A contract can be also known as an agreement when it becomes enforceable
legally. This context has been honored in our Indian Legal System as a statute
which was enforced on 1st September 1872 when India was ruled by the British Raj.
The statute is termed The Indian Contract Act 1872. This has major divisions
separating the topics to arrange the guidelines in an orderly manner.
These are presented in sections as such General Provisions have included
sections 1 to 75, Sales of Goods are in 76 to 123, Indemnity and Guarantee are
included in 124 to 147, 148 to 181 represents Bailment and Pledge, 182 to 238
consists the sections of Agency, and 238 to 266 includes Partnership. But in the
year 1930, the portion of Sales of Goods was has been recognized as a separate
Act, same was also done with the sections of partnership, which is determined as
The Indian Partnership Act 1932 and the formers is considered as Indian Sales of
Goods Act 1930.
Conventionally, contract and agreement seem to be synonymous but they do hold
grounds for being divergent. With a reference from a well-known phrase "All
contracts are agreements; all agreements are not contracts
," it is
understandable that agreement is a fundamental element of a contract.
Agreements are formed when a proposal gets converted into a promise via
acceptance and holds consideration.
When an agreement accommodates the criteria to be enforced legally; it becomes a
contract. From a practical approach, only those agreements are enforceable which
bears the essentials of a contract. The act comprises the definition of the
legal terms under section 2 where clause 'e' and 'h' defines the terms agreement
The Contract Act was formed during the British rule, so the landmark cases are
all of English origin. Balfour vs. Balfour is one of the recognized cases
signifying an essential; 'intention to create a legal obligation.' In this
regard, there lies a difference in Indian and English Law. Indian law, do not
consider the intentions during the making of the contract, but English Law does.
The latter makes sure that both the parties have a common intention to enter a
legal obligation during the formation of the contract. The parties of the case
share a marital relationship. The plaintiff is the wife while the defendant is
to be the husband. Here both of them went to England from Ceylon for a vacation.
Over time, the wife gets sick and was advised to stay in England, and the
husband returns to Ceylon due to work.
There a promise was made by the husband that he will pay a monthly allowance of
thirty pounds to his wife. But after some time he discontinued to pay. Even both
of them get separated, and arrangements were made between them. This case was
dismissed by the court and the verdict was passed by Lord Atkin, stating that
'the parties never intended that they would have a legal intention, because
agreements between husband and wife to provide capital are generally not
Another element of the valid contract is certainty or in simpler words, proper
knowledge regarding the terms and conditions of the contract to the parties.
Here the case of Lalman Shukla vs. Gauri Datt can be referred. This case is
between a servant and his mistress. Also, one important aspect to be considered
that the servant needs to fulfill his duties and to follow the instructions. The
plaintiff is the servant and the defendant is the mistress.
The nephew of the mistress escaped, to that she asked her servant to find him.
As he went out, the mistress distributed pamphlets stating to reward to the one
who could find her nephew. To this Lalmam Shukla fulfilled the given task and
informs his mistress. All this time he was not aware of the offer. Later he
files a suit claiming the reward. Here the judgment by Justice Banerjee was
declared dismissing the suit.
It was stated that only those petitions can be enforceable by the court where
there is a formation of a contract, where the parties have the proper knowledge
and the process of offer and acceptance have taken place. This contradicts the
suit filed by the plaintiff because before going for the search of the nephew he
did not know about the offer; therefore he cannot accept the offer.
To all this, there seems that no contract was formed between the parties. Also
contrary to the verdict, it is also true that if one performs all the terms and
conditions of the offer, acceptance becomes implied; but in this case,
specifically, this aspect cannot entertain as abiding the orders of the mistress
fall under the duty of a servant, this clearly shows the fulfillment of duty by
From the previous element, it stated that mere performance of the task signifies
acceptance, even if there were no communication between the two parties related
to the offer. From the case of Carill vs. Carbolic Smokeball, the arguments by
the defendant could be a strong influence on the role of acceptance during the
formation of a contract. This case depicts various hidden instances that could
seem to be vague.
The defendant gives an advertisement stating that, if anyone catches Influenza
cold after using their product they will provide a hundred pound to the
customer. Even to show sincerity they provide proof that they have deposited an
amount of thousand pounds in Alliance Bank. Eventually, the plaintiff claims for
the amount when he catches a cold after using the product according to the
During the trial, the defendant raises the defenses for which they need not pay
Firstly they said that their advertisement does not provide any time limit for
the consumption of the product or to raise the claim on the grounds of specified
consequences so accordingly, it stands to be vague.
Secondly, they stated that this suit lacks the intention for a legal obligation,
and the motive behind the advertisement was to promote the product's existence
so this ad is to be considered as a puffing advertisement.
Thirdly they claimed that there was no contract between the plaintiff and the
defendant specifically this add was not for any particular individual, also the
plaintiff provided no communication that he had accepted the offer. But the
court was one step ahead to their defense and stated that this advertisement
cannot be considered as vague because earlier they only stated that the reward
will be provided only if one catches a cold after using the product according to
So this implies the offer to be definite. Also, the court mentioned that they
have deposited an amount of a thousand pounds, corresponding to the offer, which
highlights the seriousness of the offer, therefore this cannot be termed as
puffing add. And most importantly the act of the plaintiff signifies the
performance of the condition which corresponds to sufficient acceptance without
notifications. Through all this, the plaintiff got his reward.
