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Introduction To Contracts

Contracts are legally binding agreements that govern aspects of our everyday lives like employment, home rentals, and mortgages. A contract is defined as an agreement between private parties that creates mutual legal obligations. The key elements of a valid contract are offer and acceptance, intention to create a legal relationship, capacity to contract, genuine and free consent, lawful object, lawful consideration, certainty of terms, and compliance with any legal formalities. A written contract typically specifies the parties, date, terms, goods/services, payment, signatures, and acknowledgment of agreement to the terms.

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76 views4 pages

Introduction To Contracts

Contracts are legally binding agreements that govern aspects of our everyday lives like employment, home rentals, and mortgages. A contract is defined as an agreement between private parties that creates mutual legal obligations. The key elements of a valid contract are offer and acceptance, intention to create a legal relationship, capacity to contract, genuine and free consent, lawful object, lawful consideration, certainty of terms, and compliance with any legal formalities. A written contract typically specifies the parties, date, terms, goods/services, payment, signatures, and acknowledgment of agreement to the terms.

Uploaded by

Shreya Verma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Introduction to Contracts

Contracts are in every aspect of our everyday lives. When you rent a home, you have to abide by
the terms of a lease. If you have a mortgage on your home, you essentially have a contract with
your bank to pay back the money they lent you. When you go to work, the terms and conditions
of your employment are likely outlined in a written employment contract. 

What is a contract? - An agreement between two private parties that creates mutual legal
obligations. A contract can be either oral or written.

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as
“An agreement enforceable by law”. In other words, we can say that a contract is anything that is an
agreement and enforceable by the law of the land.

Types of Contracts:
Elements of a contract:

 Offer and Acceptance


Basically, a contract unfolds when an offer by one party is accepted by the other party .
The accepted offer should be without any qualification and be definite. An offer needs to
be clear, definite, complete and final. It should be communicated to the offeree. A
proposal when accepted becomes a promise or agreement. The offer and acceptance must
be ‘consensus ad idem’ which means that both the parties must agree on the same thing in
the same sense i.e. identity of wills or uniformity of minds.
 Intention to Create Legal Relationship
The intention of the parties to a contract must be to create a legal relationship between them.
Agreements of social nature, as they do not contemplate legal relationship, are not contracts. 
 Capacity to Contract
If an agreement is entered between parties who are competent enough to contract, then the
agreement becomes a contract.
 Genuine and Free Consent
Free consent is another essential element of a valid contract. An agreement must have been
made by free consent of the parties. The contract would be void in case of mutual mistakes.
When consent is obtained by unfair means, the contract would be voidable.
 Lawful Object
Objectives of an agreement should be lawful. It must not be illegal or immoral or opposed to
public policy. It is lawful unless it is forbidden by law. When the object of a contract is not
lawful, the contract is void.
 Lawful Consideration
Something in return is Consideration. In every contract, agreement must be supported by
consideration. It must be lawful and real. There are various rules governing the law of
consideration:

1. It must not be a past consideration.

2. It might be a sufficient consideration but it does not have to be sufficient.

3. The consideration must come from the side of the promisee.


4. A valid consideration will not amount to an existing public duty.

5. A valid consideration will not amount to an existing contractual duty.

6. For a promise to forego the balance, part payment of a debt is not valid consideration

 Certainty and Possibility of Performance


The agreements, in which the meaning is uncertain or if the agreement is not capable of being
made certain, it is deemed void. T&C of the contract should always be certain and cannot be
vague. Any contract that are uncertain are considered void. The terms of the agreement must also
be capable of performance and should not enforce impossible act.
 Legal Formalities
Legal formalities if any required for particular agreement such as registration, writing, they must
be followed. Writing is essential in order to effect a sale, lease, mortgage, gift of immovable
property etc. Registration is required in such cases and legal formalities in the relevant legislation
should be strictly followed.

What does a contract look like?

A contract is often in the form of a written agreement between parties. Contracts can also be in
the form of an oral agreement but oral agreements can be much harder to prove when a dispute
arises. A typical form of a written contract contains information such as:
 the names of the parties to the contract;
 when and where the contract was made;
 terms and conditions that must be met by the parties;
 what service, product or good is provided;
 what is being exchanged (e.g., money) for the service, product or good that is provided;
 an acknowledgment that the parties agree to the terms in the contract; and
 the signature of the parties agreeing to the contract.

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