Law of Contract

Law of Contract
The law of contract is that branch of law which
determines the circumstances in which promises
made by the parties to a contract shall be legally
binding on them

In simple words, the purpose of law of contract is to

ensure the parties who enter in to contract
understand the terms of the contract

OBJECT OF LAW OF CONTRACT

The law of contract is intended to ensure

that, what a man has been led to expect
shall come to pass, and that what has
been promised to him shall be performed
Sir William Anson

Definition of Contract

a written or spoken agreement,

especially one concerning employment, sal
es, or tenancy, that is intended to be enfor
ceable by law

Oxford Dictionary

Consensus ad idem
Meeting of the minds - when the two parties
to a contract, both have the same
understanding of the terms of the agreement.
There would not be a meeting of the minds if Bill Buyer said, "I'll
buy all your stock," and he meant shares in a corporation, and
Sam Seller said, "I'll sell all my stock to you," and meant his
cattle.

Obligation
o An agreement, to become a contract, must
give rise to a legal obligation or duty.
o An obligation is a legal tie which imposes
upon a specific person or persons the
necessity of doing or abstaining from doing
a specific act or acts.

Agreement
o An agreement which gives rise to social
obligation is not a contract
o An agreement is a wider term
o An agreement may be a social agreement or a
legal agreement
o If A invites B to a dinner and B accepts the invitation, it is a social
agreement.

Contracts vs Agreements

All contracts are agreements, but not all

agreements are necessarily contracts

Essentials of a Valid Contract

1.

Offer and Acceptance

2.

Intention to create legal relationship

3.

Lawful consideration

4.

Capacity of parties-Competency

5.

Free and genuine consent

6.

Lawful object

7.

Agreement not declared void

8.

Certainty of terms

9.

Possibility of performance

10. Legal formalities

Offer and Acceptance

At least two parties to an agreement
one party making the offer and the other accepting it

Terms of the offer must be definite

Acceptance must be absolute and
unconditional
Acceptance must be as prescribed
A offers to sell his car for Rs. 400K to C
and C accepts the offer.

Intention to create legal relationship

When two parties enter into an agreement,

their intention must be to create legal
relationship between them, otherwise
there is no contract between them.

Lawful consideration
o To be enforceable by law an agreement must be
supported by consideration
o Consideration means advantage or benefit
moving from one party to the other
o A promise to do something or getting nothing in
return is usually not enforceable by law.
o Selling house for 10 lacs. House and 10 lacs are
considerations for parties.
o Killing a person for money?

Capacity of parties-Competency
The parties to the agreement must be capable of
entering in to a valid contract
Every person is competent to contract if they;
o are of the age of majority
o are of sound mind
o are not disqualified from contracting by any law.
o Retired vs serving employee.

Free and genuine consent

There must be free and genuine consent of the
parties to the agreement.
There is absence of free consent if the agreement is induced
by coercion, undue influence, fraud, misrepresentation

Lawful object
The object of the agreement must be lawful
In other words, it means that the object must not
be.
o illegal
o immoral
o opposed to public policy
o Promise to pay Rs. 10000 by A to B, if B beats C.

Legal formalities
Written of formal but with a proof
Written but not signed .. No contract.

Certainty of terms
Clear terms
A promise B to sell 20 books for some money.
Books without titleand some money is not clear,

Possibility of performance
Some times it is impossible to perform the terms
mentioned in a contract. The contract is void

A promise to sell his house to B for 20,000 in 5 days

the second day the house is burnt, therefore sale
cannot be performed.
Natural disasters..

Not declared void.

Certain agreements are considered to be void by the
law.

A promise to pay 20000 rupees to B, if B closes down

his business. It is restraint in trade.
Promise to pay 1000 rupees if Pakistan wins.

Thank You