Indian contract act, 1872
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WHAT IS A CONTRACT? The term contract is de ned under section 2(h) of the Indian Contract Act, 1872 as- "an agreement enforceable by law"
The contract consists of two essential elements: .(i) an agreement, and .(ii) its enforceability by law. (i) Agreement - The term 'agreement' given in Section 2(e) of the Act is de ned as- "every promise and every set of promises, forming the consideration for each other".
To have an insight into the de nition of agreement, we need to understand promise. Section 2 (b) defines promise as- ."when the person to whom the proposal is made signi es his assent there to, the proposal is said to be accepted. Proposal when accepted, becomes a promise
.(ii) Enforceability by law - An agreement to become a contract must give rise to a legal obligation Thus from above de nitions it can be concluded that Contract Accepted proposal/Agreement +Enforceability by law
Example: A agrees with B to sell car for '2 lacs to B. Here A is under an obligation to give car to B and B has the right to receive the car on payment of 2 lacs and also B is under an obligation to pay '2 lacs to A and A has a right to receive 2 lacs So Law of Contract deals with only such legal obligations which has resulted from agreements. Such obligation must be contractual in nature
Essentials of a valid contract . In terms of Section 10 of the Act, "all agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void"
in order to create a valid contract, the following elements should be present: .1. Two Parties: One cannot contract with himself. A contract involves at least two parties- one party making the o er and the other party accepting it. A contract may be made by natural persons and by other persons having legal existence e.g. companies, universities etc. It is necessary to remember that identity of the parties be ascertainable
Parties must intend to create legal obligations: There must be an intention on the part of the parties to create legal relationship between them. Social or domestic type of agreements are not enforceable in court of law and hence they do not result into contracts.
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