Prepared By:
Premendra Sahu
Asst. Professor, itm University
Business Law
3. Promise sec 2(b) - A Proposal when accepted becomes a promise. In simple words, when an
offer is accepted it becomes promise.
Promisor and promise sec 2(c) - When the proposal is accepted, the person making the proposal
is called as promisor and the person accepting the proposal is called as promisee.
5. Consideration sec 2(d) - When at the desire of the promisor, the promisee or any other
person has done or abstained from doing something or does or abstains from doing
something or promises to do or abstain from doing something, such act or abstinence or
promise is called a consideration for the promise.
Price paid by the one party for the promise of the other Technical word meaning QUID-
PRO-QUO i.e. something in return.
Agreement sec 2(e) - Every promise and set of promises forming the consideration for
each other.
Capacity : The parties to a contract must have capacity (legal ability) to make valid contract.
Section 11:- of the Indian contract Act specify that every person is competent to contract provided.
Is of the age of majority according to the Law which he is subject
Who is of sound mind and
Is not disqualified from contracting by any law to which he is subject.
Lawful object :The object of agreement should be lawful and legal. Consideration or object of an agreement is unlawful if it
is forbidden by law; or
is of such nature that, if permitted, would defeat the provisions of any law; or
is fraudulent; or
Involves or implies, injury to person or property of another; or
Court regards it as immoral, or opposed to public policy.
ENFORCEABLE BY LAW CONTRACT
AGREEMENT
As per Section 10 “All agreements are contracts, if they are made – by free
consent of the parties, competent to contract, for a lawful consideration and
with a lawful object, and not hereby expressly declared to be void .”
ESSENTIAL ELEMENTS OF A VALID CONTRACT
There must be two parties to an agreement i.e., one party making the offer and
the other party accepting it. the terms of offer must be definite and the
acceptance of the offer must be absolute and unconditional. The acceptance
must also be according to the mode prescribed and must be communicated to
the offeror.
2} Intention to create legal relationship
The agreement is legally enforceable only when both the parties give
something and get something in return. Consideration need not necessarily
be in cash or kind. It may be an act or abstinence or promise to do or not to
do some thing. It may be past, present or future. but it must be real and
lawful.
4} Capacity of Parties-Competency
It is essential to the creation of every contract that there must be a free and
genuine consent of the parties to the agreement. The consent of the parties
is said to be free when they are of the same mind on all the material terms
of the contract. The parties are to be same mind when they agree about
the subject matter of the contract in the same sense and at the same time.
(Sec.13).If the agreement is induced by coercion, undue influence, fraud,
misrepresentation etc then it is not said to be free consent. Sec.14
6} Lawful Object
The agreements must have not been expressly declared void by any
law in force in the country.
8} Certainty and possibility of performance
The agreements must be certain and not indefinite. (Sec.29)If it is not possible
to ascertain its meaning, it can’t be enforced. The terms of the agreement must
also be such as are capable of performance. Agreement to do an impossible
act can not be enforced by law.
According to Sec. 10, 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 expressly declared to be void. in order to become a
contract, an agreement must have the following essential elements:-
9} Legal Formalities
Express Contracts: Where the terms of the contract are expressly agreed
upon in words (written or spoken) at the time of formation, the contract
is said to be express contract.
Valid contract : An agreement which has all the essential elements of a contract is called a valid
contract. A valid contract can be enforced by law.
Void contract (2(j) : "A contract which ceases to be enforceable by law becomes void when it
ceases to be enforceable". Thus a void contract is one which cannot be enforced by a court of law.
Under a mistake of facts [20]
Consideration or object of an agreement is unlawful [23] Agreement made without consideration
[25]
Agreement in restrain of marriage [26] Restraint of trade [27]
Restrain legal proceeding [28]. Agreement by wage of wager [30]
Voidable contract Section 2[i] : Defines that an agreement which is enforceable
by law at the option of one or more parties but not at the option of the other or
others is a voidable contract.Result of coercion, undue influence, fraud and
misrepresentation.
“All illegal agreements are void agreements but all void agreements are not
illegal.”
ON THE BASIS OF EXECUTION
Unilateral contract : A unilateral contract is one in which only one party has to
perform his obligation at the time of the formation of the contract, the other
party having fulfilled his obligation at the time of the contract or before the
contract comes into existence.
From the above definitions it is cleared that contract of indemnity is a special type
of contract.
i. Where one person promises another to compensate the loss caused by promisor
interalia by another.
ii. The person who agrees to compensate the loss is calledthe indemnifier and the
person whose loss is to be made good is called the indemnified or indemnity
holder, this type of contract is a class of contingent contracts.
Characteristics of Indemnity
Indian Contract Act is silent regarding the rights of the indemnifier in a contract
of indemnity. However he has been held in number of cases that the rights of
indemnifier are similar to the rights of a surety under Sec 141 of Indian
Contract Act.
CONTRACT OF GURANTEE