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 Nature Of Contract


The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the parties. The law of contracts creates rights against persons and not against property.

India Contract Act 1872 came into effect from 1st September, 1872. It extends to the whole of India except the states of Jammu and Kashmir.

 Contract [Section 2(H)]

A contract is “an agreement enforceable by law”. Thus,

Contract = Agreement (+) Enforceability by law

E.g.: A and B enters into a contract of supply of 100Kgs of rice by A to B @ of Rs.50Kg.

“All contracts are agreements by all agreements are not contracts”

E.g.: A husband promises to buy a diamond necklace for his wife on her birthday.
“Agreement is a wider concept whereas contract is a narrow concept.”

 Agreement [Section 2(E)]


An agreement means, “Every promise or every set of promises, forming consideration for each other”.

Agreement = Promise (s) By one party (+) Promise(s) by the other party

Promise [Section 2(B)]


 “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted becomes a promise.”


Promise = Proposal + Acceptance


Proposal/Offer [section 2(a)]: A person is said to make a proposal when “he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence”

Proposal = Willingness to do or abstain from doing something (+) willingness’ to obtain assent of the other party to such act or abstinence

Consideration [Section 2(d)]: “when, at the desire of the promisor, the promise or any other person

Has done or abstained from doing, or

Does or abstains from doing or

Promises to do or to abstain from doing something,

Such act or abstinence is called consideration”.

In other words, consideration is “Something in return”. In Latin language it is termed as “quid-pro-quo”.

Consideration may be Past consideration, present consideration, or future consideration.


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