Agreement:

An agreement can be defined in several ways. One of the most common definitions of an
agreement is:

‘Harmony in thought or opinion, correspondence: an agreed settlement between two people.’

However, a more refined and accurate definition is stated in the Oxford Encyclopedic Dictionary
© 1991 as to be:

“The act of agreeing; the holding of the same opinion or a mutual understanding.”

The definition focuses on the words ‘opinion’ and ‘mutual understanding’ between two or more
parties. This definition in-depth the focal point of how an agreement comes into play and where
it is to be called an agreement.

Law requires that terminologies be defined specifically and exact to convey a universal meaning
to all in order for everyone to understand them. A more precise and detailed definition is present
in the Black’s Law Dictionary. It states an agreement to be:

“A mutual understanding between two or more persons about their relative rights and duties
regarding past or future performances; a manifestation of mutual assent by two or more
persons. The parties’ actual bargain as found in their language or by implication from other
circumstances, including course of dealing or usage of trade or course of performance.”

The definition present here by the Black’s Law Dictionary shows that any understanding
between two or more parties towards a mutual understanding in relation to time with assent from
the parties is what can be called an agreement.

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Contract:

When any agreement that is enforced by law, then that agreement automatically converts into
being a contract between two or more parties. The essentials of an agreement enforced by law
must consist of the following to become a valid contract as stated in the Contract Act 1872:

(a) intention to create a contract; 

(b) offer and acceptance; 

(c) consideration; 

(d) capacity to enter into a contract; 

(e) free consent of the parties; 

(f) lawful object of the agreement;

Another definition of contract that is provided by the Black’s Law dictionary states:

“An agreement between two or more parties creating obligations that is enforceable or
otherwise recognizable at law.”

This shows that any agreement that is enforced or recognizable by law becomes a contract
between the concerned parties. The essentials of a valid contract on the other hand set the
conditions and limit the circumstances for parties to understand who and how it is to be
executed.

These essentials of a contract convey to concerned parties going into a contract as to who intends
to create the contract, what is offered and is it accepted, the considerations, are both parties
viable for the contract and have a free consent, and overall the lawful object of the agreement. It
is through these essentials that the law has clarified all aspects regarding the contract and for it to
remain transparent and feasible for concerned parties to achieve their goals with helping each
other. Not only does it clarify the essentials but also provides as to who can and cannot enter into
an agreement and without any coercions on either parties.

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In order for one to understand the essentials of the contract better, the following are explained:

Consideration: Without consideration, any agreement is void. Hence, consideration is defined to

be:

"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 abstains from doing, something,
such act, abstinence, or promise is called a consideration for the promise."  

Competence of concerned parties: Any person who has an age of majority, a sound mind and
does not disqualify from contracting under law is consider to be competent enough for entering a
valid contract. The person should be 18 years old or in some cases be 21 years old.

Consent: The parties are viable to go into a contract if there is no undue influence, force,
intention for fraud, or misrepresentation. If so be the case then the law would protect the weaker
parties and make them prove that no undue influence was used. The law does void an agreement
consisting of a mutual mistake. However, it does not void any agreement with a unilateral or
mistake of law agreement.

Unlawful Agreements: When an agreements consideration is unlawful then that agreement is

void. Any agreement is unlawful if it is forbidden by law or it is opposes the law and involves
injuring a person or anything that the courts regard as immoral or opposed to public policy.

Persons bound by the Contract: Promises bind the promisors and in case of death of promisor
(before performance) their legal representatives, unless there is contract to the contrary, or the
nature of the contract is such that it depends upon the personal qualifications of any party. 

Offer and Acceptance:

The offer and acceptance are the most essential part of any given contract as they represent the
obligation of a party for providing services to benefit both parties in reaching out certain goals. If
there is no offer then surely there cannot be any contract and the same is the case if the
acceptance of an offer is not made. Without the acceptance of the offer, the contract cannot come

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into execution and therefore without the offer and acceptance, no contract is complete. In law,
the contract needs to be to litigated through:

(a) Whether there has there been an offer at all in the particular case, or whether there is
something less than an offer; 

(b) If there is an acceptance; whether it is in the proper form;  

(c) Whether there has been an acceptance of the offer; 

(d) Whether the acceptance has been communicated to the offeror.

These points show how the offer and acceptance need to build a contract between two or more
parties and encircle the bounds by which a contract comes into engaging itself between the two
parties.

Concept of Offer:

An offer cannot be defined and needs to be generally expressed and understood by words or
actions of a willingness to go into a contract as quickly as it is accepted by the person to whom it
is made (offeree).

Offer by & to Whom:

Any person can make an offer that is legally competent to attain a contract or someone on his
behalf who is authorized by him to make that offer. It is made to the ‘offeree’ or the person to
whom it is made or a number of persons in order for the contact to have two or more parties. As
earlier mentioned the contract must be between those who have an age of majority (18years or
above), have a sound mind, and are legally fit.

Statements that are not Offers:

Every statement of intention is not an offer. A statement must be made with the intention that it
will be accepted and will bind a contract. Following are not offers:

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(a) Statement made during negotiation, without indicating that the maker intends to be bound
without further negotiation.  

(b) A statement which invites the other party to make an offer (e.g., a notice inviting tenders).  

