This article is written by Satyendra Pratap Singh, B.A.LL.B (Hons.), 5th Sem. , Shri Ramswaroop Memorial University, Lucknow, Uttar Pradesh

Introduction

A contract is defined as one that is legally enforceable by Section 2(h) of the Indian Contract Act, 1872. Rights in personam, or private rights that solely impact two private people entering into a contract with each other, are normally the focus of contract law.

What is the meaning of the contract?

“The rights and obligations of two or more parties are established, made clear, and governed by a legally enforceable agreement known as a contract. Contracts frequently include the commitment to transmit goods, services, money, or any combination of those at a later date.”

There are several ways that a promise or a contract might form :

1.            By Agreement and Contract

2.            By Standard Form Contract

3.            By Promissory Estoppel.

How a Contract is formed?

Offer + acceptance = Promise

Promise + consideration = Agreement

Agreement + enforceable by law = Contract

The use of case laws can help people understand a number of crucial ideas in regard to contract law. Let’s briefly explore the requirements for a valid contract that are presented here before getting into the case laws:

1.            Offer

2.            Acceptance of the offer

3.            To enter into a contract, both parties must be competent

4.            A consideration that is legal in nature must exist

5.            Free consent of the parties

6.            Desire to establish a legal partnership

7.            The agreement must be unambiguous

8.            A contract cannot be explicitly ruled invalid / void

Anyone studying contract law will come across the case laws that have been presented here; they are all connected to the contract law jurisprudence.

Lalman Shukla v. Gauri Datt (1913)

The important decision in Lalman Shukla v. Gauri Datt by the Allahabad High Court emphasised the significance of information and communication in the creation of a contract (1913). The Honorable Court said that in order to turn a proposal into an enforceable agreement, there must be awareness of the plan and consent from all parties involved. Since the plaintiff was not aware of the specific conduct and no agreement was given, none of the conditions that have been established in this instance are being met. A common example of a general offer is a prize offered through an advertising for recovering a missing item. This is a key premise controlling general offers in contract law. The offer is only deemed accepted by the one who successfully completes the necessary duty.

Mohori Bibee v. Dharmodas Ghose (1903)

In the well-known case of Mohori Bibee v. DharmodasGhose, a panel of judges—Lord Mcnaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir Andrew Scoble, and Sir Andrew Wilson—examined the scope of a minor’s agreement (1903). Any individual under the age of eighteen was specifically forbidden by the Privy Council from entering into a contract and making significant choices regarding it. As a result, the mortgage deed that the plaintiff and defendant had engaged into in the current instance was deemed invalid since it had been executed by a minor.

Rose and Frank Co v. Crompton and Brother Ltd (1925)

In the well-known case of Rose and Frank Co v. Crompton and Brother Ltd (1925), the House of Lords highlighted contracts that are legally binding. In this case, the court ruled that the orders and acceptances may still be considered legally enforceable contracts despite the fact that the agreement between the parties to the case did not amount to a formal contract. Therefore, the legal transactions are not prohibited by the lack of enforceability of a legal arrangement represented in an agency agreement.

Bhagwandas Kedia v. Girdharilal & Co (1959)

In making its decision in the matter of Bhagwandas Kedia v. Girdharilal & Co. (1959), the Supreme Court of India considered Sections 2, 3, and 4 of the Indian Contract Act, 1872.  The Court observed that making an offer at a place that has been accepted elsewhere does not ipso facto form part of the cause of action in a suit for damage, in scenarios for breach of contract. In general, a contract results from an offer being accepted and some sort of visible indication that the offer has been acknowledged by the law or that is adequate in the eyes of the law.

Durga Prasad v. Baldeo (1880)

In the well-known case of Durga Prasad v. Baldeo, a two-judge Allahabad High Court panel composed of Justices Pearson and Oldfield rendered a judgement on the legality and validity of a contract (1880). The notion of rule of law, which is inextricably linked to Section 2(d) of the Indian Contract Act of 1872, was cited by the court in this case. The Act of 1872’s Section 2(d) read with Section 25 indicates that “any agreement without consideration is invalid.” Therefore, since the law itself outlines the requirements for a legitimate agreement, no situation may occur that violates the law.

What is the nature of contract?

The nature of contract is the area of law that establishes the conditions under which commitments made by contracting parties are enforceable against them, contract law is unique. It contains a number of limiting principles, pursuant to which the parties may construct rights and obligations for themselves that the law will upload, but it does not specify the duties and responsibilities that the law will enforce.

A contract Is a legal agreement between two or more parties whereby rights are gained on one side in exchange for acts or forbearances on the other. An offer and an acceptance are required for an agreement to become a contract, and the law imposes legal obligations on the promises that follow from the offer and acceptance.

What are the essential components of a valid contract?

A valid contract must have the following components :

1.            Two Parties: A minimum of two parties designated by the contract are required for a legal contract. The offer will be made by one of these parties, and the other will finally accept it. Both parties must be natural people or have a legal existence, such as corporations, educational institutions, organisations, etc.

2.            Agreement: When the party to whom the offer is given acknowledges his acceptance of it, a contract is first an agreement. A contract has a foundation that is an agreement.

3.            Free Consent: The parties must reach a consensus on the same issue at the same time and in the same manner. Without permission, a contract is not enforceable in court. When the parties agree on the same item in the same way, this is referred to as consent. In addition, for a contract to be considered legal, the parties’ assent must be devoid of coercion, fraud, undue influence, or error. The contract is null and invalid / void if it is not free.

4.            Intention of a Legal Relationship: Both parties must intend to enter into a formal partnership or otherwise commit themselves legally as a result of the arrangement. As a result, social or domestic agreements are not contracts since they are not intended to create a legal relationship between the parties.

5.            Contractual Capacity: The agreement’s parties must be able to form a legal contract. Everyone is permitted to engage into an agreement under the Act, if he or she: has reached majority age; is mentally sound; and is not prohibited by any law from entering into contracts.

6.            Consideration: An agreement made by a person who lacks competence is invalid. A contract must be backed by consideration in order to be legal. The expression signifies “something in exchange.” It may be monetary, in-kind, or physical. Past, present, or future are all possible. The concept must be true and sound.

7.            Nothing Illegal to Consider: The Act declares that consideration for an agreement is improper if: It is against the law; Its nature is such that, if permitted, it will violate all legal restrictions; It is dishonest.; it refers to or entails damage to another person’s or their property.; The judge views it as immoral.

8.            Legitimate Consideration: Consideration is receiving something in return. Every contract must provide consideration to justify the agreement. It must be true and legitimate.

9.            Suitable Object: The Indian Contract Act of 1872, Section 23, The consideration or aim of an agreement must be legal unless it is prohibited by law, of a character that, if granted, would violate any laws, fraudulent, involves or suggests harm to the person or property of another, the court deems it to be immoral, or it runs counter to public policy. The consideration or purpose of an agreement is said to be unlawful in each of these situations. Any agreement that has an illegal purpose or value is invalid.

What is the scope of Contract?

The contract’s scope outlines the whole document. Contracts can take in many various forms, and they can include little or big sums of money. While some contracts have lengthy deadlines, some have shorter ones. Contracts contain a variety of components depending on what they are used for. Commercial law has numerous facets, and it might be challenging to categorise them all. Human research is typically involved in commercial legal practise when it comes to, but is not limited to, contracts, sales of products, taxation, insurance, and renting.

A basic scope of the contract is provided at the identification phase. Some projects fall under several contract scopes because they have various development and management connections. This indicates that other parties are the recipients of the duties or services.