Contract: Meaning, Types & Elements

Corporate Legal Environment

Business Law is crucial for the understudies of Management to comprehend the lawful guidelines and parts of the business. Much the same as whatever another study, even Business Management is deficient without a legitimate investigation of its laws. Any manifestation of business needs legitimate authorization. In this manner, it is basic that a Manager comprehends the different routes in which organizations can be sorted out. This subject presents a portion of the basic types of business association, incorporating a few structures one of a kind in India like the Joint Hindu Undivided family firm.


The Indian Contract Act 1872

Meaning of Contract

As per Section 2 (h) of the Indian Contract Act – An Agreement is that which is enforceable by the law. An agreement accordingly is an assertion of the object of which is to make a legitimate commitment i.e. an obligation enforceable by law

A proposition when acknowledged turns into a guarantee. An agreement, accordingly starts to be just when one gathering makes a proposition or offer to the next gathering and that gathering means his consent (i.e. gives his acknowledgement). In short, an understanding is the aggregate of offer and acknowledgement both the gatherings to an agreement must concur about the topic of the understanding in the same sense and in the meantime.

All Contracts are agreements but all agreements are not contracts.

Vital Elements of  a Valid Contract

1. Offer and Acceptance:- With a specific end goal to make a legitimate contract, there must be a ‘legal offer’ by one gathering and ‘legal acknowledgment’ of the same by the other party.

Example: – John offers to purchase a house from the builder (Estate organization) and manufacturer acknowledges it.

2. Aim to Create Legal Relationship:- In the event that, there is no such plan from gatherings, there is no agreement. Understandings of social or local nature don’t ponder legitimate relations.

Case: – Balfour versus Balfour (1919)

3. Lawful Consideration:-Consideration has been characterized in different ways. As indicated by Blackstone,”Consideration is a reward given by the gathering contracting to another.” as it were of Pollock, “Consideration is the cost for which the guarantee of the another is brought.”

Example:- John is purchasing a house by giving Rs 10,00,00 to the manufacturer.

4. Capacity of the parties:- The gatherings to an understanding must be capable to contract. In the event, that both of the gatherings does not have the ability to get, the agreement is not substantial.

Agreeing the accompanying persons is clumsy to contract.

(a). Minors,

(b). Persons of unsound personality, and

(c). Persons precluded by law to which they are subject.

Example:- Anita is equipped for paying to the manufacturer while the developer has the position of the house prepared to give.

5. Free Consent:-“Consent” implies the gatherings probably settled upon the same thing in the same sense. As per Section 14, Consent is said to be free when it is not created by-

(1). Coercion,

(2). Undue impact

(3). Fraud

(4). Mis-representation

(5). Mistake.

Example:- John is purchasing the house due to the deceptive notice by the manufacturer of having ocean confronting flats yet just by paying higher rate was not unveiled.

6. Legal Object:-The object of understanding must be legitimate. Item has nothing to do with thought. It implies the reason or configuration of the agreement. Accordingly, when one contracts a house for utilization as a betting house, the object of the agreement is to run a betting house.

The Object is said to be unlawful if-

(a). It is illegal by law;

(b). It is of such nature that if allowed it would crush the procurement of any law;

(c). It is deceitful;

(d). It includes a damage to the individual or property of whatever other;

(e). The court views it as corrupt or contradicted to open strategy.

7. Certainty of Meaning:- As indicated in Section 29,” Agreement the importance of which is not Certain or fit for being made sure are void.”

8. Probability of Performance:- On the off chance that the demonstration is inconceivable in itself, physically or legitimately if can’t be upheld at law.

Example – Builder guarantees to have John an additional sq feet space for their home that is not lawfully enlisted then it is unrealistic.

9. Not Declared to be void or Illegal:-The assertion however fulfilling all the conditions of a legitimate contract should not have been explicitly pronounced void by any law in power in the nation. Understandings specified in Section 24 to 30 of the Act have been explicitly pronounced to be void

Example:- assertions in limitation of exchange, marriage, legitimate procedures and so forth.

