This article has been written by Krupa Parab, pursuing the Executive Certificate Course in Introduction to Legal Drafting from LawSikho.

Introduction 

Indian Contract Act, 1872 is one of the Central laws that validates the contracts or agreements between varied parties. The Contract Act oversees all the business where there is a case of a deal or an agreement. 

The term “Contract” under Section 2 (h) of Indian Contract Act, 1872: “An agreement enforceable by law”.  However, the term “Agreement” in section 2 (e) defines agreement as “every promise and each set of promises forming the consideration for each other”. Now that we know how the act defines the term “agreement”, there may be some ambiguity in the definition of specific terms under contract. 

What is the purpose of the agreement to agree and what constitutes these

As defined by Pollock, “Every agreement and promise enforceable by law is a contract”.  In Section 2 (e), the Act defines the term agreement and constitutes the enforceability of law. As we are aware that all agreements that parties enter into are contracts if they are agreed upon by the free consent of parties who are competent to the contract moreover it should be for a lawful consideration and must include a lawful object, and must not hereby expressly declare to be void. 

In other words, an agreement is stated to be an accepted promise which is accepted by all parties involved in the agreement or affected by it. 

How is it different from a concluded contract

The term concluded contract is used to describe an agreement with the essential element to constitute a valid contract. 

Agreement on the other hand is a contract that is merely an offer that is accepted by the party and which is not unqualified acceptance. Therefore, an Agreement is a qualified acceptance by the parties who accept the proposed offer. 

An Agreement must be subject to ratification by third parties or others who are not direct parties to the agreement and which is not a conclusive contract.

Essential components

So, the following conditions must be essential for an agreement: –

1. There is consideration.
2. Parties are competent to contract.
3. Consent of the parties is free.
4. The object of the agreement must be lawful. 
5. The agreement not being expressly declared to be void.

However, the following essential for a concluded agreement: –

1. There must be an offer or proposal to the parties.

How will be they enforced

An agreement must be socially acceptable. It may or may not be enforceable by the law. 

Also, an agreement does not create any legal obligations. An agreement may or may not be a contract but a few promises that are not contradicting and are accepted by the parties involved in an agreement. 

However, to note a contract is an agreement that is enforceable by law. A concluded contract is only legally enforceable and creates some legal obligation on the party. Also, where the parties are not ad idem there cannot be a concluded contract. 

Agreement are declared void

As mentioned above the agreements must not have been expressly declared to be void. However, under section 24, section 30 and section 56 of the Indian Contract Act, 1872, the following agreements are declared void. 

1. Where both the parties to an agreement are under a mistake of fact essential to the agreement as mentioned under section 20 of the Indian Contract Act, 1872.
2. Restraint of marriage agreement of any person other than minor as mentioned under section 26 of the Indian Contract Act, 1872
3. Agreement in restraint of trade as mentioned under section 27 of the Indian Contract Act, 1872.
4. Agreement in absolute restraint of judicial proceedings as mentioned below its section 28 of Indian Contract Act, 1872.
5. Agreement, the meaning to which is not certain, or capable of being made certain as mentioned under section 29 of the Indian Contract Act, 1872.
6. Agreement by way of wager as mentioned under section 30 of Indian Contract Act, 1872.
7. Agreement to do an act which is impossible in itself or which subsequently becomes impossible without any default of a party as mentioned under section 56 of Indian Contract Act, 1872.

Lawful object

For the purpose of the formation of a contract, it is noted to be very important that the consideration made, and the object of the contract must be lawful. 

Consideration and/or the object of the agreement is said to be unlawful if:

1. It is forbidden by law.
2. It would defeat the provision of any law;
3. It is fraudulent or immoral or illegal against the parties. 
4. It involves or implies an injury to the person or property of another;
5. The court regards it as immoral or against public policy. 

So, what is a contract?

Now we can define a contract and more importantly, understand the term contract in reality which is much broader in scope. A contract is an accepted proposal which in literal terms happens to be an agreement that is, in its capacity understood by the law and is legally defined and is enforceable by the governing law.

So, a contract is a legal document that bestows upon the party’s special rights (defined by the contract itself) and also obligations that are introduced, defined, and agreed upon by all the parties of the contract. 

Case laws

In Thermal Power Ltd. vs. State of Madhya Pradesh, AIR 2000 SC 1005. The Court stated that entering into the said contract which prescribed the terms and conditions under the statute which means that contract incorporates specific terms and conditions mentioned in it, which are statutory then the said contract to that extent is statutory”

In D. Srinivas vs. SBI Life Insurance Co. Ltd, Civil, 2216 of 2018. The Supreme court stated that facts and circumstances indicate that the insurer was trying to bargain out which was accepted by the company. It was held by the court that there was a complete contract as there was presumption which was made clearly of the acceptance of the proposal in favour of the proposer. 

In Haridwar Singh vs. Bagun Sumbrui 1972 AIR 1242.  The High court held that the acceptance of offer was not put in the course of transmission to the appellant; and so even assuming that an acceptance need not come to the knowledge of the offeror, the appellant cannot contend that here was a concluded contract on the basis of his offer contained in the communication. Therefore, there was no concluded contract between the appellant and the government. 

Conclusion

A contract is an agreement that is lawfully binding that exists between two or more parties to try and do or not do one thing. An agreement normally begins from an offer proposed and ends on consideration, also alongside a contract has to achieve and aim at another target i.e. enforceability of Law. However, due to the breach of the contract, the legal remedy ought to be imposed should be provided or given to the aggrieved party against the rationale. 

References 

1. https://www.vakilno1.com/legal-news/supreme-court-constitutes-concluded-contract-insurance.html
2. http://www.legalserviceindia.com/legal/article-1723-what-agreements-are-contracts.html
3. http://lawtimesjournal.in/haridwar-singh-vs-bagun-sumbrui/
4. https://indiankanoon.org/docfragment/1594596/?formInput=%20%22concluded%20contract%22
5. https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/what-is-a-contract/

---

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: