertain. (Sec. 29)
8. Agreements contingent on impossible
events, void. (Sec. 36)
8. The agreement must be capable of
performance. (Sec. 56)
1. Parties must have legal capacity to enter
contracts
2. One party must make a binding offer to the other,
and the offer must be accepted by the other party
3. Consideration
4. Agreement must be genuine
5. in some cases, the contract must be made in a
particular form
6. the object of the contract must not be
disapproved by the law
1. Bilateral contract – a promise for a
promise
2. Unilateral contract – A promise for an
act
3. Express contract – A contract expressed
in oral or written words
4. Implied-in-fact contract – A contract
inferred from the conduct of the parties
1. Quasi-contract – A contract implied
by law to prevent unjust enrichment
2. Formal contract – A contract that
requires a special form or method of
creation
3. Informal contract – A contract that
requires no special form or mode of
creation
1. Valid contract – A contract that meets all of
the essential elements to establish a
contract
2. Void contract – No contract exists
3. Voidable contract – A party has the option
of voiding or enforcing the contract
4. Unenforceable contract – A contract that
cannot be enforced because of a legal
defense
1. Executed contract – A contract
that is fully performed on both
sides.
2. Executory contract – A contract
that is not fully performed by one
or both parties.
 Test of contractual intention is objective, not
subjective. Merely because the promisor
contends that there was no intention to create
legal obligations would not exempt him from
liability.
 In McGregor v McGregor (1988), a husband
and a wife withdrew their complaints under an
agreement by which the husband promised to
pay an allowance and she to refrain from
pledging his credit. Held that there is a binding
contract.
 In Balfour v Balfour (1919), a couple
went to England on leave. For health
reasons the wife was unable to
accompany the husband again to Ceylon
(Husband’s place of work). The husband
promised to pay 30 pounds per month to
his wife as maintenance, but he failed to
pay. The husband was held not liable, as
there was no intention to create legal
relationship.
 The daughter acting on her mother’s
promise left her service and gone to
another country for education. The
mother undertook to foot the expenses.
For five long years the daughter could not
complete her education. Differences
arose between them and the mother
stopped the payments. Held, the
engagements did result in a contract, but
only for a reasonable period.
 Agreement – the manifestation by
two or more persons of the substance
of a contract
 It requires an offer and an acceptance
 Every promise & every set of promises
forming the consideration for each-
other, is an Agreement.
 A legally binding agreement
between two or more persons
which the courts will enforce
 Generates rights and obligations
that may be enforced by courts
 Agreement arises as a result of offer
and acceptance
 “When one person signifies to
another his willingness to do job, or
to abstain from doing, anything
with a view to obtaining the assent
of the other to such act or
abstinence, he is said to make a
proposal.”
4. Intention of Obtaining Assent
The offer must be made with a view to obtain the
assent of the offeree. The offer made out of a
prank or as a joke is not valid offer, and therefore
if accepted, it can never make the valid contract.
5. May be positive or Negative
The offer may involve doing something or not
doing something-Section 2(o).The offer to do
something is a positive offer or not to do
something is a negative offer.
Agreement to the terms of an offer that,
provided other requirements are fulfilled,
converts the offer into a legally binding contract
If the method by which acceptance is to be
signified is indicated by the offeror, that method
alone will be effective
If it is not, acceptance may be either express (by
word of mouth or in writing) or inferred by the
offeree’s conduct, e.g. if he receives goods and
makes use of them
Must involve some action on the part of the
offeree.
1) it must take place while the offer is still
in force;
2) it must be on the same terms as the
offer
3) it must be unconditional
4) it must be communicated to the offeror
Acceptance: Only when all the terms of the
offer are agreed to
If you propose a change to the terms of an
original offer, you are making a new offer –
this is called a counter-offer
Counter-offer – a rejection of the original
offer; there can be no contract until the
counter-offer is accepted
THANK YOU