Section 2(h) defines a contract as “an agreement enforceable by law”
Thus to make a contract there must be –
(i) an agreement
(ii) the agreement should be enforceable by law.
All agreements are not enforceable by law and, therefore, all agreements are not contracts. Some agreements may be enforceable by law and others not. For example, an agreement to sell a radio set may be a contract, but an agreement to go to see a movie may be a mere agreement not enforceable by law. Thus, all agreements are not contracts. Only those agreements which satisfy the essentials mentioned in section 10 become contract. However all contracts are agreements.
According to section 2(e) an “agreement” is defined as “every promise and every set of promises forming the consideration for each other” And a promise is defined as an accepted proposal as Section 2(b) says “ a proposal when accepted becomes a promise “ Therefore it can be said that an agreement is an accepted proposal.
The process of definition comes down to this : A contract is an agreement ; an agreement is a promise and a promise is an accepted proposal.
In an agreement there is a promise from both the sides. For example, A promises to deliver his radio to B and in return B promises to pay a sum of Rs. 500 to A , there is said to be an agreement between A and B
Thus every agreement, in its ultimate analysis, is the result of a proposal from one side and its acceptance by the other.
A promise is a result of an offer (proposal) by one person and its acceptance by the other. For example, when A makes a proposal to sell his radio to B for Rs. 500 and B accepts this proposal, there results a promise between the two persons. Section 2(b) of the Act defines a promise as under : “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted, becomes a promise”.
Thus, when there is a proposal from one side and the acceptance of that proposal by the other side, it results in a promise. This promise from one side to the other is known as an agreement.
An agreement is regarded as a contract when it is enforceable by law. In other words, an agreement that the law will enforce is a contract. The conditions of enforceability are stated in Section 10. According to this section “ all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”
The essentials needed for a valid contract, therefore, are as under :
1. The agreement should be between two parties. An agreement is the result of a proposal or offer by one party followed by its acceptance by the other.
2. The agreement should be between the parties who are competent to contract.
3. There should be a lawful consideration and lawful object in respect of that agreement.
4 There should be free consent of the parties, when they enter into the agreement.
5. The agreement must not be one, which has been declared to be void.
PROPOSAL OR OFFER
The term proposal has been defined in section 2(a) as follows:
“When one person signifies to another his willingness to do or 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 proposal.”
The willingness to do or abstain from doing something, i.e. the proposal or offer must be made with a view to obtain the assent of the other party thereto. For example, A’s willingness to sell his radio set to B for Rs. 500 if B accepts to purchase the same, amounts to proposal by A for the sale of the radio set. But if a statement is made without any intention to obtain the assent of the other party thereto that...