 Introduction to Contract:

The law is one of the major & vital parts

of every transaction. In our daily life
contract plays an important role. We may
not go or pass any day without applying
contract. It is very important to follow
the contract law enter into a contract to
avail legal remedy. The contract act does
not affect any usage or custom of trade,
or any incident of any contract not
inconsistent with the provisions of the
Act-Sec.1

 Definition of Contract:

The contract is comes from the Latin term

‘Contractum’ which means to work on
contract. Contract is an agreement between
two or more parties which is enforceable
by the court.
 According to section 2(h) of the contract
act 1872, “an agreement enforceable by law
is a contract”.
 According to the Prof Salmond, “the
contract is an agreement creating &
defining obligation between parties”.
 According to Sir Fredric Pollock, “Every
agreement & promises enforceable at law is
a contract”.

 How a Contract is made:

To make a contract there are four stages

need to be followed:
Stage-1: proposal---
1. Two Parties
2. Offer
Stage-2: Promise---- 1
1. Two parties
2. Offer
3. Acceptance

Stage-3: agreement------
1. Two Parties
2. Offer
3. Acceptance
4. Consideration

Stage-4: contract----
1. Two Parties
2. Offer
3. Acceptance
4. Consideration
5. Enforceable by law

 Essential elements of contract:

  Two or more parties
 Capacity of the parties
 Lawful offer & acceptance
 Lawful consideration
 Free consent to the parties
 Lawful purpose & objects
 Specific subject matter
 Certainty\confirmation
 Possibility of performance
 Legal formalities
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 Two or more Parties:
A person alone cannot make a contract.
There must be two or more parties in a
contract. So, to make a contract at list
two parties are needed.

 Capacity of the parties:

The parties to the contract must be
capable to enter into a contract according
to the law of the state. As for example,
in Bangladesh under the provisions of the
Contract Act 1872, a person under age of
18 years (Minor) or a person of unsound
mind may not enter into a contract.

 Lawful Offer & Acceptance:

The offer & acceptance must be lawful.
Here both are supported by the Contract
Act, 1872.
 Lawful Consideration:
Subject to some exceptions a lawful
consideration is essential for a contract.
It is supported by the Contract Act, 1872.

 Free consent to the parties:

The free consent of the all parties to a
contract is an important element of a
contract. Free consent means the consent
which is not caused by coercion, undue
influence, fraud, misrepresentation or
mistake.

 Lawful purpose & objects:

Contract must be made to lawful purpose &
objects. Here lawful purpose & objects
both are supported by the Contract Act,
1872.

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 Specific subject matter:
The subject matter of the contract must be
specific to clearly identify.

 Certainty\Confirmation:
The language & expression of the contract
must be certain & specific by which the
actual intention of the parties to it is
clearly expressed.
  Possibility of performance:
A contract may not be for such as which is
impossible to perform in fact.

 Legal formalities:
According to the nature of contract there
are variety of legal formalities need to
be fulfilled. As for example, a sale of
immovable property must need to writing &
registered.

 Classification of Contract:

Contract can be classified into five

divisions namely—

 The method of formation

 The method of expression
 The method of performance
 The method of formalities
 The method of legality

 The method of formation:

Under the method of formation, contract
may be three kinds—
1) Oral contract
2) Written contract
3) Quasi contract
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1) Oral contract:
 Oral contract is done by the words of
mouth of the parties that is called oral
contract.

2) Written contract:
Written contract is done under a written
document with the signature of the parties
that is called written contract.

3) Quasi contract:
The term ‘quasi’ means as near as. So,
‘quasi contract’ means as like as a
contract, but not a contract in proper
sense. This contract is not made by the
words of mouth of the parties or by any
written document, but the parties to it
bind then under an obligation like
contracts.

 The method of expression:

Under the method of expression, contract
may be two kinds---

1) Express contract
2) Implied contract

1) Express contract:
Express contracts which is expressed in
words spoken or written. When a contract
is formal, there no difficulty in
 understanding the rights & obligations of
the parties.

2) Implied contract:
The condition of an implied contract is to
be understood from the acts, conducts or
the courses of dealing between the
parties.

 The method of performance:

Under the method to the time of
performance, contract may be two kinds—
1) Executed contract
2) Executory contract
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1) Executed contract:
There are contracts where the parties
perform their obligations immediately, as
soon as the contract is formed.

2) Executory contract:
In this contract the obligations of the
parties are to be performed at a later
time.

 The method of formalities:

Under the method of the method of
formalities, contract may be two kinds-

1) Formal contract
2) Informal contract
1) Formal contract:
A formal contract which is formatted by
satisfied all the essentials formalities
of a contract.

