What is a Contract? Essentials & Classification — KSLU Contract I Notes

Agreement, Contract & Its Essentials

You buy a coffee, board a bus, download an app and tick “I agree.” You have just made four contracts before lunch, without a single lawyer in sight. So what turns an everyday agreement into something a court will actually enforce? That one question — when is a promise legally binding? — is the doorway to the whole subject, and the examiner walks through it almost every single year.

From promise to contract

Think of building a contract like building with blocks, each defined by the Act:

Proposal / offer — s.2(a): when one person signifies to another his willingness to do or abstain from doing something, to get the other’s assent.
Promise — s.2(b): a proposal, when accepted, becomes a promise.
Agreement — s.2(e): every promise and set of promises forming the consideration for each other. In short, agreement = offer + acceptance.
Contract — s.2(h): an agreement enforceable by law is a contract.

So the famous line — “all contracts are agreements, but all agreements are not contracts” — is simply this: every contract starts life as an agreement, but an agreement only graduates into a contract when the law is willing to enforce it. An agreement to meet a friend for dinner is not a contract; an agreement to sell your bike for ₹20,000 is.

A. The essentials of a valid contract — Section 10.

Section 10 says all agreements are contracts if made by the free consent of parties competent to contract, for a lawful consideration and a lawful object, and are not expressly declared void. Textbooks add a few more that the Act implies. Put together, a valid contract needs:

Offer and acceptance (an agreement).
Intention to create legal relations — social/domestic promises are presumed not to be contracts (Balfour v Balfour (1919)).
Lawful consideration (s.2(d), s.23).
Capacity of the parties (s.11 — Unit 2).
Free consent (s.14 — Unit 2).
Lawful object (s.23 — Unit 2).
Certainty of meaning (s.29) and possibility of performance (s.56).
Not expressly declared void (ss.24–30 — Unit 2), and legal formalities (writing/registration) where required.

B. Classification of contracts.

The same contract can be sorted three ways:

By validity — valid, void (s.2(g): not enforceable at all), voidable (s.2(i): valid until the aggrieved party rescinds), illegal, and unenforceable (good but barred, e.g. by limitation or want of stamp).
By formation — express (words), implied (conduct), and quasi (created by law, not agreement — Unit 4).
By performance — executed (done) and executory (yet to be performed); unilateral (one side still to perform) and bilateral.

🧩 WORKED EXAMPLE — is there a contract?

Facts. A invites B to dinner; B accepts but does not turn up. A sues B for the wasted cost of the food.

Rule. A contract needs an intention to create legal relations; purely social invitations are presumed to lack it (Balfour v Balfour (1919)).

Apply. A dinner invitation is a social arrangement, not a bargain the parties meant to be legally bound by.

Conclusion. No contract; A cannot recover.

Section 2(h), Indian Contract Act, 1872: “An agreement enforceable by law is a contract.”

In Simple Terms: an agreement is any “you do this, I’ll do that”; it becomes a contract only when the law will back it up in court.

flowchart TD
    P["Offer / proposal (s.2a)"] --> AC["Acceptance (s.2b)"]
    AC --> AG["AGREEMENT = offer + acceptance (s.2e)"]
    AG --> TEST["Test it against s.10: consideration, capacity, free consent, lawful object, not void"]
    TEST --> C["PASSES s.10 = CONTRACT — enforceable by law (s.2h)"]
    TEST --> N["FAILS s.10 = only an agreement — NOT enforceable (e.g. social promise, no consideration, minor's agreement)"]

Read it top to bottom: an offer that is accepted makes an agreement; that agreement becomes a contract only if it passes the s.10 test — otherwise it stays a bare, unenforceable agreement.

Case Laws

Balfour v Balfour (1919) — a husband’s promise to pay his wife an allowance was not a contract; domestic arrangements are presumed to lack the intention to create legal relations.
[C-1] Carlill v Carbolic Smoke Ball Co. (1893) — a newspaper reward promise was an enforceable contract; a general offer is accepted by performing its condition.

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