Elements of Contract

Element 1: 2 Parties are must: Offer and Acceptance

 An offer is a proposal by one party to another to enter into a legally binding agreement.
 The person making the offer is known as the offeror, proposer, or promisor and the
person to whom it is made is called the offeree or proposee.
 When the offeree accepts the offer, he is called the acceptor or promisee.
 A contract emerges from the acceptance of an offer
 Accepting is the category of assenting by the offeree to an offer.
 An offer when accepted -> promise when done by both sides -> Agreement (2e) when is
enforceable by law -> Contract (2h).

Element 2: Intention to Create Legal Relations

 Parties must intend to create legal relations.
 Intention to contract means that the party involved is ready to accept the legal
consequences if he or she does not perform the part of the contract.
 This intention will be inferred in the language they use and the circumstances in which
they use it.
 2 major agreements can be looked at here:
 - Commercial/business agreements: Business Relations are created – Contracted third party
for a particular work. Or Contract between a company and its vendors or suppliers.
- Domestic and social agreements - Marriage Contract, Adopting parents, Old age homes.

Element 3: Lawful Considerations

 Supported by contemplation (thoughtfulness).

 Something worth a price. Eg. Bailment and Pledges involve some object in their
transactions with monetary value.
 Return promise Can also be made.
 Can’t promise imaginary things (flight to Mars)
 illegal ones (Guns, Drugs etc).
Types of Considerations:
1. Present – The transaction of the lawful objects has been successfully completed. Eg online
order successfully delivered.
2. Past (No Valid) - If one party had promised to the other party in the past “we will perform
a particular task for you because you have helped us now”. This is a past consideration which
is a void contract.
3. Future - A contract in transition, where the final transfer of objects has not taken place.
4. Unlawful - The objects which are banned by law cannot be considered as lawful
consideration and cannot be used to file a case in court.
5. Illusory Considerations - These considerations are the imaginary objects or promises.
Cannot be enforced by law.

Element 4: Parties Competent to Contract

 Section 11 of Indian Contact Act 1872
 Parties Should be Capable/Competent to make Contract: mentally, Physically, legally.
 Should be Majors Eg. In the movie, Liar-Liar, the final judgement of the case turned into
divorcing lady’s favor because when marriage contract was made, she was a minor.
  Sound Mind of both the parties is a prerequisite for any contract.
 Not Disqualified by Any Other law Eg. Model Code of Conduct - 2 days before the
voting day, Election commission of India does not allow any political campaigns. If a
party forces advertising agency to follow its order to print an Adv in the newspaper,
advertising agency can move to the court saying party is forcing it to get into unlawful
activity.

Case-Element 1: Offer and Acceptance

Carlill v Carbolic Smoke Ball Company [1892]
In 1889 there was a flu called influenza which hit the European countries and nearly 1
million people died. Now this Carbolic Smoke Ball Company made a product called ‘Smoke
ball’ and they claimed it as a cure for the flu. They published advertisements in newspapers
stating that it would pay a reward of 100 pounds to those who contracted the flu even after
using the ball for three times a day for 2 weeks. It also deposited 1000 pounds in alliance
bank showing its sincerity in this matter.
A woman Mrs. Carlill bought this ball and used it for three times daily for two months. She
got She was infected with the flu later. She wrote two letters to the company claiming 100
pounds for which there was no response. The third time the company replied that ‘we have
full confidence with our product, you may not have used it properly’.
Cases on Intention to create Legal Relations
The first case is based on an uncle offering his properties and money to his
nephew on certain conditions. Here the uncle was a rich person, who is really found of his
nephew. But the nephew a young man was in a bad company, he used to drink, smoke and
gamble. So, uncle offered the nephew his ten-acre property and fifty lakhs of money when he
reaches the age of 21, on certain conditions. The conditions where he should not smoke, drink, or
gamble till the age of 21. And the nephew was ok with the conditions and he managed to keep up
with the conditions too. When he reached 21, he needed the property and money. But in the
meanwhile, the good-hearted uncle died. Then the nephew approached a lawyer to claim the
property and money. But the lawyer says you will not get anything, why? Because it was simply
a promise to make a gift in future and our law does not enforce promises to make gift. It is not a
legal deal too.
The second case is based on promise given by father to his son. A father
promised his son to give a special gift if he manages to pass for all subjects. The child managed
to pass for all the subjects and got more than 90% mark too. Even then father did not keep his
promise. Can the child move legally? No, because it was just a promise for a gift in future and
there is no legal deal in the case too.

Case-Element 3: Lawful Consideration

· Lawful consideration means as per 2(b) when at the desire of promisor, the promise has
done to obtain something, such act or promise is called a consideration for the promise.
· In simply we could say that the both parties should get something in return
· Case 1.

Mr Puto promises to Mr Muto to sell his house, to which Mr Muto agreed with Mr Puto to pay
the sum of 100000 rupees.
*CASE II:
Mr X promises to Mr Y to sell his car, to which Mr Y promise to Mr X to pay the sum of 50000
rupees. So here in both cases everyone is get benefit with receiving something in return.

Case-Element 4: Parties Competent to Contract

Case 1 – Ram is a minor boy who is 17 years 8 months old. He needed some money to go on a
vacation with friends. He approached to a moneylender and borrowed Rs. 30000. As a security,
he also signed some papers mortgaging his laptop and motorbike. Five months later, when he
attained the age of 18+, he filed a case declaring the mortgage executed by him was void and
should be cancelled. The court agrees and relieves Ram of all the liabilities and loan repayment.
Since any person less than eighteen years of age does not have the capacity to contract, any
agreement made with a minor is void and liable to be cancelled.