Law of Contract, 1872
Q. "All contracts are agreements, but all agreements are
not contracts.” Discuss
Ans: Section 2 (h) defines ‘Contract’
as an agreement enforceable by law.
If we analyse the definition it has
two components viz.
(i) An agreement an
(ii) Its enforceability by law.
Section 2
(e) defines ‘agreement’ as "every promise and set of promises
forming consideration for each other” .For a contract to be enforceable by law
there must be an agreement which should be enforceable by law. To be enforceable,
the agreement must be coupled with obligation. Obligation is a legal duty to do
or abstain from doing what one promised to do or abstain from doing.
All contracts are agreements but for
agreement to be a contract it has to be legally enforceable.
Section10 of the Act
provide "All agreements are contracts if they are made by the free consent of
the parties competent to contract for lawful object & are not hereby
expressly declared void.” All contracts
are agreements but for an agreement following essential element are required –
(i) Offer & Acceptance: - There must be two parties to an
agreement i.e. one making the offer & other party accepting it. Acceptance
of must be unconditional & absolute. A part of an offer cannot be accepted.
The terms of an offer must be definite. The acceptance must be in the mode as
prescribed & must be communicated. The acceptor of an offer must accept it
in the same way & same sense & at the same time as offered by the
offeror i.e. there must be consensus ad idem.
(ii) Intention to create legal relationship: - When two
parties enter into a contract their intention must be to create legal
relationship. If there is no such intention between the parties, there is no
contract between them. Agreements of a social or domestic nature to do not
constitute contracts.
(iii)Lawful consideration: - An agreement
to be enforceable by law must be supported by consideration. "Consideration”
means an advantage or benefit which one party receives from another. It is the
essence of bargain. The agreement is legally enforceable only when both parties
give something or get something in return. An agreement to do something without
getting anything in return is not a contract. Contract must be in cash or kind.
(iv) Capacity to Contract – Competency: - The
parties competent to contract must be capable of contracting i.e. they must be
of the age of majority, they must be of sound mind & they must not be
disqualified from contracting by any law to which they are subject to. An agreement with minors, lunatics, drunkards,
etc. is not contract & does not get a legal title.
(v) Free Consent: - It is necessary between the
contracting parties to have a free & genuine consent to an agreement. The
consent of parties is said to be free when the contracting parties are of the
same mind on the materials of a contract. They must mean the same thing at the
same time the parties must not enter into a contract under undue influence,
coercion, misrepresentation etc. If these flaws are present in an agreement it
does not become a contract.
(vi) Lawful object: - The object of an agreement must be
lawful. It should not be illegal, immoral or it should not oppose public policy.
If an agreement suffers from a legal flaw with respect to object it is not
enforceable by law & so it is not a contract.
(vii) Agreement not declared void: - For an
agreement to be a contract it is necessary for the agreement must not be
expressly declared void by any law in force in the country.
(viii) Possibility & Certainty of performance: - The terms
of an agreement must not be vague or indefinite. It should be certain. The
agreement must be to do a thing which is possible. For e.g. An agreement to
sell a car for Rs. 100/- if sun does not rise tomorrow. This agreement is
impossible & so not enforceable by law.
Thus, agreement is the genus of which
contract is the specie.
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