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Thread: essentials of valid contract

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    Word Icon 35px Jpg.ashx essentials of valid contract

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    1. Introductory Note:-
    An agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. This term, in its more extensive sense, includes every description of agreement, or obligation, whereby one party becomes bound to another to pay a sum of money, or to do or omit to do a certain act; or, a contract is an act which contains a perfect obligation. In its more confined sense, it is an agreement between two or more persons, concerning something to be, done, whereby both parties are bound to each other, or one is bound to the other.
    2. Defintion of Contract :-
    i) Blackstone Defines :-
    =>"It to be an agreement, upon a sufficient consideration, to do or not to do a particular thing".
    ii) Accordint to Salmond:-
    =>"A contract is an agreement creating & defining obligations between the parties".
    iii) Sir Frederick Pollock:-
    => “A promise or set of promises which the law will enforce”.
    iv) Statutory Definition:-
    2(h) Of The Contract Act,1872
    => "An agreement enforceable by law is a contract".
    3.~CLASSIFICATION OF CONTRACTS~
    ---> Contracts may be divided into two broad classes:
    1.Contracts by deed:-
    A deed is a formal legal document signed, witnessed and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract.
    2. Simple contracts:-
    Contracts which are not deeds are known as simple contracts. They are informal contracts and may be made in any way - in writing, orally or they may be implied from conduct.
    ---> Another way of classifying contracts is according to whether they are :
    1. Bilateral contracts:-
    A bilateral contract is one where a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable. Thus in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods.
    2. Unilateral contracts:-
    A unilateral contract is one where one party promises to do something in return for an act of the other party, as opposed to a promise, e.g, where X promises a reward to anyone who will find his lost wallet. The essence of the unilateral contract is that only one party, X, is bound to do anything. No one is bound to search for the lost wallet, but if Y, having seen the offer, recovers the wallet and returns it, he/she is entitled to the reward.
    4. ENFORCEABILITY SUBJECT TO CONTRACTS:-
    1. "Void Contracts"
    A “void contract” is one where the whole transaction is regarded as a nullity. It means that at no time has there been a contract between the parties. Any goods or money obtained under the agreement must be returned. Where items have been resold to a third party, they may be recovered by the original owner.
    2. "Voidable contracts"
    A contract which is voidable operates in every respect as a valid contract unless and until one of the parties takes steps to avoid it. Anything obtained under the contract must be returned, insofar as this is possible. If goods have been resold before the contract was avoided, the original owner will not be able to reclaim them.
    3. "Unenforceable contracts"
    An unenforceable contract is a valid contract but it cannot be enforced in the courts if one of the parties refuses to carry out its terms. Items received under the contract cannot generally be reclaimed.
    5. PARTIES TO CONTRACT:-
    In a valid proposal or promise there are always two parties generally
    1.PROMISOR [offeror] sec:2(c) of The Contract Act,1872.
    2.PROMISEE [offeree] sec:2(c) of The Contract Act,1872.
    An offeror makes a promise to the offeree, requesting form the offeree an act or the restraint of an act that the offeree has the right to perform, or a return promise.

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    6. ESSENTIALS OF A VALID CONTRACT :-

    The three basic components of a contract are the offer, the consideration and the acceptance. The following elements that are to help to determine whether or not the basic components are present and meet legal criteria for a valid contract.
    i) Offer & Acceptance :When two parties have a "meeting of the minds," an agreement can said to have been made. Both parties must understand the agreement, amking sure no misunderstanding or mistakes exists between them. Such a situation usually occurs after an offer has been made by an offeror and then accepted by an offeree A valid offer has been made when another party (or several parties) is asked to enter a defined contractual agreement.
    => Relevant Provision: 2(a) Of The Contract Act, 1872.
    ii) Agreement:An agreement is formed when one party accepts the offer of another and involves a “meeting of the minds”.
    =>Relevant Provision:2(h) Of The Contract Act,1872
    "An agreement enforceable by law is a contract".
    iii) Consideration:An exchange of consideraton must be included in any valid contract. Between the parties something of real value must be exchanged.Both parties must have provided consideration,i-e, each side must promise to give or do something for the other.
    => Relevant Secrtion: 23 & 24 Of The Contract Act, 1872.
    iv) Intention to create legal relations:The parties must have intended their agreement to have legal consequences. The law will not concern itself with purely domestic or social agreements.
    v) Form :In some cases, certain formalities (that is, writing) must be observed. The contract of Sale, Mortgage. Lease or Gift of Immovable Prperty are required in writing and to be registered according to the Transfer of Property Act,1882.
    vi) Capacity :The parties must be legally capable of entering into a contract. An agreement is enforceable only when the parties are competent to contract.
    => Relevant Provision:11 Of The Contract Act, 1872.
    vii) Free Consent :The agreement must have been entered into freely. Consent may be vitiated by duress or undue influence.
    => Relevant Provision:13 & 14 Of The Contract Act, 1872.
    viii) Legality :The purpose of the agreement must not be illegal or contrary to public policy.If the formation or the performance of a contract is illegal, resulting in a crime and/or tort, or opposing public policy or interest, the contract is usually considered void.
    ix) Object : The agreement should be based on a lawful object so that it's legality and validity may not be doubtful.
    =>Relevant Provision:23 Of The Contract Act, 1872.
    x) Not to be Void : The agreements must not have been expressly declared void.
    xi) Certainty : In order to give rise to a valid contract the terms of the agreement should not be vague and un-certain.
    => Relevant Proviosion: 29 Of The Contract Act, 1872.
    xii) Possible to be performed : Another very important requisite for a valid contract is that the agreement should not contain any condition which would humanly and phisically be impossible to do.
    =>Relevant Provision:56 Of The Contract Act, 1872.
    7. BREACH OF CONTRACT:-
    When a party fails to perform the stated obligation in a contract, the party is said to be in BREACH The injured party has several recources. The injured party may RESCIND he contract or release the the other party from the obligations stated in the contract. Also, the parties may agree on NOVATION. Any of these three resolutions may be enacted without litigation. An alternate action for the injured party is to sue for INJUNCTIVE RELIEF which prohibits the other party from performing some specific act
    8. CONCLUDING REMARKS :-
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