LAW OF CONTRACT
The Law of Contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the contracting parties. Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1st September, 1872. It extends after independence to whole Pakistan and known as “Contract Act, 1872”. Contract law is based on the principles expressed in Latin phrase; “PACTA SUNT SERVANDA”. The meaning of this phrase is “agreements to be kept”, but more literary means “PACTA” is `must be kept`. Agreement Is an Essential of a Valid Contract
1 – INTRODUCTION
A contract is an agreement between two parties that creates an obligation to do or refrain from doing a particular thing. The purpose of a contract is to establish the terms of the agreement by which the parties have fixed their rights and duties. Courts must enforce valid contracts, unless one party has legal grounds to bar enforcement. According to legal scholar Sir John William Salmond, a contract is “an agreement creating and defining the obligations between two or more parties” 2 – RELEVANT PROVISION
Section 3 – 12 of Contract Act, 1872.
3 – INTERPRETATION OF TERMS:
AGREEMENT [SECTION 2(e)]:
An agreement means, “Every promise or every set of promises, forming consideration for each other”.
AGREEMENT = PROMISE(S) BY ONE PARTY (+) PROMISE(S) BY THE OTHER PARTY
PROMISE [SECTION 2(b)]:
“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.”
PROMISE = PROPOSAL + ACCEPTANCE
PROPOSAL/OFFER [SECTION 2(a)]:
A person is said to make a proposal when “he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence”
PROPOSAL = WILLINGNESS TO DO OR ABSTAIN FROM DOING
WILLINGNESS’ TO OBTAIN ASSENT OF THE OTHER PARTY TO SUCH ACT OR ABSTINENCE
CONTRACT [SECTION 2(h)]:
A contract is “an agreement enforceable by law”. Thus,
CONTRACT = AGREEMENT (+) ENFORCEABILITY BY LAW
“All contracts are agreements but all agreements are not contracts”
4 - All contracts are agreements but all agreements are not contracts: U/S 10
According to Section 10, “All agreements are contracts if they are made by 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”.
Contracts and agreements are related in so many significant ways. Contracts mean agreeing on specific matters weather those are national or international aspects of agreements or not. In a broad sense, contract is an agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just plain understood. Some contracts are required to be in writing in order to be enforced. Examples of a contract are a lease, a promissory note, or a rental agreement. 5 – Essential Elements of a Valid Contract U/S 10:
The essential elements of a valid contract can be summed up as follows;
Certainty of meaning. Consensus-ad-idem (meeting of minds)
Intention to create legal relationship.
Parties competent to contract.
Free and genuine consent.
Agreements not declared void or illegal.
Certainty and Possibility of performance.
Necessary Legal Formalities.
To constitute a contract there must be an agreement. There must be two parties to an agreement, i.e. one party making an offer (offeror) and the other party accepting the offer (offeree). The terms of the offer must be definite and acceptance...
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