What is a contract?

Contracts have been an integral part of the development of the human community. From the beginning of time, contracts have been made among people each and every day. Though the term came into legal existence much later. Contracts have made the functioning of the human community much smoother and organized. 

A contract is simply an acceptance of an offer made by one party to another party/parties. Even the Barter System was a form of contract, for it involved the exchange of goods in accordance with appropriate consideration.

Contracts currently are being framed and validated in accordance with the Indian Contract Act of 1872. This is also based on the principles of the English Common Law. This Act is valid in all states of India.

A contract, as defined by Section 2(h) of the Indian Contract Act, is “an agreement enforceable by law”.

But really, what is a contract? We, as humans, have a tendency to come in contact with hundreds of people everyday. And unknown to us, we become part of a contract the moment we agree to accept an offer given to us with adequate consideration. For example, when you agree to buy a smartphone from a seller, you become part of a contract with the seller. You aren’t aware of the contract that you have just become a part of. But both you and the seller are under legal obligation to perform the contract. So, a contract is an agreement between two or more parties for  the sale and purchase of goods which is enforceable by law, i.e.

Agreement + Enforceability = Valid Contract.

Basically, a contract happens when a person comes up with an offer to another person/persons to perform an act or abstain from an act. This happens in exchange for the performance or abstinence of an act from the side of the other party/parties. This offer must be accepted by the said party/parties that are part of the contract.

For a contract to be valid, agreement and enforceability is a must. So first, let us try to understand the term ‘agreement’ and henceforth, understand what does enforceability means.

Agreement is the acceptance of a proposal from both sides with valid consideration. According to Section 2(e) of the Indian Contract Act, an agreement is “every promise and set of promises, forming the consideration for each other.” Thus, we can easily say that an agreement is a promise/promises which are accepted by all parties as considerate, under free will of the parties which are part of the contract, having a lawful object and are within the scope of the law. Say, the smartphone seller makes you an offer to buy a smartphone for Rs.10,000. You agreed to buy the smartphone in exchange for the money. Here, your acceptance to buy the smartphone in exchange for the money becomes the agreement. The exchange of money for smartphone becomes the adequate consideration. 

Enforceability, in the simplest of terms, means the implementation of something. Enforceability of a law means that the agreement is within the scope of the law and can be implemented by the law.  To be within the scope of the law, i.e., to be enforceable by the law, some essential elements must be required. These include:

1. Two or more parties: For an offer made, two or more parties should be part of it.
2. Offer: Every contract consists of an offeror and an offeree. The offeror is the one making the offer. And the offeree is the person to whom the offer is made to. 
3. Acceptance: When the offeree agrees to the offer made by the offeror, an offer becomes a ‘promise’. And this agreement of the terms of the offer is said to be the acceptance of the offer. The offeror then becomes the ‘promisor’ and the the offeree becomes the ‘promisee’.
4. Consideration: It is necessary for the contract to be valid, that the exchange of goods or services must be adequate for all parties and must be lawful in nature.
5. Free Consent: Consent is necessary for the acceptance of the offer. But consent should be with the free will of all the parties. There should not be coercion, fraud, misrepresentation, undue influence or mistake.
6. Capacity: Parties privy to the contract should be capable of becoming part of the contract. According to Section 11 of Indian Contract Act, there are three qualifications of a person to be in capacity to come into a contract. These include: they should be of majority age, they should be of sound mind and they should be not part of any other legal ramifications. All these are in reference to the law the individual is subject to.
7. Performance: Unless there is a breach or discharge of the contract or the contract becomes voidable, an obligation rests on the promisor for performance of the contract. 
8. Legal Object: The object of the contract should be within the scope of the law. 

The fulfillment of these essential elements leads to a valid contract. For example, in a contract between two people A and B, A offers to sell his horse to B in exchange for Rs. 5000. B accepts A’s offer. In the given example, when A offers to sell his horse to B, A is the offeror and B is the offeree. Once there is acceptance of the terms by B, the offer becomes a promise and A becomes promisor while B becomes promisee.

Contracts which fail to meet the above conditions, turn into either void, voidable or illegal contracts. For example, in the offer made by person A to person B to sell a horse for Rs. 5000, supposed mental or physical harassment of person B will violate his/her right to free consent. Thus the contract turns void, i.e., not enforceable by law. If A or B was under the majority age or of unsound mind or say, a foreign enemy, the contract wouldn’t have been valid. Unforeseeable circumstances (like the horse dying) hinders the performance of the contract. This causes the contract becoming not performative. Also, if A offers to sell illegal substances instead, to B, then again the contract is not valid.