CONTRACT LAW

WHAT IS A CONTRACT? An agreement enforceable by law is a contract. Thus for the formation of a contract there must be 1. 2. an agreement the agreement should be enforceable by law

An agreement is defined as every promise and every set of promises forming the consideration for each other and a promise is an accepted proposal. FORMATION OF A CONTRACT

For the formation of a contract the process of proposal or offer by one party and the acceptance thereof by the other is necessary. This generally involves the process of negotiation where the parties apply their minds make offer and acceptance and create a contract. OFFER An offer is an expression of willingness to contract on specified terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed. ACCEPTANCE In order to be valid an acceptance must precisely conform to the terms required in the offer if a contract is to result. The general rule of contract law is that a contract is made in the location where the offer or receives notification of the offerees acceptance.

CONSIDERATION Consideration; that is, something having value in the eye of the law. It may consist either in "some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. WHO CAN ENTER INTO A CONTRACT?

A person who is competent to contract is of the age of majority according to the law to which he is subject is of sound mind- A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. is not disqualified from contracting by any law to which he is subject

Therefore a minor is not competent to contract and an agreement by a minor is void ab initio. He can not ratify an agreement on attaining the age of majority and validate the same. (Void ab initio means

it has at no time had any legal validity). The following persons are therefore incompetent to contract 1. Minors 2. Persons of unsound mind 3. Persons disqualified by law to which they are subject

VOID CONTRACT OR AGREEMENTS (invalid agreements)

Contract that (1) is illegal (inherently void) from the moment it is made, (2) is legal but declared null (having no legal effect) by the courts because it violates a fundamental principle such as fairness, or is contrary to public policy, (3) becomes void due to changes in law or in government policy, or (4) has been fully performed. Lack of capacity to contract (being an infant or minor, intoxicated, or insane) automatically makes a contract void. Contract that is void only in one or few parts may be saved by the process of severance. Not to be confused with voidable contract. VOIDABLE CONTRACT OR AGREEMENTS A voidable contract or rule or agreement is the one which is not automatically void but an affected party or authorized person can declare it void at a later stage. So unless it is declared void it is enforceable.

What makes an agreement void or voidable?

because it violates the law as stated in constitutions, statutes, or court opinions because sometimes one of the parties lacks capacity to contract or failed to give consideration because one of the parties failed to genuinely assent to the agreement

BREACH OF CONTRACT

The parties to a contract must either perform or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of the Act, or

any other law. Promises bind the representatives of the promisor in the case of death of such promisor before performance, unless a contrary intention appears from a contract. In a contract the agreement being enforceable by law, each party to the contract is legally bound to perform his part of the obligation. Non-performance of the duty undertaken by a party in a contract amounts to breach of contract, for which he can be made liable.

REMEDIES

When a party to the contract makes a breach of contract, there are two possible alternatives available to the other party. Firstly to bring an action for the breach of contract, and secondly he may bring an action for specific performance of the contract. COMPENSATION IN CASE OF BREACH

1. Compensation for loss or damage caused by breach of contract.

For the breach of contract damages is the most appropriate remedy. When a contact has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach.

2. Compensation for breach of contact where penalty stipulated for.

When a contract has been broken and a sum has been named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether actual damage or loss is proved to have been caused thereby, to receive from the party who as broken the contract reasonable compensation not exceeding the amount so named or, the penalty stipulated for.

3. Party rightfully rescinding contract entitled to compensation

A person who rightfully rescinds a contract is entitled to compensation for any damage, which he has sustained through non-fulfillment of the contract.

Contracts Of Indemnity
Indemnity is an expressed or implied contract to compensate an individual for loss or damage; for example, an insurance policy.

Property and liability insurance contracts that restore the insured to his/her original financial condition after suffering a loss. The insured cannot profit by the loss; otherwise an unscrupulous homeowner, for example, could buy several fire insurance policies, set fire to the house, and collect on all the policies.
An employe who has been injured by the negligence of his employer, causing the explosion of a steam boiler, and who has sued such employer, can not maintain an action against an insurance company which had agreed to indemnify the employer against such losses.
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