(c) Statement of lowest price.

Termination of offer 

An offer can also be terminated if it is not accepted in its due time. The offers may standout as
some parties clearly indicate that their statements represent offers. Until an offer is established, it
creates no legal rights and it may be ended at any time in a variety of ways. Principal modes of
termination of an offer are: 

(a) the offeror revoking (or withdrawing) it before acceptance;  

(b) the offeree rejecting the offer outright or by making a counter-offer; 

(c) by lapse of time, if the offer is stated to be open only for a fixed time; 

These are the basic three factors that are involved in the termination of an offer. The offer can be
revoked, rejected, or lapsed by time.

Quality of acceptance 

Acceptance of an offer must be absolute and must correspond with the terms of the offer. This
rule is a key constituent of the basic premise, does not always accord with the realities of
complex business contract negotiations today. Such negotiations may indeed proceed through a
series of proposals, counter-proposals, withdrawals, variations and qualifications, before
agreement (or otherwise) is reached. When parties carry on lengthy negotiations, it may be hard
to say exactly when an offer has been made and acceptance.

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Special Contracts:

Contract of Indemnity:

Indemnity is defined in the Contract Act 1872 as the following:

“A contract, by which one party promises to save the other from loss caused to him by the
conduct of the promisor himself, or by the conduct of any other person, is called a contract
of indemnity”.

The contract of indemnity basically states that a party is to compensate for the losses or provide a
collateral/security against loss in case of loss. The person promising to save the other person is
called indemnifier and the person under his security is called the indemnity.

Contract of Guarantee:

The Contract of Guarantee comes under the Section 126 of the Contract Act 1872. It states:

“A ‘contract of guarantee’ is a contract to perform the promise, or discharge the liability of

a third person in case of his default. The person who gives the guarantee is called the
"surety"; the person in respect of whose default the guarantee is given is called the
"principal debtor", and the person to whom the guarantee is given is called the "creditor." A
guarantee may be either oral or written.”

The Contract of Guarantee involves three parties. One being the principal debtor, the second
being surety and the third being creditor. In case where the principal debtor defaults, the surety is
viable to pay to the creditor. However, the surety is also protected under the law to recover the
amount from the principal debtor which he has lawfully paid to the creditor on his behalf. The
surety is only viable to cover the losses on the behalf of the principal debtor once the contract
matures. However during the contract is discharged, either its terms and conditions have been
amended or creditor has provided more time to principal debtor to settle his debts.

Contract of Bailment:

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‘Bailment’ is considered to be the delivery of goods/items from one person to another for a
certain purpose with a contract that they are to be returned once that purpose has been fulfilled or
otherwise disposed of according to the directions of the person delivering them. The person
delivering the goods is called the ‘bailor’ and the person to whom they are delivered is called the
‘bailee’.

If the person who is already in possession of goods regarding certain contract to hold them, then
he is automatically called the ‘bailee’ and the owner of those goods is the ‘bailor’, of goods that
might not have been delivered the by way of bailment. This is concerned with the Section 148 of
the Contract Act 1872.

The delivery to the bailee is caused by putting goods in his possession. The delivery is anything
that has the effect of putting goods in the hands of the bailee or any person authorized on his
behalf. The constitutes of a possession include:

 Actual or potential physical control

 Intention to exercise control
 External and visible signs of possession

If the goods have faults or technicalities that may interfere with the bailee’s purpose than the
bailor is bound to disclose them to the bailee before they are delivered, otherwise he is
responsible for faults that may occur. The bailor is also to disclose any extraordinary risks and if
the goods are bailed for hire and have faults that are not known to the bailor, and then he is also
held responsible for the goods bailed. This is in accordance with the Section 150 of the Contract
Act 1872.

In any case, the bailee is to take care of them to the full extent and failure in taking care of goods
would lead the bailee to be responsible for the destruction or deterioration. In the contract of
bailment, the bailee cannot receive remuneration and the bailor has to indices all expenses
incurred by him for bailment. The bailee must return the goods according to the directions and
guidelines without any demand from the bailor once they bailment period has expired.

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Pledge:

Any bailment of goods for a security to pay a debt or promise of a performance is called pledge.
The bailor is called the ‘pawnor’ and the bailee is called the ‘pawnee’. The ‘pawnee’ is entiled to
receive any payments from the ‘pawnor’ that may have occurred as expenses to him for the
safeguard of goods. The pawnor can bring in a lawsuit in case of a default payment at a given
time stated in the contract and can retain goods that were pledged as security or collateral. If the
value of collateral is less than the balance, the pawnee is still viable to payback the amount until
it is equal.

Contract of Agency:

An agency is stated as in Black’s Law Dictionary to be:

“A fiduciary relationship created by express or implied contract or by law, in which one party
(the agent) may act on behalf of another party (the principal) and bind that other party by words
or actions.”

In the Contract of Agency, an agent represents for another party and has rights to deal with third
persons to bind with principal party and act as an intermediary for consideration. However, an
agency has to deal with the property as not the agents but belonging to the principal party. Any
agent has to follow the guidelines given by the principal party and carry out best possible
solutions in the interest of the principal party. The agent should communicate with the principal
in case of difficulties and obtain any commands directed to him from principal.

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