security and stability of a business world are depend upon the law of
contract indeed the basis of trade and commerce today is the enforce
ability of promises In business transactions, where promises are very
often made at one time and the performance is to follow later there
should be a legally enforceable obligation to perform the agreements.
Legally enforceable promises are termed contracts.
The world contract comes from a Latin word “Contractus” Contractus
means consent, agreement or to enter into an agreement with a
Formal agreement between two people and groups states etc.
“The agreement which is enforceable by saw is a contract”
Ex, Sumon says to Mamun, “Will you buy my house for Tk.50000?” This is
an offer. If Mamun says “Yes”, the offer is accepted and a contract is
Case,Where A purchase property from B and the sale is fictitious A can
not recover B money paid by him to save the property from being sold in
execution of a decrease against B. Janki Prasid Singh v. Baldeo
A contract is “an agreement creating and defining obligation between the parties”
Sir William Anson
“A contract is an agreement enforceable at law made between two or more
persons by which rights are acquired by one or more to acts or
forbearances on the part of the other or others”
A contract is an agreement or convenient made between two or more
persons by which one or some of the parties acquire legal rights to
have the other parties do or to forbear to do certain acts. A contract
is an agreement and without consent there is no agreement of the
1. Professor Carbin
defines a contract as “The legal relation between persons arising from
voluntary expression of intention and including at least one right in
perform actual or potential with it's ’corresponding duty”. Article an
“Offer and acceptance and some of the resulting legal relations” (26
Yale Law January, 169).
A contract is an agreement between two or more persons for the
violation of which a court of law will give damages. There are many
agreements for the breaking of which no damages can be held, either
because the agreement can templates no legal relations or because it
ends in a relation that is not enforceable in a court of law.
Example: Tapash and Polash
mutually agree that they will meet each other at a certain place and go
to a football game together. Polash failed to keep his promise. This is
not a contract, because the agreement contemplates social not legal
Sumon in a spirit of fun offers in writing to purchase for Tk500000
Arif’s old and dilapidated automobile, which is not more than Tk10000,
and Arif jokingly accepts the offer. Should Arif attempts to collect
the money by filing suit the court would hold there is no intention to
create a legal obligation on the part of either of the parties. Hence
no damages would be awarded.
An agreement enforceable by law is a contract.[Section-2 (8)]
The word agreement has been defined as “every promise every set of
promises forming the consideration for each other”[Section-2 (5)]
The world promise has been defined as “a proposal when it is accepted”
And “when one person signifies to another his willingness to do or to
abstain from doing anything with a view to obtaining the assent of that
other to such act or abstinence he is said to make a
Thus for the formation of a contract it is necessary that one party makes a proposal and accepts it.
CONTRACTS REQUIRED TO BE MADE IN WRITING
The following contract must be in writing:
1. An agreement may be made
without consideration if it is expressed in writing and registered and
is made on account of natural love and affection between parties
standing in a near relation to each other.[Section-25 (1)]
2. If an agreement is to pay a
debt of which the creditor might have enforced payment by for the law
for the limitation of suits, it must be made in writing and should be
signed by the person to be charged with.[Section-25 (3)]
3. The memorandum of
association and the articles of association of a company incorporated
under the companies act, 1913, must be made in writing.[Section-9
(Company Act, 1913)]
4. Any contract made by a company must be in writing[Section-88 (Companies Act,1913)]
5. A sale, [Section-54
(Companies Act,1913)]. A mortgage, [Section-59 (Transfer of Property
Act)]. A lease, [Section-123 (Transfer of Property Act)]. And a
gift,[Section-123 (Transfer of Property Act)] of the immovable property
must be made in writing.
6. A trust must be created in writing.[Section-6 (Trust Act)]
7. An agreement in the form of
an acknowledgement to save the law of limitation is required to be made
in writing.[Section-19 (Limitation Act)]
8. An agreement to refer a dispute to arbitration must be made in writing.[Section-2 (Arbitration Act)]
Who are not competent to contract
Under section 11 of the Contract Act, there are two kinds of disqualification:
(a) Disqualified of infancy, and
(b) Disqualification by insanity.
Infancy: Section 3 Majority
Act, 1875, declares that every person shall be deemed to have attained
his majority when he shall have completed his age of eighteen years and
not before. In the case however, of a minor of whose person or property
or both a guardian has been appointed by a Court, or of whose property
the superintendence is assumed by a Court of Wards, before the minor
has attained the age of eighteen years, the Act provides that the age
of majority shall be deemed to have been attained on the minor
completing his age of twenty-one years. Minor’s personal law would
apply if the majority age thereunder were different.
An agreement entered in to by a minor is invalid.
