Law of Contract 1872

Learning Objectives
• Definition of Contract
• The Essential Elements of Contract
• Offer and Acceptance
• Free consent
• Consideration
• Void and Void able Agreements,
• Capacity of the Parties,
• Remedies for breach of contract.
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Contract Meaning
“Section 2(h) of the Contract Act of 1872 enforceable in
Bangladesh provides that, “An Agreement
enforceable by law, is a contract". Therefore, in a
contract there must be (1) an agreement and (2) the
agreement must be enforceable by law.
• An, agreement comes into existence whenever one
or more persons promise to one or others, to do or
not to do something, “Every promise and every set
of promises, forming the consideration for each
other, is an agreement-Sec. 2(e).
• Some agreements cannot be enforced through the
courts of law, e.g., and agreement to play cards or
go to a cinema. An agreement, which can be
enforced through the courts of law, is called a
contract.
 Elements of Contract
• There must be a lawful offer by one party and a lawful
Offer and acceptant of the offer by the other party or parties. The
Acceptance adjective “lawful” implies that the offer and acceptance must
conform to the rules laid down in the Act of 1872

• There must be an intention among the parties that the agreement shall result in or create legal
Intention to relations. An agreement to dinner at a friend's house is not an agreement to create legal relations.
create Legal But an agreement to buy and sell goods or an agreement to marry, are agreements intended to
Relationship create some legal relationship

• Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it
Lawful give something and gets something. An agreement to do something for nothing is usually not
Consideration enforceable by law. The something given or obtained is called consideration (See ch.4
 Elements of Contract
• In order to be enforceable, an agreement must be based on the free consent of
Free all the parties. There is absence of genuine consent if the agreement is induced
Cons by coercion, undue influence, mistake, misrepresentation, and fraud
ent:

Legali • The object for which the agreement has been entered into must not be illegal,
ty of
the immoral or opposed to policy. (See ch.8)
Objec
t:

• The agreement must not be vague. It must be possible to ascertain the meaning
Certai of he agreement, for otherwise it cannot be enforced. (See ch.8)
nty:

Possi • The agreement must be capable of being performed. A promise to do an

bility
of impossible thing cannot be enforced (See ch.8)
Perfo
rman
ce:
 Elements of Contract
Vo
id
• An agreement so made must not have been expressly declared
Ag
re to be void.
e
m
en
t:

Writi
ng,
• An oral contract is a perfectly good contract, except in those
Regis
tratio
cases where writing and/or registration is required by some
n and
Legal
statute.
Form
alities

• The parties to an agreement must be legally capable of entering

Capacit
into an agreement, otherwise it cannot be enforced by a court of
y of
Parties
law.
 Formation of Contract

Proposal Offer Acceptance

• An “offer” involves the • A proposal is also • Once it is agreed by
making of a “proposal”. called on offer. The other party to whom
The term proposal is promisor or the person offer is placed.
defined in the Contract making the offer is
Act as follows: “When called the offeror. The
one person signifies to person to whom the
another his willingness offer is made is called
to do or to abstain the offeree.
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”.
 Formation of Contract-Example

• All contracts are made by the process of:

 a lawful offer by one party and the lawful acceptance
of the offer by the other party.
Example: X says to Y, “Will you buy my house for
Tk.50,000?” This is an offer. If Y says, “Yes”, the offer is
accepted and a contract is formed with documentation.
 Rules of Offer & Acceptance

Rules of
Rules of Offer Acceptance

1. It must be an absolute and unqualified

1. An offer may be express or may be acceptance of all the terms of the offer.
implied from the circumstances.
Conditional Acceptance: ; Contracts subject to
2. An offer may be made to a definite condition.
person; to some definite class of persons.
Clarification: The acceptance must be
3. Legal relationship is required. expressed in some usual or reasonable
4. The terms of the offer must be certain, manner.
definite, unambiguous and not vague. The mode of acceptance: Mental acceptance
5. A mere statement of intention is not an or uncommunicated assent does not result in a
offer. contract.
6. An offer must be communicated to the Time of Acceptance. When acceptance is
offeree. An offer may be conditional. complete.
7. Printed Contracts. Before Offer: The acceptance must be made
while the offer is in force.
 Considerations

• Consideration is an essential element in a contract.

Without consideration a contract cannot be made. It is
indicates the terms and condition of a contract.
• The key point of consideration is called “exchange of
what?
• “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
abstained from, doing, something, such act or abstinence
or promise is call a consideration for the promise.”
 Rules of Considerations
• Desire or request of the promisor is essential.
• The consideration must be real.
• It must serve a public duty.
• Consideration need be adequate.
• The consideration must not be illegal, immoral, or
opposed to public policy.
• The consideration may be present, past, or future.
• Consideration may move from the promisee or from
any other person.
 No Consideration no Contract
Without consideration there may not be any contract.
Consideration is essential for making a valid contract.
According to our Contract Act if any person proposes
anything other party to contract must accept it or reject
it. If he accepts it he must give some monetary value to
the other party in exchange of taking the delivery of
goods. This monetary value is called consideration.
Exception to the Rule “No Consideration no Contract”
• Natural love and affection
• Agency theory: Representation
 Natural love and affection

If an agreement is in writing and registered between two parties in close

relation (like blood relatives or spouse), based on natural love and
affection, then such an agreement is enforceable even without
consideration.
Example: Father, in natural love and affection, promises to give his son
1,000. father puts his promise into writing and registers it. This is a
contract.

