Introduction to Contracts
Contracts are the foundation of all legal and business relationships. They define rights, obligations, and remedies, ensuring predictability and fairness between parties.
What Is a Contract?
A contract is a legally binding agreement between two or more parties that the law will enforce once certain conditions are met. Until those conditions are fulfilled, it remains a mere agreement without legal obligation.
Essential Elements of a Valid Contract
- Offer and Acceptance: A clear proposal by one party and an unqualified assent by the other.
- Lawful Consideration: Something of value exchanged between the parties.
- Intention to Create Legal Relations: Parties must intend the arrangement to be legally binding.
- Capacity to Contract: Parties must be of sound mind and legal age.
- Free Consent: Agreement must be voluntary, without coercion, undue influence, fraud, misrepresentation, or mistake.
- Lawful Object: The contract’s purpose must not be illegal or against public policy.
- Certainty & Possibility of Performance: Terms must be clear and capable of being performed.
- Absence of Void Provisions: Should not contain clauses that render it void by law.
Classification of Contracts
Contracts may be classified based on their validity, formation, and performance:
| Type | Description |
|---|---|
| Valid Contract | Satisfies all essential elements and is enforceable by law. |
| Void Contract | Lacks legal effect from the beginning. |
| Voidable Contract | Valid until one party chooses to rescind it. |
| Executed | Fully performed by both parties. |
| Executory | Yet to be performed by one or both parties. |
| Express | Terms are clearly stated in words (oral or written). |
| Implied | Terms are inferred by conduct or circumstances. |
| Bilateral | Involves mutual promises between both parties. |
| Unilateral | One-sided promise where only one party performs. |
| Contingent Contract | Performance depends on the happening of an uncertain event. |
Formation of a Contract
- Invitation to Treat: An invitation for offers, such as a shop display.
- Offer: A definitive proposal outlining specific terms.
- Acceptance: Unconditional agreement to the exact terms of the offer.
- Communication: Offer and acceptance must be effectively communicated.
- Revocation & Lapse: Offers can be withdrawn or lapse after a set time or upon rejection.
Discharge of Contracts
A contract may be discharged in the following ways:
- Performance: Both parties fulfil their obligations.
- Agreement (Accord & Satisfaction): Parties mutually decide to end the contract.
- Breach: One party fails to perform without lawful excuse.
- Frustration: Performance becomes impossible or unlawful due to unforeseen events.
- Operation of Law: Events like insolvency or death discharge obligations.
Breach of Contract & Remedies
A breach of contract occurs when one party fails to perform a promise without lawful excuse. The injured party may seek one or more of the following remedies:
- Damages: Monetary compensation for the loss suffered.
- Specific Performance: A court order compelling the party to perform the contract.
- Injunction: A court order restraining a party from performing certain acts.
- Rescission: Cancelling the contract and restoring parties to their original position.
- Restitution: Returning any benefit or gain obtained under the contract.
Conclusion
Contracts create predictability and fairness by formalising expectations and allocating risks. They provide a clear roadmap for performance and legal remedies when obligations aren’t met.
"Contracts are not just about promises — they are about accountability, trust, and legal certainty."