The word contract has originated form the Latin word 'contractum' meaning is joining together.

1. By: Mr. Piyush Kumar
BCA,MBA(HR & Operations)
Faculty of Business Administration
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2. Introduction
 The word contract has originated from the Latin word,
‘Contractum’, meaning ‘joining togather’. A contract is
such agreement, which creates legal obligations and rights
between two or more than two persons. Thus, a contract is
a legally binding agreement, that is an agreement which
the law will enforce.
 According to Section 2 (h) of Indian Contract Act,” A
contract is an agreement enforceable by law”.
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3. Definition
 “ A Contract is an agreement between two or more persons
which is intended to be enforceable at law and is
constituted by the acceptance by one party of an offer
made to him by the other party to do or abstain from doing
some act.” -Halsbury
 “ A Contract is an agreement creating and defining
obligations between the parties.” -Sir Salmond
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4. Essential Elements of Contract
 Agreement : An agreement gives birth to a contract. An
agreement is defined as, ”Every promise and set of
promises forming consideration for each other. Section 2
(e)” A proposal when accepted becomes a promise.
Section 2 (b) defines a promise as follows : when the
person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. A proposal
when accepted, become a promise. Thus an agreement is
an ‘accepted proposal’.
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5. Essential Elements of Contract
 Legal Obligation: Although every contract is an
agreement, there are many kinds of agreements which are
not contracts. An agreement to become a contract must
give rise to a legal obligation. Obligation is an
undertaking to do or to abstain from doing some definite
act. The obligation must be such as is enforceable by law.
In other words, it must be a legal obligation and not
merely moral, social or religious.
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6. Difference between Contract and
Agreement
Agreement Contract
 It is based on proposal and
acceptance of proposal.
 An agreement may or may
not be create a legal
obligation.
 An agreement is a wider term
than a contract. All contracts
are necessarily agreements.
 Offer + Acceptance form an
agreement.
 It is based on agreement.
 A contract necessarily create a
legal obligation.
 A contract is a narrower term
than an agreement. All
agreements are not
necessarily contracts.
 Offer + Acceptance +
enforceable by the law form a
contract.
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7. Essentials of a Valid Contract
 Offer & Acceptance : There must be at least two parties: one making the
offer and the other accepting it. Such offer and acceptance must be valid.
An offer to be valid must fulfil certain conditions; such as: it must intend to
create legal relations, its terms must be certain and unambiguous, it must be
communicated to the person to whom it is made.
 Legal Relationship: Parties enter into a contract must intend to constitute
legal relationship. If there is no such intention, there can be no contract
between them.
 Free Consent: Two or more persons are said to be consented when they
agree upon the same thing in the same sense. If identity of view is not there,
no contract is possible.
 Contractual Capacity of the Parties: The parties to the contract must be
capable of contracting otherwise it cannot be enforced by court of law.
According to Section 11, every person is capable of contracting if (i) he is
minor, (ii) of sound mind, (iii) not disqualified by law.
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8. Essentials of a Valid Contract
 Lawful Consideration : The another important element of the contract is the
presence of consideration which can be said to be the price for the promise. The
consideration must be lawful.
 Lawful Object : For the formation of a valid contract, it is also necessary that the
parties must agree for a lawful object. According to Section 23, the object for which
the agreement has been entered into must not be fraudulent or illegal or immoral or
opposed to public policy or must not imply injury to the person or property of
another.
 Agreement not expressly declared Void: The agreement must not have been
expressly declared void under the provisions of Section 24 to 30, under these
provisions, agreement in restraint of marriage, agreement in restraint of legal
proceedings, agreement in restraint of trade and agreement by way of wager have
been expressly declared void.
 Legal Formalities : The last essential of a valid contract is that it must be written,
attested or registered, if it is so essential under any law prevailing in the country;
e.g., sale, mortgage and lease of an unmovable property can only be done under a
written and registered contract as per the provisions of the Transfer of Property Act.
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9. Reference Books
 Business Regulatory Framework by Dr. A. K. Garg
 Business Law by Swati Publications
 Google search
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