10. Lawful Formalities:- An oral Contract is a splendidly legitimate contract, expect in those situations where some statute needs composing, enrollment and so forth. In India wrote work is needed in instances of the offer, home loan, rent and endowment of unfaltering property, debatable instruments; notice and articles of the relationship of an organization, and so on. Enrollment is needed in instances of archives coming extremely close to area 17 of the Registration Act.

All the components specified above must be keeping in mind the end goal to make a substantial contract. In the event, that any of them is missing the understanding does not turn into an agreement.

Types of Contract

→ From the perspective of Legality

  • Valid Contract: any agreement that is sponsored by all the key components of an agreement is thought to be substantial. Example– A offers B to offer his home for Rs 3 Lakhs. B consents to purchase the house at this cost. It is a substantial contract.
  • Voidable contract: such sort of agreement are those which can be broken if one of the gatherings needs to the end the agreement. In the event that one of the gatherings feels that the certainties of the agreement were distorted, or there was any misstep, or the agreement was entered by misrepresentation, pressure or undue impact then he can request that end the agreement. However till the time the agreement is not renounced it is still legitimate. Example:- Contract with a minor to work can be Voidable.
  • Void Contracts or Agreements: Section 2(i) states that any agreement that is not enforceable by both the gatherings is void. For instance, an agreement with a minor is void.
  • Illegal Agreement: this sort of agreement is that where the gathering gets something that is not allowed by law. The thought is illicit for this situation. The certainties of the agreement don’t stand the procurements of the law. In the event that the agreement hurts anybody, is a misrepresentation or improper then it is an unlawful contract. Example:-An agreement to confer dacoity is an unlawful contract.
  • Unenforceable contract: such sort of agreement can be gone into because there are a few actualities or customs missing like composing, enlistment, and so forth it is neither void nor voidable. Example:- When the promissory note is under – stamped, the assertion in that gets to be unenforceable due to that specialized deformity.

→ From the perspective of Performance

  • Express Contract: the realities and the terms and states of the agreement ought to be in words either composed or talked. Example:-A Publication says to the writer that they will distribute his book at 500 Rs in addition to eminence and writer consents to the same then it is an express contract.
  • Implied Contract: now and again the terms of the agreement are expected by the conduct of the two gatherings or the circumstance in which they are. Case in point if an individual takes transport to go to the workplace then he goes into an inferred contract where he needs to pay for the ticket with a specific end goal to go to his destination. Example:- the powers of the transport that he wishes to go in the transport with the recommended passage rate.
  • Quasi Contracts: if a man leaves his products with his companion and his companion utilizes the merchandise, then he is to pay the man for utilizing his merchandise. Such sorts of the agreement are semi contracts. Example:-Arun, a tradesman, goes out by misstep. Assume Sajid regards the products as his own; then Sajid is sure to pay to Arun a sensible cost for the merchandise.

→ From the perspective of execution

  • Executed Contract: this sort of agreement is that where all the legitimate customs have been done, and nothing is cleared out. Example:- An individual contracts with Builder to purchase a house for Rs 1,000,000. Individual paid Rs. 1,000,000 to Builder. Developer executed the deal deed and conveyed its ownership.
  • Executory Contract: this is the sort of agreement which has not finished yet. There are sure customs which are cleared out. Example:- X offers his auto to Y for Rs. 1,00,000. Y acknowledges X’s offer. On the off chance, that X has not yet conveyed the auto and Y has not yet paid the cost, it is an executory contract.
  • Unilateral Contract: this is an agreement where one gathering is left to perform, and the other party has finished his customs. Example: -Amit takes a coolie to put his gear to a carriage. The agreement starts to be when the coolie puts the baggage. So Amina has just to satisfy his part.
  • Bilateral Contract: this is an agreement where both the gatherings need to perform, and they have not yet done anything. This is in a manner like the executory contract. Example:- Tata goes into contract with Chorus where Tata will pay melody for the acquisition of assets