AGREEMENT. AND. CONTRACT

 

                         CONTRACT ACT, 1872

 

                        AGREEMENT AND CONTRACT

 

AGREEMENT : section 2(e)

“Every promise and every set of promises, forming the consideration for each other, is an agreement”.

 

Explanation:

Ø When a person (promisor) offers something to someone else (promisee), and the concerned person accepts the proposal with equivalent consideration, this commitment is known as the agreement. When two or more than two persons agree upon the same thing in the same sense (i.e. Consensus ad idem), this identity of minds is agreement. 

 

Ø Every promise is an agreement, if it forms consideration for both parties.

 

 

Ø It may or may not create legal obligations between the parties.

 

For Example:

1): Shaheer invites Mustaqim and Samir to a dinner. Mustaqim and Samir accept the invitation but do not  attend the dinner. So Shaheer cannot sue Mustaqim and Samir, since it’s a social agreement. In case of social agreement there is no intention to create legal relationship and there the is no contract (Balfour v. Balfour)

2): Sohrab promises to sell his car to Mamoon for Rs. 10 lac. Now if Sohrab does not fulfill the responsibility on his part, he can be sued by Mamoon, since it’s a legal agreement (contract) which creates legal obligations.

 

 

Promise + Consideration =  Agreement

 

(Where promise= offer + acceptance)

 

 

CONTRACT: section 2(h)

“An agreement enforceable by law is a contract.”

Explanation:

It creates legal obligations between the parties. The parties are under obligation to play their part in the performance of the contract. If one of the parties breaches the contract, the other party can enforce it, through the court of law.

For example:

Mamoon agrees to sell his car to Hasnain for Rs. 10 lac. Hasnain agrees to buy it. It’s a contract. If Mamoon fails to deliver the car, Hasnain can sue him ,and if Hasnain fails to pay then Mamoon can sue him.

Promise + consideration = agreement

Agreement + Enforceability by law= Contract

 

 

AGREEMENT & CONTRACT: KEY DIFFERENCES

 

1)    Definition:

        Agreement:2(e) Every promise and every set of promises, forming the consideration for each other, is an agreement”.

       Contract:2(h) An agreement enforceable by law is a contract.

 

2)    Formation:

Agreement:   promise(offer & acceptance)  +  consideration = agreement.

Contract:  agreement + enforceability by law = contract.

 

3)    Scope:

Agreement: wide

Contract: narrow

 

4)    Legal Obligations:

Agreement: may or may not create legal legal obligations.

Contract:  create legal obligations.

5)    In writing:

Agreement: not necessarily

Contract: not necessarily ( may be in oral or in written form).

 

·      All contracts are agreements, but all agreements are not contracts.

 

 

 

 

VOID AGREEMENT,  VOIDABLE CONTRACT,  VOID CONTRACT:

 

VOID AGREEMENT: section 2(g)

“An agreement not enforceable by law is said to be void”.

Ø It is void an initial.(void from the beginning)

Ø It can never be enforced.

Ø Section 24-30 of the Contract Act 1872, expressly declared some agreements to be void.

Ø Examples of void agreements include social or domestic agreements, illegal agreements etc.

1)   Ali invited Maria to a lunch. Maria accepted the invitation but did not attend the lunch. Ali cannot sue Maria, since it’s a social agreement.

2)   Mustaqim gives money to Awais, a smuggler, to buy smuggled goods  . The agreement is illegal and the money cannot be recovered.

 

VOID ABLE CONTRACT: section 2(i)

“ A voidable contract is a contract which is enforceable by law at the option of one party but not at the option of the other party”.

Ø A contract becomes available, when it is made without free consent (I.e consent is obtained under coercion, undue influence, misrepresentation or fraud).

Ø It is considered valid, if not cancelled by the aggrieved party within a reasonable time.

For example:

Mustaqim compelled Nairobi at gunpoint to sell her bike  . The contract is made under coercion and is voidable at the option of Neirobi.

 

Void Contract: 2(j)

“A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable “.

Ø It is not void ab initio (I.e it is a valid contract when it is made but subsequently it becomes void due to certain reasons.

Ø In a void contract, both the parties are not legally responsible to fulfill the contract.

 

Grounds due to which the contract becomes void:

Ø Impossibility of performance.(subsequent incapacitation etc). For example, Sohrab khan agrees to sell his house to Sada Khan after a week. The house caught fire the next day. The contract becomes void due to impossibility of performance.

 

Ø Subsequent illegality(change in law makes the implementation of the contract illegal). For example, Mustaqim promises to supply 500 packs of cigarettes to Jawad. Before the delivery of cigarette packs, the government put a ban on cigarette trade. The contract becomes void.

 

Ø Impossibility of depending event. (Sec 32). For example,  Shaheer contracts to give 5 lac rupees to Mamoon, If Mamoon topped law college. Mano on fails to to top law college. The contract becomes void.

 

 

 

Ø By the rejection of voidable contract. For example,  Maaz contracts to buy Hasnain's car due to coercion for 10 lac rupees. Mass can accept or reject the contract. If Maaz rejects the contract, it becomes void.