Basic Theory | Part 1 | Law of Contracts

Q1. Define contract according to to the Indian Contract Act, 1872 ?

Ans. According to the Indian Contract Act, 1872, a contract defined by Section 2(h) as an agreement that is enforceable by law.

Q2. What is an agreement ?

Ans. An agreement, in simple words, is a promise. An offer when accepted becomes an agreement.

Q3. When can an agreement qualify as a contract ?

Ans. An agreement must meet the following criteria to qualify as a contract :

1. agreement must have some consideration
2. agreed parties must be competent
3. agreement must have free consent between parties
4. agreement must have a lawful object
5. the agreement must not be expressly declared void by law

Q4. Which agreements are contract, which case law can be used as illustration ?

Ans. Only those agreements that create legal obligations are contracts, the agreements that do not create legal obligations are not contracts.

Illustration: The case of Balfour v. Balfour (1919, 5 KB 571) explains this.

Q5. What is a Offer or Proposal ?

Ans. The Offer or Proposal is the first step in the formation of a contract, given by Section 2(a) of ICA, 1972 as, when one person signifies his willingness to do or not to do certain things, it is called an offer or a proposal .

The offer given must be with an intention to create a legal relationship.

Q6. Who is Offeror and a Offeree ?

Ans. The person making the proposal or offer is called the Offeror and the person to whom the offer has been made is called an Offeree.

Q7. What is Acceptance ?

Ans. Section 2(b) of ICA, 1972, defines acceptance as, when a offer is given with an intention to create a legal relationship, an assent or consent given to the offer by the offeree is known as acceptance.

Q8. Give an illustration to explain offer, acceptance and agreement.

Ans. A expresses his willingness to sell his cottage to B for Rs 5 lakhs. Here A’s willingness is called offer. A is the offeror and B is the offeree. B accepts the offer to purchase the cottage. This is called the acceptance. A’s offer when accepted by B becomes an agreement.

Q9. What is an invalid offer ?

Ans. An offer must be definite and certain. If the offer is not clear enough to conclude a contract, it is considered to be an invalid offer.

Q10. What is a general offer, give a supporting case law ?

Ans. An offer can also be made to the world at large. It is called a general offer and it is valid. In the case of a general offer, there is no need for communicating acceptance to the offeror. Merely fulfiling the conditions of the offer itself is treated as acceptance to create a contract.

Case law : Carlil v. Carbolic Smoke Ball Co. (1893, 1 QB 256).

Q11. What is a consideration ?

Ans. A consideration is an important element in a contract. Consideration means “something in return” for the offer. Consideration can be in the form of an act or forbearance. A contract without consideration is a void contract and is not enforceable by law.

However there are exceptions to the general rule in certain situations such as a written and registered agreement out of natural love is not void, even if it is without a consideration. Consideration need not be adequate but should be real.

Q12. Give examples for a contract with and without a consideration.

Ans. Illustration 1: Contract with consideration

A offers to sell his bike for Rs 30,000/- to B. B accepts the offer. In this case, the consideration of A is his bike and the consideration of B is Rs 30,000/-. This is a contract with consideration.

Illustration 2: Contract without consideration

A, for natural love and affection, promises to give his son, B Rs 2,000/-. A puts his promise to B in writing and registers it. This is a contract and absence of consideration does not make it void.

*********************************