A minor entered in to a mortgage and the money was advanced to him by
the money lender. It was held that the mortgage was void and the money
lender who had advanced money to a minor on the security of the
mortgage is not entitled to repayment of the money under section
64and65 on a decree being made declaring the mortgage invalid. Mohori
Bibee v. Dhurnodas Ghose, (1903) 30 Cal.539:L.R.30.I.A.114.
A guardian can make an enforceable contract of marriage for a minor (48
Bim.573, dupts.) but a Muslim widow is not competent to make a
partnership contract for her minor children. A.Khorajsaway v.
C.Acha,(1928) 6 Rang. 98.
The court may award compensation to the other party against the minor
if the latter obtained the contract through fraudulent representation
(Mohori Bibee’s case supra) but a contract will not be allowed to be
converted in to tourt. Leslie v. Sheill, (1914) 3 K.B.607.
A minor can not be stopped by a false representation as to hia age,
for, there is no estoppels against statute. Sadiq Ali Khan v. Joi
Kishore. (1928) 109.I.C. 387.
Sale in favour of minors. A
dully executed transfer by way of sale (Munni Koer v. Madan Gopal 1916)
38 All 52 Munia v. Perumal (1911) 37 Mad. 390. Or mortgage(Raghava
Chariar v. Srinivasa 1917) 40 Mad..308(F.B) Madhab Roeri v. Baikuntha
Karmakar (1919) 4 Pat. I.J. 582. Zafar Ahsan v. Zubaida Khatum (1929)
27 All.L.J.1114. in favour of a minor who has paid the consideration
money is not void, and it is enforceable by him.
Necessaries. Section 68
provides for liability in respect of necessaries supplied to a person
incapable of entering in to a contract. A minor is a person incapable
of contracting within the meaning of that section, (Walkins v. Dhunnoo
Baboo, 1881) 7.Cal 140,143) and therefore the provisions of that
section apply to his case. Thus if a minor is supplied necessaries by a
person, that person must be reimbursed from minor’s property.
Examples of Necessaries.
incurred in successfully defending a suit on be half of a minor in
which his property was in jeopardy are, “necessaries”.Watkins v.
Dhunnoo Baboo,(1881) 7,Cal,140.
(b) Cost incurred in defending a minor in a prosecution. Sham Charan Mal v. Ch. Dedya Singh, (1894) 21, Cal. 872.
(c) A loan to
a minor to save his property from sale in execution of a decree. Kidar
Nath v. Ajudhia(1883)Punj.Rec.No.185.
(d) Money advanced to minor to meet his marriage expenses. Rahima Bidi v.Sherfuddin,(1947) Mad.541.
Insanity. A person is said to
be of sound mind for the purpose of making a contract if, at the time
when he makes it, he is capable of understanding it and of forming a
rational judgement as to its effect upon his interests. As to evidence
of unsound mind see Ram Sundar Saha v.Raj Kumar Sen(1928)55Cal.285.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.
(b) A sane
man, who is delirious from fever who is so drunk that he can not
understand the terms of a contract or form a rational judgement as to
its effect on his interest, can not contract whilst such delirium or
KINDS OF CONTRACT
Contracts may be classified in terms of their form, or in terms of their enforceability, or the way they are created.
Formal and simple contracts:
Contracts are classified in terms of their form as (1) contracts under
seal (2) contracts of records, and (3) simple or parol contracts.
The first two classes are known as formal contracts, their validity or
legal force being based upon form alone. An obligation imposed by the
judgement of a court and entered upon its records is often called a
contract of record.All contracts other than contracts of record and
contracts under seal are called simple or parol contracts, whether oral
or in writing, must be supported by consideration.
A formal contract specially of English law, and is enforceable, if it
satisfies four conditions, namely,
(1) The contract must be in writing.
(2) It must be registered according to the law of registration of document.
(3) It must be between parties standing in near relation to each other.
(4) It should be proceed out of natural love and affection between the parties.
Express and implied contracts
Simple contracts may be classified in terms of the way in which they
are created as (1) express contracts and (2) implied contracts.
Express contracts: Express contracts is one in which the parties have
made an oral or written declaration of their intentions and of the
terms of the condition. In other words, an express contract is one, the
terms of which are stated in words, spoken or written.
Implied contract: Implied contract is one in which the evidence of the
agreement is not shown by words, written or spoken, but by acts and
conduct of the parties An implied contract can not arise when there is
an existing express contract on the same object
Under certain conditions the law creates and enforces legal rights and
obligations when no real contract, express or implied exists. These
obligations are known as quasi contracts. A quasi or constructive
contracts rests upon the equitable principle that a person shall not be
allowed to enrich himself unjustly at the expense of another. In truth
however it is not a contract at all. Duty and a promise or agreement or
intention of the person sought to be charged, defines it.