Corresponding to the context of acceptance there lies another element that is
consent. Specifically, consent is defined under section 13 of the Act. It
signifies the purpose of authorization or permission. When consent is provided
free from the parties that count as a valid element essential for the formation
of a contract. But in this regard, there are various grounds where consent can
be obtained by illegal means. Section 15 to 19A defines all these aspects.
These include the grounds of fraud, undue influence, coercion, and
misrepresentation. All these are legally chargeable and punishable under IPC.
From a practical aspect, it can be considered that these grounds provide an
escape to choose a way which may not be legal, and as if one holds enough pieces
of evidence one could succeed. But again law also consists of other provisions
maybe not from this act but from others that could prevent the fraud from
happening. It is said that mistakes can be pardoned, but upon this, there are
various grounds where the mistake is investigated and inquired so one cannot
take these aspects lightly.
Two cases are considered to signify the importance of the capacity of the
contract. Section 11 of the Contract Act represents this element. It states that
the age of majority is an essential element for the parties to the contract to
be competent, also the person should not be unsound mind and not disqualified
from contracting any law to which he is a subject.
The case of Morhiribibi vs
holds the facts relating to this aspect. The parties of the case
are Brahmodatt, a money lender, Kedarnath, his agent, Dharmodas Ghosh a minor,
the mother of the minor, wife of Brahmodatt, Morhiribibi. Dharmodas Ghosh being
a minor, mortgages land to Brahmodatt for an amount of Rs. 20,000 and with a
rate of interest of 12% per year. The payment of the first installment is also
been paid by Kedarnath to Dharmodas Ghosh.
After this, the mother of the minor
gets the knowledge of this mortgage and she sends a letter to Kedarnath asking
to cancel the contract as Dharmodas is not competent as he is a minor. To this
Brahmodatt demands the payment which Kedarnath had paid on his behalf as the
first installment. The lower court has passed that judgment where it stated that
as this is not a valid contract so the defendant need not pay back any money.
Later the same petition was filed to Supreme Court by Morhibibi. There they
relied on sections 64 and 65 of the Contract Act which says in case any contract
becomes void or voidable the benefits received by the concerned parties need to
be restored. But Supreme Court rejected the contention and stated that the basis
of sections 64 and 65 is a valid contract as Dharmodas was a minor so, there was
no valid contract, so no benefits can be restored.
Then Section 41 of the
Specific Relief Act was brought into action which stated that in case if a
contract gets dissolves this section gives discretion to the court to ask the
concerned party who has received the benefits, to compensate the other party.
But this was also rejected by the court stating that at the time of the
mortgage, Brahmadatt was aware of the minority of Dharmodas, still, he entered
the contract, this signifies the negligence towards following the guidelines
before any formation of the contract. So here the plaintiff is not eligible to
receive any compensation.
Another case corresponding to the capacity aspect is Khangul vs Lakha Singh
Here the facts state that a minor comes in contract with another party and
purposely hides his age and sells a plot of land where he receives the money and
did not give the land to the other party, and states that as he is a minor so he
need not act according to the contract.
To this, the court takes a different approach where they did not follow the
previous judgment as their motive is not to favor the fraud even it is done by
the minor and cannot allow him to enjoy the benefits. So the minor was asked, to
compensate the party to whom he has done the fraud. In this instance, there was
a loophole whose advantage was taken by the minor, but since our judiciary has
the right to give judgments according to the circumstances so here the justice
carried with equity.
It also happens like this there may be a contract between two parties but the
benefits are directed to some other party who may not be the party to the
concerned contract. So here a question arises that whether the third party holds
any right to claim for the benefits in case one may be deprived of the same.
Corresponding to a similar situation Chinnaya V. Rammaya is a landmark case.
Here in total, there are three parties but the contract included only two of
The whole act happened between mother, daughter, and sister of the mother. The
mother had land from which she allotted a portion of it to her sister. Then
after she gifted the whole land to her daughter, and made a contract that after
receiving the gift she will provide an annuity to the sister of her mother. To
this, she accepted the offer. Later on, she refused to provide the annuity to
the sister, here the sister filed a petition claiming annuity as per the terms
of the contract.
Here the defense states that she has received the plot as a gift from her mother
and to which her aunt is someone outsider to the contract so she is not eligible
to claim. The verdict of the court was passed that includes when the daughter
has accepted the contract she had agreed to all the terms and conditions which
included the context of providing annuity to her aunt.
Now when she refuses to pay it holds to be not abiding by the terms of the
contract were receiving the gift and providing the annuity are the simultaneous
part of the same contract to which the other party present has the right to
question. As the sister of the landowner is not a party to the contract but
still she is a beneficiary so there she deserves to receive the annuity.
So these were the essentials of a valid contract, but apart from this it there
are many other that holds importance, and one should not be negligent towards
them. It may happen due to fewer considerations of the other elements, the
contract may lose validity and can be declared as a void which may result in
losses. Every aspect of any statutes should be taken seriously in case of any
legal works, this increases the efficiency of the document and the purpose of
the work and also make the work effective and can be accomplished speedily.
- Balfour vs. Balfour 1991 2KB 571
- Lalman Shukla vs. Gauri Datt, 1913,40 ALJ 489
- Carill vs. Carbolic Smokeball,  EWCA Civ 1,  1 QB 256 (CA)
- Morhiribibi vs Dharmodas Ghosh (1903) ILR 30 Cal 539 (PC)
- Khangul vs Lakha Singh AIR 1928 Lah 609
- Chinnaya V. Rammaya ILR (1876-82) 4 Mad 137