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Monday, 1 August 2011

Define the term contract and agreement discuss the essential of valid contract or describe the requirements of a valid contract

Sometimes contract and agreement, both are used in the same sense but according to the law there is a great difference between them.

AGREEMENT :-
Agreement is defined in the following words :
" Every promise or every set of promises forming the consideration for each other" Contract act and its kind is an agreement.
There are two conditions for agreement :
1. Promise.
2. Consideration of both the parties.

In other words we can say that proposal which is offered by one party, it becomes an agreement.
Agreement = proposal + acceptance.

Example :- Mr. Sam invites Miss Sarah to a marriage party at his house. Miss Sarah does not go to the party, Mr. Sam cannot claim any compensation because this agreement is not enforceable at law.

CONTRACT :-
It is defined in the following words "A contract is an agreement enforceable by law".
Salmond defines the contract in the following words "An agreement creating and defining obligations between the parties". So there are two conditions for the contract.
1. An Agreement.
2. Enforceable by law.
Any agreement which enables a man to compel another to do something or not do something, it is called contract. Agreement becomes a contract when it is enforceable by law.

Example :- Suppose there is an agreement between Mr. Khan and Miss. Lucy that Mr. Khan will bring the car from Washington for Miss. Lucy and Miss Lucy will pay Rs. 10 lac to Mr. Khan. Now this agreement is a contract because it enables Mr. Khan to compel Miss. Lucy for purchase of car. It also compels to Mr. Khan for the sale of car. So agreement is a contract because it is at law.

Explanation :-
Promise = Proposal + Acceptance.
Agreement = Promise + Consideration of both the parties
Contract = Agreement enforceable at law.

Important Note :- All agreements are not contract but all contract are agreement. Because agreement is not enforceable by law. It may exist without any legal obligation.


VALID CONTRACT ESSENTIALS :-
Following are the important conditions for the validity of the contract :

1. Proposal :-
For the valid contract proposal is necessary. There are two parties in the proposal.

Example :- Mr. Ali offers for marriage to Miss. Zaiba for her willingness to do the marriage. In this example Mr. Ali is a promisor Miss Zaiba is a promisee.

2. Acceptance :-
When the promisee signifies the assent then proposal is said to be accepted. Acceptance must be according the contract act rules.

3. Agreement :-
After the acceptance of proposal it will be only promise. For the valid contract there must be an agreement enforceable by law.

4. Agreement Must be in Writing :-
For the validity of the contract it is necessary that it must be in writing and registered with the registrar if it is required by the law.

Example :- "A" verbally promises to sell his college to "B". It is not a valid contract because the contract of movable property must be in writing.

5. Lawful Agreement :-
Lawful agreement is essential for the valid contract. Because unlawful agreement can not be enforceable at law.

6. Legal Relationship :-
The agreement must create legal relationship between the parties of the contract. Each party should know the legal rights and duties.

Example :- If "A" offers to sell his cow to "B" for Rs. 10,000 and "B" agree to buy it. It is contract which creates legal relationship between them.

7. Lawful Object :-
If the object of the contract is not lawful then it is invalid contract. Illegal and immoral object makes the contract invalid.

Example :- Mr. Arun promises to pay one lac to Mr. Adit. if he kills Mr. Shan. The agreement is illegal because the object is not lawful.

8. Competency of the Parties :-
Only competent parties can enter to the contract. According to contract act following persons are competent.
1. Anyone who attained the age of majority.
2. Who are of sound mind.
3. Who are not disqualified to enter into any contract.

9. Consideration :-
It is also essential for a valid contract. When at the wish of the promisor the promisee does or abstain from doing such act or promise is called consideration for the promise. It may be past or present.

10. Free Consent :-
If free consent of any party is absent then contract is invalid. If contract is induced by fraud under influence or coercion then it will be invalid.

Example :- Mr. Anderson compels Miss. Reena to enter into a marriage contract on the gun point. It is not a valid contract because consent is not free.

11. Certain and Definite :-
Contract meaning should be clear. It should be also certain and definite. If the performance of the contract is not possible then it cannot be called a valid contract.

Example :- "A" promised to sell a car to "B" it is not clear. So the agreement is void.

12. Not Declared Void :-
It is also essential that agreement must have been not declared void by any law in the country.
Following agreements are expressly declared to be void.
1. Agreement to restraint legal proceeding.
2. Agreement to do an act which is impossible.
3. Agreement to restraint the marriage of any person.
4. Agreement by way of wager.
5. Agreement restraint of trade.
6. Agreement where both the parties are under a mistake of fact.
7. Agreement of immoral acts.

Note :- If any essential element is missing contract is not valid.

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