Contract is an exchange of Promises by two or more persons on the bases of an Agreement creating an obligation which means a binding agreement

in consequence of offer or proposal making a contract Promise. Discuss.

What is a Contract?
A contract is like a promise between people. It is an understanding, a deal between two or more people or organizations to do certain things. Each person or organization who agrees to do something in a contract is called a party.. An agreement, or a contract, says what you and the other person or organizations have agreed to do. It is a written list of the promises you have made. The best form of contract is written on paper and signed by each party. Some examples of contracts include: Entry forms: when you enter your work into an exhibition, festival or competition Consent / Release forms: when someone wants your permission to show images of you or your work in public Gallery agreements and publishing licenses: when showing work in a gallery, or if your work is published Funding agreements: when you receive funding Studio agreements: when working in a supported studio or a program run by an organization.

Why is a contract used?

A contract is used when people or organisations have agreed to do something together. A contract is often used to: say what is expected of you say what you expect of the other person or organisation protect each others needs and rights make each party more responsible for what that party promises to do Say what happens if a party does not keep its promise.

What should you do before making a contract?

Before making a contract: Make sure you understand what is promised to you and what you are promising. You have the right to ask that a contract is explained to you with simple words before signing it. You could also ask someone you trust to read it and explain it to you. The contract and any explanation of its meaning should meet your communication needs. You have the right to ask that a contract is provided in alternative formats, such as: Braille large print Interpretation Make sure that the contract really protects your interests. Only make promises which you can keep. Write your contract down and make sure that everyone involved has signed it. Get legal advice, to make sure that the contract is a good one for you.

ESSENTIALS OF A VALID CONTRACT

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 hereby expressly declared to be void. The analysis of the provisions of Section 10 shows that a valid contract musthave the following essential elements: Proper Offer and Acceptance: There must be at least two parties- one making the offer and the other accepting it. Such offer any acceptance must be valid. An offer to be valid must fulfil certain conditions, such as it must intend to create legal relations, its term, must be certain and unambiguous, it must be communicated to the person to whom it is made, etc. An acceptance to be valid must folds certain conditions, such as it must be absolute and unqualified, it must be made in the prescribed manner, it must be communicated by an authorized person before the offer lapses. 2. Intention to Create Legal Relationship: There must be an intention among the parties to create a legal relationship. In case of social or domestic agreements, the usual presumption is that the parties do not intend to create legal relationship but in commercial or business agreements, the usual presumption is that the parties intend to create legal relationship unless otherwise agreed upon.

Example: X invited Y to a dinner Y accepted the invitation. It is a social agreement. If X fails to serve dinner to Y, Y cannot go to the courts of law for enforcing the agreement. Similarly, if Y fails to attend the dinner, X cannot go to the courts of law for enforcing the agreement. But even a business agreement may not be enforceable by law where the agreement so provides e.g. in Rose & Frank Co. v. Crompton Bros. (1925) A.C. 445, the agreement entered into stated that it will not be subject to legal jurisdiction in the law courts, the agreement was not enforceable by law as the parties never agreed to create legal obligations despite being a business agreement.

Capacity of Parties The parties to an agreement must be competent to contract. In other words, they must be capable of entering into a contract. Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

In other words the person must be major, must be of sound mind and must not be declared disqualified from contracting by any law to which he is subject. If the parties to agreement are not competent to contract, then no valid contract comes into existence.

Example: X a minor borrowed Rs 8,000 from Y and executed mortgage of his property in favour of the lender. This was not a valid contract because X is not competent to contract. Therefore, the mortgage was not valid and the money advanced to minor could not be recovered. Lawful Consideration An agreement must be supported by lawful consideration. Consideration means something in return. According to Section 23 of the Indian Contract Act, 1872, the consideration is considered lawful unless it is forbidden by law or is fraudulent or involves or implies injury to the person or property of another or is immoral or is opposed to public policy.

Example : X agrees to sell his car to Y for Rs. 1,00,000. Here Ys promise to pay Rs. 1,00,000 is the consideration for Xs promise to sell the car and Xs promise to sell the car is the consideration for Ys promise to pay 1,00,000. Free Consent There must be free consent of the parties to the contact. According to Section 14, Consent is said to be free when it is not caused by (i) coercion, (ii) undue influence, (iii) fraud, (iv) misrepresentation, or (v) mistake. If the consent of the parties is not free, then no valid contract comes into existence.

Example: X threatens to kill Y if he does not sell his house to X. Y agrees to sell his house to X. In this case, Ys consent has been obtained by coercion and therefore, it cannot be regarded as free. Lawful Object The object of an agreement must be lawful. According to Section 23 of the Indian Contract Act, 1872, the object is considered lawful unless it is forbidden by law or is fraudulent or involves or implies injury to the person or property of another or is immoral or is opposed to public policy.

Example : X, Y and Z enter into an agreement for the division among them of gains acquired or to be acquired by them by fraud. The agreement is void because its object is unlawful. Example II: X lets a flat on hire to Y a prostitute, knowing that it would be used for immoral purposes. The agreement is void because its object is for immoral purposes. Agreement not Expressly Declared Void The agreement must not have been expressly declared void under the provisions of Sections 24 to 30 of the Indian Contract Act, 1872. Under these provisions, agreement in restraint of marriage, agreement in restraint of legal proceedings, agreement in restraint of trade and agreement by way of wager have been expressly declared void.

