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Basic of all business laws Deals with creation of a contract, performance of contract

and enforceability of contract

Defined the rights and obligations of the parties to the

contract Defines specific contracts

Remedies incase of breach of contract

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Contract : Contract is an agreement enforceable bylaw

The defn can be resolved into two distinct parts.

First there must be an agreement.

Second such an agreement must be enforceable bylaw. To be enforceable, an agreement must becoupled with obligation.

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Agreement: It is an exchange of promises by two ormore persons.

An agreement occurs when two minds meet upon acommon purpose ie they mean the same thing in thesame sense at the same time.

Obligation: It is the legal duty to do or abstain fromdoing what one has promised to do abstain fromdoing

Thus contract is an exchange of promises by two ormore persons resulting in an obligation to do orabstain from doing a particular act, which obligation

is recognized and enforced by law.

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Parties to a contract

A contractual obligation arises from a bargain

between the parties to the agreement who called thepromisor and the promise

Promisor: Person who makes the offer

Promisee: Person who accepts the

offer

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Rights and obligations

Where parties have made a binding contract,they have created rights and obligations betweenthemselves. The contractual rights andobligations are correlative

Eg: A agrees with B to sell his car for Rs 10,000.In this case the following rights and obligationsare created

1. A is obligation to give the car to B

B has a right to receive the car

2. B is under an obligation to pay Rs 10,000to A

A has a corresponding right to receive Rs

10,000 from B

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Kinds of contracts

Express contract: A contract wherein both the offer

and aceeptance are made in words spoken or written Implied contract: A contract wherein the offer

and/or acceptance are implied from the acts andconduct of the parties

Eg: A announces in the newspaper to give a sum ofRs 20,000 to whoever who finds his lost son. B findshis lost son. Bs acceptance to the contract is impliedby conduct

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Contingent contract: A contract to do or not to dosomething, if some event, collateral to the contractdoes or does not happen. Thus it is a contract in

which the performance becomes due only uponthe happening or non-happening of some event,certain or uncertain

Eg: Contract of insurance

Eg: A agrees to his property to B if B marries C

Eg: P agrees to give Rs 10,000 to Q if he goes to US

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Executed contract: A contract in which both theparties have performed their respective legalobligations

Executory contract: A contract in which both theparties have yet to perform their respectiveobligations

Contracts for executed consideration: At the timeof formation of contract, one party has alreadyfulfilled its obligation and the other party is yet tofulfil its obligation

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Quasi contracts: These are relations resemblingthose created by contract

Eg: Necessaries supplied to a person incompetent tocontract

Eg: Goods delivered by mistake

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Essentials of a contract

1. Offer proposal made by one of the parties

2. Acceptance signifying consent to the offer made3. Intention to create legal relationship intention to

have legal consequences

4. Consideration something in return for the

promise made/performed

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5. Capacity to contract major and of sound mind

6. Free consent of parties consent not obtained bycoercion, undue influence, fraud ormisrepresentation

7. Legal object purpose to be legal /lawful

8. Capable of performance

9. Certain and specific terms

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Valid contract1. fulfils all essentials of contract2. both parties are bound by the terms3. both parties have rights and obligations

Void contract

1. not a contract at all2. does not fulfil all or any one of the essentials ofcontract3. parties not bound by the yerms

4. not enforceable at lawVoid ab-initio contract1. does come into existence at all2. not enforceable at law

3. parties not bound by terms

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Voidable contract

1. which can be set aside at the option of one of the

parties and not the other2. contract binding if the option is not exercised

Eg : where consent of one of the parties is not free

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Subsequently void valid in the beginning butvoid later due to change in circumstancesbeyond the control of the parties theperformance becomes impossible

1. destruction of subject matter after agreementbut before performance

2. death of parties where the personalperformance of the parties is required

3. contract becoming unlawful later

4. subsequent incapacity of the parties5. enemy alien