2) Informal contract:
An informal contract which is failed by
satisfied any of the essential formalities
of a contract.

 The method of legality:

Under the method of legality, contract may
be five kinds—

1) Valid contract
2) Void contract
3) Voidable contract
4) Unenforceable contract
5) Illegal contract

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1) Valid contract:
An agreement which is satisfied all the
essential requirements of a contract &
which is enforceable by the court is
called valid contract.

2) Void contract:
An agreement which is not satisfied any
essential requirements of a contract &
which is not enforceable by the court that
 is called void contract. A void agreement
has no legal fact. It confers no right on
any person & creates no obligation between
the parties.
Example: An agreement is made by a minor.

3) Voidable contract:
An agreement which is enforceable by law
at the opinion of one or more parties of
the contract but not at the opinion of the
other or others is a voidable contract. A
voidable contract is one which can be
avoided & satisfied by the parties to it.
Until it is avoided, it is a good & valid
contract.
Example: Contracts is made by coercion or
undue influence or misrepresentation or
fraud.

4) Unenforceable contract:
An unenforceable contract is not
enforceable before a court for its
technical & formal defect.
Example: An agreement required by law to
register but not registered & an agreement
with not sufficient stamped.

5) Illegal contract:
An illegal contract is against a law
enforcing in Bangladesh.
 Example: An agreement to complied murder.

♣ Void Contract: 7

“An agreement not enforceable at law is a

void contract”. Originally it is a valid
contract but due to certain reasons it
becomes void after its formation
Features of void contract:
 It is not enforceable by law
 It creates no legal rights
 It creates no obligations on any
party
 An agreement which is against the
public policy or against any law is
also void
 Under this contract no compensation
can be paid to any party
Example: Rahul & Rothy contract to marry
on next Sunday. Rothy dies before the
Sunday. The contract becomes void

♣ Voidable Contract:

“An agreement which is enforceable by law

at the option of one or more of the
parties, there to but not at the option of
the others is a voidable contract”.

Features of voidable contract:

  It is enforceable at law at the option
of one or more of the parties
A voidable contract can only be
objected by the party who has been
subject to fraud, coercion,
misrepresentation & undue influence
 If the contract is revoked by a person
rightfully then he can also receive the
compensation
 The contract is voidable at the option
of the party whose consent is caused
 Contracts caused by fraud, undue
influence, misrepresentation, or by
coercion are voidable contracts.
Example: Mr. Kader threatens to shoot Mr.
Shah to purchase a car for one lac. Mr.
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shah agrees the contract was made by
coercion & is voidable at the option of
Mr. Shah.

 Difference between Void & voidable contract:

 Definition: When a contract ceases to

be enforceable at law, it becomes void
contract. Voidable contract is a
contract which is enforceable by law at
the option of one or more parties
thereof , but not at the option of
others.
 Status: A void contract cannot create
any legal rights. It is a total
 nullity. A voidable contract takes its
full & proper legal effect unless it is
disputed & set aside by the person
entitled to do so.
 Nature: A void contract is valid when
it is made. But subsequently it becomes
void due to one reason or the other. A
contract may be voidable since very
beginning, or may subsequently become
voidable.
 Effect: When a contract is void because
of illegality, its collateral
transactions also becomes void. A
voidable contract does not effect the
collateral transactions.

 Distinguish between agreement & contract:

There have differences between agreement &

contract which is given below---

 Every promise & every set of promises

forming the consideration for each
other is an agreement & an agreement
enforceable by law is a contract.
 Agreement is discussed in section 2(e)
of the Contract Ac 1872, & contract is
discussed in section 2(h) of the
Contract Act, 1872.
  There have need to four elements for
agreement but need to five elements for
contract.
 All agreements are not contract but all
contracts are agreement.
 Agreement always may not create a legal
obligation but contract always creates
a legal obligation.
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 Agreement always may not be enforceable

by law but contract always enforceable
by law.
 Agreement is the previous stage of a
contract but contract is the next stage
of an agreement.
 Agreement is the genus but contract is
the species.

 Conclusion:

The elements mentioned above must all be

present. If any one of them is absent, the
agreement does not become a contract. An
agreement which fulfils all the essential
elements is enforceable by law & is called
a contract. From this it follows that,
every contract is an agreement but all
agreements are not contracts. Every
contract gives rise to certain legal
obligations or duties on the part of the
contracting parties. The legal obligations
are enforced by the courts.
The Indian Contract Act contains rules
regarding each of the elements mentioned
above.

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