Are all agreements contracts If not what agreements can be termed as contracts Explain in detail?

Answer 1

An Agreement is defined [Section 2 (e)] as "every promise and every set of promises forming consideration for each other". A promise is defined as 'an accepted proposal.' Thus, every agreement in its ultimate analysis is made of a proposal from one side and its acceptance by the other. Contract: 'An Agreement enforceable by law is a contract' [Section2 (h)]. To become a contract an agreement must be enforceable by law. Sec. 10 of the Indian Contract Act lays down the condition of enforceability. An agreement becomes enforceable only when it is coupled with obligation. An obligation is the legal bond, which binds the parties to a contract. The obligations springing from agreements should be legal obligations and not moral, social or religious obligations. Thus it can be said that all contracts are agreements but all agreements need not be contracts. The agreements that create legal obligations only are contracts. The validity of an enforceable agreement depends upon whether the agreement satisfies the essential requirements laid down in the Act. Section 10 lays down that ' all agreements are contracts if they are made by the free consent of the parties competent to contract for a lawful object and are not hereby expressly declared to be void'. Section 10 provides that all agreements are contracts, if they are made by the free consent of the parties, competent to contract, for a lawful consideration, and with a lawful object, and are not expressly declared by law to be void. The following are the essentials: a) Agreement: To constitute a contract, there must be an agreement between two or more than two parties. No one can enter into a contract with himself. An agreement is composed of two elements - offer or proposal by one party and acceptance thereof by the other party. The party making the offer (or proposal) is known as the offerer or proposer; the party to whom the offer is made is known as the offeree. When the offeree gives his assent to the offer, then he is known as the acceptor. At the time of entering into an agreement, parties must be thinking of the same thing in the same sense. In other words they must have what is known as consensus ad idem. b) Free consent: The consent of the parties to the agreement must be free and genuine. That is, the parties should agree upon the same thing in the same sense and their consent should be free from all sorts of pressure. The consent will not be free if it is obtained by misrepresentation, fraud, undue influence, coercion or mistake. c) Contractual capacity: The parties to agreement must be competent to contract, that is the parties entering into an agreement must have legal competence. In other words they must have attained the age of majority, should be of sound mind and should not be disqualified under the law of the land. The flaw in the capacity of parties to contract may be due to minority, lunacy, idiocy, drunkenness or status. If a party suffers from any of these flaws, then it may not be a valid one. d) Lawful consideration: The contract must be supported by consideration on both sides. Consideration means something in return for something. It is the price of the promise that is, each party to the contract must give or promise something, and receive something or a promise in return. However this consideration need not be in terms of money. In case the promise is not supported by consideration, the promise will be nudum pactum (a bare promise) and would not be enforceable by law. Moreover the consideration should be lawful and adequate. However, there are certain exceptions to this rule. e) Lawful object: The object of the agreement must be lawful and not one, of which the law disapproves. That is, it should not be forbidden by law, should not be fraudant, should not cause injury to the person or the property of another, should not be immoral or against public policy. f) Not expressly declared void: The statue should not declare an agreement void. The Act itself has declared certain types of agreements as void. E.g. agreements in restraint of marriage, trade, legal proceedings. In such cases, the aggrieved party can't seek any relief from the court of law. g) Possibility of performance: The agreement should be capable of being performed. e.g., Mr. A agrees with Mr. B to discover treasure by magic. Mr. B can't seek redressal of the grievance if Mr. A fails to perform the promise. h) Certainty of terms: The terms of the agreement should be certain. E.g., Mr. A agrees to sell 100 tons of oil. The agreement is vague as it does not mention the types of oil agreed to be sold. i) Intention to create legal obligation: Though section 10 is silent about this, under English law this happens to be an important agreement. Therefore, Indian courts also recognize this ingredient. An agreement creating social obligation can't be enforced. j) Legal formalities: Indian Contract Act deals with a simple contract supported by consideration. Agreements made in India may be oral or written. However, Section 10 states that where the statute states that the contract should be in writing and should be witnessed or should be registered, the same must be observed. Otherwise, the agreement can't be enforced e.g. under Indian Companies Act, the Memorandum of Association and articles of Association must be registered.