A valid contract is an agreement which is binding and enforceable. It
has all the essential elements to be stated and discussed later.
A voidable contract is an agreement that is binding and enforceable
but, because of the lack of one or more of the essentials of valid
contract, it may be repudiated by the aggrieved party at his option. If
the party having the right to avoid his obligation does not exercise
the right within a reasonable time, the agreement is binding and
A Void Contract:
A void contract is not really a contract at all. The term means an
agreement which is without any legal effect. Thus an agreement by a
minor is void under the Indian law.
An Unenforceable Contract:
An unenforceable contract is one which, though perfecyly valid iv all
other respects, lacks some technical requrement needed ti make it
enforceable,e.g,some necessary evidence. Such a contract will not be
enforced by the court unless until the defect is rectified. Thus
contracts for the sale of land or any interest therein must be evidence
in writing, signed by the defendant, before they can be the subject of
a successful action at law.
But such enforceable contracts are not void, and therefore if they have
been performed and property has been transferred to the court will not
intervene to set the agreement aside. Thus, if A really agrees to buy
B’s house and payes a deposit to B, then latter changes his mind and
refuses to sign a written contract to purchase the house, B will be
unable to sue A for damages or performance of the contract but will be
able to keep A’s deposit, and the court will not assist A to recover
Executed and Executory Contract:
Contracts can be classified in terms of the extent to which they
have been perform or carried out as (1) Executed contracts and (2)
Executed contract is one that has been completely performed. A contract
may be executed at once, (i.e, at the time the contract is made), as in
the case of a cash sale, or it may be become executed in the future bt
it’s terms being carried out in due time.
An executory contract is composed of undertakings in which one or both
parties under an obligation to do or not to do certain things. In other
words, under the terms of the contract something remains to be done.
For example, if an electric supply company agrees to furnish
electricity to another party for a specified period of time at a
stipulated price, the contract is executory. If the entire price is
paid in advance, the contract is still deemed executory on the other.
Bilateral and Unilateral Contract :
An agreement may originated in one of the several ways. First, there
may be an offer of a promise and a simple assent. This is possible only
when the promise is under seal or of record. This way or mode of making
contract is applicable in English law and not in Indian law. Second way
in which there may be an offer of an act for a promise, as when a
public omnibus by running on it’s route makes an offer of it’s services
for the promise of the one entering to pay his face. Third there may be
an offer of a promise for an act, as one promises to pay a specified
sum for the performance of an act, such as the returning of lost goods.
Fourth, an agreement may originated in an offer of promise for a
promise, as when one person offers to pay Rs.100 in return for the
promise of another to paint his car. The first three methods result in
Unilateral contracts, because in each instance there is an obligation
to perform on the part of only one party. The fourth or last method
creates a Bilateral contract, in that there is an obligation on the
part of both to do or to refrain from doing a particular thing. In the
case of a unilateral or one sided contract, one party to the contract
has performed his part even at the time of it’s formation and an
obligation is outstanding only against the other. In the bilateral or
two-sided contract, at the time of it’s formation there are two
outstanding obligations, one on either party to the contract, e.g., A
promises to paint a picture in one month in return for which B promises
to pay Rs.100. Here, there are two promises and each party is a
promisor in respect of one promise and a promise in respect of the
other, and as such each can hold the other liable for the breach of his
Essentials of a Valid Contract
In order to be an enforceable contract, there must be
1. An agreement
2. Based upon the genuine assent of the parties
3. Supported by consideration.
4. Made for a lawful object.
5. Between competent parties.
These requirements of valid contract may be analyzed into the following elements, all of which must be present:
1. Proposal or offer by one party and acceptance of
the proposal or offer by another party, resulting in an agreement-
2. An intention to create legal relationship or an intent to have legal consequences.
3. Genuine, (i.e. free and real) consent between the
parties (i.e. not marred by mistake, undue influence, coercion, fraud
4. The parties to the contract are capable of contracting.
5. The object contracted for is legal and is not opposed to public policy.
6. There are at least two persons to make the contract.
7. The agreement is supported by lawful consideration (or, under English law proper form is used).
8. The agreement is capable of being perform.
9. The terms of the contract are certain.
Contracts arise under a wide variety of circumstances. They may arise
from face to face conversation or from conversations by telephone, from
the exchange of letters or telegrams or by any other means of
communication. When the contract is part of a common business
transaction, a printed form is often used. In such a case, all that is
usually necessary to complete the contract is to add the date, the
names of the parties, the price, the particular performance or
commodity which is the subject matter of the contract, and signatures
of the parties. Familiar types of standard contract forms are leases
and the various forms used for the installment purchase of motor
vehicles, refrigerators, radio sets etc. Some times the contract must
comply with certain standards. For example, the may require particular
contract to be in writing, such as an arbitration agreement.