BUSINESS LAW- CONTRACT AND ESSENTIALS OF VALID CONTRACT
A contract is an agreement enforceable by law. The law of contract is the basis of business. The law of contract is concerned with everybody and every aspect of the business to perform to perform any kind of activity and it is concerned with the rights &obligation of the parties entering into it.
DEFINITION: A.J SALMOND,” An agreement creating and defining obligation between two or more parties is a contract.”
NATURE OF CONTRACT:
- An agreement or promissory nature.
- Private legislation
- Legal obligation
- Purity of contract
- Function of contract
ESSENTIAL OF VALID CONTRACT:
- OFFER & ACCEPTANCE: In order to create a valid contract, there must be a lawful offer by one party and lawful acceptance by another party.
- CONSIDERATION: Consideration means something in return. An agreement is only possible when both parties are giving & getting something in return.
- LEGAL RELATIONSHIP: Agreement between both parties are legal because through legal agreement all kind of conflicts is avoided in the contract.
- FREE CONSENT: Free consent means both parties must have agreed upon the same things in the same action.
- LAWFUL OBJECT: The object of an agreement must be lawful. The object has nothing to do with consideration. It means the purpose or design of the contract. Thus, when one hires a house for use as a gambling house, the object of the contract is to run a gambling house.
- CAPABLE PARTIES: The parties to an agreement must be competent to contract. If either of the parties does not have the capacity to contract, the contract is not valid.
- NOT DECLARED TO BE VOID OR ILLEGAL: The agreement through satisfying all the conditions for a valid contract must not have been expressly declared void by any law in force in the country.
- CERTAINTY: The terms of the contract must be precise and certain. A contract may be void on the grounds of uncertainty. Similarly, agreement subject to war clause is too vague to be enforceable.
- POSSIBILITY OF PERFORMANCE: If the act is impossible itself, physically or legally, it cannot be enforced at law.
- LEGAL FORMALITIES: An oral contract is perfectly a valid contract, except in those cases where writing, registration etc. are required by some statute.