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THE BASICS OF CONTRACTS AND AGREEMENTS

THE BASICS OF BUSINESS CONTRACTS AND AGREEMENTS
INTRODUCTION :
MULLA: Every promise or agreement enforceable by law is a contract.
SALMOND: Contract is an agreement creating defining obligations between parties .
A contract is an agreement enforceable by law. An agreement is the prime stage of the
contract. If agreement is enforceable by law or if agreement is recognized by law then it will
become a contract and otherwise not . It is basically based upon British Law because the
Contract Act was passed by British Indian Govt. in 1872.

To make contract an agreement it is essential that no contract is possible without an
agreement, but we cannot say that all agreements are contracts. Section 2(h) of contract act
says that, “ contract is an agreement enforceable by law” . All agreement e.g. to see cinema
is not contract, if offer is accepted then it becomes promise. Promise is followed by
consideration then it becomes agreement and agreement is enforceable by law then it
becomes contract, see below :-

i) PROPOSAL + ACCEPTANCE = PROMISE
ii) PROMISE + CONSIDERATION = AGREEMENT
iii) AGREEMENT + ENFORCEABILITY = CONTRACT

AGREEMENT:- Agreement section 2(e) promise or set of promises forming the
consideration with each other, is an agreement.
PROPOSAL/OFFER:- According to section 2(a) when one person signifies to other his
willingness to do or to abstain from doing anything with a view of obtaining the assent of that
offer to such act or abstinence, he is said to make a proposal.

PROMISE:- Promise is an important part of agreement. A proposal when accepted it
becomes promise.
ACCEPTANCE:- According to section 2(b) of contract act when the person to whom the
proposal is made signifies his assent there to the proposal then it is said to be accepted. A
proposal when accepted it becomes promise.
CONSIDERATION:- Section 2(d) of contract act defines consideration. Section 2 says that
an agreement made without consideration is void unless:-
A) Natural love and affection section 25 of contract act, the parties to the agreement
must be standing in a near relationship to each other. The promise should be made by
one party out of natural love and affection for the other. The promise should be
written and registered.
B) Compensation for past voluntary services sec.25(2) in case Sindha vs. Abrahim 1895
Bombay: The promise to compensate though without consideration is binding because
of this exception. The exception also covers a situation where the promise is for doing
something voluntarily.
C) Promise to pay time barred debt sec 25(3):- The promise must be to pay wholly or in
part a time barred debt i.e. a debt of which the creditor might have enforced payment
but for the law for the limitation of suit. The promise must be writing and signed by
the person to be charged within.
ENFORCEABLE BY LAW:- In Indian Contract Act 2(h) it says that contract is agreement
enforceable by law. If an agreement is enforceable by law then it becomes CONTRACT,
otherwise merely an agreement.
To make an agreement a contract in Indian Contract Act section 10, the following conditions
must be fulfilled:-

1) COMPETENT PARTIES:- Section 11 says , contract should be made with person
who must be major and sound mind not disqualified by law.
2) FREE CONSENT:- Section 14 says that consent must be free, when it is not caused
by Coercion, undue influence under section 16 , fraud under section 17 ,
misappropriation under section 18 and mistake under section 20.
3) LAWFUL CONSIDERATION AND OBJECTS:- According to section 23 when
agreements consideration and objects are unlawful, they are void.
4) NOT EXPREELY DECLARED AS VOID :- The such agreements which are made
without consideration and expressly declared to be void as per section 25 are no
contract, these are as under :-
i) AGREEMENT IN RESTRAIN OF MARRIAGE SECTION 26
ii) AGREEMENT IN RESTRAIN OF TRADE SECTION 27
iii) AGREEMENT IN RESTRAIN OF LEGAL PROCEEDINGS SECTION 28
iv) AGREEMENT WHICH IS AMBITIOUS AND UNCERTAIN SECTION 29
v) AGREEMENT BY WAY OF WAGES SECTION 30
vi) AGREEMENT TO DO AN IMPOSSIBLE ACT SECTION 56
5) FORMALITIES PERFORMED BY LAW IF NEEDED:- The person by whom the
contract must be performed time and place and opportunity of payment . Thus when
these conditions are fulfilled then an agreement made a contract because these are
enforceable by law .
Also Read Business Law and Parliament

These are :-
Social agreement :- When agreements based on social relationships and parties, we
cannot enforce these agreements by law , for example:-
A case Jones vs paday If A give invitation of dinner to B and B accept this but doe not go to dinner then A
suffers damage after this. But A cannot file suit against B because it is a social
agreement not enforceable by law.
FAMILY LAW:- Family law are not made contract as in the case of :-
BALFOUR VS BALFOU:- In this case the defendant who was employed in govt. Job in
Ceylon went to went to this wife on love.
For health reasons wife was unable to return to Ceylon. The husband promise to pay 30
ponds per month to his wife as maintenance for the period she had to live apart. The husband
failed to pay this amount. The wife filed a suit against her husband for this money. The court
held that this agreement is not enforceable by law.

BUSINESS CONTRACTS AND BUSINESS AGREEMENTS
A business contract is used to legally solidify terms of engagement between two parties who
are in a business relationship. Creating a business contract removes any doubt or attempt at
speculation. While verbal contracts have some legal precedence, written contracts provide
much better protection. In the case of a breach of contract, a written business contract must
include all required elements, including the consideration, to be valid. The written contract
will also help in the defense should a breach of contract lawsuit be filed.
A business agreement is not enforceable by law and does not include a specific obligation on
the part of either party. An example of a business agreement is when one party agrees to
make a product for the other party, who agrees to pay for the product. When the first party
sends a contract with details about pricing and payment details, and the second party agrees,
it is now a business contract.

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WRITTEN VS. VERBAL CONTRACTS

It is recommended that all contracts be written down in the event the contract is questioned
and details of the contract must be shown. Verbal contracts are legally binding in some
instances, but the burden of proof is much harder to meet. The exception is the ability to
uphold short-term verbal business arrangements. Contracts that are not allowed to be verbal
included pre-nuptial agreements or wills.
Creating a written contract is possible by using forms available on the Internet. While this
option saves money for basic contracts, anything that is more complicated should be drafted
by a lawyer.

CONCLUSION:-
It is not enough for a contract to be clear and specific, it shall also meet certain requirements
to be legally enforceable. Valid contracts are legally enforceable. A legally enforceable
contract can be invoked in court as support for a decision made regarding a disputed matter.
In the absence of certain essential components, a contract cannot be legally enforced.

There is no requirement for a contract to be in writing unless there is a special purpose for this.
Most contracts are not filed in court, and they may easily be verbal. The parties are protected
if something goes wrong when they have a written agreement. The laws governing contracts
and the underlying legal doctrines are powerful and can have profound legal consequences
that could make or break your business.

An expertly drafted contract will protect your
business’s interests and provide you with the full protection of all your rights in any given
transaction. A well-written, enforceable contract can ensure your business’ interests are
protected and its rights can be enforced in several situations.