We enter into contracts day after day. The Law of Contract is comboided in the Indian Contract Act, 1872. The contract act incorporates many features of English Law.
What is a Contract ?
Section 2(h) of the Indian Contract Act 1872 defines a as an agreement enforceable by law. Section 2(e) defines agreement as “every set of promises forming consideration for each other. Section 2 defines promises in these words , when the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted becomes a promise.
Contract = Agreement + Enforceable by Law
What agreements are contracts?
All agreements are not studied under Indian Contract Act, as some of them are not contracts. Only those agreements which are enforceable at law are contracts. The Contract Act is the law of those agreements which create obligations and in case of a breach of a promise by one party to the agreement the other has a legal remedy. Thus a contract consists of two elements :
(a) An agreement
(b) Legal obligation
Essential Elements of Contract Act
We have seen above that the two elements of a contract are an agreement and legal obligation. Section 10 of the act provides for some more elements which are essential in order to constitute a valid contract. They are as under.
(2) Intention to create legal relationship
(3) Free and genuine consent
(4) Parties competent to contract
(5) Lawful consideration
(6) Lawful object
(7) Agreement not decided void or illegal
(8) Possibility of performance
(9) Certaainity of meaning
(10) Necessary legal formalities
There was an agreement between Ross Company and Crompton Company, where of the former were appointed selling agents in North America for the later. One of the clauses included in the agreement was “ This arrangement is not formal or legal shall not be subject to the legal jurisdiction in the law of courts “.
Held that : This