Example : X promised to marry none else except Y and in default pay her Rs 1,00,000. X married to Z and Y sued X for the recovery of Rs 1,00,000. It was held that Y was not entitled to recover anything because this agreement was in restraint of marriage and as such void.

Certainty of Meaning The terms of the agreement must be certain and unambiguous. According to Section 29 of the Indian Contract Act, 1872, agreements the meaning of which is not certain or capable of being made certain are void. Example: X a dealer in different types of oils agreed to sell 100 tonnes of oil to Y. This agreement is void on the ground of uncertainty because it is not clear what kind of oil is intended to be sold. If, however, the meaning of the agreement could be made certain from the circumstances of the case, it will be treated as a valid contract. Example: X who is a dealer in mustard oil, agreed to sell 100 tonnes of oil to Y. This agreement is valid because the meaning of the agreement could be easily ascertained from the circumstances of the case. Possibilities of Performance The terms of the agreement must be such as are capable of performance. According to Section 56, an agreement to do an impossible act is void.

Example : X agrees with Y to discover treasure by magic and Y agrees to pay Rs 1,000 to X. This agreement is void because it is an agreement to do an impossible act. Example II: X agrees with Y to enclose some area between two parallel lines and Y agrees to pay Rs 1,000 to X. This agreement is void because it is an agreement to do an impossible act. Legal Formalities The agreement must comply with the necessary formalities as to writing, registration, stamping etc. if any required in order to make it enforceable by law.

Example : An oral agreement for arbitration is unenforceable because the law requires that arbitration agreement must e in writing.

Kinds of Contract
1. Voidable Contract:
An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. A contract is voidable when one of the parties to the contract has not exercised his free consent. One of the essential elements of a formation of a contract for example, free consent, is absent. All voidable contracts are those which are induced by coercion fraud or misrepresentation. The person whose consent is not freely given may avoid a contract. It therefore continues to be valid till the party whose consent is caused by coercion, undue influence, fraud or misrepresentation chooses to avoid the contract within a reasonable time. Contract then is not binding on the other party.

2. Void Contract:
A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable. A void contract is a nullity from its inception. No rights accrue there under. A contract may also be originally valid when entered into but subsequently due to change in the events or circumstances, it may become void. It should be noted that there cannot be a void contract because when the contract is void, it is no contract at all. The right expression therefore is void agreement and not void contract.

3. Unenforceable Contract:
A contract which cannot be enforced is a valid contract in law, but is incapable of proof, and therefore cannot be enforced in the Court of Law.

4. Executed Contract:
Where both the parties have performed their obligation, it is an executed contract. Even when one party to the contract has performed his share of the obligation, the contract is executed though to the other party is still under an outstanding obligation to perform his part of the promise.

5. Executory Contract:
Here neither party to the contract has performed his share of the obligation, for example, both the parties have yet to perform their promises, the contract is executory. In an executed contract one party has already performed his part of he agreement while the other party has to perform his par. In an executory contract both the parties have to perform their mutual promises and the fact that they have to perform their parts of the contract does not affect the validity of the contract.

6. Express Contract:
When the terms of a contract are reduced in writing or are agreed upon by spoken words at the time of its formation, the contract is express.

7. Implied Contract:
The terms of a contract are inferred from the conduct or dealing between the parties. When the proposal or acceptance of any promise is made otherwise than in words, the promise is said to be implied. Such an implied promise leads to an implied contract. For example, A boards a bus. It is implied from his conduct that A has entered onto an implied promise to purchase a ticket.

8. Quasi-Contract:
Certain relations resemble those created by a contract. Certain obligations which are not contracts in fact but are so in the contemplation of law. These are called Quasi-Contracts. Illustration: A supplies necessities to B who is not capable of contracting and reimbursing to A. A is entitled to be reimbursed from Bs property. Quasi contracts raise out of obligation enjoyed by one person from the voluntary acts of the other which are not intended to be performed gratuitously.

9. Contingent Contract:
A contingent is one in which a promise is conditional and the contract shall be performed only on the happening of some future uncertain event. Illustrations: A contracts to pay B Rs 10,000, if Bs house is burnt. This is a contingent contract.

10. Contracts of Record:

A contract of record is one which is taken to the records of a Court, for example judgment of a court. Such judgments create a binding effect through the authority of the Court.

11. Specialty Contract:

A specialty contract is a contract which is in writing signed, sealed and delivered by the parties. It is also called a contract under seal. Consideration is not necessary in a specialty contract.

12. Simple Contract:

A simple contract s one which is not under seal. All contracts which are not under seal are simple contracts. All simple contracts require consideration. They may be made by written or spoken words. Contracts of Record and Specialty Contracts are also known as Formal Contracts. The classification of contracts into Contracts of Record, Specialty and simple is under the English Law. Indian Law does not recognize contracts without consideration. All contracts must have consideration in order the valid subject to exceptions under section 25 of the Act.

13. Statutory Contract:

When all or some of the terms and conditions of contract are statutory then the entire contract, or that extent as the case may be, would be regarded as statutory contract.

DIFFERENCE BETWEEN VOID AGREEMENT AND VOID CONTRACT

Void Agreement : 1. A void agreement is unenforceable from the beginning. 2. A void agreement can never be enforced. 3. In a void agreement the parties are not entitled for restoration of benefits which they have exchange during the contract. Void Contract : 1. A void contract is enforceable when it is made. It becomes unenforceable later on. 2. A void contract can be enforced before it becomes unenforceable. 3. In a void contract the parties are entitled for restoration of benefits which they have exchange during the contract.