The law of contract is the collection of legal rules which govern contracts. These rules, in turn, are part of the law of obligations, a subdivision of the law of property which is traditionally regarded as part of private law. Private law governs the persons (legal subject) in their personal or private capacity before the law in relation to other legal subjects. In other word, private law can be defined as balance and protect legitimate individual interests. Traditionally private law, being concerned with individual values and the private activities of individuals, is contrasted with public law. Public law consists of the rules governing subjects in their relations with the organized authority in a society. The focus of public law therefore is on the promotion and protection of collective interests. This system or division of the rules of the law is by no means logically compelling or jurisprudentially indefeasible; other distinctions exist. Any emphasis on the law of contract as an aspect of private law cannot deny the increasing degree to which certain traditional area of private and public law have come to overlap.
DEFINITION OF CONTRACT AND AGREEMENT
A contract is generally called on obligationary agreement. In other word, contract is an agreement which actually creates legal obligation. The agreement will be a contract if only the parties intended to create an obligations, and if, in addition, the agreement comply with all other requirements which the law sets for the creation of obligations by agreement (such as the contractual capacity of the parties., possibility of performance, legality of the agreement, and prescribed formalities).
A contract also merely defined as an agreement made with the intention of creating an obligation. If this intention is present, the agreement is said to be a contract in the eyes of the law. Contract is made by the parties while they buy or sell goods. Contracts can be done by two ways which are by writing or verbally. The writing contract needs to be signed by the parties while the verbal or oral contract must be proved by the witnesses. Section 2(h) of the Contracts Act 1950 (Malaysia) provide the define contract as an agreement enforceable by law. Thus, to be a contract there must be an agreement first. The agreement by definition is when two or more persons agree to do something or abstain from doing something. The valid agreement which is free from illegality will become a contract. Accordingly, should any of the latter requirements not be met, there may be an agreement, but not a contract.
ELEMENTS OF A VALID CONTRACT
There are some elements that need to be available to hold a contract valid which are offer, acceptance, consideration, intention to create legal relation, the purpose of the contract should be legal and enforceable by law, certainty, capacity, and formalities. In order to actually create an obligation, the contract must be valid in the sense that it meets all the requirements mentioned. According to this approach the parties may agree on the creation of obligations but their contract may be invalid because it does not meet all the requirements for validity. Basically there are 8 elements of valid contracts which are:
Offer is the main element exists in a valid contract. In its strict contractual sense, an offer is a clear statement of the terms upon which an offeror is prepared to be contractually bound. An offer can be oral or written as long as it is not required to be written by law. It is also known as a proposal. An offer must be distinguished from simple willingness to deal or negotiate. For example, X offers to make and sell to Y calendars featuring Australian paintings. Before any agreement is reached on size, quality, style or price, Y decides not to continue. At this stage, there is no legally binding contract between X and Y because there is no definite offer for Y to accept until the essential terms of the...