In the case of Rajlakhi Devi V. Bhootnath: Husband promised to pay to

his wife, after constant quarrels between them, a fixed monthly amount
for her maintenance and separate residence without any consideration.
The promise was in writing and registered. When he refused to pay, the
wife filed a case.
The agreement was declared void by the Court on the ground that the
exception was not applicable as there was no natural love left between
them.
 Agency theory: Representation

• Management took some decisions which

results in their financial benefit but
reduction of share price. In this situation
they violated the principles of agency
theory. Therefore, shareholders can take
legal actions.
 Void and Voidable
• Meaning: “An agreement not enforceable by law is said to be
void.” A void agreement has no legal effect. It confers rights on
any person and creates no obligations. – Sec. 2(g):
Agreements which become voids
• Every agreement in restraint of the marriage of any person other than a
minor, is void.
• Every agreement by which anyone is restrained from exercising a lawful
profession, trade or business of any kind, is to that extent void.
• Act Private individuals cannot by agreement alter or vary their personal
law or the Statute law.
• The meaning of which is not certain, or capable of being made certain, are
void.
• Agreements to do an act impossible in itself are void.
• Agreement whose objects or considerations are unlawful are void.
 Voidable

•“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 or
others, is a voidable contract.” – Sec. 2(i).
”Until it is declared void by the affected parties”. The affected party
has to raise the claim. I.e. undue influence, fraud, coercion.
Illegal Agreement
An Illegal Agreement is one which is against a law in force in
Bangladesh: an agreement to commit murder, robbery or cheating.
Valid Contract
An agreement which satisfies all the essential elements of a contract,
and which is enforceable through the courts is called valid contract.
 Capacity of Parties

•Capacity means completeness of the parties to enter

into the valid contract.
As per section 10 of contract law:
“ An agreement becomes a contract if it is entered into
between the parties who are competent to the contract”.
Every person is competent to contract who is of the age
of majority according to the law to which he is subject,
and who is of sound mind, and is not disqualified from
contracting by any law to which he is subject.
 Capacity of the Parties

• From Section 11 it follows that a person is incapable of

entering into contract under the following circumstances:
 If he has not attend the age of majority according to the
law to which his subjects
 If he is not of sound mind
 If he is disqualified from contracting by any law to which he
is subject.
 Aliens: a citizen of foreign country
 Foreign Sovereigns: any foreign estate.
 Company and Corporations:
 Professional Person: In the name of profession.
 Free Consent

An agreement is valid only when it is the result of the

“free consent” of all the parties to it.
The Law of contract less down that the consent is not
free if it is caused by the following ways:
 Coercion
 Undue influence
 Misrepresentation
 Fraud
 Mistake
 Disqualification for contract
• Who is not in the age of maturity. In Bangladesh it is 18
Mino years.
rs

• Who is a mental disorder

Unso
und • If sometimes/Interval good condition, is eligible to contract
mind

Disq • If the person is disqualify by any law or causes

ualify
by • Example: person who holding the trust property
any
law

• Also called foreign sovereigns.

Amb
assa • But they cant be sued with prior permission of Government
dor
 Disqualifications of Contract

• Person who sentenced to punishment by law/court

Convic • He is not capable to contract till sentence period
t/
Koedi

• When the person or the body is adjudged as insolvent by law or order

Bankr
upt

• Also called corporations

Artifici • If it is not legally formed cannt be sue or to be sued.
al • It has right as person a but it has limitation for example it cannot marry
perso
n
 Remedies for Breach of Contract
Monetary A money damage award includes a sum of money that is given as
Damage compensation for financial losses caused by a breach of contract. Example:
If a company deliver wrong furniture
** The Damage can be partial of full depend on Contract nature
Restitution Restitution is a remedy designed to restore the injured party to the
position occupied prior to the formation of the contract. Example:
Returning One asset of party as it was prior to contract
Rascission Rescission is the name for the remedy that terminates the contractual
duties of both parties. Example: Enter into contracts by mistake, fraud,
undue influence or related caused which terminate the contract
Reformation Reformation is the name for the remedy that allows courts to change the
substance of a contract to correct inequities that were suffered.

Specific Specific performance is an equitable remedy that compels one party to

Performance perform, as nearly as practicable, his or her duties specified by the
contract. Example: when monetary compensation is not possible.
 Suggestion-Q&A

• Please be advised to all “ Not to rely only on class

slides”
• We advise to use Books, Internet, google and all other
sources