Law of contract is body of legal rules governing the conclusion and consequences of contract. Contract is an agreement based on consensus between legal subjects with contractual capacity. Which is legal, physically possible and complies with the prescribed formalities and which is reached with the intension of creating a legal obligation with resultant rights and duties? 1. Consideration
It’s the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something. Something given or obtained is the price for the promise and it’s the consideration. for example: if one person agrees to lend money to the other, before that person gives out the money, there must be some agreement like when to pay, the need for the money and the form of payment. 2. Legality
The purpose of the agreement must not be illegal or contrary to the public policy. E.g. jimmy enters into an agreement with Joel to lend him an amount of money, which Joel was to use to buy food and they agreed to be after 3 months. After 3 months jimmy learns that Joel is not willing to pay back the money and he urges that he used the money to buy food just the same way he would have gone to visit jimmy and give him a dish. The agreement was legal and jimmy has a right to demand for the money. 3. Intention to create legal relation
The parties must intend the agreement to be legally binding. The courts apply an objective test to judge the situation by what was said and done. Agreement of a social or domestic nature do not give rise to a contract e.g. Joan and Mary agreed to have a party at Joan’s room and at a certain day, and the day comes Joan had already used the money and urged the she bought medicine for the kid. 4. Capacity of parties
The parties to an agreement must be competent to contract. The contracting parties must be of the same age...